Neustar Announces Results for First Quarter 2010

STERLING, Va., April 28 /PRNewswire-FirstCall/ -- Neustar, Inc. (NYSE: NSR), a provider of essential technology and directory services to its carrier and enterprise customers, today announced results for the quarter ended March 31, 2010 and affirmed its prior guidance for full year 2010 announced on February 10, 2010.

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Summary of First Quarter Results

• Consolidated revenue increased 14% from the first quarter of 2009 to $129.0 million.
• Consolidated net income totaled $25.2 million, compared to $24.4 million from the first quarter of 2009.
• Earnings per diluted share of $0.33, compared to $0.32 per diluted share from the first quarter of 2009.
• EBITDA totaled $52.1 million, compared to $48.0 million from the first quarter of 2009.
• Cash, cash equivalents and short-term investments totaled $354.9 million as of March 31, 2010.

"As consumer adoption of new modes of digital communications continues to accelerate, there is increasing demand for seamless connections across the rapidly growing number of devices and endpoints," said Jeff Ganek, Neustar's chairman and chief executive officer.  "Our first quarter results reflect our success in responding to our customers' needs for innovative solutions associated with the growing complexities of their networks.  For example, we are developing our new digital media directory, which will allow customers to view video programming on any device, at any time, in any place."

Paul Lalljie, Neustar's chief financial officer, added, "Our results for the quarter provide us with solid momentum to meet our full-year guidance targets.  During the quarter, we continued to invest in early-stage growth opportunities to build on our core competencies and to drive future growth.  To keep pace with the ongoing evolution of our business, we have changed our segment disclosures to align the presentation of our results with our two key customer groups – Carrier Services and Enterprise Services."  

Segment Reporting Change

In the first quarter of 2010, the company realigned its operating structure and internal financial reporting by customer type.  This change is a natural evolution of the business as the company integrates its operations around an efficient common infrastructure to provide its customers with global service offerings.  The company is now reporting in two operating segments that reflect this customer-oriented approach and how the company is organized:  Carrier Services and Enterprise Services.  Customers of the Carrier Services segment are comprised primarily of communications service providers, or carriers, and utilize the company's Numbering Services, Order Management Services and IP Services.  Customers of the Enterprise Services segment are comprised primarily of non-carrier, commercial businesses, or enterprises, and utilize the company's Internet Infrastructure Services and Registry Services.

Disclosure of segment results for fiscal years 2007 to 2009, as well as quarterly results for 2009, is available under the Investor Relations tab of the company's website (www.neustar.biz).

Discussion of First Quarter Results

Consolidated revenue totaled $129.0 million, a 14% increase from $113.2 million from the first quarter of 2009.  In particular:

• Carrier Services revenue increased 13% to $99.8 million, due to an established increase in the fixed fee under the company's contracts to provide NPAC services, an increase in revenue from functionality improvements requested by its customers and an increase in revenue from its international LNP solutions.  These revenue increases were partially offset by lower revenue from its order management services; and

• Enterprise Services revenue increased 16% to $29.2 million, primarily due to an increase in revenue from its Internet Infrastructure Services resulting from increased demand from existing and new customers for its expanded DNS service offerings.  Additionally, revenue increased from its Registry Services due to a greater number of domain names under management and common short codes under management.

Consolidated operating expense increased 17% to $87.0 million from $74.4 million for the first quarter of 2009.  The $12.6 million increase was primarily due to increased personnel and personnel-related expense as well as contractor costs to support expansion in the company's operations and new business opportunities.  In particular, the company continued to expand its registry offerings into new markets, such as digital media, resulting in an overall EBITDA margin of 40% for the first quarter of 2010.

Segment contribution, which excludes unallocated indirect operating costs, is as follows:

• Carrier Services segment contribution increased 17% to $86.1 million, primarily driven by an increase in revenue under the company's contracts to provide NPAC services; and

• Enterprise Services segment contribution increased 39% to $12.8 million, primarily due to an increase in revenue from the company's Internet Infrastructure Services.

Cash, cash equivalents and short-term investments totaled $354.9 million as of March 31, 2010, compared to $342.2 million as of December 31, 2009.

Business Outlook for 2010

Based on its first quarter results and the leading indicators of the business, Neustar affirmed its guidance previously provided on February 10, 2010, which called for revenue to range from $520 to $535 million and EBITDA margin to exceed 42%.

Reconciliation of Non-GAAP Financial Measures

In this press release, Neustar presents certain non-GAAP financial data.  To place this data in an appropriate context, the following is a reconciliation of EBITDA to net income for the quarter ended March 31, 2009, the quarter ended March 31, 2010 and the year ended December 31, 2009.  Also provided is a reconciliation of projected EBITDA to estimated net income for the year ending December 31, 2010.

EBITDA, EBITDA per diluted share, EBITDA margin and segment contribution are not measures of financial performance under GAAP and have no standardized measurement prescribed by GAAP.  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.  The company provides the foregoing reconciliation to the most directly comparable GAAP financial measure to allow investors to appropriately consider each non-GAAP financial measure.

Conference Call

As announced on April 14, 2010, 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 site 15 minutes early to register, download and install any necessary audio software.

The conference call is also accessible via telephone by dialing (888) 297-0370 (international callers dial (719) 325-2390).  For those who cannot listen to the live broadcast, a replay will be available through Midnight (Eastern Time) Wednesday, May 5, 2010 by dialing (888) 203-1112 (international callers dial (719) 457-0820) and entering replay PIN 2356814, 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 reclassified historical segment information, 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) solves complex communications challenges and provides market-leading, innovative solutions and directory services to enable trusted communication across networks, applications, and enterprises around the world.  Visit Neustar online 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 2010 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 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; its ability to redeem auction rate securities; 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 Annual Report on Form 10-K for the year ended December 31, 2009 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.

(1)  In the first quarter of 2010, Neustar realigned its operating structure and internal financial reporting by customer type, resulting in two segments: Carrier Services and Enterprise Services.

Carrier Services:

• Numbering Services
• Order Management Services
• IP Services

Enterprise Services:

• Internet Infrastructure Services
• Registry 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 $43.8 million and $56.9 million for the quarters ended March 31, 2009 and 2010, respectively.

SOURCE Neustar, Inc.