Neustar, Inc. (NSR)

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NeuStar, Inc. (NSR)

Q2 2011 Earnings Call

July 27, 2011 4:30 pm ET

Executives

Brandon Pugh – Senior Director, Finance and IR

Lisa Hook – President and CEO

Paul Lalljie – CFO

Analysts

Nandan Amladi – Deutsche Bank

John Bright – Avondale Partners

Daniel Meron – RBC Capital Markets

Scott Sutherland – Wedbush Securities

Dan Cummins – ThinkEquity

Saket Kalia – JP Morgan

Vincent Lin – Goldman Sachs

Jonathan Ho – William Blair

Stephen Beckert – Robert W. Baird

Presentation

Operator

Please standby. Good day, ladies and gentlemen, and thank you for standing by. Welcome to the NeuStar Second Quarter of 2011 Earnings 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 listen-only mode. Afterwards, securities analysts and institutional portfolio managers will be invited to participate in a question-and-answer session. (Operator Instructions)

As a reminder, this call is being recorded today, Wednesday, July 27, 2011. A replay of the call will be accessible until midnight, August 3rd by dialing 877-870-5176 and entering conference ID number 5629974. International callers should dial 858-384-5517. An archive of this call will be also available on the NeuStar website at www.neustar.biz.

I would now like to turn the conference call over to Brandon Pugh, Senior Director of Finance and Investor Relations of NeuStar. Please go ahead, sir.

Brandon Pugh

Thank you and good afternoon, everyone. Welcome to our second quarter 2011 earnings call. Joining us today from NeuStar is Lisa Hook, President and Chief Executive Officer; and Paul Lalljie, our Chief Financial Officer. Our call today will begin with comments from Lisa Hook then Paul Lalljie will follow with a discussion of our financial performance, after which we will be – will open the line to questions from qualified investors and research analysts.

Before we begin, I’d like to remind everyone that today’s discussion contains forward-looking statements based on the environment as we currently see it and as such are subject to many risks and uncertainties that may cause actual results to differ materially from those anticipated.

Additional information containing these risks and uncertainties can be found in today’s press release, in our quarterly report on Form 10-Q for the quarter ended March 31, 2011 and our other current periodic reports filed with the U.S. Securities and Exchange Commission. 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 reconciliation to the most comparable GAAP measures, can be found under the 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 Hook

Thanks very much, Brandon. And thank you for joining us as we report our results for the second quarter 2011. I’ll start this afternoon with some perspective on the quarter and the company’s overall strategic direction, then our Chief Financial Officer, Paul Lalljie will walk you through our results in detail.

Our second quarter results which were solidly in line with our expectations reflect our sharpened focus on innovating and growing our businesses while building new revenue streams. Compared to the second quarter of 2010 revenues were up 16% overall to $147.7 million, driven primarily by the NPAC, Internet Infrastructure Services and Order Management Services. EBITDA from continuing operations increased 6% to $64.6 million, up 44% margin.

Looking at our revenues from a segment perspective, carrier services and enterprise services grew 13% and 23%, respectively. Cutting revenues a different way, NPAC Services revenue grew 14% in the quarter and represented approximately 62% of total revenue. Revenue from non-NPAC Services represented the remaining 38% of total revenue grew 19% from the second quarter of 2010.

We’re well-positioned to capitalize on opportunities to drive even stronger revenue and earnings growth in future. For each of our businesses we have rolling three-year product roadmaps, which are designed to build incremental revenues organically and as opportunities arise through acquisition.

As you saw earlier this month, we’ve closed on numbering asset acquisitions from Evolving Systems. This acquisition underscores our ongoing process to sharpen our strategic focus and to enhance our competitive position. This asset strengthens our core business while squarely within our core competency and fulfill solutions that were already on our product roadmap for internal development. We welcome the team in Denver and we are excited about the people and the capabilities we gain with this acquisition.

The Evolving Systems acquisition enhances new source ability to leverage our existing strategic assets and core competency. Directory services for addressing, policy management, authentication and analytics. This acquisition has two significant strategic benefits.

First, it increases our market share in Order Management Services, a key on-ramp to the NPAC for our carrier customers and broadens our reach with additional top tier operators. Second, it brings us a telephone number to inventory management service called NumeriTrack that allows us to offer new analytics capabilities to our carrier customers. This is a centralized system that gives operators a much needed capability to store, assign, track and manage their inventory of telephone numbers.

For example, a carrier can analyze its inventory to determine based on geography, service or customer type, when they are likely to exhaust their existing supplier numbers and to trigger an order for more. We’ve been talking to our customers about this new and enhanced capability that came with the Evolving Systems numbering assets and the response has been extremely enthusiastic.

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