Neustar Reports Results for Third Quarter 2013

  Neustar Reports Results for Third Quarter 2013

Business Wire

STERLING, Va. -- October 30, 2013

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time
information services and analysis, today announced results for the quarter
ended September30,2013, and in a separate release stated that it has
acquired Aggregate Knowledge, Inc., a leading campaign and predictive
analytics platform, for approximately $119 million in cash consideration.

Results for Third Quarter 2013 Compared to Third Quarter 2012

  *Revenue increased 8% to $227.6 million
  *Non-NPAC revenue increased 9% to $118.3 million
  *Net income increased 4% to $47.5 million. Net income for the third quarter
    of 2012 included $5.2 million of discrete income tax benefits
  *Net income per share increased 7% to $0.73

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

  *Adjusted net income increased 3% to $62.3 million, representing a 27%
    margin. Adjusted net income for the third quarter of 2012 included $5.2
    million of discrete income tax benefits
  *Adjusted net income per share increased 6% to $0.95

“We continue to execute on our strategic plan and deliver on our 2013
priorities,” said Lisa Hook, Neustar's President and Chief Executive Officer.
“We have continued to position ourselves for a successful NPAC renewal while
broadening our information and analytics capabilities with the addition of the
Aggregate Knowledge platform.”

Paul Lalljie, Neustar’s Chief Financial Officer, added, “During the third
quarter, we continued to drive shareholder value through our disciplined
expense management and commitment to return cash to shareholders. We continued
to experience increased demand for our services but sales cycles have been
longer than anticipated, mainly for certain of our information services.”

Discussion of Third Quarter Results

Consolidated revenue totaled $227.6 million, an 8% increase from $211.2
million in the third quarter of 2012. In particular:

  *Carrier Services revenue totaled $139.5 million, an 11% increase from
    $125.2 million in 2012. This increase was primarily due to a $6.7 million
    increase in NPAC Services revenue and a $6.2million increase in Order
    Management Services revenue;
  *Enterprise Services revenue totaled $44.9 million, a 3% increase from
    $43.6 million in 2012. This increase was due to a 9% increase in Internet
    Infrastructure Services revenue, partially offset by a decrease in
    Registry Services revenue driven by one-time project-related revenue in
    2012; and
  *Information Services revenue totaled $43.3 million, a 2% increase from
    $42.3 million in 2012.

Operating expense totaled $147.2 million, an 8% increase from $136.5 million
in the third quarter of 2012. This increase was driven by investments to
support business growth, in particular, professional fees increased to pursue
new business opportunities and to support the company’s long-term sales
strategy. In addition, advertising and marketing costs increased to promote
awareness of the company’s services and solutions. Cash, cash equivalents and
investments totaled $352.7 million as of September 30, 2013, compared to
$381.6million as of June 30, 2013 and to $343.9million as of December 31,
2012. During the third quarter, the company purchased approximately 1.8
million shares at an average price of $52.06 per share, for approximately
$96.1 million.

Business Outlook for 2013

The company updated its revenue guidance, which was provided on February 5,
2013 and affirmed in the previous two earnings releases. In addition, the
company updated its profitability guidance previously provided on July 30,

  *Revenue to range from $895 million to $905 million, representing growth of
    8% to 9%
  *Adjusted net income to range from $225 million to $231 million,
    representing growth of 9% to 12%
  *Adjusted earnings per share to range from $3.39 to $3.48, representing
    growth of 12% to 14%

Conference Call

As announced on October 17, 2013, Neustar will conduct an investor conference
call to discuss the company's results and acquisition 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
( Those listening via the Internet should go to the website
15 minutes early to register, download and install any necessary audio

The conference call is also accessible via telephone by dialing 888-811-5445
(international callers dial 913-312-0687) and entering PIN 9591303. For those
who cannot listen to the live broadcast, a replay will be available through
11:59p.m. (Eastern Time) Wednesday, November 6, 2013 by dialing 877-870-5176
(international callers dial 858-384-5517) and entering replay PIN 9591303, or
by going to the Investor Relations tab of the company's website

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 communications services, financial services,
retail, and media and advertising sectors. Neustar applies its advanced,
secure technologies to help its clients promote and protect their businesses.
More information is available at

Safe Harbor Statement under the Private Securities Litigation Reform Act of

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; the realization of the
benefits of the acquisition of Aggregate Knowledge; the reaction of the users
of the acquired business; the company's 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; the company's 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.

