Neustar 2012 Results: Revenue increased 34% and Income increased 26%

Neustar, Inc. (NYSE: NSR), the .biz .us and .co registry among other things, announced results for the quarter and year ended December 31, 2012 and provided guidance for 2013. Revenue increased 34% to $831.4 million in 2012. Income from continuing operations increased 26% to $156.1 million.

Here is the press release:

STERLING, Va., Feb. 5, 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 and year ended December 31, 2012 and provided guidance for 2013.

Summary of Fourth Quarter Results Compared to Fourth Quarter of 2011

·         Revenue increased 23% to $214.2 million

·         Income from continuing operations increased 102% to $37.8 million or $0.56 per share

·         Adjusted net income increased 37% to $50.7 million, representing a margin of 24%

·         Adjusted earnings per share increased 47% to $0.75

·         Adjusted EBITDA was $101.3 million compared to $78.5 million

Summary of 2012 Results Compared to 2011

·         Revenue increased 34% to $831.4 million

·         Income from continuing operations increased 26% to $156.1 million or $2.30 per share

·         Adjusted net income increased 30% to $206.4 million, representing a margin of 25%

·         Adjusted earnings per share increased 43% to $3.04

·         Adjusted EBITDA was $398.2 million compared to $298.7 million

“We successfully executed on our priorities in 2012.  We exceeded our financial performance targets, we successfully integrated a major acquisition that furthered our transition into information and analytics, and we made strong progress in instilling a culture of ownership,” said Lisa Hook, Neustar’s president and chief executive officer.  “We look forward to continuing to capitalize on the opportunities we see in the market and renewing the NPAC contract.”

Paul Lalljie, Neustar’s chief financial officer added, “Our 2012 operating results demonstrate strong execution across all of our business segments while integrating a significant acquisition.  In addition, we repurchased nearly $100 million of our common stock and improved our financial flexibility through our recently executed credit facility and notes offering.  Our guidance for 2013 reflects the momentum from 2012, operating leverage, and the impact of our new debt structure.”

Business Outlook for 2013

·         Revenue to range from $895 million to $915 million or growth of 8% to 10%

·         Adjusted net income to range from $220 to $230 million or growth of 7% to 11%.  This growth rate was influenced by discrete tax benefits totaling $6.8 million which resulted in higher adjusted net income in 2012.  On a per share basis, adjusted net income is expected to range from $3.28 to $3.43

Discussion of Fourth Quarter and Full-Year 2012 Results

Fourth Quarter Revenue

Consolidated revenue totaled $214.2 million, a 23% increase from $174.2 million in the fourth quarter of 2011.  In particular:

·         Carrier Services revenue totaled $126.2 million, an 11% increase from $113.3 million in 2011.  This increase was primarily due to an $11.2 million increase in NPAC Services revenue;

·         Enterprise Services revenue totaled $45.2 million, a 14% increase from $39.7 million in 2011.  This increase was due to higher revenue in both Internet Infrastructure Services and Registry Services; and

·         Information Services generated revenue of $42.8 million in the fourth quarter as compared to revenue of $21.2 million from the November 8, 2011 acquisition date through the end of the year.

Full-Year Revenue

Consolidated revenue totaled $831.4 million, a 34% increase from $620.5 million in 2011.  In particular:

·         Carrier Services revenue totaled $502.1 million, a 12% increase from $447.9 million in 2011.  This increase was primarily due to a $43.8 million increase in NPAC Services revenue;

·         Enterprise Services revenue totaled $170.4 million, a 13% increase from $151.4 million in 2011.  This increase was due to higher revenue in both Internet Infrastructure Services and Registry Services; and

·         Information Services generated revenues of $158.9 million for 2012.  Revenue from Information Services was $21.2 million from the November 8, 2011 acquisition date through the end of 2011.

Operating expense for the fourth quarter totaled $144.9 million, a 7% increase from $134.8 million in 2011.  This $10.1 million increase was driven by incremental operating expense of $19.2 million from the acquisition of our Information Services segment.  This increase of $19.2 million was partially offset by $9.6 million of acquisition costs incurred in the 2011 quarter.

Operating expense for 2012 totaled $554.7 million, an increase of 35% or $143.3 million from $411.4 million in 2011.  This increase was driven by incremental operating costs of $130.4 million from the acquisitions completed in 2011. This increase of $130.4 million was partially offset by expenses incurred in 2011 driven by acquisition costs of $11.6 million.  The remaining $24.5 million increase represents a growth of 6% in the Company’s operating expense.

For 2012, adjusted net income totaled $206.4 million, including the impact of discrete tax benefits totaling $6.8 million, primarily associated with a domestic production activities deduction.  Excluding the impact of these discrete tax benefits, our effective tax rate was approximately 38.6%.

Cash, cash equivalents and investments totaled $343.9 million as of December 31, 2012, an increase of $208.6 million from December 31, 2011.

As of December 31, 2012, the Company’s outstanding debt under its 2011 credit facility was $592.5 million.  On January 22, 2013, the Company refinanced this credit facility.  In particular, the Company issued $300 million of 4.5% senior notes that mature in 2023.  In addition, the Company completed a $525 million credit facility that includes a $325 million term loan A and a $200 million revolver.  The interest rate for the term loan A and the revolver is leverage-based and ranges from LIBOR plus 1.50% to LIBOR plus 1.75%.  At the Company’s current leverage, the applicable interest rate is LIBOR plus 1.50%.  The Company will record a non-operating expense of approximately $11.0 million in the first quarter of 2013 related to the modification and extinguishment of its 2011 credit facility.