STERLING, Va.--(BUSINESS WIRE)--Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, entertainment, advertising and marketing industries, today announced results for the quarter and year ended December 31, 2011 and provided guidance for 2012.
Summary of Consolidated Fourth Quarter Results Compared to Fourth Quarter of 2010
- Revenue increased 27% to $174.2 million
- Income from continuing operations totaled $18.7 million, or $0.26 per diluted share
- Adjusted net income from continuing operations increased 7% to $37.0 million, representing a margin of 21%
- Adjusted net income from continuing operations per diluted share increased 11% to $0.51
Summary of Consolidated 2011 Results Compared to 2010
- Revenue increased 19% to $620.5 million
- Income from continuing operations totaled $123.6 million, or $1.66 per diluted share
- Adjusted net income from continuing operations increased 16% to $159.0 million, representing a margin of 26%
- Adjusted net income from continuing operations per diluted share increased 18% to $2.13
- Share repurchases totaled $324.3 million or 10.1 million shares
“Neustar made significant progress across the board in 2011, from our financial performance to implementing our strategies through both organic and inorganic successes,” said Lisa Hook, Neustar’s president and chief executive officer. “We continued to deliver strong revenue growth, margins and cash flow, while increasing our scale and strengthening our position as a neutral and trusted provider of services to an expanding number of customers and industries. Our actions in 2011 have enhanced our ability to generate profitability and shareholder value.”
Paul Lalljie, Neustar’s chief financial officer added, “Neustar’s acquisition of TARGUSinfo was the culmination of a successful year in which we delivered double-digit revenue growth with strong margins. We improved our capital structure by securing $600 million of low-cost debt and repurchasing 10.1 million shares of our common stock. Our 2012 guidance reflects our strong momentum and the ongoing integration of TARGUSinfo as we leverage our platforms to achieve long-term revenue growth.”
Business Outlook for 2012
- Revenue to range from $810 million to $830 million
- Adjusted net income from continuing operations to range from $178 million to $190 million
- Adjusted net income from continuing operations per diluted share to range from $2.66 to $2.84
Discussion of Fourth Quarter and Full-Year 2011 Results
Fourth Quarter Revenue
Consolidated revenue totaled $174.2 million, a 27% increase from $136.9 million in the fourth quarter of 2010. This increase consisted of growth in Carrier Services and Enterprise Services and the addition of revenue from the Company’s Information Services business segment.
- Carrier Services revenue totaled $113.3 million, a 14% increase from $99.7 million in 2010. This increase was primarily due to a $10.9 million increase in revenue under the Company's contracts to provide NPAC Services. Additionally, Order Management Services revenue increased $3.5 million due to greater customer usage and the addition of licensed order management services;
- Enterprise Services revenue totaled $39.7 million, a 7% increase from $37.1 million in 2010. Registry Services increased $1.4 million due to the number of common short codes under management, and Internet Infrastructure Services revenue increased $1.2 million due to the expansion of DNS solutions, including IP geolocation services; and
- Information Services generated revenue of $21.2 million from the date of acquisition through the end of the year.
Full-Year Revenue
Consolidated revenue totaled $620.5 million, a 19% increase from $520.9 million in 2010. This increase consisted of growth in Carrier Services and Enterprise Services and the addition of revenue from the Company’s Information Services business segment.
- Carrier Services revenue totaled $447.9 million, a 14% increase from $391.8 million in 2010. This increase was primarily due to a $43.5 million increase in revenue under the Company's contracts to provide NPAC Services. Additionally, Order Management Services revenue increased $16.0 million due to greater customer usage and the addition of licensed order management services. These increases were partially offset by a decrease in revenue from customer requests for functionality improvements;
- Enterprise Services revenue totaled $151.4 million, a 17% increase from $129.1 million in 2010. Internet Infrastructure Services increased $13.9 million due to the expansion of DNS solutions, including IP geolocation services. Registry Services increased $8.4 million due to the number of common short codes under management; and
- Information Services generated revenues of $21.2 million from the date of acquisition through the end of the year.
