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8-K - FORM 8-K - NEUSTAR INCd432658d8k.htm
EX-99.2 - SLIDES - NEUSTAR INCd432658dex992.htm

Exhibit 99.1

Neustar Reports Results for Third Quarter 2012

STERLING, VA., November 5, 2012 — Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors, today announced results for the quarter ended September 30, 2012 and updated its guidance for full-year 2012.

GAAP Results for Third Quarter 2012 Compared to Third Quarter 2011

 

   

Revenue increased 38% to $211.2 million

 

   

Income from continuing operations increased 21% to $45.8 million. Income from continuing operations for the third quarter of 2012 includes $5.2 million of discrete income tax benefits

 

   

Income from continuing operations per diluted share increased 33% to $0.68

Non-GAAP Results for Third Quarter 2012 Compared to Third Quarter 2011

 

   

Adjusted net income from continuing operations increased 36% to $60.7 million. Adjusted net income from continuing operations for the third quarter of 2012 includes $5.2 million of discrete income tax benefits

 

   

Adjusted earnings per diluted share increased 50% to $0.90

“In the third quarter, we continued to execute well on our priorities – working towards the renewal of the NPAC contract, integrating Information Services and capitalizing on the opportunities it brings us, transforming our culture and achieving our financial performance targets,” said Lisa Hook, Neustar’s president and chief executive officer. “With strong year-to-date results and continued progress in implementing our strategic plan, we are well-positioned to achieve both our short-term objectives and our long-term strategic goals.”

Paul Lalljie, Neustar’s chief financial officer added, “We generated solid profits in the third quarter while continuing to invest in the long-term growth of our business. We continue to produce consistently high margins and strong cash flows through our operational efficiencies, which gives us the flexibility to continue to return capital to our shareholders. We are updating our full-year guidance given our results and visibility into our key performance indicators.”

Discussion of Third Quarter Results

Consolidated revenue totaled $211.2 million, a 38% increase from $152.5 million in the third quarter of 2011. In particular:

 

   

Carrier Services revenue totaled $125.2 million, a 10% increase from $114.2 million in 2011. This increase was due to an $11.1 million increase in NPAC Services revenue;

 

   

Enterprise Services revenue totaled $43.6 million, a 14% increase from $38.3 million in 2011. This increase was due to higher revenue in both Internet Infrastructure and Registry Services; and

 

   

Information Services contributed $42.3 million of revenue in the third quarter of 2012. This business segment was created as a result of the TARGUSinfo acquisition completed in the fourth quarter of 2011. Revenue from Information Services was comprised of $24.2 million in Identification Services, $13.1 million in Verification & Analytics Services, and $5.0 million in Local Search & Licensed Data Services.


Total operating expense increased 45% to $136.5 million from $94.4 million in the third quarter of 2011. This $42.1 million increase was driven by the addition of $31.4 million in operating expense from the acquisition of our Information Services business segment. The remaining $10.7 million increase represents growth of 11% in the company’s operating expense. In particular, personnel and personnel-related expense increased $8.9 million due to increased headcount in technology and operations, research and development, and sales and marketing.

For the third quarter of 2012, adjusted net income totaled $60.7 million, including the impact of discrete tax benefits primarily associated with a domestic production activities deduction. Excluding the impact of these discrete tax benefits, our effective tax rate was approximately 38.8%.

Cash, cash equivalents and investments totaled $269.2 million as of September 30, 2012, compared to $235.0 million as of June 30, 2012 and $135.3 million as of December 31, 2011. In the third quarter of 2012, the company purchased approximately 688,000 shares of common stock at an average price of $36.34 per share, for a total purchase price of $25.0 million.

Business Outlook for 2012

The company updated its full-year 2012 guidance, previously provided on July 26, 2012:

 

   

Revenue range remains unchanged at $825 to $835 million;

 

   

Adjusted net income to range from $200 to $206 million. Prior adjusted net income guidance was $189 to $197 million; and

 

   

Adjusted net income per diluted share to range from $2.94 to $3.03. Prior adjusted net income per diluted share range was $2.78 to $2.90

Conference Call

As announced on October 29, 2012, Neustar will conduct an investor conference call to discuss the company’s results today at 4:30 p.m. (Eastern Time). Prior to the call, investors may access the conference call over the Internet via the Investor Relations tab of the company’s website (www.neustar.biz).

The conference call is also accessible via telephone by dialing 866-382-9489 (international callers dial 706-679-4287) and entering PIN 43902736. For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) on Tuesday, November 13, 2012 by dialing 855-859-2056 (international callers dial 404-537-3406) and entering replay PIN 43902736, or by going to the Investor Relations tab of the company’s website (www.neustar.biz).

This press release, the financial tables and other supplemental information, including a reconciliation of segment contribution to the nearest comparable GAAP measure and reconciliations of certain other non-GAAP measures to their nearest comparable GAAP measures that may be used periodically by management when discussing the company’s financial results with investors and analysts, are available on the company’s website under the Investor Relations tab.


About Neustar, Inc.

