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 March 31, 2010
 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
    
    52-2141938(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 46000 Center Oak Plaza
 Sterling, Virginia 20166
 (571) 434-5400
 þ o
 o o
  Large accelerated filer þ   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



NeuStar, Inc.
Index
 PART I FINANCIAL INFORMATIONItem 1. Financial Statements

3Consolidated Balance Sheets as of December 31, 2009 and March 31, 2010 (unaudited)

3Unaudited Consolidated Statements of Operations for the three months ended March 31, 2009 and 2010

5Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2010

6Notes to Unaudited Consolidated Financial Statements

7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

25Item 3. Quantitative and Qualitative Disclosures About Market Risk

33Item 4. Controls and Procedures

33PART II OTHER INFORMATIONItem 1. Legal Proceedings

34Item 1A. Risk Factors

34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

45Item 3. Defaults upon Senior Securities

45Item 4. [Removed and Reserved]

45Item 5. Other Information

45Item 6. Exhibits

46Signatures

47




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##### 



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 NEUSTAR, INC.


CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 December 31,
    
    
    March 31,2009
    
    
    2010(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    304,581
    
    
    $
    317,886Restricted cash
    
    
    512
    
    
    
    524Short-term investments
    
    
    37,610
    
    
    
    37,021Accounts receivable, net of allowance for doubtful accounts of $1,425 and
$1,233, respectively
    
    
    64,019
    
    
    
    66,998Unbilled receivables
    
    
    2,986
    
    
    
    4,138Prepaid expenses and other current assets
    
    
    11,171
    
    
    
    11,006Deferred costs
    
    
    6,916
    
    
    
    6,936Deferred tax assets
    
    
    6,973
    
    
    
    8,030Total current assets
    
    
    434,768
    
    
    
    452,539Property and equipment, net
    
    
    73,881
    
    
    
    74,156Goodwill
    
    
    118,417
    
    
    
    118,417Intangible assets, net
    
    
    8,789
    
    
    
    7,594Deferred costs, long-term
    
    
    1,731
    
    
    
    1,309Deferred tax assets, long-term
    
    
    5,124
    
    
    
    5,420Other assets, long-term
    
    
    5,094
    
    
    
    5,743Total assets
    
    $
    647,804
    
    
    $
    665,178
 See accompanying notes.
 3




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##### 



NEUSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 December 31,
    
    
    March 31,2009
    
    
    2010(unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,872
    
    
    $
    4,286Accrued expenses
    
    
    60,180
    
    
    
    40,876Income taxes payable
    
    
    2,764
    
    
    
    15,904Deferred revenue
    
    
    26,117
    
    
    
    28,385Notes payable
    
    
    987
    
    
    
    Capital lease obligations
    
    
    10,235
    
    
    
    9,434Accrued restructuring reserve
    
    
    2,459
    
    
    
    2,219Other liabilities
    
    
    3,891
    
    
    
    3,891Total current liabilities
    
    
    118,505
    
    
    
    104,995Deferred revenue, long-term
    
    
    8,923
    
    
    
    9,104Capital lease obligations, long-term
    
    
    10,766
    
    
    
    9,630Accrued restructuring reserve, long-term
    
    
    1,111
    
    
    
    645Other liabilities, long-term
    
    
    4,062
    
    
    
    4,776Total liabilities
    
    
    143,367
    
    
    
    129,150Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares
issued and outstanding as of December 31, 2009 and March 31, 2010
    
    
    
    
    
    
    Class A common stock, par value $0.001; 200,000,000 shares authorized;
79,425,095 and 79,872,061 shares issued and outstanding at
December 31, 2009 and March 31, 2010, respectively
    
    
    79
    
    
    
    80Class B common stock, par value $0.001; 100,000,000 shares authorized;
3,082 and 3,082 shares issued and outstanding at December 31, 2009 and
March 31, 2010, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    338,109
    
    
    
    344,767Treasury stock, 4,967,979 and 4,981,057 shares at December 31, 2009 and
March 31, 2010, respectively, at cost
    
    
    (128,757
    )
    
    
    (129,057
    )Accumulated other comprehensive loss
    
    
    (463
    )
    
    
    (433
    )Retained earnings
    
    
    295,469
    
    
    
    320,671Total stockholders equity
    
    
    504,437
    
    
    
    536,028Total liabilities and stockholders equity
    
    $
    647,804
    
    
    $
    665,178
 See accompanying notes.
 4




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##### 



NEUSTAR, INC.


UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 Three Months EndedMarch 31,2009
    
    
    2010Revenue:Carrier Services
    
    $
    88,043
    
    
    $
    99,788Enterprise Services
    
    
    25,145
    
    
    
    29,203Total revenue
    
    
    113,188
    
    
    
    128,991Operating expense:Cost of revenue (excluding depreciation and amortization shown separately below)
    
    
    27,843
    
    
    
    29,113Sales and marketing
    
    
    19,507
    
    
    
    22,854Research and development
    
    
    4,313
    
    
    
    4,078General and administrative
    
    
    13,501
    
    
    
    18,449Depreciation and amortization
    
    
    9,245
    
    
    
    10,143Restructuring charges
    
    
    
    
    
    
    2,34974,409
    
    
    
    86,986Income from operations
    
    
    38,779
    
    
    
    42,005Other (expense) income:Interest and other expense
    
    
    (1,224
    )
    
    
    (1,748
    )Interest and other income
    
    
    2,459
    
    
    
    1,390Income before income taxes
    
    
    40,014
    
    
    
    41,647Provision for income taxes
    
    
    15,661
    
    
    
    16,445Net income
    
    $
    24,353
    
    
    $
    25,202Net income per share:Basic
    
    $
    0.33
    
    
    $
    0.34Diluted
    
    $
    0.32
    
    
    $
    0.33Weighted average common shares outstanding:Basic
    
    
    74,134
    
    
    
    74,613Diluted
    
    
    75,323
    
    
    
    75,944
 See accompanying notes.
 5




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##### 



NEUSTAR, INC.


UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Three Months EndedMarch 31,2009
    
    
    2010Operating activities:Net income
    
    $
    24,353
    
    
    $
    25,202Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    9,245
    
    
    
    10,143Stock-based compensation
    
    
    3,699
    
    
    
    3,866Amortization of deferred financing costs
    
    
    42
    
    
    
    42Excess tax benefits from stock option exercises
    
    
    (462
    )
    
    
    (350
    )Deferred income taxes
    
    
    1,441
    
    
    
    (1,388
    )Provision for doubtful accounts
    
    
    765
    
    
    
    266Gain on trading securities
    
    
    (476
    )
    
    
    (61
    )Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    6,760
    
    
    
    (3,444
    )Unbilled receivables
    
    
    95
    
    
    
    (1,152
    )Notes receivable
    
    
    567
    
    
    
    Prepaid expenses and other current assets
    
    
    (1,292
    )
    
    
    359Deferred costs
    
    
    894
    
    
    
    402Income taxes receivable
    
    
    5,083
    
    
    
    Other assets
    
    
    (672
    )
    
    
    (619
    )Other liabilities
    
    
    (107
    )
    
    
    714Accounts payable and accrued expenses
    
    
    (10,659
    )
    
    
    (27,309
    )Income taxes payable
    
    
    8,560
    
    
    
    13,490Accrued restructuring reserve
    
    
    (1,402
    )
    
    
    (706
    )Deferred revenue
    
    
    978
    
    
    
    2,449Net cash provided by operating activities
    
    
    47,412
    
    
    
    21,904Investing activities:Purchases of property and equipment
    
    
    (1,418
    )
    
    
    (7,191
    )Sales of investments, net
    
    
    3,102
    
    
    
    650Net cash provided by (used in) investing activities
    
    
    1,684
    
    
    
    (6,541
    )Financing activities:Reduction (disbursement) of restricted cash
    
    
    51
    
    
    
    (12
    )Principal repayments on notes payable
    
    
    (763
    )
    
    
    (987
    )Principal repayments on capital lease obligations
    
    
    (2,343
    )
    
    
    (3,545
    )Proceeds from exercise of common stock options
    
    
    1,310
    
    
    
    2,443Excess tax benefits from stock-based compensation
    
    
    462
    
    
    
    350Repurchase of restricted stock awards
    
    
    (132
    )
    
    
    (300
    )Net cash used in financing activities
    
    
    (1,415
    )
    
    
    (2,051
    )Effect of foreign exchange rates on cash and cash equivalents
    
    
    (1,211
    )
    
    
    (7
    )Net increase in cash and cash equivalents
    
    
    46,470
    
    
    
    13,305Cash and cash equivalents at beginning of period
    
    
    150,829
    
    
    
    304,581Cash and cash equivalents at end of period
    
    $
    197,299
    
    
    $
    317,886
 See accompanying notes.
 6




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##### 



NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 1. DESCRIPTION OF BUSINESS AND ORGANIZATION
   
    
    Carrier Services.Through its set of unique databases and system infrastructure in
geographically dispersed data centers, the Company manages the increasing complexity in the
telecommunications industry and ensures the seamless connection of its carrier customers
numerous networks, while also enhancing the capabilities and performance of their
infrastructure. The Company operates the authoritative databases that manage virtually all
telephone area codes and numbers, and enables the dynamic routing of calls among numerous
competing carriers in North America. All carriers that offer telecommunications services
to the public at large must access a copy of the Companys unique database to properly
route virtually all of their customers calls. The Company also facilitates order
management and work flow processing among carriers, and allows operators to manage and
optimize the addressing and routing of emerging Internet Protocol (IP) communications.
 
    
    Enterprise Services.The Company provides a suite of domain name system (DNS) services
to its enterprise customers built on a global directory platform. The Company manages a
collection of these directories that maintain addresses to direct, prioritize and manage
Internet traffic, and find and resolve Internet queries and top-level domains on behalf of
its enterprise customers. The Company serves as the authoritative provider of essential
registry services and manages directories of similar resources, or addresses, that its
customers use for reliable, fair and secure access and connectivity. Additionally, the
Company provides directory services for the 5 and 6-digit number strings used for all U.S.
Common Short Codes, which is part of the short messaging service relied upon by the U.S.
wireless industry.
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Unaudited Interim Financial Information
  Use of Estimates
  7




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 Reclassifications
  Segment Reporting
  Fair Value of Financial Instruments
   December 31, 2009
    
    
    March 31, 2010Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueCash and cash equivalents
    
