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Form 8-K NEUSTAR INC For: Oct 30

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October 30, 2014 4:03 PM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549�
�
FORM 8-K
�
�

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
�
Date of Report (Date of earliest event reported) October�30, 2014
�
NeuStar, Inc.
(Exact name of registrant as specified in its charter)
�
�
�
Delaware
�
001-32548
�
52-2141938
(State or other jurisdiction
�
(Commission
�
(IRS Employer
Of incorporation)
�
File Number)
�
Identification No.)

21575 Ridgetop Circle
Sterling, Virginia
�
20166
(Address of principal executive offices)
�
(Zip Code)
(571) 434-5400
(Registrant's telephone number, including area code.)
N/A
(Former name and former address, if changed since last report.)
�
�
�
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[]����Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[]����Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[]����Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[]����Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02. Results of Operations and Financial Condition.
On October�30, 2014, NeuStar, Inc. (the Company or Neustar) announced its financial results for the third quarter of 2014. A copy of the press release containing the announcement is included as Exhibit�99.1 to this Current Report and is incorporated herein by reference.
Item�7.01. Regulation�FD Disclosure.
On October�30, 2014, Neustar issued a press release announcing its financial results for the third quarter of 2014. A copy of the press release containing the announcement is included as Exhibit�99.1 to this Current Report and is incorporated herein by reference.
As set forth in this press release, Neustar will conduct an investor conference call to discuss the Company's results today at 4:30 p.m (Eastern Time). A replay of this call will be available to all those who cannot listen to the live broadcast.
The information in this report on Form 8-K under Items 2.02 and 7.01, including Exhibit 99.1 shall not be deemed filed for purposes of Section�18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
The following is attached as an exhibit to this Current Report on Form 8-K:
Exhibit
Number
�
Description
�
�
�
99.1
�
Earnings Release of Neustar, dated October 30, 2014.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
�
�
�
�
�
�
�
�
�
NeuStar, Inc.
�
�
�
�
�
Date:
October�30, 2014
�
By:
�
/s/ Paul S. Lalljie
�
�
�
Name: Paul S. Lalljie
�
�
�
Title: Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)







EXHIBIT INDEX
Exhibit
Number
�
Description
�
�
�
99.1
�
Earnings Release of Neustar, dated October 30, 2014.





Exhibit 99.1

Neustar Reports Results for Third Quarter 2014

STERLING, VA, October�30, 2014  Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information services and analytics, today announced results for the quarter ended September�30, 2014, and updated its guidance for 2014.
Results for Third Quarter 2014 Compared to Third Quarter 2013
"
Revenue increased 7% to $243.9 million
"
Revenue from Marketing Services increased 21% to $37.5 million
"
Revenue from Security Services increased 25% to $35.9 million, including $4.4 million in revenue from the acquisition of .CO Internet S.A.S.
"
Net income increased 1% to $48.2 million, which includes a net benefit of $9.8 million in discrete income tax items
"
Net income per share increased 15% to $0.84
Non-GAAP Results for Third Quarter 2014 Compared to Third Quarter 2013
"
Adjusted net income increased 25% to $78.1 million, which includes a net benefit of $9.8 million in discrete income tax items
"
Adjusted net income per share increased 44% to $1.37
During the third quarter, we continued to deliver consistent, strong results while broadening the scope of our suite of services and forming important strategic partnerships that deepen our capabilities in Information Services and Analytics, said Lisa Hook, Neustars President and Chief Executive Officer.� We remain focused on expanding our service offerings in high-growth markets, increasing shareholder value, and competing vigorously for the NPAC contract.
Paul Lalljie, Neustars Chief Financial Officer, added, In the third quarter, we delivered year-over-year revenue growth of over 20% in both Marketing and Security Services, while making investments to further our strategy. We are updating our full-year guidance given our leading indicators, results to date and visibility into the next quarter.
Discussion of Third Quarter Results
Revenue totaled $243.9 million, a 7% increase from $227.6 million in 2013. Marketing Services revenue of $37.5 million grew 21% driven by higher demand for the company's workflow solutions. Security Services revenue of $35.9 million grew 25% due to 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 $51.8 million declined 8% due to lower revenue from caller identification services.