Operating expense for the fourth quarter totaled $134.8 million, a 59% increase from $84.7 million in 2010. This increase in operating expense was primarily driven by the impact of the Company’s two acquisitions completed in 2011. In particular, total personnel and personnel-related expense increased $26.9 million due primarily to a $5.0 million increase in stock-based compensation and additional costs associated with an increased number of employees resulting from acquisitions completed in 2011. Total contractor and professional fees increased $13.9 million, primarily due to acquisition-related costs and expenses associated with the Company’s tender offer. In addition, depreciation and amortization increased $8.2 million related to capital asset additions to support the Company’s expanded service offerings and acquired intangible assets.
Operating expense for 2011 totaled $411.4 million, a 31% increase from $315.1 million in 2010. This increase in operating expense was driven by the impact of the Company’s two acquisitions completed in 2011. In particular, total personnel and personnel-related expense increased $49.4 million due in part to a $10.4 million increase in stock-based compensation and increased costs associated with the addition of nearly 500 employees resulting from acquisitions completed in 2011. Total contractor and professional fees increased $22.5 million, primarily due to an increase in acquisition-related costs and expenses associated with the Company’s tender offer. In addition, depreciation and amortization increased $13.3 million related to capital asset additions to support the Company’s expanded service offerings and acquired intangible assets.
Cash, cash equivalents and investments totaled $135.3 million as of December 31, 2011, a decrease of $247.1 million from $382.4 million as of December 31, 2010. This decrease was primarily due to the acquisitions of TARGUSinfo and certain numbering solutions assets from Evolving Systems. In addition, the Company repurchased 10.1 million shares for a total of $324.3 million. These uses of cash were partially offset by proceeds from the Company’s $600 million senior secured term loan and cash generated from operations.
Conference Call
As announced on January 13, 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). 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) 798-2796 (international callers dial (617) 614-6204) and entering PIN 70950646. For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Thursday, February 9, 2012 by dialing (888) 286-8010 (international callers dial (617) 801-6888) and entering replay PIN 44985569, 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, 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, entertainment, advertising and marketing industries throughout the world. Neustar applies its advanced, secure technologies in routing, addressing and authentication to its customers’ data to help them identify new revenue opportunities, network efficiencies, cyber security and fraud protection measures. 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, the risks and uncertainties arising from the difficulties with the integration process or the realization of the benefits of the TARGUSinfo acquisition; 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 |
Year Ended December 31, |
|||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
(unaudited) | (audited) | (unaudited) | ||||||||||||||
Revenue: | ||||||||||||||||
Carrier Services | $ | 99,713 | $ | 113,290 | $ | 391,762 | $ | 447,894 | ||||||||
Enterprise Services | 37,149 | 39,719 | 129,104 | 151,390 | ||||||||||||
Information Services | – | 21,171 | – | 21,171 | ||||||||||||
Total revenue | 136,862 | 174,180 | 520,866 | 620,455 | ||||||||||||
