##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number 001-32548
 NeuStar, Inc.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    52-2141938
(I.R.S. Employer
Identification No.)
 46000 Center Oak Plaza
Sterling, Virginia 20166
 (571) 434-5400
 þ  ̈
  þ o o
 o þ




---



##### 



NeuStar, Inc.
Index
 PART I FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of December 31, 2006 and September 30, 2007 (unaudited)Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2006 and 2007Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and  2007Notes to Unaudited Consolidated Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and ProceduresPART II OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 1A.
    
    Risk FactorsItem 2.
    
    Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
    
    Defaults upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsSignatures
 2




---



##### 



PART I FINANCIAL INFORMATION
 Item 1. Financial Statements
 NEUSTAR, INC.
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share data)
 December 31,
    
    
    September 30,2006
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    39,242
    
    
    $
    118,381Restricted cash
    
    
    
    
    
    
    139Short-term investments
    
    
    19,010
    
    
    
    27,625Accounts receivable, net of allowance
for doubtful accounts of $1,103 and
$1,276, respectively
    
    
    53,108
    
    
    
    71,853Unbilled receivables
    
    
    810
    
    
    
    247Notes receivable
    
    
    1,994
    
    
    
    2,116Prepaid expenses and other current assets
    
    
    6,945
    
    
    
    10,068Deferred costs
    
    
    6,032
    
    
    
    7,813Income tax receivable
    
    
    893
    
    
    
    3,081Deferred tax assets
    
    
    7,641
    
    
    
    15,519Total current assets
    
    
    135,675
    
    
    
    256,842Property and equipment, net
    
    
    42,678
    
    
    
    51,727Goodwill
    
    
    205,855
    
    
    
    203,629Intangible assets, net
    
    
    51,196
    
    
    
    40,414Notes receivable, long-term
    
    
    2,918
    
    
    
    1,315Deferred costs, long-term
    
    
    4,411
    
    
    
    4,105Deferred tax assets, long-term
    
    
    4,500
    
    
    
    Other assets
    
    
    1,026
    
    
    
    5,367Total assets
    
    $
    448,259
    
    
    $
    563,399
 See accompanying notes.
 3




---



##### 



NEUSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 December 31,
    
    
    September 30,2006
    
    
    2007(unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,619
    
    
    $
    6,627Accrued expenses
    
    
    49,460
    
    
    
    41,494Deferred revenue
    
    
    22,923
    
    
    
    32,384Notes payable
    
    
    768
    
    
    
    2,471Capital lease obligations
    
    
    4,367
    
    
    
    2,577Accrued restructuring reserve
    
    
    368
    
    
    
    401Other liabilities
    
    
    200
    
    
    
    100Total current liabilities
    
    
    81,705
    
    
    
    86,054Deferred revenue, long-term
    
    
    17,921
    
    
    
    18,023Notes payable, long-term
    
    
    174
    
    
    
    6,037Capital lease obligations, long-term
    
    
    3,751
    
    
    
    3,261Accrued restructuring reserve, long-term
    
    
    2,206
    
    
    
    1,899Deferred tax liabilities, long-term
    
    
    
    
    
    
    1,912Other
liabilities, long-term
    
    
    1,356
    
    
    
    3,301Total liabilities
    
    
    107,113
    
    
    
    120,487Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.001 par value;
100,000,000 shares authorized; no
shares issued or outstanding
    
    
    
    
    
    
    Class A common stock, par value
$0.001; 200,000,000 shares authorized;
74,351,200 and 76,822,350 shares
issued and outstanding at December 31,
2006 and September 30, 2007,
respectively
    
    
    74
    
    
    
    77Class B common stock, par value
$0.001; 100,000,000 shares authorized;
18,330 and 4,538 shares issued and
outstanding at December 31, 2006 and
September 30, 2007, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    243,395
    
    
    
    285,511Treasury stock, 756 and 98,509 shares
at December 31, 2006 and September 30,
2007, respectively, at cost
    
    
    (22
    )
    
