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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

Sterling P. Auty - JP Morgan Chase & Co, Research Division

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

Daniel T. Cummins - B. Riley Caris, Research Division

Gray Powell - Wells Fargo Securities, LLC, Research Division

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

NeuStar (NSR) Q1 2013 Earnings Call May 2, 2013 4:30 PM ET

Operator

Good afternoon, everyone. Thank you for standing by, and welcome to the NeuStar First Quarter 2013 Earnings Conference. [Operator Instructions] As a reminder, this conference is being recorded. For opening remarks, I will now 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, our 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 information as of today, May 2, 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. I'll begin by providing some perspective on the quarter and our progress towards the goals we've set for the year. Paul will then provide a more detailed look at our financial results.

As I outlined on our February call, we have 4 priorities for the year: achieving our financial performance targets, continuing to position NeuStar for successful NPAC contract renewal, executing on our strategy to become a leading provider of commercial insights and analytics, and continuing to invest in our employees and our platforms to drive growth and shareholder value.

Our first quarter performance has us on track to meet our full year financial targets. First quarter revenue was up 8% to $216.4 million, and adjusted net income was up 23% to $54.1 million. Revenue from the NPAC contract, which historically has grown at annual rates above 12%, grew by contract, only 6.5%. Revenue from all of our non-NPAC services grew 10%.

As Paul has told you previously, after spending last year laying the strategic foundation, this is the year that we are bending the curve on non-NPAC revenue, and we expect this to become increasingly visible as the year progresses. As you know, we have had a share repurchase program in place that has averaged about $25 million a quarter. This program was scheduled to expire in July.

Today, we announced that we replaced this program with a plan pursuant to which we expect to repurchase up to $250 million in shares by the end of the year. At that time, we expect to have repurchased nearly $750 million or roughly 27% of our shares since July of 2010. This demonstrates our continued commitment to returning capital to shareholders. Paul will provide more details on exactly how the new program works.

Our second priority for the year is to position NeuStar for successful renewal of the NPAC contract for the period beginning in July 2015. After nearly 2 years of preparation, we achieved a major milestone in the RFP process by submitting our proposal on the deadline, April 5. Subsequently, the process was reopened to extend the deadline to April 22. As some of you may have seen, we filed a letter with the NAPM and the SEC on April 24, emphasizing our concern that extending the deadline was inconsistent with the industry's and the SEC's commitment to manage a transparent and timely RFP process.

I know you're eager to hear details on where things stand now. Of course, I'd love to share those details with you if I could. However, every party participating in the process is under a nondisclosure agreement, and therefore, I'm very limited in what I can say.

While you may hear rumors regarding this process over the next few months, they are exactly that, truly nothing more than speculation. What I can tell you is that we're confident in the strength of our proposal, and it remained unchanged after the deadline extension. Our proposal builds on our demonstrated track record of performance and innovation, and the significant value we have created for the communications industry.

Let me turn to our third priority, continuing to execute on our strategy to become a leading provider of commercial insights and analytics. Our technology analyzes our customers' data sets to provide insights that allow them to retain their customers, to prevent fraud and to evaluate new revenue opportunities.

I'll offer an example of this. We have a solution that helps communication service providers reduce costs by identifying subscribers with higher credit risk. We are working on an enhancement to that solution, leveraging our data assets to evaluate consumers' propensity to buy. This will drive incremental revenue for our customers. We're excited about this service and the myriad of other opportunities in-house today to provide additional value to our customers.

Fourth, we're continuing to build a foundation for our future growth by investing in our people and platforms. From an organizational perspective, we have integrated account plans for our sales force, with one point of contact for our customers. In order to serve our customers more efficiently, we're cross-training our employees in all of our services. And when it comes to our technology, we've undertaken a major program to consolidate more than 20 platforms into a single next-generation platform. This will allow us to streamline operations, and more importantly, to accelerate the development of customer solutions.