    $
    304,581
    
    
    $
    304,581
    
    
    $
    317,886
    
    
    $
    317,886Restricted cash (current assets)
    
    $
    512
    
    
    $
    512
    
    
    $
    524
    
    
    $
    524Short-term investments
    
    $
    37,610
    
    
    $
    37,610
    
    
    $
    37,021
    
    
    $
    37,021Marketable securities (long-term other assets)
    
    $
    1,665
    
    
    $
    1,665
    
    
    $
    2,894
    
    
    $
    2,894Deferred compensation (long-term other
liabilities)
    
    $
    1,682
    
    
    $
    1,682
    
    
    $
    2,871
    
    
    $
    2,871
 Investments
  8




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
  Revenue Recognition
  Significant Contracts
     Carrier Services
   9




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
     Enterprise Services
    Service Level Standards
  Income Taxes
  10




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NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
   i.e.
 Recent Accounting Pronouncements
   3. INVESTMENTS
 Cash Reserve Fund
  Auction Rate Securities and Rights
  11




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
     4. FAIR VALUE MEASUREMENTS
  
    
    Level 1. Observable inputs, such as quoted prices in active markets;
 
    
    Level 2. Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and
 
    
    Level 3. Unobservable inputs in which there is little or no market data, which require
the reporting entity to develop its own assumptions.
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
  December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAuction rate securities  trading securities

(short-term investments)
    
    $
    
    
    
    $
    
    
    
    $
    30,718
    
    
    $
    30,718Auction rate securities rights

(short-term investments)
    
    $
    
    
    
    $
    
    
    
    $
    6,892
    
    
    $
    6,892Marketable securities (1)
    
    $
    1,665
    
    
    $
    
    
    
    $
    
    
    
    $
    1,665Deferred compensation (2)
    
    $
    1,682
    
    
    $
    
    
    
    $
    
    
    
    $
    1,682
 12




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 March 31, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAuction rate securities  trading securities

(short-term investments)
    
    $
    
    
    
    $
    
    
    
    $
    31,201
    
    
    $
    31,201Auction rate securities rights

(short-term investments)
    
    $
    
    
    
    $
    
    
    
    $
    5,820
    
    
    $
    5,820Marketable securities (1)
    
    $
    2,894
    
    
    $
    
    
    
    $
    
    
    
    $
    2,894Deferred compensation (2)
    
    $
    2,871
    
    
    $
    
    
    
    $
    
    
    
    $
    2,871
 
 (1)
    
    NeuStar, Inc. Deferred Compensation Plan (the Plan) provides directors and certain
employees with the ability to defer a portion of their compensation. The assets of the
Plan are invested in marketable securities that are held in a Rabbi Trust and reported at
market value in other assets.(2)
    
    Obligations to pay benefits under the Plan are included in other long-term liabilities.  Auction Rate
    
    
    ARSSecurities
    
    
    RightsBalance on December 31, 2009
    
    $
    30,718
    
    
    $
    6,892Transfers in and/or (out) of Level 3
    
    
    
    
    
    
    Total gains (losses) realized / unrealized
included in earnings
    
    
    1,133
    
    
    
    (1,072
    )Total unrealized gains included in accumulated
other comprehensive loss
    
    
    
    
    
    
    Purchases, sales, issuances and settlements, net
    
    
    (650
    )
    
    
    Balance on March 31, 2010
    
    $
    31,201
    
    
    $
    5,820
   13




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NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 5. GOODWILL AND INTANGIBLE ASSETS
 Goodwill
     Carrier Services
    
    
    Enterprise Services
    
    
    TotalBalance at December 31, 2009:Goodwill
    
    $
    202,055
    
    
    $
    9,964
    
    
    $
    212,019Accumulated impairment losses
    
    
    (93,602
    )
    
    
    
    
    
    
    (93,602
    )$
    108,453
    
    
    $
    9,964
    
    
    $
    118,417Balance at March 31, 2010:Goodwill
    
    $
    202,055
    
    
    $
    9,964
    
    
    $
    212,019Accumulated impairment losses
    
    
    (93,602
    )
    
    
    
    
    
    
    (93,602
    )$
    108,453
    
    
    $
    9,964
    
    
    $
    118,417
 14




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 Intangible Assets
  Weighted-AverageAmortizationDecember 31,
    
    

   March 31,
    
    
    Period2009
    
    
    2010
    
    
    (in years)Intangible assets:Customer lists and relationships
    
    $
    36,659
    
    
    $
    36,659
    
    
    
    5.6Accumulated amortization
    
    
    (29,483
    )
    
    
    (30,544
    )Customer lists and relationships, net
    
    
    7,176
    
    
    
    6,115Acquired technology
    
    
    17,744
    
    
    
    17,744
    
    
    
    3.3Accumulated amortization
    
    
    (16,131
    )
    
    
    (16,265
    )Acquired technology, net
    
    
    1,613
    
    
    
    1,479Trade name
    
    
    200
    
    
    
    200
    
    
    
    3.0Accumulated amortization
    
    
    (200
    )
    
    
    (200
    )Trade name, net
    
    
    
    
    