    
    (3,194
    )Retained earnings
    
    
    97,699
    
    
    
    160,518Total stockholders equity
    
    
    341,146
    
    
    
    442,912Total liabilities and stockholders equity
    
    $
    448,259
    
    
    $
    563,399
 See accompanying notes.
 4




---



##### 



NEUSTAR, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenue:Addressing
    
    $
    28,645
    
    
    $
    28,451
    
    
    $
    75,507
    
    
    $
    82,311Interoperability
    
    
    13,550
    
    
    
    15,191
    
    
    
    40,911
    
    
    
    43,153Infrastructure and other
    
    
    40,314
    
    
    
    67,115
    
    
    
    124,517
    
    
    
    182,434Total revenue
    
    
    82,509
    
    
    
    110,757
    
    
    
    240,935
    
    
    
    307,898Operating expense:Cost of revenue (excluding depreciation
and amortization shown separately
below)
    
    
    21,591
    
    
    
    24,093
    
    
    
    62,422
    
    
    
    70,417Sales and marketing
    
    
    12,185
    
    
    
    16,317
    
    
    
    32,754
    
    
    
    52,602Research and development
    
    
    4,625
    
    
    
    5,977
    
    
    
    12,782
    
    
    
    19,297General and administrative
    
    
    9,966
    
    
    
    12,978
    
    
    
    25,551
    
    
    
    35,018Depreciation and amortization
    
    
    6,212
    
    
    
    9,498
    
    
    
    16,493
    
    
    
    27,93754,579
    
    
    
    68,863
    
    
    
    150,002
    
    
    
    205,271Income from operations
    
    
    27,930
    
    
    
    41,894
    
    
    
    90,933
    
    
    
    102,627Other (expense) income:Interest expense
    
    
    (240
    )
    
    
    (504
    )
    
    
    (927
    )
    
    
    (1,218
    )Interest and other income
    
    
    1,328
    
    
    
    1,123
    
    
    
    2,729
    
    
    
    3,196Income before minority interest and income
taxes
    
    
    29,018
    
    
    
    42,513
    
    
    
    92,735
    
    
    
    104,605Minority interest
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    Income before income taxes
    
    
    29,018
    
    
    
    42,513
    
    
    
    92,640
    
    
    
    104,605Provision for income taxes
    
    
    11,914
    
    
    
    16,811
    
    
    
    37,299
    
    
    
    41,786Net income
    
    $
    17,104
    
    
    $
    25,702
    
    
    $
    55,341
    
    
    $
    62,819Net income per common share:Basic
    
    $
    0.23
    
    
    $
    0.34
    
    
    $
    0.77
    
    
    $
    0.83Diluted
    
    $
    0.22
    
    
    $
    0.32
    
    
    $
    0.71
    
    
    $
    0.79Weighted average common shares outstanding:Basic
    
    
    73,042
    
    
    
    76,461
    
    
    
    71,849
    
    
    
    75,664Diluted
    
    
    78,399
    
    
    
    79,272
    
    
    
    78,096
    
    
    
    79,120
 See accompanying notes.
 5




---



##### 



NEUSTAR, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Nine Months EndedSeptember 30,2006
    
    
    2007Operating activities:Net income
    
    $
    55,341
    
    
    $
    62,819Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    16,493
    
    
    
    27,937Stock-based compensation
    
    
    8,650
    
    
    
    11,589Amortization of deferred financing costs
    
    
    5
    
    
    
    115Excess tax benefits from stock-based compensation
    
    
    (42,419
    )
    
    
    (17,997
    )Deferred income taxes
    
    
    2,852
    
    
    
    1,737Provision for doubtful accounts
    
    
    1,070
    
    
    
    1,876Minority interest
    
    
    95
    
    
    
    Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (15,926
    )
    
    
    (22,490
    )Unbilled receivables
    
    
    6,253
    
    
    
    563Notes and securitized notes receivable
    
    
    (4,311
    )
    
    
    1,481Prepaid expenses and other current assets
    
    
    731
    
    
    