Operating expense: | ||||||||||||||||
Cost of revenue (excluding depreciation and | ||||||||||||||||
amortization shown separately below) | 29,704 | 41,329 | 111,282 | 137,992 | ||||||||||||
Sales and marketing | 21,677 | 33,580 | 86,363 | 109,855 | ||||||||||||
Research and development | 3,132 | 6,326 | 13,780 | 17,509 | ||||||||||||
General and administrative | 17,412 | 33,193 | 65,496 | 96,317 | ||||||||||||
Depreciation and amortization | 9,036 | 17,191 | 32,861 | 46,209 | ||||||||||||
Restructuring charges | 3,772 | 3,162 | 5,361 | 3,549 | ||||||||||||
84,733 | 134,781 | 315,143 | 411,431 | |||||||||||||
Income from operations | 52,129 | 39,399 | 205,723 | 209,024 | ||||||||||||
Other (expense) income: | ||||||||||||||||
Interest and other expense | (153 | ) | (5,131 | ) | (6,995 | ) | (6,279 | ) | ||||||||
Interest and other income | 94 | 529 | 7,582 | 1,966 | ||||||||||||
Income from continuing operations before income taxes | 52,070 | 34,797 | 206,310 | 204,711 | ||||||||||||
Provision for income taxes, continuing operations | 20,712 | 16,077 | 82,282 | 81,137 | ||||||||||||
Income from continuing operations | 31,358 | 18,720 | 124,028 | 123,574 | ||||||||||||
(Loss) income from discontinued operations, net of tax | (8,873 | ) | – | (17,819 | ) | 37,249 | ||||||||||
Net income | $ | 22,485 | $ | 18,720 | $ | 106,209 | $ | 160,823 | ||||||||
Basic net income (loss) per common share: | ||||||||||||||||
Continuing operations | $ | 0.42 | $ | 0.26 | $ | 1.66 | $ | 1.69 | ||||||||
Discontinued operations | (0.12 | ) | – | (0.24 | ) | 0.51 | ||||||||||
Basic net income per common share | $ | 0.30 | $ | 0.26 | $ | 1.42 | $ | 2.20 | ||||||||
Diluted net income (loss) per common share: | ||||||||||||||||
Continuing operations | $ | 0.42 | $ | 0.26 | $ | 1.63 | $ | 1.66 | ||||||||
Discontinued operations | (0.12 | ) | – | (0.23 | ) | 0.50 | ||||||||||
Diluted net income per common share | $ | 0.30 | $ | 0.26 | $ | 1.40 | $ | 2.16 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 73,804 | 70,945 | 74,555 | 72,974 | ||||||||||||
Diluted | 75,458 | 72,865 | 76,065 | 74,496 | ||||||||||||
NEUSTAR, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
December 31, |
December 31, |
|||||||
(audited) | (unaudited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and short-term investments | $ |
345,372 |
|
$ |
132,782 |
|
||
Restricted cash | 556 | 10,251 | ||||||
Accounts and unbilled receivables, net | 89,438 | 111,825 | ||||||
Prepaid expenses and other current assets | 19,213 | 40,674 | ||||||
Income taxes receivable | − | 37,599 | ||||||
Deferred tax assets | 6,146 | 6,264 | ||||||
Total current assets | 460,725 | 339,395 | ||||||
Long-term investments | 37,009 | 2,506 | ||||||
Property and equipment, net | 74,296 | 100,102 | ||||||
Goodwill and intangible assets, net | 143,625 | 913,419 | ||||||
Other assets, long-term | 8,082 | 27,216 | ||||||
Deferred tax assets, long-term | 10,137 | − | ||||||
Total assets | $ | 733,874 | $ | 1,382,638 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 61,690 | $ | 86,719 | ||||
Deferred revenue | 31,751 | 41,080 | ||||||
Note payable and capital lease obligations | 6,325 | 7,921 | ||||||
Accrued restructuring | 4,703 | 4,361 | ||||||
Other liabilities | 11,035 | 5,317 | ||||||
Total current liabilities | 115,504 | 145,398 | ||||||
Deferred revenue, long-term | 10,578 | 10,363 | ||||||
Note payable and capital lease obligations, long-term | 4,076 | 586,727 | ||||||
Accrued restructuring, long-term | 315 | − | ||||||
Deferred tax liabilities, long-term | − | 121,237 | ||||||
Other liabilities, long-term | 7,289 | 16,279 | ||||||
Total liabilities | 137,762 | 880,004 | ||||||
Total stockholders' equity | 596,112 | 502,634 | ||||||
Total liabilities and stockholders' equity | $ | 733,874 | $ | 1,382,638 | ||||