Finally, I'd like to share some changes to the management team. Julian Lighton, who ran corporate development, has left NeuStar to be closer to home. In addition, Scott Harris, who served as our General Counsel, has decided to return to private practice. We're grateful for their contributions to the company during their tenures. And I'm particularly pleased to welcome Len Kennedy to Neustar's leadership team. As General Counsel and Senior Vice President of External Affairs, Len will oversee our legal organization, as well as public policy, regulatory affairs and government relations. He has 30 years of experience in the public and private sectors, including serving as General Counsel to Sprint Nextel and as Senior Advisor and General Counsel to the U.S. Consumer Financial Protection Bureau.

And so in summary, our first quarter results provide a solid foundation to meet our goals for the year. Today, we've announced a new, more aggressive share repurchase program that supports our ongoing commitment to return capital to shareholders. And this quarter, we delivered a strong proposal to renew the NPAC contract, as well as achieving greater revenue diversity in strategic growth areas. Finally, we continue to invest in our people, as well as to upgrade our systems and processes to grow our businesses.

With that, let me turn the call over to Paul, and I look forward to answering your questions.

Paul S. Lalljie

Thanks, Lisa, and good afternoon, everyone. As you've seen in our press release, we continue to deliver on our objectives this quarter. We generated revenue growth of 8%, driven by a 10% increase in non-NPAC revenue and a 6.5% increase in our NPAC fixed fee revenue. Our revenue growth, combined with prudent cost management and the impact of certain tax benefits this quarter, resulted in strong earnings.

Adjusted net income totaled $54.1 million, up 23% from the first quarter of last year, and represented a 25% margin. Adjusted net income per share was $0.80, a 25% year-over-year increase.

Overall, we had a good quarter, but more importantly, we are on our way to achieving our full year numbers. Now for some specifics, starting with revenue by segment. Carrier Services revenue totaled $132.2 million, a 6% increase from $124.4 million in the first quarter of 2012. Our contractual NPAC revenue increased $6.7 million year-over-year. And for all of 2013, this increase will be $26.7 million. Please note that this increase is lower than the full year increase of $45.1 million recorded in 2012. Said differently, we have some growth to make up in 2013, and we are confident that we will do so.

Revenue from our Enterprise Services business segment totaled $44.8 million, an increase of 13% from $39.5 million in the first quarter of 2012. We saw an increase in demand for our DNS solutions, that fueled a 10% increase in Internet Infrastructure Services revenue. In addition, higher transaction volumes in one of our newer registries contributed to an 18% increase in Registry Services revenue.

Our Information Services revenue totaled $39.5 million, which is 10% higher than last year. Of this growth, Verification & Analytics contributed $3.1 million, driven by new customers and continued demand for customized commercial insights.

Moving on to expenses. Operating expense totaled $145.6 million, an increase of $10.4 million from $135.2 million in the first quarter of 2012. Our cost of revenue and sales and marketing expenses increased $8.3 million, to support growth, and in particular, higher sales.

Another key driver across all of our expense categories was stock-based compensation. This increased $5.1 million due to the 2012 employee performance-based equity grants. In addition, and something I'd talked about on our last earnings call, we recorded a nonoperating expense of $10.9 million in the first quarter related to our debt financing.

Turning to the balance sheet. We continued to generate strong cash this quarter. This was supplemented by an $18.4 million of incremental proceeds from our debt financing. During the quarter, we spent $24.4 million to buy back 551,000 shares at an average price of $44.38 per share. Additionally, we spent $13.4 million in capital expenditures.

We ended the quarter with $378.2 million in cash and investments, as compared to $343.9 million at the end of the year. Our accounts and unbilled receivables totaled $150.9 million versus $138.2 million at the end of the year. Our days sales outstanding was 62 days compared to 58 days in the fourth quarter of 2012, due to the timing of receipts from a number of our larger customers.

Now for a discussion of guidance. Our first quarter results, that is sales, operating indicators, customer satisfaction, contracts to be deployed, all provide us visibility into the full year numbers. We have told you in the past that we have visibility many quarters out. To that end, we remain confident in our guidance provided on February 5, 2013.