    (519
    )Deferred costs
    
    
    (379
    )
    
    
    (1,475
    )Income tax receivable
    
    
    33,873
    
    
    
    16,581Other assets
    
    
    393
    
    
    
    (57
    )Other liabilities
    
    
    
    
    
    
    48Accounts payable and accrued expenses
    
    
    (2,429
    )
    
    
    (1,774
    )Accrued restructuring reserve
    
    
    (416
    )
    
    
    (274
    )Deferred revenue
    
    
    1,485
    
    
    
    8,889Net cash provided by operating activities
    
    
    61,361
    
    
    
    89,049Investing activities:Purchases of property and equipment
    
    
    (10,183
    )
    
    
    (20,718
    )Sales of investments, net
    
    
    (35,505
    )
    
    
    (8,615
    )Business acquired, net of cash
    
    
    (66,925
    )
    
    
    (1,569
    )Net cash used in investing activities
    
    
    (112,613
    )
    
    
    (30,902
    )Financing activities:Disbursement of restricted cash
    
    
    (14
    )
    
    
    (139
    )Principal repayments on notes payable
    
    
    (1,126
    )
    
    
    (2,522
    )Principal repayments on capital lease obligations
    
    
    (4,535
    )
    
    
    (3,705
    )Proceeds from exercise of common stock options
    
    
    14,034
    
    
    
    12,533Excess tax benefits from stock-based compensation
    
    
    42,419
    
    
    
    17,997Repurchase of restricted stock awards
    
    
    
    
    
    
    (3,172
    )Net cash provided by financing activities
    
    
    50,778
    
    
    
    20,992Net (decrease) increase in cash and cash equivalents
    
    
    (474
    )
    
    
    79,139Cash and cash equivalents at beginning of period
    
    
    27,529
    
    
    
    39,242Cash and cash equivalents at end of period
    
    $
    27,055
    
    
    $
    118,381
 See accompanying notes.
 6




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2007
 1. DESCRIPTION OF BUSINESS AND ORGANIZATION
   
    
    Addressing.The Company enables CSPs to use critical, shared
addressing resources, such as telephone numbers, Internet top-level
domain names, and U.S. Common Short Codes.
    
    Interoperability.The Company enables CSPs to exchange and share
critical operating data so that communications originating on one
providers network can be delivered and received on the network of
another CSP. The Company also facilitates order management and work
flow processing among CSPs.
    
    Infrastructure and Other.The Company enables CSPs to manage their
networks more efficiently by centrally managing certain critical data
they use to route communications over their own networks.
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Unaudited Interim Financial Information
   7




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Use of Estimates
  Goodwill
 Goodwill and Other Intangible Assets
  Identifiable Intangible Assets
 Accounting for Impairment or Disposal of Long-Lived Assets
  Years
    
    MethodAcquired technologies
    
    3 to 4
    
    Straight-lineCustomer lists and relationships
    
    3 to 7
    
    VariousTrade names
    
    
    3
    
    
    Straight-line
  Impairment of Long-Lived Assets
  Revenue Recognition
  8




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Revenue
Recognition
 Addressing
    Interoperability
  Infrastructure and Other
  9




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Significant Contracts
    Service Level Standards
  Cost of Revenue and Deferred Costs
   10




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation
 Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards
 Basic and Diluted Net Income per Common Share
  Income Taxes
 Accounting for Income
Taxes .
  Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
 11




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 i.e.
 Comprehensive Net Income
  Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. ACQUISITION
 I-View.com, Inc. (d/b/a MetaInfo)
 Business Combinations
 12




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  4. GOODWILL AND INTANGIBLE ASSETS
  December 31,
    
    
    September 30,2006
    
    
    2007(unaudited)Goodwill
    
    $
    205,855
    
    
    $
    203,629
  Weighted-AverageDecember 31,
    
    
    September 30,
    
    
    Amortization Period2006
    
    
    2007
    
    
    (In Years)(unaudited)
    