    
    Intangible assets, net
    
    $
    8,789
    
    
    $
    7,594
  6. NOTES PAYABLE
   15




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 7. STOCKHOLDERS EQUITY
 Stock-Based Compensation
     Stock Options
  Three Months EndedMarch 31,2009
    
    2010Dividend yield
    
    
    
    %
    
    
    
    %Expected volatility
    
    
    44.28
    %
    
    
    39.30
    %Risk-free interest rate
    
    
    1.46
    %
    
    
    2.17
    %Expected life of options (in years)
    
    
    4.42
    
    
    
    4.42
   16




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
    Weighted-AverageWeighted-
    
    
    Aggregate
    
    
    RemainingAverage
    
    
    Intrinsic
    
    
    ContractualExercise
    
    
    Value
    
    
    LifeShares
    
    
    Price
    
    
    (in millions)
    
    
    (in years)Outstanding at December 31, 2009
    
    
    5,951,258
    
    
    $
    19.37Options granted
    
    
    1,646,625
    
    
    
    22.82Options exercised
    
    
    (180,911
    )
    
    
    13.69Options forfeited
    
    
    (110,946
    )
    
    
    23.74Outstanding at March 31, 2010
    
    
    7,306,026
    
    
    $
    20.22
    
    
    $
    46.0
    
    
    
    5.08Exercisable at March 31, 2010
    
    
    3,395,618
    
    
    $
    18.96
    
    
    $
    29.4
    
    
    
    3.69
  Restricted Stock
  Weighted-
    
    
    AggregateAverage
    
    
    IntrinsicGrant Date
    
    
    ValueShares
    
    
    Fair Value
    
    
    (in millions)Outstanding at December 31, 2009
    
    
    353,157
    
    
    $
    22.64Restricted stock granted
    
    
    270,490
    
    
    
    22.82Restricted stock vested
    
    
    (34,424
    )
    
    
    24.11Restricted stock forfeited
    
    
    (4,435
    )
    
    
    24.46Outstanding at March 31, 2010
    
    
    584,788
    
    
    $
    22.62
    
    
    $
    14.7
  Performance Vested Restricted Stock Units
  17




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
     Weighted-
    
    
    AggregateAverage
    
    
    IntrinsicGrant Date
    
    
    ValueShares
    
    
    Fair Value
    
    
    (in millions)Non-vested December 31, 2009
    
    
    839,786
    
    
    $
    21.17Granted
    
    
    265,230
    
    
    
    22.82Vested
    
    
    
    
    
    
    Forfeited
    
    
    (173,515
    )
    
    
    31.27Non-vested March 31, 2010
    
    
    931,501
    
    
    $
    19.77
    
    
    $
    23.5
 18




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##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 Restricted Stock Units
  Weighted-
    
    
    AggregateAverage
    
    
    IntrinsicGrant Date
    
    
    ValueShares
    
    
    Fair Value
    
    
    (in millions)Outstanding at December 31, 2009
    
    
    163,111
    
    
    $
    25.13Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2010
    
    
    163,111
    
    
    $
    25.13
    
    
    $
    4.1
  8. BASIC AND DILUTED NET INCOME PER COMMON SHARE
  Three Months EndedMarch 31,2009
    
    
    2010Computation of basic net income per common share:Net income
    
    $
    24,353
    
    
    $
    25,202Weighted average common shares and
participating securities outstanding  basic
    
    
    74,134
    
    
    
    74,613Basic net income per common share
    
    $
    0.33
    
    
    $
    0.34Computation of diluted net income per
common share:Net income
    
    $
    24,353
    
    
    $
    25,202Weighted average common shares and
participating securities outstanding  basic
    
    
    74,134
    
    
    
    74,613Effect of dilutive securities:Stock-based awards
    
    
    1,189
    
    
    
    1,331Weighted average common shares
outstanding  diluted
    
    
    75,323
    
    
    
    75,944Diluted net income per common share
    
    $
    0.32
    
    
    $
    0.33
  19




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 9. COMPREHENSIVE INCOME
   Three Months EndedMarch 31,2009
    
    
    2010Net income
    
    $
    24,353
    
    
    $
    25,202Unrealized loss / gain on investments
    
    
    68
    
    
    
    44Accumulated translation adjustments
    
    
    (590
    )
    
    
    (14
    )Total comprehensive income
    
    $
    23,831
    
    
    $
    25,232
  Three Months EndedMarch 31,2009
    
    
    2010Tax (provision) benefit:Unrealized loss / gain on investments
    
    $
    (1
    )
    
    $
    (28
    )Accumulated translation adjustments
    
    $
    622
    
    
    $
    (7
    )
 10. SEGMENT INFORMATION
     20




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
  Three Months EndedMarch 31,2009
    
    
    2010Revenue:Carrier Services
    
    $
    88,043
    
    
    $
    99,788Enterprise Services
    
    
    25,145
    
    
    
    29,203Total revenue
    
    $
    113,188
    
    
    $
    128,991Segment contribution:Carrier Services
    
    $
    73,362
    
    
    $
    86,069Enterprise Services
    
    
    9,184
    
    
    
    12,788Total segment contribution
    
    
    82,546
    
    
    
    98,857Indirect operating expenses:Cost of revenue (excluding depreciation and amortization shown separately below)
    
    
    16,249
    
    
    
    18,860Sales and marketing
    
    
    3,747
    
    
    
