Neustar Reports Results for First Quarter 2014

  Neustar Reports Results for First Quarter 2014

Business Wire

STERLING, Va. -- April 16, 2014

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time
information services and analytics, today announced results for the quarter
ended March31, 2014, and affirmed its revenue and adjusted net income
guidance for 2014.

Results for First Quarter 2014 Compared to First Quarter 2013

  *Revenue increased 6% to $229.9 million
  *Revenue from Marketing Services increased 21% to $32.9 million
  *Revenue from Security Services increased 11% to $30.1 million
  *Net income decreased 6% to $31.7 million
  *Net income per share was flat at $0.50

Non-GAAP Results for First Quarter 2014 Compared to First Quarter 2013

  *Adjusted net income decreased 3% to $52.4 million
  *Adjusted net income per share increased 5% to $0.84

“Our first quarter results demonstrate that we are delivering on our strategic
initiative to become a leader in information services and analytics,” said
Lisa Hook, Neustar's President and Chief Executive Officer. “Our targeted
investments are paying off and we are seeing strong and growing market demand
for our IS&A offerings. We are competing vigorously in the LNPA vendor
selection process, and will continue to advocate strongly that we are the
logical choice to remain as administrator, which we believe is beneficial to
the industry and consumers alike.”

Paul Lalljie, Neustar’s Chief Financial Officer, added, “During the first
quarter, we delivered 16% revenue growth in our Marketing and Security
Services. We closed on the acquisition of .CO earlier this week, bolstering
our position as a key player in the expanding gTLD market. We remain confident
in our full-year forecast driven by our first quarter results and leading
indicators, and as a result we are affirming our guidance for the year.”

Discussion of First Quarter Results

Revenue totaled $229.9 million, a 6% increase from $216.4 million in 2013.
Marketing Services revenue of $32.9 million grew 21% driven by higher demand
for our workflow solutions. Security Services revenue of $30.1 million grew
11% driven by increased demand for our DDoS protection services. NPAC Services
revenue of $118.8 million grew 6% driven by an increase in the fixed fee
established under our contracts to provide local number portability services.
Data Services revenue of $48.1 million declined 5% due to lower revenue in
caller identification services.

Operating expense totaled $174.6 million, a 20% increase from $145.6 million
in the first quarter of 2013. This $29.0 million increase was primarily driven
by $6.2 million in advertising and professional fees associated with the NPAC
vendor selection process and $5.0 million in costs for restructuring
initiatives designed to improve efficiencies. In addition, personnel and
personnel-related costs increased $6.8 million and depreciation and
amortization expense increased $3.0million.

As of March 31, 2014, cash and cash equivalents totaled $386.5 million,
compared to $223.3million as of December31,2013. During the quarter, the
company borrowed $175 million under its revolving credit facility. At the end
of the quarter, the company's outstanding debt under its term facilities and
4.5% senior notes was $789.3 million. During the first quarter, the company
purchased approximately 1.2million shares at an average price of $34.85 per
share, for approximately $41.9million.

Business Outlook for 2014

The company affirmed its guidance for revenue and adjusted net income provided
on January 29, 2014:

  *Revenue to range from $945 million to $970 million, or growth of 5% to 8%
  *Adjusted net income to range from $233 million to $243 million, or flat to
    growth of 4%
  *Adjusted earnings per share to range from $3.64 to $3.80, or growth of 3%
    to 8%

Conference Call

As announced on April 10, 2014, 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 800-580-5706
(international callers dial 913-312-0687) and entering PIN 6589335. For those
who cannot listen to the live broadcast, a replay will be available through
11:59p.m. (Eastern Time) Wednesday, April 23, 2014 by dialing 877-870-5176
(international callers dial 858-384-5517) and entering replay PIN 6589335, 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
supplemental information 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 the first real-time provider of cloud-based
information services and data analytics, enabling marketing and IT security
professionals to promote and protect their businesses. With a commitment to
privacy and neutrality, Neustar operates complex data registries and uses its
expertise to deliver actionable, data-driven insights that help clients make
high-value business decisions in real time, one customer interaction at a
time. 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 resulting from network disruptions,
security breaches or other events, an inability to obtain high quality data on
favorable terms or otherwise, 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 ability to complete its realignment efforts with minimal
disruptions; the company's indebtedness and the impact that it may have on the
company's financial and operating activities; the company's ability to incur
additional debt; the variable interest rates applicable under the company's
indebtedness and the effects of changes in those rates; 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 the company’s 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; the
company’s ability to raise additional capital on favorable terms or at all;
and business, regulatory and statutory changes related to the communications
and Internet industries. 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
                                                     March 31,
                                                     2013         2014
                                                     (unaudited)
Revenue                                              $ 216,416     $ 229,897
Operating expense:
Cost of revenue (excluding depreciation and            49,297        58,611
amortization shown separately below)
Sales and marketing                                    42,260        49,991
Research and development                               7,484         7,059
General and administrative                             21,882        26,291
Depreciation and amortization                          24,665        27,640
Restructuring charges                                 2           4,966   
                                                      145,590     174,558 
Income from operations                                 70,826        55,339
Other (expense) income:
Interest and other expense                             (17,562 )     (5,997  )
Interest and other income                             141         95      
Income before income taxes                             53,405        49,437
Provision for income taxes                            19,641      17,754  
Net income                                           $ 33,764     $ 31,683  
Net income per share:
Basic                                                $ 0.51       $ 0.52    
Diluted                                              $ 0.50       $ 0.50    
Weighted average common shares outstanding:
Basic                                                 66,184      61,240  
Diluted                                               67,614      62,753  
                                                                   