Neustar, Inc. (NYSE: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors. Neustar applies its advanced, secure technologies in location, identification, and evaluation to help its customers promote and protect their businesses. More information is available at www.neustar.biz.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release includes information that constitutes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about the company’s expectations, beliefs and business results in the future, such as guidance regarding its 2012 results. The company has attempted, whenever possible, to identify these forward-looking statements using words such as “may,” “will,” “should,” “projects,” “estimates,” “expects,” “plans,” “intends,” “anticipates,” “believes” and variations of these words and similar expressions. Similarly, statements herein that describe the company’s business strategy, prospects, opportunities, outlooks, objectives, plans, intentions or goals are also forward-looking statements. The company cannot assure you that its expectations will be achieved or that any deviations will not be material. Forward-looking statements are subject to many assumptions, risks and uncertainties that may cause future results to differ materially from those anticipated. These potential risks and uncertainties include, among others, general economic conditions in the regions and industries in which the company operates; the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as disruptions to the company’s operations, modifications to or terminations of its material contracts, its ability to successfully identify and complete acquisitions, integrate and support the operations of businesses the company acquires, increasing competition, market acceptance of its existing services, its ability to successfully develop and market new services, the uncertainty of whether new services will achieve market acceptance or result in any revenue, and business, regulatory and statutory changes in the communications industry. More information about potential factors that could affect the company’s business and financial results is included in its filings with the Securities and Exchange Commission, including, without limitation, the company’s most recent Annual Report on Form 10-K and subsequent periodic and current reports. All forward-looking statements are based on information available to the company on the date of this press release, and the company undertakes no obligation to update any of the forward-looking statements after the date of this press release.


NEUSTAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2012     2011     2012  
     (unaudited)  

Revenue:

        

Carrier Services

   $ 114,155      $ 125,202      $ 334,604      $ 375,922   

Enterprise Services

     38,342        43,630        111,671        125,204   

Information Services

     —          42,340        —          116,090   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     152,497        211,172        446,275        617,216   

Operating expense:

        

Cost of revenue (excluding depreciation and amortization shown separately below)

     34,194        46,339        96,663        137,364   

Sales and marketing

     25,069        38,040        76,275        117,466   

Research and development

     3,746        7,663        11,183        23,483   

General and administrative

     20,960        20,915        63,124        61,999   

Depreciation and amortization

     10,486        23,622        29,018        69,041   

Restructuring (recoveries) charges

     (33     (32     387        492   
  

 

 

   

 

 

   

 

 

   

 

 

 
     94,422        136,547        276,650        409,845   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     58,075        74,625        169,625        207,371   

Other (expense) income:

        

Interest and other expense

     (675     (8,517     (1,148     (25,114

Interest and other income

     304        140        1,437        479   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     57,704        66,248        169,914        182,736   

Provision for income taxes, continuing operations

     19,931        20,495        65,060        64,429   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     37,773        45,753        104,854        118,307   

Income from discontinued operations, net of tax

     —          —          37,249        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 37,773      $ 45,753      $ 142,103      $ 118,307   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per common share:

        

Continuing operations

   $ 0.52      $ 0.69      $ 1.42      $ 1.77   

Discontinued operations

     —          —          0.51        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per common share

   $ 0.52      $ 0.69      $ 1.93      $ 1.77   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per common share:

        

Continuing operations

   $ 0.51      $ 0.68      $ 1.40      $ 1.74   

Discontinued operations

     —          —          0.49        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per common share

   $ 0.51      $ 0.68      $ 1.89      $ 1.74   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

        

Basic

     73,237        66,523        73,658        66,880   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     74,632        67,623        75,079        67,961   
  

 

 

   

 

 

   

 

 

   

 

 

 


NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     December 31,
2011
    September 30,
2012
 
     (audited)     (unaudited)  

ASSETS

  

Current assets:

    

Cash and cash equivalents

   $ 122,237     $ 261,049  

Restricted cash

     10,251       10,248  

Short-term investments

     10,545       8,147  

Accounts receivable, net

     106,274       147,564  

Unbilled receivables

     5,551       7,213  

Notes receivable

     2,786       2,860  

Prepaid expenses and other current assets

     30,166       18,450  

Deferred costs

     8,174       7,929  

Income taxes receivable

     38,687       4,093  

Deferred tax assets

     6,264       5,850  
  

 

 

   

 

 

 

Total current assets

     340,935       473,403  

Long-term investments

     2,506         

Property and equipment, net

     100,102       107,825  

Goodwill

     573,307       573,307  

Intangible assets, net

     338,768       301,056  

Notes receivable, long-term

     3,748       1,601  

Deferred costs, long-term

     701       651  

Other assets, long-term

     22,767       19,891  
  

 

 

   

 

 

 

Total assets

   $ 1,382,834     $ 1,477,734  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 7,385     $ 2,906  

Accrued expenses

     79,334       69,200  

Deferred revenue

     41,080       47,595  

Note payable

     4,856       59,324  

Capital lease obligations

     3,065       2,294  

Accrued restructuring reserve

     4,361       741  

Other liabilities

     5,317       3,241  
  

 