    4,604Research and development
    
    
    2,874
    
    
    
    3,523General and administrative
    
    
    11,652
    
    
    
    17,373Depreciation and amortization
    
    
    9,245
    
    
    
    10,143Restructuring charges
    
    
    
    
    
    
    2,349Consolidated income from operations
    
    $
    38,779
    
    
    $
    42,005
  Enterprise-Wide Disclosures
  Three Months EndedMarch 31,2009
    
    
    2010Revenues by geographical areas:North America
    
    $
    104,149
    
    
    $
    120,480Europe, Middle East and Africa
    
    
    6,921
    
    
    
    5,157Other regions
    
    
    2,118
    
    
    
    3,354Total revenues
    
    $
    113,188
    
    
    $
    128,991
 21




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
 Three Months EndedMarch 31,2009
    
    
    2010Revenues by service offerings:Numbering Services
    
    $
    78,469
    
    
    $
    90,701Order Management Services
    
    
    4,964
    
    
    
    4,521IP Services
    
    
    4,610
    
    
    
    4,566Internet Infrastructure Services
    
    
    11,845
    
    
    
    15,448Registry Services
    
    
    13,300
    
    
    
    13,755Total revenues
    
    $
    113,188
    
    
    $
    128,991
 December 31,
    
    
    March 31,2009
    
    
    2010Long-lived assets, netNorth America
    
    $
    77,785
    
    
    $
    77,562Europe, Middle East and Africa
    
    
    4,350
    
    
    
    3,716Other regions
    
    
    535
    
    
    
    472Total long-lived assets, net
    
    $
    82,670
    
    
    $
    81,750
 11. RESTRUCTURING CHARGES
     22




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
  Severance
    
    
    Lease andand Related
    
    
    Facilities ExitCosts
    
    
    Costs
    
    
    TotalBalance at December 31, 2009
    
    $
    1,629
    
    
    $
    463
    
    
    $
    2,092Additional restructuring cost
    
    
    1,232
    
    
    
    
    
    
    
    1,232Adjustments
    
    
    (82
    )
    
    
    (36
    )
    
    
    (118
    )Cash payments
    
    
    (2,100
    )
    
    
    (80
    )
    
    
    (2,180
    )Balance at March 31, 2010
    
    $
    679
    
    
    $
    347
    
    
    $
    1,026
  12. OTHER (EXPENSE) INCOME
  Three Months Ended March 31,2009
    
    
    2010Interest and other expense:Interest expense
    
    $
    350
    
    
    $
    543Loss on asset disposals
    
    
    203
    
    
    
    40Loss on ARS Rights
    
    
    
    
    
    
    1,072Foreign currency transaction loss
    
    
    261
    
    
    
    93ARS trading losses
    
    
    410
    
    
    
    Total
    
    $
    1,224
    
    
    $
    1,748Interest and other income:Interest income
    
    $
    389
    
    
    $
    257ARS trading gains
    
    
    886
    
    
    
    1,133Gain on indemnification claims
    
    
    1,180
    
    
    
    Other income
    
    
    4
    
    
    
    Total
    
    $
    2,459
    
    
    $
    1,390
  13. INCOME TAXES
   23




---



##### 



NEUSTAR, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2010
    24




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  Overview
      Our Company
  25




---



##### 




    
    Reliable.Our services depend on complex technology that is configured to deliver high
reliability consistent with stringent industry and customer standards. We have made a
commitment to our customers to deliver high quality services meeting numerous measured
service level requirements, such as system availability, response times for help desk
inquiries and billing accuracy.
 
    
    Scalable.The modular design of our infrastructure enables capacity expansion without
service interruption or quality of service degradation, and with incremental investment
that provides significant economies of scale.
 
    
    Neutral.We provide our services in a competitively neutral way to ensure that no
customer is favored over any other. Our databases and capabilities provide competing
entities with fair, equal and secure access to essential shared resources. Moreover, it is
our commitment to not compete with our customers.
 
    
    Trusted.The data we collect is important and proprietary. Accordingly, we have
implemented appropriate procedures and systems to protect the privacy and security of
customer data, restrict access to the system and generally protect the integrity of our
databases. Our performance with respect to neutrality, privacy and security is
independently audited on a regular basis.
  Carrier Services
     
    
    Numbering Services.We operate and maintain authoritative databases for telephone
number resources utilized by our carrier customers and manage the telephone number
lifecycle. Our unique set of databases enables our carrier customers to obtain data to
successfully route telephone calls in the United States and Canada. The numbering services
we provide to our carrier customers using these databases include NPAC Services, NPAC
Services in Canada and LNP services in Taiwan and Brazil, or international LNP solutions,
and number inventory and allocation management. Additionally, we enable carriers to more
efficiently manage their networks by centrally processing essential changes they use to
route communications.
 
    
    Order Management Services.Our Order Management Services permit our carrier customers,
through a single interface, to exchange essential operating data with multiple carriers in
order to provision services.
 26




---



##### 




    
    IP Services.We provide scalable IP services to carriers that allow them to manage
access for the routing of IP communications, such as multimedia messaging service, or MMS,
traffic, Instant Messaging, or IM, traffic, and presence. Our solutions solve the
complexity of mapping a phone number to an IP address for accurate and reliable routing to
a carriers network. We also enable direct network-to-network peering between carriers for
voice, video and content services.
 Enterprise Services
   
    
    Internet Infrastructure Services.We provide a suite of DNS services to our enterprise
customers built on a global directory platform. These services play a key role in
directing and managing Internet traffic flow, resolving Internet queries, providing
security protection against Internet breaches called Distributed Denial of Service, or
DDoS, attacks, and monitoring, testing and measuring the performance of websites and
networks.
 
