Neustar Reports Results for Second Quarter 2013

  Neustar Reports Results for Second Quarter 2013

Business Wire

STERLING, Va. -- July 30, 2013

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time
information and analysis to the Internet, telecommunications, technology,
financial services, retail, and media and advertising sectors, today announced
results for the quarter ended June 30, 2013 and updated its guidance for 2013.

Results for Second Quarter 2013 Compared to Second Quarter 2012

  *Revenue increased 7% to $220.4 million
  *Non-NPAC revenue increased 7% to $111.0 million
  *Net income increased 12% to $43.4 million
  *Net income per share increased 14% to $0.65

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

  *Adjusted net income increased 11% to $56.9 million, representing a 26%
    margin
  *Adjusted net income per share increased 13% to $0.85

“We continue to execute on our strategy to become a leading provider of
real-time information and analytics,” said Lisa Hook, Neustar's president and
chief executive officer. “As we enhance our capabilities and infrastructure
and build strategic partnerships, we are increasingly well positioned to
deliver high-value workflow solutions to our clients and strong results for
our shareholders.”

Paul Lalljie, Neustar's chief financial officer, added, “Our second quarter
results were strengthened by the acceleration of a portion of the
transaction-based revenue originally anticipated in the second half of the
year. In total, we are on track to achieve our full-year revenue guidance. In
addition, our continued focus on making discreet investments while maintaining
tight control of operating expense allows us to raise our adjusted net income
and net income per share guidance for the year.”

Discussion of Second Quarter Results

Consolidated revenue totaled $220.4 million, a 7% increase from $206.5 million
in the second quarter of 2012. In particular:

  *Carrier Services revenue totaled $134.7 million, a 7% increase from $126.3
    million in 2012. This increase was primarily due to a $7.4 million
    increase in NPAC Services revenue and a $2.9 million increase in Order
    Management Services revenue;
  *Enterprise Services revenue totaled $43.8 million, a 4% increase from
    $42.1 million in 2012. This increase was primarily due to higher revenue
    in Internet Infrastructure Services; and
  *Information Services revenue totaled $41.8 million, a 10% increase from
    $38.0 million in 2012. This increase was primarily due to higher revenue
    in Verification & Analytics Services.

Operating expense totaled $145.6 million, a 5% increase from $138.1 million in
the second quarter of 2012. This increase was primarily due to additional
personnel and personnel-related expense to support the expansion of the
company's operations, including increased stock-based compensation expense of
$2.0million driven by performance-based equity that was granted to a broader
employee base.

Cash, cash equivalents and investments totaled $381.6 million as of June 30,
2013, compared to $378.2million as of March 31, 2013 and compared to $343.9
million as of December 31, 2012. During the second quarter, the company
purchased approximately 1.5 million shares of its common stock at an average
price of $47.09 per share, for approximately $69.3 million.

Business Outlook for 2013

The company reaffirmed its full-year guidance for revenue, previously provided
on February 5, 2013 and affirmed on May2, 2013 and increased its guidance for
adjusted net income and adjusted earnings per share:

  *Revenue range remains unchanged at $895 million to $915 million;
  *Adjusted net income to range from $225 million to $235 million. Prior
    adjusted net income guidance was between $220 million and $230 million;
    and
  *Adjusted earnings per share to range from $3.38 to $3.53. Prior adjusted
    earnings per share was between $3.28 and $3.43.

Conference Call

As announced on July 16, 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 888-461-2031
(international callers dial 719-325-2248) and entering PIN 5171805. For those
who cannot listen to the live broadcast, a replay will be available through
11:59p.m. (Eastern Time) Tuesday, August 6, 2013 by dialing 877-870-5176
(international callers dial 858-384-5517) and entering replay PIN 5171805, or
by going to the Investor Relations tab of the company's website
(www.neustar.biz).

Neustar will take 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 most directly
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, technology,
financial services, retail, and 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 regarding future results of operations. 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, expenses 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 and 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 and 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 risk
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         Six Months Ended
                         June 30,                    June 30,
                         2012         2013          2012         2013
                         (unaudited)
Revenue:
Carrier Services         $ 126,347     $ 134,733     $ 250,720     $ 266,904
Enterprise Services      42,089        43,791        81,574        88,570
Information Services     38,026       41,826       73,750       81,292    
Total revenue            206,462       220,350       406,044       436,766
Operating expense:
Cost of revenue
(excluding
depreciation and
amortization shown       46,127        50,219        91,025        99,516
separately below)
Sales and marketing      41,073        41,955        79,426        84,215
Research and             8,096         7,616         15,820        15,100
development
General and              20,091        21,124        41,084        43,006
administrative
Depreciation and         22,713        24,690        45,419        49,355
amortization
Restructuring charges    2            —            524          2         
                         138,102      145,604      273,298      291,194   
Income from operations   68,360        74,746        132,746       145,572
Other (expense)
income:
Interest and other       (8,404    )   (5,793    )   (16,597   )   (23,355   )
expense
Interest and other       110          87           339          228       
income
Income before income     60,066        69,040        116,488       122,445
taxes
Provision for income     21,474       25,642       43,934       45,283    
taxes
Net income               $ 38,592     $ 43,398     $ 72,554     $ 77,162  
Net income per share:
Basic                    $ 0.58       $ 0.66       $ 1.08       $ 1.17    
Diluted                  $ 0.57       $ 0.65       $ 1.06       $ 1.15    
Weighted average
common shares
outstanding:
Basic                    66,917       65,531       67,060       65,855    
Diluted                  67,887       66,990       68,132       67,301    
                                                                             