Operating expense totaled $177.1 million, a 20% increase from $147.2 million in the third quarter of 2013. This $29.8 million increase included the addition of $12.4 million in operating expense from the companys recent acquisitions. Of the remaining $17.4 million, personnel and personnel-related expense increased $13.9 million driven primarily by stock-based compensation. In addition, professional fees and marketing expenses associated with the NPAC vendor selection process increased $4.4 million.
As of September 30, 2014, cash and cash equivalents totaled $244.3 million, compared to $223.3�million as of December�31,�2013. At September 30, 2014, the company's outstanding debt under its term facilities and senior notes was $785.3 million. During the third quarter, the company purchased approximately 2.1�million shares at an average price of $27.79 per share, for approximately $58.8�million. In September, the company completed its $200�million share repurchase plan announced on January 29, 2014.
Business Outlook for 2014
The company updated its guidance:
"
Revenue range increased to $955 million to $970 million, or growth of 6% to 8%, from $945 million to $970 million
"
Adjusted net income range increased to $245 million to $255 million, or growth of 5% to 9%, from $233 million to $243 million
"
On a per share basis, adjusted net income range increased to $4.08 to $4.25, or growth of 16% to 20%, from $3.88 to $4.05
Conference Call
As announced on October 20, 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 888-204-4485 (international callers dial 913-981-5552) and entering PIN 3085723.� For those who cannot listen to the live broadcast, a replay will be available through 11:59�p.m. (Eastern Time) Thursday, November 6, 2014 by dialing 877-870-5176 (international callers dial 858-384-5517) and entering PIN 3085723, 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 investors; 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. The supplemental information includes reconciliations of certain non-GAAP measures to their most directly comparable GAAP measures. These non-GAAP measures 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 and, beliefs about its future results, such as its guidance regarding future 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, 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 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, including its contracts to serve as the Local Number Portability Administrator; the financial covenants in the company's secured credit facility and their impact on the company's financial and business operations; 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 effectiveness of the company's restructuring initiatives in improving efficiencies; 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 companys 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 companys ability to raise additional capital on favorable terms or at all; business, regulatory and statutory changes related to the communications and Internet industries; and the impacts on the company of any litigation, arbitration, investigation or other similar proceeding.� 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�
�September 30,
�
Nine Months Ended�
�September 30,
�
2013
�
2014
�
2013
�
2014
�
(unaudited)
Revenue
$
227,633

�
$
243,859

�
$
664,399

�
$
711,213

Operating expense:
�
�
�
�
�
�
�
Cost of revenue (excluding depreciation and amortization shown separately below)
51,434

�
62,801

�
150,950

�
182,256

Sales and marketing
40,253

�
47,937

�
124,468

�
146,565

Research and development
7,196

�
7,266

�
22,296

�
21,257

General and administrative
23,751

�
27,702

�
66,757

�
80,001

Depreciation and amortization
24,586

�
29,999

�
73,941

�
87,725

Restructuring charges


�
1,355

�
2

�
6,521

�
147,220

�
177,060

�
438,414

�
524,325

Income from operations
80,413

�
66,799

�
225,985

�
186,888

Other (expense) income:
�
�
�
�
�
�
�
Interest and other expense
(5,496
)
�
(6,270
)
�
(28,851
)
�
(19,537
)
Interest and other income
64

�
32

�
292

�
290

Income before income taxes
74,981

�
60,561

�
197,426

�
167,641

Provision for income taxes
27,442

�
12,388

�
72,725

�
50,938

Net income
$
47,539

�
$
48,173

�
$
124,701

�
$
116,703

Net income per share:
�
�
�
�
�
�
�
Basic
$
0.74

�
$
0.87

�
$
1.91

�
$
1.99

Diluted
$
0.73

�
$
0.84

�
$
1.87

�
$
1.94

Weighted average common shares outstanding:
�
�
�
�
�
�
�
Basic
63,978

�
55,494

�
65,223

�
58,548

Diluted
65,510

�
57,171

�
66,713

�
60,050






NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
�
December�31,
2013
�
September�30,
2014
�
(audited)
�
(unaudited)
ASSETS
Current assets:
�
�
�
Cash and cash equivalents
$
223,309