    
    Registry Services.We operate the authoritative registries of Internet domain
names for the .biz, .us, .tel and .travel top-level domains. We also provide
international registry gateways for Chinas .cn and Taiwans .tw country-code
top-level domains. All Internet communications routing to any of these domains must
query a copy of our directory to ensure that the communication is routed to the
appropriate destination. We also operate the authoritative Common Short Codes
registry on behalf of the US wireless industry.
 Critical Accounting Policies and Estimates
   Goodwill
  27




---



##### 



Revenue Recognition
  Restructuring
  Investments
   28




---



##### 



Stock-Based Compensation
      29




---



##### 



Consolidated Results of Operations
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2010
  Three Months Ended March 31,2009
    
    
    2010
    
    
    2009 vs. 2010$
    

    
    $
    

    
    $ Change
    

    
    % change(unaudited)(In thousands, except per share data)Revenue:Carrier Services
    
    $
    88,043
    
    
    $
    99,788
    
    
    $
    11,745
    
    
    
    13.3
    %Enterprise Services
    
    
    25,145
    
    
    
    29,203
    
    
    
    4,058
    
    
    
    16.1
    %Total revenue
    
    
    113,188
    
    
    
    128,991
    
    
    
    15,803
    
    
    
    14.0
    %Operating expense:Cost of revenue (excludes depreciation
and amortization shown separately below)
    
    
    27,843
    
    
    
    29,113
    
    
    
    1,270
    
    
    
    4.6
    %Sales and marketing
    
    
    19,507
    
    
    
    22,854
    
    
    
    3,347
    
    
    
    17.2
    %Research and development
    
    
    4,313
    
    
    
    4,078
    
    
    
    (235
    )
    
    
    (5.4
    )%General and administrative
    
    
    13,501
    
    
    
    18,449
    
    
    
    4,948
    
    
    
    36.6
    %Depreciation and amortization
    
    
    9,245
    
    
    
    10,143
    
    
    
    898
    
    
    
    9.7
    %Restructuring charges
    
    
    
    
    
    
    2,349
    
    
    
    2,349
    
    
    
    100.0
    %74,409
    
    
    
    86,986
    
    
    
    12,577
    
    
    
    16.9
    %Income from operations
    
    
    38,779
    
    
    
    42,005
    
    
    
    3,226
    
    
    
    8.3
    %Other (expense) income:Interest and other expense
    
    
    (1,224
    )
    
    
    (1,748
    )
    
    
    (524
    )
    
    
    42.8
    %Interest and other income
    
    
    2,459
    
    
    
    1,390
    
    
    
    (1,069
    )
    
    
    (43.5
    )%Income before income taxes
    
    
    40,014
    
    
    
    41,647
    
    
    
    1,633
    
    
    
    4.1
    %Provision for income taxes
    
    
    15,661
    
    
    
    16,445
    
    
    
    784
    
    
    
    5.0
    %Net income
    
    $
    24,353
    
    
    $
    25,202
    
    
    $
    849
    
    
    
    3.5
    %Net income per common share:Basic
    
    $
    0.33
    
    
    $
    0.34Diluted
    
    $
    0.32
    
    
    $
    0.33Weighted average common shares outstanding:Basic
    
    
    74,134
    
    
    
    74,613Diluted
    
    
    75,323
    
    
    
    75,944
 30




---



##### 



Revenue
 Total revenue.
 Carrier Services.
 Enterprise Services.
 Expense
 Cost of revenue.
 Sales and marketing.
 Research and development.
 General and administrative.
 Depreciation and amortization.
 Restructuring charges.
 Interest and other expense.
 31




---



##### 



Interest and other income.
 Provision for income taxes.
 Summary of Operating Segments
  Three Months Ended March 31,2009
    
    
    2010
    
    
    2009 vs. 2010$
    
    
    $
    
    
    $ Change
    
    
    % ChangeRevenue:Carrier Services
    
    $
    88,043
    
    
    $
    99,788
    
    
    $
    11,745
    
    
    
    13.3
    %Enterprise Services
    
    
    25,145
    
    
    
    29,203
    
    
    
    4,058
    
    
    
    16.1
    %Total revenue
    
    $
    113,188
    
    
    $
    128,991
    
    
    $
    15,803
    
    
    
    14.0
    %Segment contribution:Carrier Services
    
    $
    73,362
    
    
    $
    86,069
    
    
    $
    12,707
    
    
    
    17.3
    %Enterprise Services
    
    
    9,184
    
    
    
    12,788
    
    
    
    3,604
    
    
    
    39.2
    %Total segment contribution
    
    
    82,546
    
    
    
    98,857
    
    
    
    16,311
    
    
    
    19.8
    %Indirect operating expenses:Cost of revenue (excluding depreciation and
amortization shown separately below)
    
    
    16,249
    
    
    