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

                                            December 31,   June 30,
                                             2012            2013
                                             (audited)       (unaudited)
ASSETS
Current assets:
Cash and cash equivalents                    $ 340,255       $ 380,153
Restricted cash                              2,543           2,300
Short-term investments                       3,666           1,462
Accounts receivable, net                     131,805         141,579
Unbilled receivables                         6,372           8,276
Notes receivable                             2,740           2,291
Prepaid expenses and other current assets    17,707          21,395
Deferred costs                               7,379           6,783
Income taxes receivable                      6,596           —
Deferred tax assets                          6,693          8,431       
Total current assets                         525,756         572,670
Property and equipment, net                  118,513         112,113
Goodwill                                     572,178         576,038
Intangible assets, net                       288,487         269,877
Notes receivable, long-term                  1,008           —
Deferred costs, long-term                    702             633
Other assets, long-term                      20,080         26,428      
Total assets                                 $ 1,526,724    $ 1,557,759 
                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                             $ 9,269         $ 3,014
Accrued expenses                             85,424          72,968
Income taxes payable                         —               3,775
Deferred revenue                             49,070          48,004
Notes payable                                8,125           7,972
Capital lease obligations                    1,686           602
Other liabilities                            3,856          7,509       
Total current liabilities                    157,430         143,844
Deferred revenue, long-term                  9,922           10,184
Notes payable, long-term                     576,688         612,278
Capital lease obligations, long-term         817             409
Deferred tax liabilities, long-term          114,130         110,848
Other liabilities, long-term                 21,129         22,247      
Total liabilities                            880,116         899,810
Stockholders’ equity:
Common stock                                 86              87
Additional paid-in capital                   532,743         567,667
Treasury stock                               (604,042    )   (704,402    )
Accumulated other comprehensive loss         (767        )   (1,153      )
Retained earnings                            718,588        795,750     
Total stockholders’ equity                   646,608        657,949     
Total liabilities and stockholders’ equity   $ 1,526,724    $ 1,557,759 
                                                                         

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 to their
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 and six months ended June 30, 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          Six Months Ended            Year Ending
                 June 30,                    June 30,                    December 31,
                 2012         2013          2012         2013          2013^(1)
                 (in thousands, except per share data)

                 (unaudited)
Revenue          $ 206,462    $ 220,350    $ 406,044    $ 436,766    $ 905,000 
                                                                         
Net income       $ 38,592      $ 43,398      $ 72,554      $ 77,162      $ 167,000
Add:
Stock-based      7,049         9,055         10,950        18,012        42,000
compensation
Add:
Amortization
of acquired      12,571        12,377        25,143        24,749        49,000
intangible
assets
Add: Loss on
debt
modification     —             —             —             10,886        10,886
and
extinguishment
^(2)
Less:
Adjustment for
provision for    (7,014    )   (7,960    )   (13,613   )   (19,839   )   (38,886   ) 
income taxes
^(3)
Adjusted net     $ 51,198     $ 56,870     $ 95,034     $ 110,970    $ 230,000 
income
Adjusted net
income margin    25        %   26        %   23        %   25        %   25        % 
^(4)
Adjusted net
income per       $ 0.75       $ 0.85       $ 1.39       $ 1.65       $ 3.46    
diluted share
Weighted
average shares   67,887       66,990       68,132       67,301       66,500    
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.
      Amount represents loss on debt modification and extinguishment related
(2)   to the refinancing of the company’s 2011 credit facility in the first
      quarter of 2013.
      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 and six months ended June 30, 2012 and 2013. Management believes that
this measure provides additional information to debt holders and other
investors about its operating performance and its ability to satisfy certain
debt obligations.

                                                  
                          Three Months Ended         Six Months Ended
                          June 30,                   June 30,
                          2012        2013          2012         2013
                          (in thousands, unaudited)
Net income                $ 38,592     $ 43,398      $ 72,554      $ 77,162
Add: Provision for        21,474       25,642        43,934        45,283
income taxes
Add: Interest expense     8,254        5,772         16,867        12,337
Add: Depreciation and     22,713       24,690        45,419        49,355
amortization
Add: Non-cash other
(income) and expense,     150          21            (270      )   132
net ^(1)
Add: Stock-based          7,049        9,055         10,950        18,012
compensation
Add: Restructuring        2            —             524           2
charges
Add: Other adjustments    —            —             —             10,975
^(2)
Less: Interest income     (110     )   (87       )   (339      )   (228      )
Adjusted EBITDA           $ 98,124    $ 108,491    $ 189,639    $ 213,030 

      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 Contact
Kim Hart, 202-533-2934
Kim.Hart@neustar.biz
 
Press spacebar to pause and continue. Press esc to stop.