(in thousands, except per share data)

                        Three Months Ended         Nine Months Ended
                         September 30,               September 30,
                         2012         2013          2012         2013
Carrier Services         $ 125,202     $ 139,477     $ 375,922     $ 406,381
Enterprise Services      43,630        44,896        125,204       133,466
Information Services     42,340       43,260       116,090      124,552   
Total revenue            211,172       227,633       617,216       664,399
Operating expense:
Cost of revenue
depreciation and
amortization shown       46,339        51,434        137,364       150,950
separately below)
Sales and marketing      38,040        40,253        117,466       124,468
Research and             7,663         7,196         23,483        22,296
General and              20,915        23,751        61,999        66,757
Depreciation and         23,622        24,586        69,041        73,941
Restructuring            (32       )   —            492          2         
(recoveries) charges
                         136,547      147,220      409,845      438,414   
Income from operations   74,625        80,413        207,371       225,985
Other (expense)
Interest and other       (8,517    )   (5,496    )   (25,114   )   (28,851   )
Interest and other       140          64           479          292       
Income before income     66,248        74,981        182,736       197,426
Provision for income     20,495       27,442       64,429       72,725    
Net income               $ 45,753     $ 47,539     $ 118,307    $ 124,701 
Net income per share:
Basic                    $ 0.69       $ 0.74       $ 1.77       $ 1.91    
Diluted                  $ 0.68       $ 0.73       $ 1.74       $ 1.87    
Weighted average
common shares
Basic                    66,523       63,978       66,880       65,223    
Diluted                  67,623       65,510       67,961       66,713    

(in thousands)

                                            December 31,   September 30,
                                             2012            2013
                                             (audited)       (unaudited)
Current assets:
Cash and cash equivalents                    $ 340,255       $ 352,714
Restricted cash                              2,543           1,858
Short-term investments                       3,666           —
Accounts receivable, net                     131,805         142,130
Unbilled receivables                         6,372           12,927
Notes receivable                             2,740           1,601
Prepaid expenses and other current assets    17,707          20,335
Deferred costs                               7,379           6,873
Income taxes receivable                      6,596           4,324
Deferred tax assets                          6,693          5,285       
Total current assets                         525,756         548,047
Property and equipment, net                  118,513         111,541
Goodwill                                     572,178         576,038
Intangible assets, net                       288,487         257,492
Notes receivable, long-term                  1,008           —
Other assets, long-term                      20,782         25,585      
Total assets                                 $ 1,526,724    $ 1,518,703 
Current liabilities:
Accounts payable                             $ 9,269         $ 5,730
Accrued expenses                             85,424          79,187
Deferred revenue                             49,070          49,343
Notes payable                                8,125           7,972
Capital lease obligations                    1,686           572
Other liabilities                            3,856          2,826       
Total current liabilities                    157,430         145,630
Deferred revenue, long-term                  9,922           10,020
Notes payable, long-term                     576,688         610,285
Capital lease obligations, long-term         817             245
Deferred tax liabilities, long-term          114,130         103,545
Other liabilities, long-term                 21,129         22,264      
Total liabilities                            880,116         891,989
Stockholders’ equity:
Common stock                                 86              87
Additional paid-in capital                   532,743         585,282
Treasury stock                               (604,042    )   (800,737    )
Accumulated other comprehensive loss         (767        )   (1,207      )
Retained earnings                            718,588        843,289     
Total stockholders’ equity                   646,608        626,714     
Total liabilities and stockholders’ equity   $ 1,526,724    $ 1,518,703 

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 is the reconciliation of the non-GAAP financial measure to its
most directly comparable GAAP financial measure. This reconciliation 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 nine months ended September 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          Nine Months Ended           Year Ending
                      September 30,               September 30,               December 31,
                      2012         2013          2012         2013          2013^(1)
                      (in thousands, except per share data)
Revenue               $ 211,172    $ 227,633    $ 617,216    $ 664,399    $ 900,000 
Net income            $ 45,753      $ 47,539      $ 118,307     $ 124,701     $ 159,000
Add: Stock-based      9,037         9,663         19,987        27,675        43,000
Add: Amortization
of acquired           12,569        12,385        37,712        37,134        51,000
intangible assets
Add: Loss on debt
modification and      —             —             —             10,886        10,886
extinguishment ^(2)
Add: Aggregate
Knowledge             —             924           —             924           1,700
costs ^ (3)
Less: Adjustment
for provision for     (6,684    )   (8,168    )   (20,344   )   (27,983   )   (37,586   ) 
income taxes ^(4)
Adjusted net income   $ 60,675     $ 62,343     $ 155,662    $ 173,337    $ 228,000 
Adjusted net income   29        %   27        %   25        %   26        %   25        % 
margin ^(5)
Adjusted net income   $ 0.90       $ 0.95       $ 2.29       $ 2.60       $ 3.44    
per diluted share
Weighted average
shares outstanding    67,623       65,510       67,961       66,713       66,300    
- 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.
(3)   Amounts represent costs incurred by the company in connection with its
      acquisition of Aggregate Knowledge.
      Adjustment reflects the estimated tax effect of tax-deductible
      adjustments for stock-based compensation expense, amortization of
      acquired intangible assets, loss on debt modification and extinguishment
(4)   and Aggregate Knowledge acquisition-related costs of $0.3 million, based
      on the effective tax rate for the applicable period. For the year ending
      December 31, 2013, the company estimates that $39.0 million of
      stock-based compensation expense will be deductible for income tax
(5)   Adjusted net income margin is a measure of adjusted net income as a
      percentage of revenue.


Neustar, Inc.
Investor Relations Contact
Dave Angelicchio, 571-434-3443
Media Contact
Kim Hart, 202-533-2934
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