We expect revenue to range from $895 million to $915 million. At the midpoint of this range, it represents growth of 9% over 2012. Importantly, our non-NPAC businesses, which represent 52% of our total revenue, are expected to grow 11%.

Looking at the revenue pattern over the course of the year. We are expecting the second half of 2013 to be 8% higher than the first half of the year. We are confident that we will achieve our full year revenue target based on 3 factors: first, we have existing contracts with large volumes of transactions scheduled for later this year, particularly within our Order Management Services; second, we have closed a number of deals that will generate increasing revenue over the remainder of the year; and finally, we have a number of deals in the pipeline that we believe have a high probability of closing in the coming months.

From a profitability perspective, we continue to exercise control over expenditures, and we expect adjusted net income to range from $220 million to $230 million. We are also affirming our adjusted EPS guidance to range from $3.28 to $3.43 per share, which does not include the impact of the share repurchase program we announced today.

Moving on now to a discussion of capital deployment. Since the second half of 2010, which was when Lisa took over as CEO, we have repurchased 15.2 million shares at an average price of $32.70 per share. This represents over 20% of our total shares outstanding and demonstrates our commitment to allocating capital to shareholders.

I'm proud to announce that today, we have launched a $250 million open market share repurchase program. This program is expected to run from May 7 through December 31, 2013. Under current circumstances, we believe that an open market program is the best approach for us, given the increase in our average daily trading volume. It is also quick and easy to implement, and it will support our stock on a daily basis. For future programs, we will consider whichever structure is most appropriate at that time.

Under this program, we expect to buy back between $30 million and $60 million per month through an open market 10b5-1 program. We will buy back more shares below certain prices and fewer shares above certain prices. Of note, we have materially changed the structure of our open market program this time around. In particular, we have eliminated quarterly limits and blackout dates.

So in closing, we had a good quarter operationally. We're on track to meet our full year targets, and we announced a more aggressive share repurchase program. As we've said in the past, we will continue to strive for the upper end of the guidance range, and we feel good about our prospects given the leading indicators in our business.

With that, operator, we'll open the line up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first today to John Bright with Avondale Partners.

John F. Bright - Avondale Partners, LLC, Research Division

Lisa, I know you're constrained on what you can talk about regarding the contract renewal. But have there been any public indications by Telcordia or anyone else, that there are other bidders besides yourself in the process?

Lisa A. Hook

We have not heard anything public earlier on, until Telcordia had indicated that they were going to participate, and certainly, you can see from the ex parte filings by us and by Telcordia, we've both been into the commission. I don't know, at the end of the day, because it's subject to nondisclosure, who else may have filed. I can only tell you that we did.

John F. Bright - Avondale Partners, LLC, Research Division

Okay. On Information Services, a non-impact side of your business. You talked about in your prepared text about bending the growth curve, particularly in Information Services, and Paul gave some thoughts around that. Maybe you can flush those out a bit on the -- when you look at those deals in the pipeline and the closed deals, Paul, we'll go back to a phrase that was used before. What's the "you have to go out there and get," maybe percentage versus the percentage you feel pretty comfortable with?

Paul S. Lalljie

So John, if we annualize the first quarter revenue, you'd probably require another $40 million or so to get to the midpoint of the guidance range. Historically, our second half of the year revenue has always been roughly around 5%, 6% greater than the first half of the year. What we're expecting here is about an 8% growth, back half versus front half of the year. From a go-get perspective, if you look at that back half of the year, we had a very good first quarter, and we have a very strong pipeline so far in the second quarter. And we feel confident that the go-get number is a very small number of what we have to get. And for that reason, we speak with confidence of getting to that midpoint of the range. What we're talking about to get to the back half of the year numbers, we're speaking specifically to deals that we have signed, contracts that we have to deploy, customers that we have to turn up, and then in particular, you may recall in the Order Management business, probably 18 months ago, we had transactions from customers transitioning from one network to another. We have some of those scheduled for the back half of the year. So to some extent, we're speaking with great specificity as we speak to the back half of the year. It is not a go-get number, where you have to go sell to a customer, convince them to put a contract in place and things like that. These are customers that are onboard today, contracts that we have in place. And in the Information Services category, some strong pipeline that we believe we can close.