    
    (unaudited)Intangible assets:Customer lists and relationships
    
    $
    43,467
    
    
    $
    43,740
    
    
    
    5.7Accumulated amortization
    
    
    (5,817
    )
    
    
    (13,156
    )Customer lists and relationships, net
    
    
    37,650
    
    
    
    30,584Acquired technology
    
    
    16,808
    
    
    
    17,069
    
    
    
    3.1Accumulated amortization
    
    
    (3,416
    )
    
    
    (7,343
    )Acquired technology, net
    
    
    13,392
    
    
    
    9,726Trade names
    
    
    200
    
    
    
    200
    
    
    
    3.0Accumulated amortization
    
    
    (46
    )
    
    
    (96
    )Trade names, net
    
    
    154
    
    
    
    104Intangible assets, net
    
    $
    51,196
    
    
    $
    40,414
  5. NOTES PAYABLE
  13




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    6. STOCKHOLDERS EQUITY
 Stock-Based Compensation
   Stock Options
  14




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2007
    
    2006
    
    2007Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    39.11
    %
    
    
    32.81
    %
    
    
    38.68
    %
    
    
    33.25
    %Risk-free interest rate
    
    
    4.94
    %
    
    
    4.46
    %
    
    
    4.68
    %
    
    
    4.46
    %Expected life of options (in years)
    
    
    4.60
    
    
    
    4.60
    
    
    
    4.56
    
    
    
    4.61
    Share-Based Payment
  Weighted-AverageShares
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    7,916,728
    
    
    $
    10.83Options granted
    
    
    815,630
    
    
    
    32.60Options exercised
    
    
    (2,235,525
    )
    
    
    5.61Options canceled
    
    
    (630,275
    )
    
    
    20.07Outstanding September 30, 2007
    
    
    5,866,558
    
    
    
    14.85Exercisable at September 30, 2007
    
    
    3,475,089
    
    
    
    7.90
  15




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Restricted Stock
  Weighted-AverageGrant DateShares
    
    Fair ValueNon-vested December 31, 2006
    
    
    103,223
    
    
    $
    31.41Granted
    
    
    13,300
    
    
    
    30.84Vested
    
    
    (25,247
    )
    
    
    31.42Forfeited
    
    
    (15,850
    )
    
    
    30.78Non-vested September 30, 2007
    
    
    75,426
    
    
    
    31.44
  Performance Vested Restricted Stock Units
   Weighted-AverageGrant DateShares
    
    Fair ValueNon-vested December 31, 2006
    
    
    
    
    
    $
    Granted
    
    
    322,290
    
    
    
    32.59Vested
    
    
    
    
    
    
    Forfeited
    
    
    (18,810
    )
    
    
    32.59Non-vested September 30, 2007
    
    
    303,480
    
    
    
    32.59
  16




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Restricted Stock Units
    Phantom Stock Units
  Treasury Stock
  17




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 7. BASIC AND DILUTED NET INCOME PER COMMON SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Computation on basic net income per common share:Net income
    
    $
    17,104
    
    
    $
    25,702
    
    
    $
    55,341
    
    
    $
    62,819Weighted average common shares outstanding 
basic
    
    
    73,042
    
    
    
    76,461
    
    
    
    71,849
    
    
    
    75,664Basic net income per common share
    
    $
    0.23
    
    
    $
    0.34
    
    
    $
    0.77
    
    
    $
    0.83Computation on diluted net income per common share:Net income
    
    $
    17,104
    
    
    $
    25,702
    
    
    $
    55,341
    
    
    $
    62,819Weighted average common shares outstanding 
basic
    
    
    73,042
    
    
    
    76,461
    
    
    
    71,849
    
    
    
    75,664Effect of dilutive securities:Stock-based awards
    
    
    5,357
    
    
    
    2,811
    
    
    
    6,247
    
    
    
    3,456Weighted average common shares outstanding 
diluted
    
    
    78,399
    
    
    
    79,272
    
    
    
    78,096
    
    
    
