Neustar, Inc. (NSR)

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Neustar, Inc. (NSR)

Q3 2012 Earnings Call

November 5, 2012 4:30 pm ET


Dave Angelicchio – Investor Relations

Lisa A. Hook – President and Chief Executive Officer

Paul S. Lalljie – Senior Vice President and Chief Financial Officer


John Bright – Avondale Partners

Sterling Auty – JPMorgan

Greg Mesniaeff – Maxim Group

Daniel Meron – RBC Capital Markets

Scott Sutherland – Wedbush Securities

Julio Quinteros – Goldman Sachs

Randall Heck – Goodnow Investment



Good afternoon. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Neustar’s Third Quarter Earnings Conference Call (Operator Instruction).

Thank you, Mr. Angelicchio. You may begin the conference.

Dave 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 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, November 05, 2012, 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. 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, head count and additional expense detail. This information, including reconciliations to the most comparable GAAP measures, can be found in today’s earnings release and under the Investor Relations tab on our website, www.

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 today, as we report our Neustar’s results for the third quarter of 2012. As you know, our earning call was originally scheduled for October 30. Despite our strong third quarter results, which we’re quite eager to talk about, we’ve made the decision to move the call given the anticipated impact of Hurricane Sandy on our employees and on the investment community. I’m pleased now finally to be able to speak with you all.

Consistent with prior quarters I will discuss our performance relative to the primary goals we set or ourselves at the beginning of the year. First, I’ll provide an overview of Neustar’s third quarter financial results. Next, I’ll provide an update on the integration of TARGUSinfo into Neustar Information Services and comment on our ongoing cultural transformation.

And finally, I’ll provide an update on the status of Neustar’s progress towards renewal of our contract to manage the Number Portability Administration Center or the NPAC. Paul will then follow with the detailed review of our financial performance.

Let me begin with our financial results. Our third quarter results demonstrate that we are executing on our strategic plan, generating strong growth across all three of our business segments and delivering on or exceeding our financial targets at a time when many companies are not. As you will recall, last quarter we’ve raised our full-year revenue, we’ve raised our adjusted net income and we’ve raised our adjusted EPS guidance. This quarter we are again raising our full-year adjusted net income and EPS guidance again.

Again, our third quarter revenues totaled $211 million, a 38% increase from last year’s third quarter. The increase was driven by double-digit growth in both Carrier and Enterprise Services and by the addition of Information Services. We’re particularly pleased with the double-digit growth in our Internet Infrastructure Services offerings, reaching strong growth in new services such as our cloud-based DDoS Mitigation Service. As you are probably aware, Distributed Denial of Service or DDoS attacks are occurring at an accelerated rate, with the number of recent high profile attacks on financial institutions.

Beyond these headline attacks it is estimated that 1000s of DDoS attacks are launched each day by DDoS for higher hackers, by hacktivists, and by organized criminals. These attacks cause significant monitory losses to their victims. Our advanced solutions leverage state-of-the-art 24x7 operation centers to help our customers mitigate these attacks. While there is today no technology that can entirely protect against the largest most sophisticated DDoS attacks, we can siphon off millions of malicious queries, allowing our customers to continue operating without significant disruption. And we are expanding our capabilities as these kinds of threats increase and evolve.

Our existing Internet Infrastructure Services customers are increasingly looking to us to help protect their revenue and brand reputations thus propelling our rapid growth in this area. It’s also important to note that the relative revenue contribution from our Information Services segment continues to increase quarter-over-quarter, consistent with our strategic focus on real-time information services and analytics.

In the third quarter we continued to produce strong margins, earnings growth, and cash flow, and we continued to repurchase shares. Our third quarter adjusted net income per diluted share was up 50% year-over-year. We would be pleased with earnings growth of this magnitude in any environment but that believe it really differentiates Neustar in the current economic climate.

Now, let me spend few minutes on the integration of TARGUSinfo into Neustar Information Services, which is proceeding extraordinarily well. Last quarter, I reported that we have completed the back office integration. We have now also made meaningful progress in the integration of our product development, sales and sales operation teams across the company. We have created a single coherent sales operations platform which strengthens our ability to cross-sell and up-sell. Working from this platform the various sales teams are developing integrated account plans for our top 200 customers and prospects.

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