John F. Bright - Avondale Partners, LLC, Research Division

One final question. In the slides you provide, in the key performance metrics under the Enterprise Services segment, the ISS -- IIS new customers, ISS upgrades, new customers, that metric seemed to be down and the upgrades really meaningfully up. Maybe you can tell me what those mean.

Paul S. Lalljie

So I think it was probably first quarter of 2012, we talked a little bit. We had a similar dynamic going on with that business, and we talked about helping to improve the quality of customers that we have in that business. Our focus is to ensure that we have customers that are economically more important to us, meaning the volumes are commensurate with the pricing that we get on the business. So for example, when we inherited this business, we had customers with large volumes that were relatively free to them. We have since transitioned those customers as we've improved our networks and improved the quality of customers. So we expect to see growth in that business through upgrades and then smaller chunks of new contracts, more upgrades as we go forward. And that's what we have seen all of 2012, and I would argue, we continue to see that in 2013.

Lisa A. Hook

Just to put a greater emphasis on that, when we're talking about training our reps on all of our services, cross-selling and upselling, we're really focused on upgrading and upselling our existing customer base to incremental products. So we're less focused today on going out and getting a dramatically larger number of new logos to DNS. We're more focused on upselling SiteProtect to existing customers. To the extent we get DNS at this point, it's more SiteProtect leading DNS than vice versa. That is with regard to new logos.

Operator

We'll hear next from Sterling Auty with JPMorgan.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

So in terms of the share repurchase, the 10b5-1 plan, Paul, did I hear you correctly, above a certain point, you would deal [ph] shares? Can you just explain that?

Paul S. Lalljie

So we have -- if you think of it as a share price -- as a threshold, if the price gets above that threshold, we will buy less. If the price is below that threshold, we'll buy more.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay, that's what I -- I just wanted to make sure. And then, going back to the first question, Lisa, just for everyone's benefit, is the deadline now completely done? So whoever is going to submit has submitted? Or did they further extend, and it's still open? For the NPAC RFP.

Lisa A. Hook

They did not further extend. So the original deadline was April 5, a little bit less than or about a week later, they came out and reopened the process until April 22, and it is now closed.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And again, I unfortunately was breaking up, would you mind repeating? Is there anything that you're aware of in terms of other bidders? And did they at least give you insight, meaning the working group for FoNPAC, did they give you insight as to who else may have bid or because it's NDA, it's even closed to you?

Lisa A. Hook

Because it's under NDA, it's completely closed. So we don't have any idea who else may have bid. The only thing I can tell you is that the draft RFP came out in August of 2012. So there was plenty of time for any serious bidder to file as of April 5.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Got you. On the Targus business, is there any additional visibility into -- especially the caller name business, there's been talk about broader adoption by the wireless carriers, et cetera. Any insight as to whether we would see any movement on that front in 2013?

Lisa A. Hook

Well, first of all, let me say preliminarily, I'm expecting that you send me $25 after this call because you just committed a brand violation. We no longer refer to it as TARGUSinfo. We only say NeuStar Information Services. You can make that out to Paul. We're still working. We -- it's actually kind of a longer -- it's a fairly long sales cycle to sell additionally into the mobile carriers. We're optimistic, but there are several factors in mobile that make it very different from adoption of caller ID in wireline. As more and more people cut the cord, taking all of their phone calls on their mobile device, consumers will actually see fewer numbers that they recognize. So today a lot of consumers actually think that they have caller ID because the device dips their address book, right? But again, as you start moving everybody to mobile, they'll know -- have fewer calls recognized. So we believe that there'll be, in future, a greater demand for wireless caller ID. The question is what is the value on that demand, and what is the best technological means of delivering caller ID. Should it be network-based, or should it be app-based?