    79,120Diluted net income per common share
    
    $
    0.22
    
    
    $
    0.32
    
    
    $
    0.71
    
    
    $
    0.79
 8. SEGMENT INFORMATION
 Disclosure About Segments of an Enterprise and Related Information
   ClearinghouseServices
    
    NGM Services
    
    Consolidated TotalRevenue
    
    $
    108,960
    
    
    $
    1,797
    
    
    $
    110,757Income (loss) from operations
    
    $
    51,506
    
    
    $
    (9,612
    )
    
    $
    41,894
 18




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  ClearinghouseServices
    
    NGM Services
    
    Consolidated TotalRevenue
    
    $
    304,013
    
    
    $
    3,885
    
    
    $
    307,898Income (loss) from operations
    
    $
    128,683
    
    
    $
    (26,056
    )
    
    $
    102,627
  ClearinghouseServices
    
    NGM Services
    
    Consolidated TotalTotal assets
    
    $
    396,303
    
    
    $
    167,096
    
    
    $
    563,399Goodwill
    
    $
    87,821
    
    
    $
    115,808
    
    
    $
    203,629Intangible assets
    
    $
    16,669
    
    
    $
    23,745
    
    
    $
    40,414
 9. INCOME TAXES
     19




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  Overview
    Recent Developments
  Critical Accounting Policies and Estimates
  20




---



##### 



Deferred Income Taxes
   Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109 i.e.
 Goodwill and Intangible Assets
 Goodwill and Other
Intangible Assets
 21




---



##### 



Acquisitions
 NeuLevel, Inc.
 Business Combinations
 UltraDNS Corporation
   Followap Inc.
  22




---



##### 



I-View.com, Inc. (d/b/a MetaInfo)
  23




---



##### 



Consolidated Results of Operations
  Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2007
  Three Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006 vs. 2007$
    
    
    $
    
    
    $ Change
    
    
    % Change(unaudited)(in thousands, except per share data)Revenue:Addressing
    
    $
    28,645
    
    
    $
    28,451
    
    
    $
    (194
    )
    
    
    (0.7
    )%Interoperability
    
    
    13,550
    
    
    
    15,191
    
    
    
    1,641
    
    
    
    12.1Infrastructure and other
    
    
    40,314
    
    
    
    67,115
    
    
    
    26,801
    
    
    
    66.5Total revenue
    
    
    82,509
    
    
    
    110,757
    
    
    
    28,248
    
    
    
    34.2Operating expense:Cost of revenue (excluding depreciation
and amortization shown separately below)
    
    
    21,591
    
    
    
    24,093
    
    
    
    2,502
    
    
    
    11.6Sales and marketing
    
    
    12,185
    
    
    
    16,317
    
    
    
    4,132
    
    
    
    33.9Research and development
    
    
    4,625
    
    
    
    5,977
    
    
    
    1,352
    
    
    
    29.2General and administrative
    
    
    9,966
    
    
    
    12,978
    
    
    
    3,012
    
    
    
    30.2Depreciation and amortization
    
    
    6,212
    
    
    
    9,498
    
    
    
    3,286
    
    
    
    52.954,579
    
    
    
    68,863
    
    
    
    14,284
    
    
    
    26.2Income from operations
    
    
    27,930
    
    
    
    41,894
    
    
    
    13,964
    
    
    
    50.0Other (expense) income:Interest expense
    
    
    (240
    )
    
    
    (504
    )
    
    
    (264
    )
    
    
    110.0Interest and other income
    
    
    1,328
    
    
    
    1,123
    
    
    
    (205
    )
    
    
    (15.4
    )Income before income taxes
    
    
    29,018
    
    
    
    42,513
    
    
    
    13,495
    
    
    
    46.5Provision for income taxes
    
    
    11,914
    
    
    
    16,811
    
    
    
    4,897
    
    
    
    41.1Net income
    
    $
    17,104
    
    
    $
    25,702
    
    
    $
    8,598
    
    
    
