Neustar Reports Results for First Quarter 2013

  Neustar Reports Results for First Quarter 2013

    Expects to Purchase an Additional $250 Million of Common Stock in 2013

Business Wire

STERLING, Va. -- May 2, 2013

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 March 31, 2013 and affirmed its
guidance for 2013. The company also announced that it plans to purchase up to
$250 million of its Class A common shares beginning May 7, 2013 through
December 31, 2013.

Results for First Quarter 2013 Compared to First Quarter 2012

  *Revenue increased 8% to $216.4 million
  *Non-NPAC revenue increased 10% to $107.1 million
  *Net income decreased 1% to $33.8 million, including the impact of a $10.9
    million charge for the loss on debt modification and extinguishment
  *Net income per share was flat at $0.50

Non-GAAP Results for First Quarter 2013 Compared to First Quarter 2012

  *Adjusted net income increased 23% to $54.1 million, representing a 25%
    margin
  *Adjusted net income per share increased 25% to $0.80

“In the first quarter, we made progress on each of our 2013 priorities,” said
Lisa Hook, Neustar’s president and chief executive officer. “We submitted our
proposal for the NPAC contract in early April, and we remain confident in our
ability to provide world class service to the communications industry. In
addition, we continued to implement our strategy through targeted investments
in our people and platforms, while identifying and executing on significant
growth opportunities.”

Paul Lalljie, Neustar’s chief financial officer added, “The 25% increase in
first quarter adjusted earnings per share demonstrated strong operating
leverage and prudent cost management. Our first quarter results and leading
indicators provide us with the visibility to affirm our full-year guidance. In
addition, we have announced a $250 million share repurchase program that
returns significant capital to our shareholders while maintaining our ability
to invest in the growth of our business.”

Discussion of First Quarter Results

Consolidated revenue totaled $216.4 million, an 8% increase from $199.6
million in the first quarter of 2012. This $16.8 million increase included
growth in all three of our operating segments. In particular:

  *Carrier Services revenue totaled $132.2 million, a 6% increase from $124.4
    million in 2012. This increase was primarily due to a $7.5 million
    increase in NPAC Services revenue;
  *Enterprise Services revenue totaled $44.8 million, a 13% increase from
    $39.5 million in 2012. This increase was due to higher revenue in both
    Internet Infrastructure and Registry Services; and
  *Information Services revenue totaled $39.5 million, a 10% increase from
    $35.7 million in 2012. This increase was primarily due to higher revenue
    in Verification and Analytics Services.

Operating expense totaled $145.6 million, an 8% increase from $135.2 million
in the first quarter of 2012. This increase was primarily due to the expansion
of the company’s operations. In particular, stock-based compensation increased
$5.1 million driven by performance-based equity that was granted to a broader
employee base.

Cash, cash equivalents and investments totaled $378.2 million as of March 31,
2013, compared to $343.9million as of December 31, 2012. The debt refinancing
completed in January 2013 resulted in total debt obligations of $623.8 million
as of March 31, 2013, compared to $587.3 million as of December 31, 2012.
During the first quarter, the company purchased approximately 551,000 shares
of common stock at an average price of $44.38 per share, for a total purchase
price of $24.4million.

Business Outlook for 2013

The company affirmed its guidance for revenue and adjusted net income provided
on February 5, 2013:

  *Revenue to range from $895 million to $915 million
  *Adjusted net income to range from $220 million to $230 million
  *Adjusted net income per share to range from $3.28 to $3.43

Conference Call

As announced on April 18, 2013, 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). Those
listening via the Internet should go to the website 15 minutes early to
register, download and install any necessary audio software.

The conference call is also accessible via telephone by dialing (888) 437-9315
(international callers dial (719) 325-2223) and entering PIN 5300732. For
those who cannot listen to the live broadcast, a replay will be available
through 11:59p.m. (Eastern Time) Thursday, May 9, 2013 by dialing (877)
870-5176 (international callers dial (858) 384-5517) and entering replay PIN
5300732, or by going to the Investor Relations tab of the company’s website
(www.neustar.biz).