Operator

And we'll move on to Will Power with Robert Baird.

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

I didn't know if I could get an update on the NeuStar Information Services integration, kind of where that stands today. And I know you referenced at least one of the cross-selling samples. But any sense for when you might start to actually drive revenue, I guess, from some of those cross-selling opportunities?

Lisa A. Hook

Sure. So the underpinnings of the integration are complete. The systems are all fully integrated, financial systems, billing systems, HR, we're SOX compliant, we're cross-training people as we go. So from our point of view, the notion of integration is in our rearview mirror. The opportunity for the entire company to begin developing analytics services, not just services developed by NeuStar Information Services, but across the company, is still in front of us. So we have a number of opportunities that are in development, but I'd say we're still looking at material sales, as we initially indicated when we announced the deal back end of '13 with revenue in '14. We've seen some early revenue from the deals that I spoke of a couple of quarters ago. Our cable order management service, we're now enabling a business directory service through that, which is an NIS service. So there's some early cross-sell, upsell opportunities, but we're still on the same track as when we originally announced.

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

Okay, all right. And then second question, the Registry business had particularly good growth year-over-year in the quarter. And I think, Paul, you referenced something, I guess, maybe if you could repeat what you said there, and is that more onetime-ish in nature? How should we think about growth in that piece of the business going forward?

Paul S. Lalljie

So basically from a revenue perspective in the Registry portion, it grew probably around 6%, rounding up slightly. From a domain names perspective, we had about 5.9 million names compared to 5.7 million. That was a 3% growth. From a Short Code perspective -- Short Code is relatively flat from a revenue perspective, and the number of codes went up 4%. And that's probably because -- mainly because of mix versus just from a dollar and number of codes perspective. The piece of that, that probably contributed a little bit more than it did the prior year was the UltraViolet business from a Registry perspective. And we expect that, that would normalize as we get to the back half of the year here.

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

Okay. So are you seeing a pickup in UltraViolet relative to the last couple of quarters? Or is that just kind of steady, still early?

Paul S. Lalljie

Probably still early and steady. We did see a little bit more this quarter just because we had some additional work that we did with the industry, from statement of works, if you will. And we expect that to normalize to Q4-type run rates as we get to the back half of the year.

Operator

We'll move next to Dan Cummins with B. Riley.

Daniel T. Cummins - B. Riley Caris, Research Division

I wanted to just really ask 2, I guess you'd call them housekeeping questions. What is the level of a stock-based comp to expect quarterly this year? And if you could just review for us the seasonal expectations around NeuStar Information Services, both on the revenue and the sales and marketing lines.

Paul S. Lalljie

Okay, from a stock-based compensation perspective, the first quarter we recorded about $9 million. On a full year basis, we expect that to go up probably about $1 million or $2 million, as we get to the remaining 3 quarters of the year. That's because as you -- from a layering perspective, the first quarter you would have the layering of any new grants that were issued in 2013. So you should expect Q3 and Q4 to be slightly higher. On the reconciliation table that we did at the back of the press release, you would see a number of roughly around $42 million there. So that gives you a ballpark of how to straight line that towards the back end of the year. From an Information Services perspective, Q4 is typically their highest quarter, and that is simply because in some of their Verification & Analytics business, in particular the ad advisor business, it's more seasonal as marketing spend tends to occur during that time of the year. So we do expect the first quarter to be relatively low for them, as we've seen last year and as we've seen again this year, and then we see a gradual increase as we go through the rest of the year with Q4 being the highest.

Daniel T. Cummins - B. Riley Caris, Research Division

And similar expectations in terms of the sales and marketing? They would like sort of roughly contour the way the revenue progresses?