�
$
244,323

Restricted cash
1,858

�
2,207

Accounts receivable, net
152,821

�
158,043

Unbilled receivables
10,790

�
10,552

Notes receivable
1,008

�


Prepaid expenses and other current assets
23,914

�
21,504

Deferred costs
6,324

�
6,395

Income taxes receivable
7,328

�
3,647

Deferred tax assets
8,532

�
11,580

Total current assets
435,884

�
458,251

Property and equipment, net
124,285

�
151,498

Goodwill
641,404

�
685,712

Intangible assets, net
275,141

�
318,579

Other assets, long-term
28,704

�
25,154

Total assets
$
1,505,418

�
$
1,639,194

�
�
�
�
LIABILITIES AND STOCKHOLDERS EQUITY
�
�
�
Current liabilities:
�
�
�
Accounts payable
$
9,620

�
$
9,327

Accrued expenses
94,457

�
84,182

Deferred revenue
54,004

�
63,512

Notes payable
7,972

�
7,972

Capital lease obligations
1,894

�
3,054

Other liabilities
3,580

�
4,990

Total current liabilities
171,527

�
173,037

Deferred revenue, long-term
12,061

�
15,486

Notes payable, long-term
608,292

�
777,311

Capital lease obligations, long-term
2,419

�
5,891

Deferred tax liabilities, long-term
80,275

�
50,246

Other liabilities, long-term
41,270

�
64,987

Total liabilities
915,844

�
1,086,958

Stockholders equity:
�
�
�
Common stock
87

�
81

Additional paid-in capital
602,796

�
655,525

Treasury stock
(893,852
)
�
(899,881
)
Accumulated other comprehensive loss
(797
)
�
(1,678
)
Retained earnings
881,340

�
798,189

Total stockholders equity
589,574

�
552,236

Total liabilities and stockholders equity
$
1,505,418

�
$
1,639,194





Reconciliation of Non-GAAP Financial Measures
In this press release and in other 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 and nine months ended September 30,�2013 and 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 results to prior periods, as well as against the performance of other companies.

�
Three Months Ended
September 30,
�
Nine Months Ended�
�September 30,
�
Year Ending
December 31,
�
2013
�
2014
�
2013
�
2014
�
2014�(1)
�
(in thousands, except per share data)
(unaudited)
Revenue
$
227,633

�
$
243,859

�
$
664,399

�
$
711,213

�
$
962,500

�
�
�
�
�
�
�
�
�
�
Net income
$
47,539

�
$
48,173

�
$
124,701

�
$
116,703

�
$
158,000

Add: Stock-based compensation
9,663

�
20,007

�
27,675

�
47,292

�
63,000

Add: Amortization of acquired intangible assets
12,385

�
16,295

�
37,134

�
46,346

�
62,000

Add: Loss on debt modification and extinguishment (2)


�


�
10,886

�


�


Add: Restructuring charges (3)


�
1,355

�
2

�
6,521

�
8,500

Add: Acquisition-related costs�(4)
924

�


�
924

�
2,379

�
2,500

Less: Adjustment for income taxes�(5)
(8,168
)
�
(7,703
)
�
(27,983
)
�
(31,156
)
�
(44,000
)
Adjusted net income
$
62,343

�
$
78,127

�
$
173,339

�
$
188,085

�
$
250,000

Adjusted net income margin (6)
27
%
�
32
%
�
26
%
�
26
%
�
26
%
Adjusted net income per diluted share
$
0.95

�
$
1.37

�
$
2.60

�
$
3.13

�
$
4.17

Weighted average shares outstanding - diluted
65,510

�
57,171

�
66,713

�
60,050

�
60,000


(1)
The amounts expressed in this column represent the midpoint of the company's guidance as of the date of this press release.
(2)
Amount represents loss on debt modification and extinguishment related to the refinancing of the companys 2011 credit facility in the first quarter of 2013.
(3)
Amounts represent restructuring charges related to the termination or 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.
(5)
Adjustments reflect the estimated impact of income taxes using the effective rate for the applicable period. Certain of the reconciling items are not tax deductible.
(6)
Adjusted net income margin is a measure of adjusted net income as a percentage of revenue.











Contact Info:

Investor Relations Contact:
Dave Angelicchio
(571) 434-3443
�
Press Contact:
Todd Wilms
(415) 590-4576




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