NEUSTAR, INC. | ||||||||||||||||
SEGMENT REVENUE AND CONTRIBUTION | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
(unaudited) | (audited) | (unaudited) | ||||||||||||||
Revenue: (1)(3) | ||||||||||||||||
Carrier Services | $ |
99,713 |
|
$ |
113,290 |
|
$ |
391,762 |
|
$ |
447,894 |
|
||||
Enterprise Services | 37,149 | 39,719 | 129,104 | 151,390 | ||||||||||||
Information Services | – | 21,171 | – | 21,171 | ||||||||||||
Total revenue | $ | 136,862 | $ | 174,180 | $ | 520,866 | $ | 620,455 | ||||||||
Segment contribution:(2)(3) | ||||||||||||||||
Carrier Services | $ | 90,530 | $ | 97,549 | $ | 352,317 | $ | 391,000 | ||||||||
Enterprise Services | 17,502 | 17,460 | 59,284 | 65,080 | ||||||||||||
Information Services | – | 12,583 | – | 12,583 | ||||||||||||
Total segment contribution | $ | 108,032 | $ | 127,592 | $ | 411,601 | $ | 468,663 |
(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 $55.9 million and $88.2 million for the three months ended December 31, 2010 and 2011, respectively, and totaled $205.9 million and $259.6 million for the year ended December 31, 2010 and 2011, respectively. | |
(3) | The financial information above reflects the reclassification of the Company’s Converged Messaging Services business to discontinued operations for all periods presented. |
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 twelve months ended December 31, 2010 and 2011 and the year ending December 31, 2012 (projected). The Company plans to use this non-GAAP profitability measure as a measure of its performance in 2012. Also provided is a reconciliation of income from continuing operations to adjusted EBITDA from continuing operations.
These reconciliations allow 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 December 31, |
Year Ended December 31, |
Year Ending December 31, |
||||||||||||||||||
2010 | 2011 |
2010(1) |
2011 |
2012 (2) |
||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||||||
Revenue | $ | 136,862 | $ | 174,180 | $ | 520,866 | $ | 620,455 | $ | 820,000 | ||||||||||
Income from continuing operations | $ | 31,358 | $ | 18,720 | $ | 124,028 | $ | 123,574 | $ | 138,400 | ||||||||||
Add: Stock-based compensation | 4,034 | 9,015 | 17,045 | 27,491 | 26,000 | |||||||||||||||
Add: Amortization of acquired intangible assets | 1,602 | 8,152 | 4,753 | 12,107 | 50,000 | |||||||||||||||
Add: TARGUSinfo acquisition-related costs (3) | − | 9,561 | − | 11,602 | − | |||||||||||||||
Add: Tender offer costs (4) | − | 2,413 | − | 2,413 | − | |||||||||||||||
Add: Adjustment for provision for income taxes (5) | (2,242 | ) | (10,821 | ) | (8,694 | ) | (18,173 | ) | (30,400 | ) | ||||||||||
Adjusted net income from continuing operations | $ | 34,752 | $ | 37,040 | $ | 137,132 | $ | 159,014 | $ | 184,000 | ||||||||||
Adjusted net income margin from continuing operations (6) |
25% |
|
21% |
|
26% |
|
26% |
|
22% |
|
||||||||||
Adjusted net income from continuing operations per diluted share | $ | 0.46 | $ | 0.51 | $ | 1.80 | $ | 2.13 | $ | 2.75 | ||||||||||
Weighted average diluted common shares outstanding | 75,458 | 72,865 | 76,065 | 74,496 | 67,000 |
(1) |
The amounts expressed in this column are derived from the Company’s audited consolidated financial statements for the year ended December 31, 2010. Results related to the Company’s Converged Messaging Services business for prior periods have been reclassified to discontinued operations. |
|
(2) |
The amounts expressed in this column are current estimates as of the date of this press release of the results for the full year. This reconciliation is based on the midpoint of the revenue guidance. |
|
(3) |
Amounts represent costs incurred by the Company in connection with its acquisition of Targus Information Corporation. |
|
(4) |