Paul S. Lalljie

Well, I think you're referring to 2012 sales and marketing, had a little hockey stick towards the back end of the year there, particularly being driven by the Information Services business. We don't have that this year. As Lisa just commented, we've fully integrated from an organizational perspective. So their commission plans and their compensation structure for everybody have to be the same this year. So we don't expect that sales and marketing bump, which used to be a cumulative model, if you will. We don't expect that this year.

Daniel T. Cummins - B. Riley Caris, Research Division

Got it. If I could ask one more for Lisa. Are you looking or are you sort of receiving proposals on maybe small bits of M&A to add to Information Services, or is that not a priority as you wind down all the integration and start to focus on the revenue-generating synergies?

Lisa A. Hook

We are getting approached fairly often, both with regard to the small and large M&A opportunities. We're not actively out there searching for M&A. But as we've explained before, we've got a multi-year product road map. To the extent that we see something that is more effective to buy rather than build, it's already in our own map. That would be a nice tuck-in. I don't see anything wildly interesting at the moment, and the couple of things that we've had on our wish list for a long time that would be larger, are not actionable right now.

Operator

We'll hear now from Gray Powell with Wells Fargo.

Gray Powell - Wells Fargo Securities, LLC, Research Division

I just had a couple of quick ones. So we were happy to see the increased share buyback. Just back of the envelope, even if you guys do the full $250 million by the end of the year, your leverage is still going to look pretty conservative at about 0.6x or 0.7x net debt-to-EBITDA. I'm just curious, is there anything that can make you guys maybe be a little bit more aggressive on the leverage front and go back to about 1.5x, which is where you were levered maybe a year ago?

Paul S. Lalljie

I mean, Gray, we always look to have an efficient capital structure. At a number of 1.5x, 2x, 2.25x, we'd probably get to more efficient numbers than we are right now, from a weighted average cost of capital perspective. Given the volumes and the things like that, that we have from an average daily trading volume perspective, we believe the levels we have right now from a share repurchase is appropriate. It also gives us the flexibility to do anything else we need to do. We can even do a Dutch tender as we get down the road. We can do another share repurchase as we get down the road. But at the end of the day, we do look at capital structure frequently, and we recognize the drive to be more efficient, and it's something that we strive for.

Gray Powell - Wells Fargo Securities, LLC, Research Division

Got it. That's very helpful. And then just a completely different topic. I realize that Registry is relatively a small part of the business. Can you help us think about the opportunity with the, I think it was 358 top-level or new top-level domains that you're going to be supporting as part of the gTLD expansion? And to the extent that you can, can you talk about how many of those domains would be like geos like a dot nyc versus brands or other categories like a dot site or dot art.

Lisa A. Hook

We haven't broken down the mix of geos, special interests and corporates, and I'm not sure that we're going to. People have to win these registries first. So while we've got over 350, let's get through the process and see where we wind up. And that's as well why we haven't given anything in terms of a revenue outlook, because we still obviously need to wait for our clients to go through the auction processes.

Operator

And we'll go on to Dan Perlin with RBC.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

So a couple of quick ones. I just wanted to make sure I'm clear on this. So you said that the second half of '13 looks like it should be 8% higher than the first half. So the way that, that kind of shakes out, I'm just wondering it kind of sets up, I mean, a little bit of a sequential bump for June, but it looks like we should be expecting Information Services to be pretty much flat sequentially, just a pretty big drop sequentially, in terms of year-over-year growth. Is that about right or?

Paul S. Lalljie

I mean, I don't know specifically if there's a drop in Information Services. Information Services has typically, sequentially been showing a growth all through the years. Where we -- the key difference in 2013 versus any other year happens to be in Carrier Services for us. We have a 6.5% growth in the fixed portion of the business, and the Order Management revenue stream is more back-end loaded this year than it is front-end loaded because of the transaction volumes that are scheduled towards the back end of the year. So I don't think we're suggesting that Information Services is the one that's going to have a flat Q2, if you will.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Okay, the Carrier Services, you're talking about the back half of the year, and that's a function, when we think about -- you talk about a 6.5% growth rate because of NPAC. But you got an 8 -- you got like 2 points of growth you got to grow over because of the year-over-year discrepancy, is that right? And the $26.5 million, $26.7 million this year versus $45 million last, on the step-up in pricing, or I don't really want to describe it. So I'm just trying to -- I'm trying to reconcile that commentary with Order Management stepping up in the back half the year, which would have to be a big jump in terms of deal size, which is great, but I just want to make sure I understand why you have such confidence. And then secondly, if that's the case, then second quarter looks like it's going to be a bit weaker than we would have expected?