    50.3
    %Net income attributable to common stockholders
per common share:Basic
    
    $
    0.23
    
    
    $
    0.34Diluted
    
    $
    0.22
    
    
    $
    0.32Weighted average common shares outstanding:Basic
    
    
    73,042
    
    
    
    76,461Diluted
    
    
    78,399
    
    
    
    79,272
 24




---



##### 



Revenue
 Total revenue
 Addressing.
 Interoperability.
 Infrastructure and other.
 Expense
 Cost of revenue
 Sales and marketing
 Research and development
 25




---



##### 



General and administrative.
 Depreciation and amortization
 Interest expense
 Interest and other income
 Provision for income taxes
 Additional Information regarding NGM Segment
  NGM Revenue
 Operating expense
 Segment loss from operations
 26




---



##### 



Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2007
  Nine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006 vs. 2007$
    
    
    $
    
    
    $ Change
    
    
    % Change(unaudited)(in thousands, except per share data)Revenue:Addressing
    
    $
    75,507
    
    
    $
    82,311
    
    
    $
    6,804
    
    
    
    9.0
    %Interoperability
    
    
    40,911
    
    
    
    43,153
    
    
    
    2,242
    
    
    
    5.5Infrastructure and other
    
    
    124,517
    
    
    
    182,434
    
    
    
    57,917
    
    
    
    46.5Total revenue
    
    
    240,935
    
    
    
    307,898
    
    
    
    66,963
    
    
    
    27.8Operating expense:Cost of revenue (excluding depreciation and
amortization shown separately below)
    
    
    62,422
    
    
    
    70,417
    
    
    
    7,995
    
    
    
    12.8Sales and marketing
    
    
    32,754
    
    
    
    52,602
    
    
    
    19,848
    
    
    
    60.6Research and development
    
    
    12,782
    
    
    
    19,297
    
    
    
    6,515
    
    
    
    51.0General and administrative
    
    
    25,551
    
    
    
    35,018
    
    
    
    9,467
    
    
    
    37.1Depreciation and amortization
    
    
    16,493
    
    
    
    27,937
    
    
    
    11,444
    
    
    
    69.4150,002
    
    
    
    205,271
    
    
    
    55,269
    
    
    
    36.8Income from operations
    
    
    90,933
    
    
    
    102,627
    
    
    
    11,694
    
    
    
    12.9Other (expense) income:Interest expense
    
    
    (927
    )
    
    
    (1,218
    )
    
    
    (291
    )
    
    
    31.4Interest and other income
    
    
    2,729
    
    
    
    3,196
    
    
    
    467
    
    
    
    17.1Income before minority interest and income taxes
    
    
    92,735
    
    
    
    104,605
    
    
    
    11,870
    
    
    
    12.8Minority interest
    
    
    (95
    )
    
    
    
    
    
    
    95
    
    
    
    100.0Income before income taxes
    
    
    92,640
    
    
    
    104,605
    
    
    
    11,965
    
    
    
    12.9Provision for income taxes
    
    
    37,299
    
    
    
    41,786
    
    
    
    4,487
    
    
    
    12.0Net income
    
    $
    55,341
    
    
    $
    62,819
    
    
    $
    7,478
    
    
    
    13.5
    %Net income attributable to common stockholders
per common share:Basic
    
    $
    0.77
    
    
    $
    0.83Diluted
    
    $
    0.71
    
    
    $
    0.79Weighted average common shares outstanding:Basic
    
    
    71,849
    
    
    
    75,664Diluted
    
    
    78,096
    
    
    
    79,120
 Revenue
 Total revenue.
 Addressing.
 27




---



##### 



Interoperability.
 Infrastructure and other.
 Expense
 Cost of revenue.
 Sales and marketing
 Research and development
 General and administrative.
 28




---



##### 



Depreciation and amortization
 Interest expense
 Interest and other income
 Provision for income taxes
 Additional Information regarding NGM Segment
  NGM Revenue
 Operating expense
 Segment loss from operations
 Liquidity and Capital Resources
  29