Amounts represent costs incurred by the Company to repurchase 7.2 million shares of its Class A common stock through a modified “Dutch auction” tender offer which closed on December 8, 2011. These costs are not deductible for income tax purposes. |
|
(5) |
Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense, amortization of acquired intangible assets and approximately $6.3 million of tax deductible TARGUSinfo acquisition-related costs based on the effective tax rate for income from continuing operations for the applicable period. |
|
(6) |
Adjusted net income margin is a measure of adjusted net income from continuing operations as a percentage of revenue. |
Reconciliation of Income from Continuing Operations to Adjusted EBITDA from Continuing Operations | ||||||||||||||||
Three Months Ended |
Year Ended December 31, |
|||||||||||||||
2010 | 2011 |
2010(1) |
2011 | |||||||||||||
(in thousands, except per share data)
(unaudited) |
||||||||||||||||
Revenue | $ | 136,862 | $ | 174,180 | $ | 520,866 | $ | 620,455 | ||||||||
Income from continuing operations | $ | 31,358 | $ | 18,720 | $ | 124,028 | $ | 123,574 | ||||||||
Add: TARGUSinfo acquisition-related costs (2) | – | 9,561 | – | 11,602 | ||||||||||||
Add: Tender offer costs (3) | – | 2,413 | – | 2,413 | ||||||||||||
Add: Amortization of acquired intangible assets | 1,602 | 8,152 | 4,753 | 12,107 | ||||||||||||
Add: Adjustment for provision for income taxes (4) | (637 | ) | (6,656 | ) | (1,896 | ) | (7,277 | ) | ||||||||
Adjusted income from continuing operations | 32,323 | 32,190 | 126,885 | 142,419 | ||||||||||||
Add: Depreciation and amortization (5) | 7,434 | 9,039 | 28,108 | 34,102 | ||||||||||||
Add: Other expense (income) | 59 | 4,602 | (587 | ) | 4,313 | |||||||||||
Add: Stock-based compensation | 4,034 | 9,015 | 17,045 | 27,491 | ||||||||||||
Add: Provision for income taxes, continuing operations (6) | 21,349 | 22,733 | 84,178 | 88,414 | ||||||||||||
Adjusted EBITDA from continuing operations | $ | 65,199 | $ | 77,579 | $ | 255,629 | $ | 296,739 | ||||||||
Adjusted EBITDA margin from continuing operations (7) |
48% |
|
45% |
|
49% |
|
48% |
|
||||||||
Adjusted income from continuing operations per diluted share | $ | 0.43 | $ | 0.44 | $ | 1.67 | $ | 1.91 | ||||||||
Weighted average diluted common shares outstanding | 75,458 | 72,865 | 76,065 | 74,496 |
(1) |
The amounts expressed in this column are derived from the Company’s audited consolidated financial statements for the year ended December 31, 2010. Results related to the Company’s Converged Messaging Services business for prior periods have been reclassified to discontinued operations. |
(2) |
Amounts represent costs incurred by the Company in connection with its acquisition of Targus Information Corporation. |
(3) |
Amounts represent costs incurred by the Company to repurchase 7.2 million shares of its Class A common stock through a modified “Dutch auction” tender offer which closed on December 8, 2011. These costs are not deductible for income tax purposes. |
(4) |
Adjustment reflects the estimated tax effect of adjustments for approximately $6.3 million of tax deductible TARGUSinfo acquisition-related costs and the amortization of acquired intangible assets based on the effective tax rate for income taxes from continuing operations for the applicable period. |
(5) |
Adjustment represents depreciation and amortization expense, excluding amortization of acquired intangible assets. |
(6) |
Amounts represent the provision of income taxes included in adjusted income from continuing operations and when combined with the adjustment to provision for income taxes equals the recorded provision for income taxes during the periods presented. |
(7) |
Adjusted EBITDA margin is a measure of Adjusted EBITDA as a percentage of revenue. |