Neustar, Inc. (NSR)

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NeuStar (NSR)

Q2 2013 Earnings Call

July 30, 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

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

Saket Kalia - JP Morgan Chase & Co, Research Division

Howard Smith - First Analysis Securities Corporation, Research Division

Presentation

Operator

Good afternoon, everyone. Thank you for standing by. Welcome to the NeuStar's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. For opening remarks, I will 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, 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 the information as of today, July 30, 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. Let me apologize in advance if it's difficult to hear me as I'm recovering from a pretty nasty cold.

I'll start by updating you on our progress through the second quarter on our 4 key priorities, and then Paul will walk you through our results in more detail. As you know, our key priorities for 2013 are achieving our financial targets, positioning ourselves for a successful NPAC renewal, continuing to execute on our strategy to become a leading provider of commercial insights and analytics and finally, continuing to invest in our employees and our platforms to drive growth and shareholder value.

Let me turn first to our financial performance. Second quarter results put us solidly on track to achieve our 2013 targets. Revenue increased 7%, adjusted net income increased 11% and adjusted earnings per share increased 13%.

Second quarter revenue was in line with our expectations. We continue to gain visibility into our forecast for the second half acceleration of revenue based on contracts signed in the first half, transactions scheduled for the second half and new contracts we expect to sign soon that will drive additional revenue this year.

We generated adjusted net income margins in excess of 25% for the second consecutive quarter, and our adjusted EPS growth reflects our strong performance and our continued focus on returning capital to shareholders through our share repurchase plans. Based on our first half results and our visibility into the second half, we're reaffirming our full year revenue guidance and increasing our full year earnings guidance. Paul will provide further detail on our guidance in his remarks.

Our second priority is to position NeuStar for a successful NPAC contract renewal. Since our last call, the NAPM has updated the RFP time line. The revised estimated debt -- date for FCC approval of the vendor selection is now January 20, 2014. As you may recall, the previous time line called for FCC approval on September 20 of this year. No explanation was provided for the change.

As I've said on previous calls, the NPAC is the largest and, by far, the most complex number management system in the world. Its operation requires capabilities and expertise far exceeding those with -- of the more limited portability services available in other countries.

NeuStar has the experience and proven track record to run this incredibly complex system. This quarter, we received our 2012 performance evaluation scores for 2 national numbering administration services we performed on behalf of the FCC. In both cases, we received the highest possible scores.

To be clear, these services are not covered under the NPAC contract. However, we believe these ratings demonstrate again that our carrier customers continue to be highly satisfied with all the services we provide. We remain confident that our NPAC proposal is thorough, compelling and supported by the proven track record of value we provide to our clients and the consumers and businesses they serve.

Our third priority is to continue executing on our strategy to become a leading provider of commercial insights and analytics. We continue to expand our position in fast-growing markets and verticals where we already have a significant presence.

Our analytics platforms provide marketing departments with keen insights that help them to understand the buying propensities of consumers at the exact moment of interaction, allowing our clients to tailor offerings and increase conversion rates for every person with whom they interact. We have 2 primary differentiators in this area: proprietary information that is continually updated based on over 200 authoritative data sources, and the ability to deliver to our clients realtime, actionable insight derived from this information.

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