Neustar will take live questions from securities analysts and institutional
portfolio managers; the complete call is open to all other interested parties
on a listen-only basis.

This press release, the financial tables and other supplemental information
are available on the company’s website under the Investor Relations tab. This
includes reconciliations of certain 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.

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 its guidance. 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, the financial covenants in the company’s secured credit facility
and their impact on the company’s financial and business operations; the
company’s indebtedness and the impact that it may have on the company’s
financial and operating activities and the company’s ability to incur
additional debt; the variable interest rates borne by the company’s
indebtedness and the effects of changes in those rates; 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 risks
factors, uncertainties and other 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
                                              March 31,
                                              2012         2013
                                              (unaudited)
Revenue:
Carrier Services                            $ 124,373         $ 132,171
Enterprise Services                           39,485            44,779
Information Services                          35,724           39,466  
Total revenue                                 199,582           216,416
Operating expense:
Cost of revenue (excluding depreciation and   44,898            49,297
amortization shownseparately below)
Sales and marketing                           38,353            42,260
Research and development                      7,724             7,484
General and administrative                    20,993            21,882
Depreciation and amortization                 22,706            24,665
Restructuring charges                         522              2       
                                              135,196          145,590 
Income from operations                        64,386            70,826
Other (expense) income:
Interest and other expense                    (8,193  )         (17,562 )
Interest and other income                     229              141     
Income before income taxes                    56,422            53,405
Provision for income taxes                    22,460           19,641  
Net income                                  $ 33,962         $ 33,764  
                                                                
Net income per share:
Basic                                       $ 0.51           $ 0.51    
Diluted                                     $ 0.50           $ 0.50    
                                                                
Weighted average common shares outstanding:
Basic                                         67,205           66,184  
Diluted                                       68,478           67,614  



NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

                                        December 31,       March 31,
                                            2012                   2013
                                            (audited)              (unaudited)
ASSETS
Current assets:
Cash and cash equivalents                 $ 340,255              $ 376,675
Restricted cash                             2,543                  2,549
Short-term investments                      3,666                  1,564
Accounts receivable, net                    131,805                144,319
Unbilled receivables                        6,372                  6,612
Notes receivable                            2,740                  2,619
Prepaid expenses and other                  17,707                 20,344
current assets
Deferred costs                              7,379                  7,291
Income taxes receivable                     6,596                  −
Deferred tax assets                         6,693                 8,497     
Total current assets                        525,756                570,470
                                                                   
Property and equipment, net                 118,513                113,723
Goodwill                                    572,178                572,178
Intangible assets, net                      288,487                276,115
Notes receivable, long-term                 1,008                  406
Deferred costs, long-term                   702                    600
Other assets, long-term                     20,080                26,979    
Total assets                              $ 1,526,724           $ 1,560,471 
                                                                   
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable                          $ 9,269                $ 2,926
Accrued expenses                            85,424                 59,767
Income taxes payable                        −                      6,167
Deferred revenue                            49,070                 48,387
Notes payable                               8,125                  7,971
Capital lease obligations                   1,686                  1,105
Other liabilities                           3,856                 2,844     
Total current liabilities                   157,430                129,167
                                                                   
Deferred revenue, long-term                 9,922                  10,061
Notes payable, long-term                    576,688                614,271
Capital lease obligations,                  817                    422
long-term
Deferred tax liabilities,                   114,130                117,487
long-term
Other liabilities, long-term                21,129                21,592    
Total liabilities                           880,116                893,000
                                                                   
Stockholders' equity:
Common stock                                86                     87
Additional paid-in capital                  532,743                550,709
Treasury stock                              (604,042   )           (634,879  )
Accumulated other comprehensive             (767       )           (798      )
loss
Retained earnings                           718,588               752,352   
Total stockholders' equity                  646,608               667,471   
Total liabilities and                     $ 1,526,724           $ 1,560,471 
stockholders' equity
                                                                   

