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NeuStar, Inc. Releases Fourth Quarter and Full-Year 2005 Financial Results7 February 2006
NeuStar, Inc. (NYSE: NSR), a provider of essential clearinghouse services to the communications industry, today announced results for its fiscal fourth quarter and its full fiscal year ended December 31, 2005.
Summary of Fourth Quarter and Full-Year Results
Revenue for the fourth quarter of 2005 totaled $63.4 million, up from $41.4 million in the fourth quarter of 2004. Net income for the fourth quarter of 2005 totaled $13.8 million, up from $4.2 million in the fourth quarter of 2004. Net income per diluted share was $0.18 for the fourth quarter of 2005, compared to $0.05 per share for the fourth quarter of 2004.
Revenue for the 2005 fiscal year totaled $242.5 million, up from $165.0 million for 2004. Net income for the 2005 fiscal year totaled $55.4 million, up from $45.4 million in the 2004 fiscal year. Net income per diluted share was $0.72 for the 2005 fiscal year, compared to $0.57 per diluted share for the 2004 fiscal year.
Revenue for the fourth quarter of 2005 and full 2005 fiscal year was reduced by the application of contractual, volume-based credits of $2.5 million and $7.5 million, respectively. In 2004, $11.9 million in credits were recorded, all in the fourth quarter. Annual volume credits are earned on all transactions in excess of the pre-determined 100 million transaction cumulative annual volume threshold under the company's contracts to provide telephone number portability services in the United States. Based on the strong growth in transaction volume in 2005, the company reached the 100 million transaction threshold in August; in 2004, the 100 million transaction threshold was reached in November.
Both revenue and profitability for 2005 exceeded the guidance provided by the company on October 27, 2005, which was for revenue to range between $237 million and $239 million, including the application of contractual, volume- based credits, and for 2005 net income to range between $52 million and $53 million. Guidance given by the company on October 27, 2005 did not take into account approximately $900,000 in follow-on offering costs incurred subsequently in the fourth quarter.
Discussion of Fourth Quarter and Full-Year Results
NeuStar's year-over-year quarterly revenue growth of 53% and full-year revenue growth of 47% were driven primarily by increases in transactions under its contracts to provide telephone number portability services, as well as strong growth in the use of Common Short Codes:
* Addressing revenue increased 35% to $17.3 million in the fourth quarter
of 2005 and 48% to $75.0 million for the 2005 fiscal year, primarily as
a result of continued expansion of carrier networks to provide new
communications services, such as Internet telephony, and Common Short
Codes and other wireless data services. In addition, the continued
expansion of carrier networks contributed to the demand for addressing
services.
* Interoperability revenue increased 55% to $13.7 million in the fourth
quarter of 2005 and 53% to $52.5 million for the 2005 fiscal year.
These increases were due primarily to consolidation of service
providers, which required the integration of disparate systems and
networks, as well as continued demand for the company's order management
clearinghouse services.
* Infrastructure and other revenue increased 64% to $32.5 million in the
fourth quarter of 2005 and 44% to $114.9 million for the 2005 fiscal
year, primarily due to increased demand for the company's network
management services in support of activities such as service
disconnects, changes to features and functions provided by service
providers, as well as the vendors that supply those features and
functions and the implementation of new technologies.
Total operating expense for the fourth quarter of 2005 rose 16% compared to the fourth quarter of 2004, primarily due to higher costs to support ongoing revenue growth and business expansion initiatives, as well as approximately $900,000 in costs related to the company's follow-on offering in December 2005.
Total operating expenses for the 2005 fiscal year rose 28% compared to 2004, primarily due to higher costs to support ongoing revenue growth and business expansion initiatives, as well as $5.8 million in costs related to the company's two public offerings in 2005. Total headcount at December 31, 2005 increased to 502 from 413 at December 31, 2004.
At December 31, 2005, the company had $103.5 million in cash, cash equivalents and short-term investments, an increase of $19.2 million compared to September 30, 2005. This increase resulted principally from cash provided by operating activities.
Business Outlook for 2006
On the strength of its recent results and visibility into future performance, NeuStar expects revenue and profitability growth trends to continue in 2006, and provides the following guidance for 2006:
* Revenue in 2006 is expected to range between $303 million and $310
million, including the application of an estimated $7.5 million in
contractual, volume-based credits under the company's contracts to
provide telephone number portability services in the United States.
This projection is an increase from the revenue guidance provided on
January 9, 2006 of $296 million to $306 million.
* Net income in 2006 is expected to range between $66 million and $70
million, or between $0.83 and $0.88 per diluted share. Per share
calculations are based on an estimated 79.8 million diluted weighted
average shares outstanding.
The company's guidance includes an estimated
$12.5 million in non-cash, stock-based compensation expense related to
the adoption of FASB Statement No. 123(R). The company continues to
review the impact of FASB Statement No. 123(R) and intends to update
guidance when more precise data is available.
* Transactions under the company's contracts to provide telephone number
portability services in the United States are projected to grow:
-- in excess of 28% for the full year 2006 from the 2005 total of 171.6
million transactions, and
-- in excess of 25% in the first quarter of 2006 versus the first quarter
of 2005 total of 40.4 million.
Management Commentary
"Network expansion, subscriber growth, industry consolidation and carrier cost reduction contributed greatly to our outstanding performance in 2005 and will continue to be the key drivers of our growth in 2006," said Jeff Ganek, NeuStar's Chairman and Chief Executive Officer. "These drivers of our core business, combined with our investment in new technological advances such as a global routing directory for the GSMA and SIP-IX, each announced in late 2005, and international expansion following in the footsteps of our successful delivery of a telephone number portability system in Taiwan, give us great confidence not only in our ability to attain our 2006 performance projections, but also in our being able to continue growing both revenue and profitability at attractive levels into the future."
