Neustar, Inc. (NSR)

NSR 
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NeuStar (NSR)

Q1 2013 Earnings Call

May 02, 2013 4:30 pm ET

Executives

David Angelicchio

Lisa A. Hook - Chief Executive Officer, President, Director and Member of Neutrality Committee

Paul S. Lalljie - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

John F. Bright - Avondale Partners, LLC, Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

William V. Power - Robert W. Baird & Co. Incorporated, Research Division

Daniel T. Cummins - B. Riley Caris, Research Division

Gray Powell - Wells Fargo Securities, LLC, Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Good afternoon, everyone. Thank you for standing by, and welcome to the NeuStar First Quarter 2013 Earnings Conference. [Operator Instructions] As a reminder, this conference is being recorded. For opening remarks, I will now turn the call over to Mr. Dave Angelicchio, Head of Investor Relations. Please go ahead, sir.

David Angelicchio

Thank you, and good afternoon, everyone. Welcome to today's conference call. Joining us today from NeuStar are Lisa Hook, President and Chief Executive Officer; and Paul Lalljie, our Chief Financial Officer. Our call today will begin with comments from Lisa Hook and Paul Lalljie, followed by Q&A.

Before we begin, I'd like to remind everyone that today's discussion contains forward-looking statements based on information as of today, May 2, 2013, and as such, is subject to many risks and uncertainties that may cause actual results to differ materially from those anticipated. Additional information concerning these risks and uncertainties can be found in our earnings release and our filings with the U.S. Securities and Exchange Commission, including our last annual report on Form 10-K and subsequent periodic and current reports. We assume no obligation to update any forward-looking statements. As you listen to today's call, we will discuss certain non-GAAP financial measures and supplemental key performance metrics by revenue categories, headcount and additional expense detail. This information, including reconciliations to the most comparable GAAP measures, can be found in today's earnings release and under our Investor Relations tab on our website, www.neustar.biz.

With that, I'm pleased to introduce Neustar's President and Chief Executive Officer, Lisa Hook. Lisa?

Lisa A. Hook

Thank you, Dave, and thank you, all, for joining us this afternoon. I'll begin by providing some perspective on the quarter and our progress towards the goals we've set for the year. Paul will then provide a more detailed look at our financial results.

As I outlined on our February call, we have 4 priorities for the year: achieving our financial performance targets, continuing to position NeuStar for successful NPAC contract renewal, executing on our strategy to become a leading provider of commercial insights and analytics, and continuing to invest in our employees and our platforms to drive growth and shareholder value.

Our first quarter performance has us on track to meet our full year financial targets. First quarter revenue was up 8% to $216.4 million, and adjusted net income was up 23% to $54.1 million. Revenue from the NPAC contract, which historically has grown at annual rates above 12%, grew by contract, only 6.5%. Revenue from all of our non-NPAC services grew 10%.

As Paul has told you previously, after spending last year laying the strategic foundation, this is the year that we are bending the curve on non-NPAC revenue, and we expect this to become increasingly visible as the year progresses. As you know, we have had a share repurchase program in place that has averaged about $25 million a quarter. This program was scheduled to expire in July.

Today, we announced that we replaced this program with a plan pursuant to which we expect to repurchase up to $250 million in shares by the end of the year. At that time, we expect to have repurchased nearly $750 million or roughly 27% of our shares since July of 2010. This demonstrates our continued commitment to returning capital to shareholders. Paul will provide more details on exactly how the new program works.

Our second priority for the year is to position NeuStar for successful renewal of the NPAC contract for the period beginning in July 2015. After nearly 2 years of preparation, we achieved a major milestone in the RFP process by submitting our proposal on the deadline, April 5. Subsequently, the process was reopened to extend the deadline to April 22. As some of you may have seen, we filed a letter with the NAPM and the SEC on April 24, emphasizing our concern that extending the deadline was inconsistent with the industry's and the SEC's commitment to manage a transparent and timely RFP process.

I know you're eager to hear details on where things stand now. Of course, I'd love to share those details with you if I could. However, every party participating in the process is under a nondisclosure agreement, and therefore, I'm very limited in what I can say.

While you may hear rumors regarding this process over the next few months, they are exactly that, truly nothing more than speculation. What I can tell you is that we're confident in the strength of our proposal, and it remained unchanged after the deadline extension. Our proposal builds on our demonstrated track record of performance and innovation, and the significant value we have created for the communications industry.

Let me turn to our third priority, continuing to execute on our strategy to become a leading provider of commercial insights and analytics. Our technology analyzes our customers' data sets to provide insights that allow them to retain their customers, to prevent fraud and to evaluate new revenue opportunities.

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