Neustar, Inc. (NSR)

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NeuStar Inc. (NSR)

Q3 2009 Earnings Call Transcript

October 27, 2009 at 4:30 pm ET

Executives

Jeffrey E. Ganek - Chairman and Chief Executive Officer

Paul S. Lalljie - Chief Financial Officer

Brandon M. Pugh - Senior Director, Finance - Investor Relations

Analysts

Daniel Meron - RBC Capital Markets

Phil Winslow - Credit Suisse First Boston

Unidentified Analyst for Thomas Ernst - Deutsche Bank

Sterling Auty - JP Morgan

Shaul Eyal - Oppenheimer and Company

Tom Kucera for John Bright - Avondale Partners LLC

Katherine Egbert - Jefferies & Co.

Jonathan Ho –William Blair and Company, LLC

Scott Sutherland - Wedbush Morgan Securities Inc.

Presentation

Operator

Welcome to the NeuStar, Inc. third quarter Investors’ Conference Call. The Company’s release made earlier today is available from its website at www.NeuStar.biz. During the presentation all participants will be in a listen-only mode. Afterwards, securities, analysts and institutional portfolio managers, will be invited to participate in a Question and Answer session. (Operator instruction) As a reminder this call is being recorded, Tuesday 27 October 2009. A replay of the call will be accessible until midnight 3 November by dialing 888-203-1112 and entering conference ID 7740020, International callers should dial 719-457-0820. An archive of this call will also be available on the NeuStar website at www.NeuStar.biz.

I would now like turn to conference over to Brandon M. Pugh, Senior Director for Finance in Investor Relations of NeuStar, Inc. Please go ahead sir.

Brandon M. Pugh

Welcome to our third quarter 2009 earnings call. Joining us today from NeuStar, Inc. are Jeffrey E. Ganek, Chairman and Chief Executive Officer and Paul S. Lalljie our Chief Financial Officer. Our call today will begin with comments from Jeffrey E. Ganek. Then Paul Lalljie will follow with the discussion of our financial performance, after which we will open the line to questions from qualified investors and research analysts.

Before we begin, I would like to remind everyone that some of the information discussed on this call including our projections regarding revenue and EBITDA for the coming year contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. And we cannot assure you that our expectations will be achieved or that any deviation will not be material. Additional information concerning these risks and uncertainties can be found in the Company’s Annual Report on Form 10-K for the year ended 31 December 2008 and its other subsequent and current periodic report filed with the US Securities and Exchange Commission. NeuStar, Inc. assumed no obligation to update any forward-looking statements.

As you listen to today’s call we will discuss certain non-GAAP financial measures. We encourage you to have our press release in front of you, which can be found at our Investors Relations website and includes our financial result, metrics, and commentary for the quarter and the reconciliation of certain non-GAAP measures with the most directly comfortable GAAP measures. You will find additional disclosures regarding non-GAAP measures under the Investor Relations tab on our website www.NeuStar.biz including reconciliation of these measures with the most directly comparable GAAP measures.

With that, I am pleased to introduce NeuStars, Inc.’s Chairman and Chief Executive Officer Jeffrey Ganek.

Jeffrey E. Ganek

Welcome to today’s conference call. We are pleased with our results for the third quarter. This year market conditions were challenging and uncertain. Nonetheless, with our strong position and business model, we produced solid financial results that met and in some cases exceeded ambitious goals. Concurrently we are focused on building a solid foundation for growth in the future when the economy improves.

Let me provide an overview of our results for the third quarter. Consolidated revenue totaled a $117 million, resulting in an EBITDA margin of 43% and a net income margin of 21%. Our performance shows NeuStar’s ability to sustain solid profits and high cash generations are also growing the top-line sequentially. This is an important point to note, we managed spending efficiently, while still producing revenue growth in each of the last two successive quarters.

Let me comment on our revenue performance and the associated market demands we are seeing. Overall, customer demand has continued to show positive signs as indicated by growth in LNP transaction volume this quarter. Demand for LNP services continues to grow. The primary source of the growth was the increasing utilization of our impact services by network operators to better optimize their networks. And part services served these requirements quicker, cheaper and better than any alternatives. Revenues from these LNP services which account for about 60% of our overall total revenues is contractually defined and provides us with a predictable, compounded annual growth rate of 10% through 2015.

Most recently we also saw good growth in our non-LNP businesses and specifically from NeuStar Ultra Services. Our customers rely on our Ultra Services to meet their needs for reliable DNS services and enhanced IP network performance, improved security and provide for better scale efficiencies.

In the first quarter of this year market demands for NeuStar’s Ultra services were slow. We saw some signs of stabilizing demands in the second quarter. During the third quarter we continued to add customers, existing customers upgraded to higher rate plans and internet traffic continued to increase. As a result we are happy to report that in the third quarter Ultra’s revenues were 22% year-over-year. In addition, we believe the metrics of growth for NeuStar’s Ultra services indicate a good trajectory for the remainder of the year.

Read the rest of this transcript for free on seekingalpha.com