Reconciliation of Non-GAAP Financial Measures

In this press release and in other public statements, Neustar presents certain
non-GAAP financial measures. These non-GAAP financial measures have
limitations and 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. Set
forth below are reconciliations of the non-GAAP financial measures from the
most directly comparable GAAP financial measure. These reconciliations should
be carefully evaluated. Prior disclosures of non-GAAP figures may not exclude
the same items and as such should not be used for comparison purposes.

Reconciliation of Net Income to Adjusted Net Income

The following is a reconciliation of net income to adjusted net income for the
three months ended March 31, 2012 and 2013 and the year ending December 31,
2013. Management believes that this measure enhances 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.

                                  
                                 Three Months Ended           Year Ending
                                  March 31,                       December 31,
                                  2012         2013              2013 ^ (1)
                                 (in thousands, except per share data)
                                  (unaudited)
                                  
Revenue                         $ 199,582    $ 216,416      $   905,000   
                                                                  
Net income                      $ 33,962      $ 33,764        $   162,500
Add: Stock-based compensation     3,901         8,957             42,000
Add: Amortization of acquired     12,572        12,372            49,000
intangible assets
Add: Loss on debt modification    −             10,886            11,000
and extinguishment ^(2)
Less: Adjustment for provision    (6,557  )     (11,848 )         (39,500   )
for income taxes ^(3)
Adjusted net income             $ 43,878     $ 54,131       $   225,000   
Adjusted net income margin ^(4)   22      %     25      %         25        %
Adjusted net income per diluted $ 0.64       $ 0.80         $   3.36      
share
Weighted average shares           68,478       67,614           67,000    
outstanding - diluted

      The amounts expressed in this column are current estimates of the
(1)  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)   Amount represents loss on debt modification and extinguishment related
      to the refinancing of the company’s 2011 credit facility.
      Adjustment reflects the estimated tax effect of adjustments for
(3)   stock-based compensation expense, amortization of acquired intangible
      assets and loss on debt modification and extinguishment based on the
      effective tax rate for the applicable period.
(4)   Adjusted net income margin is a measure of adjusted net income as a
      percentage of revenue.

Reconciliation of Net Income to Adjusted EBITDA

The following is a reconciliation of net income to adjusted EBITDA for the
three months ended March 31, 2012 and 2013. Management believes that the
inclusion of adjusted EBITDA is appropriate to provide additional information
to debt holders about its operating performance and its ability to satisfy
certain debt obligations.

                                                  Three Months Ended
                                                    March 31,
                                                    2012          2013
                                                    (in thousands, unaudited)
                                                    
Net income                                        $  33,962     $  33,764
Add: Provision for income taxes                       22,460         19,641
Add: Interest expense                                 8,613          6,565
Add: Depreciation and amortization                    22,706         24,665
Add: Non-cash other (income) and expense, net         (420   )       111
^(1)
Add: Stock-based compensation                         3,901          8,957
Add: Restructuring charges                            522            2
Add: Other adjustments ^(2)                           −              10,975
Less: Interest income                                (229   )      (141    )
Adjusted EBITDA                                   $  91,515    $  104,539 
                                                    

      Amounts represent (gain) loss on foreign currency transactions, realized
(1)  gains on available-for-sale investments and (gain) loss on asset
      disposals.
      Amount represents the loss on debt modification and extinguishment
(2)   related to the refinancing of the company’s 2011 credit facility and
      certain non-capitalized charges incurred in connection with the
      company’s financing activities.

Contact:

Neustar, Inc.
Investor Relations Contact
Dave Angelicchio, 571-434-3443
InvestorRelations@neustar.biz
or
Media
Kim Hart, 202-533-2934
Kim.Hart@neustar.biz
 
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