    18,860
    
    
    
    2,611
    
    
    
    16.1
    %Sales and marketing
    
    
    3,747
    
    
    
    4,604
    
    
    
    857
    
    
    
    22.9
    %Research and development
    
    
    2,874
    
    
    
    3,523
    
    
    
    649
    
    
    
    22.6
    %General and administrative
    
    
    11,652
    
    
    
    17,373
    
    
    
    5,721
    
    
    
    49.1
    %Depreciation and amortization
    
    
    9,245
    
    
    
    10,143
    
    
    
    898
    
    
    
    9.7
    %Restructuring charges
    
    
    
    
    
    
    2,349
    
    
    
    2,349
    
    
    
    100.0
    %Consolidated income from operations
    
    $
    38,779
    
    
    $
    42,005
    
    
    $
    3,226
    
    
    
    8.3
    %
  Liquidity and Capital Resources
    32




---



##### 



Discussion of Cash Flows
 Cash flows from operations
  Cash flows from investing
  Cash flows from financing
  Recent Accounting Pronouncements
  Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  33




---



##### 



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Cautionary Note Regarding Forward-Looking Statements
  
    
    failures or interruptions of our systems and services;
 
    
    security or privacy breaches;
 
    
    loss of, or damage to, a data center;
 
    
    termination, modification or non-renewal of our contracts to provide
telephone number portability and other clearinghouse services;
 
    
    adverse changes in statutes or regulations affecting the communications industry;
 
    
    our failure to adapt to rapid technological change in the communications industry;
 
    
    competition from our customers in-house systems
or from other providers of addressing, interoperability or infrastructure services;
 
    
    our failure to achieve or sustain market acceptance at desired pricing levels;
 
    
    a decline in the volume of transactions we handle;
 
    
    inability to manage our growth;
 
    
    economic, political, regulatory and other risks associated
with our potential further expansion into international markets;
 
    
    inability to obtain sufficient capital to fund our operations, capital expenditures and expansion; and
 
    
    loss of members of senior management, or inability to recruit and retain skilled employees.
 Risks Related to Our Business
 The loss of, or damage to, a data center or any other failure or interruption to our network
infrastructure could materially harm our revenue and impair our ability to conduct our operations.
   
    
    damage to, or failure of, our computer software or hardware or our connections and
outsourced service arrangements with third-parties;
 
    
    failure of, or defects in, the third-party systems, software or equipment on which we or
our customers rely to access our data centers and other systems;
 
    
    errors in the processing of data by our system;
 
    
    computer viruses or software defects;
 
    
    physical or electronic break-ins, sabotage, distributed denial of service, or DDoS,
attacks, intentional acts of vandalism and similar events;
 
    
    increased capacity demands or changes in systems requirements of our customers;
 
    
    power loss, natural disasters, or telecommunications failures; or
 
    
    errors by our employees or third-party service providers.
 34




---



##### 




    
    our reputation may be damaged, which may adversely affect our ability to attract or
retain customers for our existing services, and may also make it more difficult for us to
market our services;
 
    
    we may be subject to significant penalties or damages claims, under our contracts or
otherwise, including the requirement to pay substantial penalties related to service level
requirements in our contracts;
 
    
    we may be required to make significant expenditures to repair or replace equipment,
third-party systems or, in some cases, an entire data center, or to establish new data
centers and systems from which we may provide services;
 
    
    our operating expenses or capital expenditures may increase as a result of corrective
efforts that we must perform;
 
    
    our customers may postpone or cancel subsequently scheduled work or reduce their use of
our services; or
 
    
    one or more of our significant contracts may be terminated early, or may not be renewed.
  Security breaches could result in significant liabilities, interruptions of service or reduced
quality of service, which could increase our costs or result in a reduction in the use of our
services by our customers.
  Our seven contracts with North American Portability Management LLC represent in the aggregate a
substantial portion of our revenue, are not exclusive and could be terminated or modified in ways
unfavorable to us, and we may be unable to renew these contracts at the end of their term.
   35




---



##### 



Certain of our other contracts may be terminated or we may be unable to renew these contracts,
which may reduce the number of services we can offer and damage our reputation.
  
    
    North American Numbering Plan Administrator, under which we maintain the authoritative
database of telephone numbering resources in North America;
 
    
    National Pooling Administrator, under which we perform the administrative functions
associated with the administration and management of telephone number inventory and
allocation of pooled blocks of unassigned telephone numbers;
 
    
    provider of NPAC Services in Canada;
 
    
    operator of the .us registry;
 
    
    operator of the .biz registry; and
 
    
    operator of the registry of U.S. Common Short Codes.
  Failure to comply with neutrality requirements could result in loss of significant contracts.
  Regulatory and statutory changes that affect us or the communications industry in general may
increase our costs or otherwise adversely affect our business.
  36




---



##### 




    
    increase regulatory oversight over the services we provide;
 
    
    adopt or modify statutes, regulations, policies, procedures or programs that are
disadvantageous to the services we provide, or that are inconsistent with our current or
future plans, or that require modification of the terms of our existing contracts,
including the manner in which we charge for certain of our services. For example,
 
    
    In November 2005, BellSouth Corporation filed a petition with the FCC seeking
changes in the way our customers are billed for services provided by us under our
contracts with North American Portability Management LLC; and
 
