Neustar Q2 2014 Results: Revenue up 8% to $237.5 million but net income down 15% to $36.8 million

Neustar, Inc. (NYSE: NSR), today announced results for the quarter ended June 30, 2014. Revenue increased 8% to $237.5 million compared to the 2nd quarter of 2013 but net income decreased 15% to $36.8 million.

Security Services revenue of $34.4 million increased 28% driven by revenue from the acquisition of .CO Internet S.A.S. and increased demand for DDoS protection services.

During the second quarter, the company closed on the acquisition of .CO Internet S.A.S. for total cash consideration of $106.8 million, after taking into account cash acquired of $6.9 million.

Here is the complete report:

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information services and analytics, today announced results for the quarter ended June 30, 2014, and reaffirmed its guidance for 2014.

Results for Second Quarter 2014 Compared to Second Quarter 2013

• Revenue increased 8% to $237.5 million
• Revenue from Marketing Services increased 19% to $35.0 million
• Revenue from Security Services increased 28% to $34.4 million
• Net income decreased 15% to $36.8 million
• Net income per share decreased 6% to $0.61

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

• Adjusted net income increased 1% to $57.6 million, representing a 24% margin
• Adjusted net income per share increased 12% to $0.95

“In the second quarter, we continued to build on and strengthen our position in attractive, high-growth markets in the Information Services and Analytics space,” said Lisa Hook, Neustar’s President and Chief Executive Officer. “This quarter’s results reflect the ongoing benefits of a thoughtful strategy, disciplined investments and focused execution. We are confident that we will sustain our momentum and drive value for our shareholders going forward.”

Paul Lalljie, Neustar’s Chief Financial Officer, added, “Our Information Services business continues to deliver strong results. In particular, our Marketing and Security Services, when combined, delivered year-over-year revenue growth of 23% and are approaching one-third of total revenue. Led by this strong momentum, we are confident in our outlook for the year. While we are reaffirming our full-year revenue and adjusted net income guidance, we will be targeting the top end of the revenue range.”

Discussion of Second Quarter Results

Revenue totaled $237.5 million, an 8% increase from $220.4 million in 2013. Marketing Services revenue of $35.0 million grew 19% driven by higher demand for the company’s workflow solutions. Security Services revenue of $34.4 million increased 28% driven by revenue from the acquisition of .CO Internet S.A.S. and increased demand for DDoS protection services. NPAC Services revenue of $118.7 million grew 6% driven by an increase in the fixed fee established under the contracts to provide local number portability services. Data Services revenue of $49.4 million declined 6% due to lower revenue from caller identification services and common short codes.

Operating expense totaled $172.7 million, a 19% increase from $145.6 million in the second quarter of 2013. This $27.1 million increase was primarily driven by the addition of $11.9 million in operating expense from the company’s recent acquisitions, as it continues to diversify and strengthen its information services and analytics portfolio. Of the remaining $15.2 million increase, personnel and personnel-related expense increased $3.5 million driven by additional stock-based compensation. In addition, costs related to information technology and systems increased $3.4 million, and professional and marketing expenses associated with the NPAC vendor selection process increased $3.3 million.

As of June 30, 2014, cash and cash equivalents totaled $245.9 million, compared to $223.3 million as of December 31, 2013. At June 30, 2014, the company’s outstanding debt under its term facilities and 4.5% senior notes was $787.3 million. During the second quarter, the company closed on the acquisition of .CO Internet S.A.S. for total cash consideration of $106.8 million, after taking into account cash acquired of $6.9 million. In addition, the company purchased approximately 3.7 million shares at an average price of $26.48 per share, for approximately $99.1 million.

Business Outlook for 2014

The company reaffirmed its revenue and adjusted net income guidance 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 4% growth, and on a per share basis $3.88 to $4.05, or growth of 10% to 15%

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.