Jeff Babka, NeuStar's Chief Financial Officer, added, "Our NeuStar team had a banner year in 2005, both in our operational performance and in successfully completing two public market events. Our guidance projections being made today are indicative of the high degree of confidence we have in our visibility into future performance and anticipated market trends."
Conference Call
As announced on January 24, 2006, NeuStar, Inc. will conduct an investor conference call to discuss the company's results today at 8:00 a.m. (Eastern). Investors may access the conference call over the Internet via the Investor Relations tab of the company's Website (http://www.NeuStar.biz), or via telephone by dialing (800) 289-0572 (international callers dial (913) 981-5543). Those listening via the Internet should go to the site 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available through Midnight (Eastern) Monday, February 13, by dialing (888) 203-1112 (international callers dial (719) 457-0820) and entering replay PIN 6924381, or by going to the Investor Relations tab of the company's website (http://www.NeuStar.biz).
NeuStar, Inc. will take live questions from securities analysts and institutional portfolio managers; the complete call is open to all other interested parties on a listen-only basis.
About NeuStar, Inc.
NeuStar (NYSE: NSR) is a provider of essential clearinghouse services to the North American communications industry and Internet service providers around the world. Visit NeuStar online at http://www.NeuStar.biz.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release includes information that constitutes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about NeuStar, Inc.'s expectations, beliefs and business results in the future. We cannot assure you that our expectations will be achieved or that any deviations will not be material. Forward-looking statements are subject to many assumptions, risks and uncertainties that may cause future results to differ materially from those anticipated. These potential risks and uncertainties include, among others, the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as disruptions to our clearinghouse operations, modifications to our material contracts, increasing competition, market acceptance of our existing services, the ability of NeuStar, Inc. to successfully develop and market new services, the uncertainty of whether new services will achieve market acceptance or result in any revenue, and business, regulatory and statutory changes in the communications industry. More information about potential factors that could affect our business and financial results is included in NeuStar, Inc.'s filings with the Securities and Exchange Commission, including in NeuStar's Registration Statement on Form S-1 related to its follow-on offering in December 2005. All forward-looking statements are based on information available to NeuStar, Inc. on the date of this press release and NeuStar, Inc. undertakes no obligation to update any of the forward-looking statements after the date of this press release.
NEUSTAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2004 2005 2004 2005
(unaudited) (audited) (unaudited)
Revenue:
Addressing $12,810 $17,271 $50,792 $75,036
Interoperability 8,825 13,669 34,228 52,488
Infrastructure and other 19,813 32,481 79,981 114,945
Total revenue 41,448 63,421 165,001 242,469
Operating expense:
Cost of revenue
(excluding depreciation
and amortization shown
separately below) 13,851 18,737 49,261 64,891
Sales and marketing 7,711 7,768 22,743 29,543
Research and development 1,968 3,343 7,377 11,883
General and administrative 7,363 6,003 21,144 28,048
Depreciation and
amortization 3,798 4,285 17,285 16,025
Restructuring recoveries (220) - (220) (389)
34,471 40,136 117,590 150,001
Income from operations 6,977 23,285 47,411 92,468
Other (expense) income:
Interest expense (625) (406) (2,498) (2,121)
Interest income 529 650 1,629 2,406
Income before minority
interest and income taxes 6,881 23,529 46,542 92,753
Minority interest - (104) - (104)
Income before income taxes 6,881 23,425 46,542 92,649
Provision for income taxes 2,670 9,598 1,166 37,251
Net income 4,211 13,827 45,376 55,398
Dividends on and accretion
of preferred stock (2,169) - (9,737) (4,313)
Net income attributable to
common stockholders $2,042 $13,827 $35,639 $51,085
Net income attributable to
common stockholders
per common share:
Basic $0.35 $0.22 $6.33 $1.48
Diluted $0.05 $0.18 $0.57 $0.72
Weighted average common
shares outstanding:
Basic 5,880 62,392 5,632 34,437
Diluted 78,119 77,726 80,237 77,046
NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
2004 2005
ASSETS (audited) (unaudited)
Current assets:
Cash, cash equivalents and short-term
investments $63,929 $103,475
Restricted cash 4,835 374
Accounts receivable, net and unbilled
receivables 30,151 37,376
Prepaid expenses and other current assets 10,396 13,947
Income taxes receivable - 14,595
Deferred tax asset 10,923 12,216
Total current assets 120,234 181,983
Restricted cash, long-term 835 -
Property and equipment, net 36,504 39,627
Goodwill and intangible assets, net 50,703 54,150
Other non-current assets 4,047 6,011
Total assets $212,323 $281,771
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses $35,458 $40,999
Income taxes payable 419 -
Customer credits 15,541 -
Deferred revenue 14,761 20,006
Notes payable and capital lease obligations 9,449 6,772
Accrued restructuring reserve 1,330 536
Total current liabilities 76,958 68,313
Deferred revenue, long-term 13,892 18,463
Notes payable and capital lease
obligations, long-term 7,964 4,459
Accrued restructuring reserve, long-term 3,719 2,572
Deferred tax liability 1,194 1,197
Other liabilities, long-term - 500
Total liabilities 103,727 95,504
Minority interest - 104
Commitments and contingencies - -
Series B Voting Convertible Preferred Stock 66 -
Series C Voting Convertible Preferred Stock 85,717 -
Series D Voting Convertible Preferred Stock 54,671 -
Total stockholders' (deficit) equity (31,858) 186,163
Total liabilities and stockholders'
(deficit) equity $212,323 $281,771
Source: prnewswire
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