Paul S. Lalljie

So the first thing is not all of the back half bump of the year is -- belongs to Order Management. You do have an Information Services business that's been steadily growing. So we do expect that to perform in the back half of the year, as it did in 2012. Its Q4 numbers was probably more than 8% greater than its first quarter numbers last year. That's the first comment. The second comment, your observation is correct. The second quarter may not be as strong as it normally is from a sequential growth perspective, simply because we have more of our revenue back-end loaded this year than normally.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Got it. But you're...

Lisa A. Hook

If I could add one comment on Order Management, we're not expecting new contracts. What we're telling you is that there are scheduled transactions under existing contracts. So if you look historically, there's an ongoing transaction rate, but then as customers migrate geographies onto our service, the mass migrations are very lumpy.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Okay. And that geographic shift, is that -- what's driving that? Is that a function of residential shifts?

Lisa A. Hook

It's a function of moving from another service provider to us, so it's onboarding geographies.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

So that's more of a share gains argument, as opposed to anything else. Is that right?

Lisa A. Hook

Yes.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Okay, that's great. And then I just wanted to get some commentary around just buy back. I haven't been around you guys for a long time, but it sounded like the way that this buyback and the way you've structured it is a little bit different than what we would have been accustomed to, had we followed it for a long time. And you were moving kind of these like shock absorbers, when things could go maybe against you, you can step into the market and support it. And I'm just wondering what's the commentary around how that ultimately became created in that manner. Just, it kind of makes me worry that we're stepping into something that -- we're supporting the stock, but there's some sort of unforeseen risk that we need to be aware of.

Paul S. Lalljie

So a couple of things. Since the beginning of time when we've started doing share repurchase programs, we've always done our share repurchase program in an open market manner until 2011. In 2011, we did a $250 million Dutch tender. The open market programs that we've done traditionally have been programs that are 10b-18s and 10b5-1 plans, and the plans tend not to purchase or have blackout dates that correspond with when we have an open window in the company. Said differently, when management is allowed to sell. The program that you see now does not have blackout dates. Why? Because we have our NPAC contract RFP process that's in place right now. The management is not allowed to sell during this period anyhow. That means you can be in the market everyday and buy back without having that issue to deal with from a pure program perspective. So that's the general shift that has caused this change in plan. Now as a company, we've traditionally had low average daily trading volumes, and we tend to lean towards modified Dutch tenders. So we can put out a price that we want to get shares out of the market, and we can have a tender, and we can get out -- in and out of the market quite quickly, and account for it in that same period in a nice clean manner. We still believe those things are good things to do, modified Dutch tenders. But given where we are right now, the average daily trading volumes, the support that we have, and it's a quick and easy program to put in place, we felt that this was the most appropriate program to put in place right now. There is nothing more to it beyond those words there.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division

Okay. That's great. And then I just want to make sure, a clarification point, you said between $30 million and $60 million per month, is that what I heard?

Paul S. Lalljie

Yes.

Operator

And at this time, I'll turn the program back to Lisa Hook for closing remarks.

Lisa A. Hook

Thanks very much. As you heard this quarter, we've made progress towards achieving our 4 priorities for the year, including submitting a compelling proposal to renew the NPAC contract. We've announced a significant share repurchase program to drive additional shareholder value, and I look forward to updating you on further progress as the year unfolds. So until then, thanks very much.

Operator

And that will conclude today's conference. Thank you, all, for joining us.

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