---



##### 



Discussion of Cash Flows
 Cash flows from operations
  Cash flows from investing
  Cash flows from financing
  Recent Accounting Pronouncements
 Fair Value Measurements
 30




---



##### 



The Fair Value Option for Financial Assets and
Financial Liabilities
 Off-Balance Sheet Arrangements
  Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Item 4. Controls and Procedures
    31




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetPart of Publicly
    
    Be Purchased UnderTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    the Plans orMonth
    
    Shares Purchased(1)
    
    per Share
    
    Programs
    
    ProgramsJuly 1 through 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1 through 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1 through 30, 2007
    
    
    506
    
    
    
    31.38
    
    
    
    
    
    
    
    Total
    
    
    506
    
    
    
    31.38
    
    
    
    
    
    
    
    
 
 (1)
    
    The number of shares purchased consists of shares of common stock tendered by employees to
the Company to satisfy the employees tax withholding obligations arising as a result of
vesting of restricted stock grants under the Companys stock incentive plan, which shares were
purchased by the Company based on their fair market value on the vesting date. None of these
share purchases were part of a publicly announced program to purchase common stock of the
Company. Item 3. Defaults upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  32




---



##### 



Item 6. Exhibits
 Exhibit No.
    
    Description3.1
    
    Restated Certificate of Incorporation, incorporated herein by
reference to Exhibit 3.1 to Amendment No. 7 to NeuStars
Registration Statement on Form S-1, filed June 28, 2005 (File
No. 333-123635).3.2
    
    Amended and Restated Bylaws, incorporated herein by reference
to Exhibit 3.1 to NeuStars report on Form 8-K, filed July 13,
2007 (File No. 001-32548).10.1.2
    
    Amendment to the contractor
services agreement by and between NeuStar, Inc. and North American
Portability Management LLC, as amended.**10.3
    
    National Thousands-Block Pooling Administration agreement
awarded to NeuStar, Inc. by the Federal Communications
Commission.**10.4.4
    
    Amendments to North American Numbering Plan Administrator
agreement awarded to NeuStar, Inc. by the Federal
Communications Commission.10.31.1
    
    Amendment to Credit Agreement among NeuStar, Inc., JP Morgan
Chase Bank, N.A. and other lenders.10.99
    
    Amendments to National Thousands-Block Pooling Administration
Agreement awarded to NeuStar, Inc. by the Federal
Communications Commission which expired as of August 14, 2007.31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 **
    
    Confidential treatment has been requested for portions of this document. The omitted portions of
this document have been filed with the Securities and Exchange Commission. 33




---



##### 



NeuStar, Inc.Date: November 5, 2007
    By:
    /s/ Jeffrey A. BabkaJeffrey A. BabkaChief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer) 34




---



##### 



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    Restated Certificate of Incorporation, incorporated herein by
reference to Exhibit 3.1 to Amendment No. 7 to NeuStars
Registration Statement on Form S-1, filed June 28, 2005 (File
No. 333-123635).3.2
    
    Amended and Restated Bylaws, incorporated herein by reference
to Exhibit 3.1 to NeuStars report on Form 8-K, filed July 13,
2007 (File No. 001-32548).10.1.2
    
    Amendment to the contractor
services agreement by and between NeuStar, Inc. and North American
Portability Management LLC, as amended.**10.3
    
    National Thousands-Block Pooling Administration agreement
awarded to NeuStar, Inc. by the Federal Communications
Commission.**10.4.4
    
    Amendments to North American Numbering Plan Administrator
agreement awarded to NeuStar, Inc. by the Federal
Communications Commission.10.31.1
    
    Amendment to Credit Agreement among NeuStar, Inc., JP Morgan
Chase Bank, N.A. and other lenders.10.99
    
    Amendments to National Thousands-Block Pooling Administration
Agreement awarded to NeuStar, Inc. by the Federal
Communications Commission which expired as of August 14, 2007.31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 **
    
    Confidential treatment has been requested for portions of this document. The omitted portions of
this document have been filed with the Securities and Exchange Commission.