                                                          
NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                             
                                                             
                                             December 31,    March 31,
                                             2013            2014
                                             (audited)       (unaudited)
ASSETS
Current assets:
Cash and cash equivalents                    $ 223,309       $ 386,453
Restricted cash                                1,858           1,785
Accounts receivable, net                       152,821         156,660
Unbilled receivables                           10,790          9,306
Notes receivable                               1,008           406
Prepaid expenses and other current assets      23,914          22,297
Deferred costs                                 6,324           5,884
Income taxes receivable                        7,341           —
Deferred tax assets                           8,774         12,640    
Total current assets                           436,139         595,431
Property and equipment, net                    124,285         124,345
Goodwill                                       643,038         650,765
Intangible assets, net                         275,141         266,975
Other assets, long-term                       28,704        27,974    
Total assets                                 $ 1,507,307    $ 1,665,490 
                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                             $ 9,620         $ 10,266
Accrued expenses                               94,457          63,375
Income taxes payable                           —               10,517
Deferred revenue                               54,004          56,508
Notes payable                                  7,972           7,972
Capital lease obligations                      1,894           1,442
Other liabilities                             3,580         3,815     
Total current liabilities                      171,527         153,895
Deferred revenue, long-term                    12,061          12,273
Notes payable, long-term                       608,292         781,299
Capital lease obligations, long-term           2,419           2,131
Deferred tax liabilities, long-term            82,164          83,605
Other liabilities, long-term                  41,270        44,349    
Total liabilities                              917,733         1,077,552
Stockholders’ equity:
Common stock                                   87              86
Additional paid-in capital                     602,796         619,997
Treasury stock                                 (893,852  )     (902,403  )
Accumulated other comprehensive loss           (797      )     (817      )
Retained earnings                             881,340       871,075   
Total stockholders’ equity                    589,574       587,938   
Total liabilities and stockholders’ equity   $ 1,507,307    $ 1,665,490 
                                                             

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 months ended March31,2014 and the year ending December 31, 2014.
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, 2014              December 31,
                                      2013         2014          2014 ^(1)
                                      (in thousands, except per share data)
                                      (unaudited)
Revenue                               $ 216,416    $ 229,897    $  957,500 
                                                                  
Net income                            $ 33,764      $ 31,683      $  150,000
Add: Stock-based compensation           8,957         11,726         63,000
Add: Amortization of acquired           12,372        14,066         61,000
intangible assets
Add: Loss on debt modification and      10,886        —              —
extinguishment ^(2)
Add: Restructuring charges ^(3)         2             4,966          12,000
Add: Acquisition-related costs ^        —             1,580          2,000
(4)
Less: Adjustment for provision for     (11,849 )    (11,613 )     (50,000 )
income taxes ^(5)
Adjusted net income                   $ 54,132     $ 52,408     $  238,000 
Adjusted net income margin ^(6)        25      %    23      %     25      %
Adjusted net income per diluted       $ 0.80       $ 0.84       $  3.75    
share
Weighted average shares outstanding    67,614      62,753       63,500  
- 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.
      Amount represents restructuring charges related to the termination or
(3)   relocation of certain employees and the reduction in or closure of
      leased facilities.
(4)   Amounts represent costs incurred by the company in connection with
      completed acquisitions.
      Adjustment reflects the estimated tax effect of tax-deductible
      adjustments for stock-based compensation expense, amortization of
(5)   acquired intangible assets, loss on debt modification and extinguishment
      and acquisition-related costs, based on the effective tax rate for the
      applicable period.
(6)   Adjusted net income margin is a measure of adjusted net income as a
      percentage of revenue.
      

Contact:

Neustar, Inc.
Investor Relations Contact
Dave Angelicchio, 571-434-3443
InvestorRelations@neustar.biz
or
Media Relations Contact
Nicole Nolte, 571-434-5323
Nicole.Nolte@neustar.biz
 
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