 

   

 

 

 

Total current liabilities

     145,398       185,301  

Deferred revenue, long-term

     10,363       10,115  

Note payable, long-term

     584,809       526,690  

Capital lease obligations, long-term

     1,918       817  

Deferred tax liability, long-term

     121,237       116,526  

Other liabilities, long-term

     16,475       20,875  
  

 

 

   

 

 

 

Total liabilities

     880,200       860,324   

Stockholders’ equity:

    

Common stock

     83       86  

Additional paid-in capital

     436,598       516,349  

Treasury stock

     (495,790     (579,224

Accumulated other comprehensive loss

     (758     (609

Retained earnings

     562,501       680,808  
  

 

 

   

 

 

 

Total stockholders’ equity

     502,634       617,410  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,382,834     $ 1,477,734  
  

 

 

   

 

 

 


NEUSTAR, INC.

SEGMENT REVENUE AND CONTRIBUTION

(in thousands)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2012      2011      2012  
     (unaudited)  

Revenue: (1)

           

Carrier Services

   $ 114,155       $ 125,202       $ 334,604       $ 375,922   

Enterprise Services

     38,342         43,630         111,671         125,204   

Information Services

     —           42,340         —           116,090   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 152,497       $ 211,172       $ 446,275       $ 617,216   
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment contribution:(2)

           

Carrier Services

   $ 99,302       $ 109,359       $ 293,451       $ 328,243   

Enterprise Services

     16,551         20,314         47,620         55,911   

Information Services

     —           24,064         —           59,069   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total segment contribution

   $ 115,853       $ 153,737       $ 341,071       $ 443,223   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Carrier Services:

 

   

Numbering Services

 

   

Order Management Services

 

   

IP Services

Enterprise Services:

 

   

Internet Infrastructure Services

 

   

Registry Services

Information Services:

 

   

Identification Services

 

   

Verification & Analytics Services

 

   

Local Search & Licensed Data Services

 

(2) Segment contribution excludes certain unallocated costs within the following expense classifications: cost of revenue, sales and marketing, research and development, and general and administrative. In addition, depreciation and amortization and restructuring charges are excluded from segment contribution. Such unallocated costs totaled $57.8 million and $79.1 million for the three months ended September 30, 2011 and 2012, respectively, and totaled $171.4 million and $235.9 million for the nine months ended September 30, 2011 and 2012, respectively.

Reconciliation of Non-GAAP Financial Measures

In this press release and in other public statements, Neustar presents certain non-GAAP financial data. To place these data in an appropriate context, the following is a reconciliation of income from continuing operations to adjusted net income from continuing operations for the three and nine months ended September 30, 2011 and 2012 and the year ending December 31, 2012.

This reconciliation allows investors to appropriately consider each non-GAAP financial measure. These non-GAAP financial measures, however, should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes that these measures enhance investors’ understanding of the company’s financial performance and the comparability of


the company’s operating results to prior periods, as well as against the performance of other companies. However, these non-GAAP financial measures may not be comparable with similar non-GAAP financial measures used by other companies and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for comparison purposes.

Reconciliation of Income from Continuing Operations to Adjusted Net Income from Continuing Operations

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
    Year Ending
December 31,

2012 (1)
 
     2011     2012     2011     2012    
     (in thousands, except per share data)  
     (unaudited)  

Revenue

   $ 152,497     $ 211,172     $ 446,275     $ 617,216     $ 830,000  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

   $ 37,773     $ 45,753     $ 104,854     $ 118,307     $ 154,000  

Add: Stock-based compensation

     6,460        9,037       18,476       19,987       27,000  

Add: Amortization of acquired intangible assets

     1,716       12,569       3,955       37,712       50,000  

Add: TARGUSinfo acquisition-related costs (2)

     1,361       —          2,041       —          —     

Add: Adjustment for provision for income taxes (3)

     (2,824     (6,684     (8,589     (20,344 )     (28,000
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income from continuing operations

   $ 44,486     $ 60,675     $ 120,737     $ 155,662     $ 203,000  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income margin from continuing operations (4)

     29 %     29 %     27 %     25 %     24 %
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income from continuing operations per diluted share

   $ 0.60     $ 0.90     $ 1.61     $ 2.29     $ 2.99  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average diluted common shares outstanding

     74,632       67,623       75,079       67,961       68,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The amounts expressed in this column are current estimates of the results for the full year as of the date of this press release. This reconciliation is based on the midpoint of the revenue guidance.
(2) Amounts represent costs incurred by the company in connection with its acquisition of Targus Information Corporation. These costs are not deductible for income tax purposes.
(3) Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense and amortization of acquired intangible assets based on the effective tax rate for income from continuing operations for the applicable period.
(4) Adjusted net income margin is a measure of adjusted net income from continuing operations as a percentage of revenue.

Contact Info:

 

Investor Relations Contact

Dave Angelicchio

(571) 434-3443

InvestorRelations@neustar.biz

  

Media Contact

Kim Hart

(202) 533-2934

Kim.Hart@neustar.biz