    
    After the amendment of our contracts with North American Portability Management
LLC in September 2006, Telcordia Technologies, Inc. filed a petition with the FCC
requesting an order that would require North American Portability Management LLC to
conduct a new bidding process to appoint a provider of telephone number portability
services in the United States, which Telcordia has continued to pursue in response
to our amendment of these contracts in January 2009. If successful, this petition
could result in the loss of one or more of our contracts with North American
Portability Management LLC or otherwise frustrate our strategic plans;
 
    
    prohibit us from entering into new contracts or extending existing contracts to provide
services to the communications industry based on actual or suspected violations of our
neutrality requirements, business performance concerns, or other reasons;
 
    
    adopt or modify statutes, regulations, policies, procedures or programs in a way that
could cause changes to our operations or costs or the operations of our customers;
 
    
    appoint, or cause others to appoint, substitute or add additional parties to perform the
services that we currently provide; and
 
    
    prohibit or restrict the provision or export of new or expanded services under our
contracts, or prevent the introduction of other services not under the contracts based upon
restrictions within the contracts or in FCC policies.
  If we do not adapt to rapid technological change, we could lose customers or market share.
  Our customers face implementation and support challenges in introducing IP-based services, which
may slow their rate of adoption or implementation of our solutions.
  37




---



##### 



The market for certain of our carrier and enterprise services is competitive, which could result
in fewer customer orders, reduced revenue or margins or loss of market share.
  If we are unable to protect our intellectual property rights adequately, the value of our services
and solutions could be diminished.
   38




---



##### 



Our intellectual property could be misappropriated, which could force us to become involved in
expensive and time-consuming litigation.
  Our failure to achieve or sustain market acceptance at desired pricing levels could impact our
ability to maintain profitability or positive cash flow.
  
    
    competitors offering our customers services at reduced prices, or bundling and pricing
services in a manner that makes it difficult for us to compete. For example, a competing
provider of interoperability services might offer its services at lower rates than we do, a
competing domain name registry provider may reduce its prices for domain name registration
or an Internet service provider or a competitor may offer mobile instant messaging
solutions at reduced prices or at no cost to the customer;
 
    
    customers with a significant volume of transactions may have enhanced leverage in
pricing negotiations with us; and
 
    
    if our prices are too high, potential customers may find it economically advantageous to
handle certain functions internally instead of using our services.
  A significant decline in the volume of transactions we handle could have a material adverse effect
on our results of operations.
  39




---



##### 



If we are unable to manage our costs, our profits could be adversely affected.
  We may be unable to complete acquisitions, or we may undertake acquisitions that could
increase our costs or liabilities or be disruptive to our business.
  An impairment in the carrying value of goodwill or long-lived assets could negatively impact our
consolidated results of operations and net worth.
  Our expansion into international markets may be subject to uncertainties that could increase our
costs to comply with regulatory requirements in foreign jurisdictions, disrupt our operations, and
require increased focus from our management.
  
    
    economic and political risks in foreign jurisdictions in which we operate or seek to
operate;
 
    
    difficulty of enforcing contracts and collecting receivables through some foreign legal
systems;
 
    
    differences in foreign laws and regulations, including foreign tax, intellectual
property, labor and contract law, as well as unexpected changes in legal and regulatory
requirements;
 40




---



##### 




    
    differing technology standards and pace of adoption;
 
    
    export restrictions on encryption and other technologies;
 
    
    fluctuations in currency exchange rates and any imposition of currency exchange
controls;
 
    
    increased competition by local, regional, or global companies; and
 
    
    difficulties associated with managing a large organization spread throughout various
countries.
  Our senior management is important to our customer relationships, and the loss of one or more of
our senior managers could have a negative impact on our business.
  We must recruit and retain skilled employees to succeed in our business, and our failure to
recruit and retain qualified employees could harm our ability to maintain and grow our business.
  Health epidemics or other events such as wars, acts of terrorism, political unrest or other
man-made or natural disasters could severely disrupt our business operations.
  Risks Related to the Financial Market Conditions
 The recent financial crisis could negatively affect market utilization of our existing and new
services and may harm our financial results.
  41




---



##### 



Funds invested in auction rate securities that we hold may not be accessible in the short term,
and we may be required to adjust the carrying value of these securities through an asset
impairment charge.
  We may need additional capital in the future and it may not be available on acceptable terms.
  
    
    not be able to continue to meet customer demand for service quality, availability and
competitive pricing;
 
    
    be forced to reduce our operations;
 
    
    not be able to expand or acquire complementary businesses; and
 
    
    not be able to develop new services or otherwise respond to changing business conditions
or competitive pressures.
 Risks Related to Our Common Stock
 Our common stock price may be volatile.
  
    
    our perceived prospects and the prospects of the telephone and Internet industries in
general;
 
    
    differences between our actual financial and operating results and those expected by
investors and analysts;
 
    
    changes in analysts recommendations or projections;
 
    
    changes in general valuations for communications companies;
 
    
    adoption or modification of regulations, policies, procedures or programs applicable to
our business;
 42




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##### 




    
    sales of our Class A common stock by our officers, directors or principal stockholders;
 
    
    sales of significant amounts of our Class A common stock in the public market, or the
perception that such sales may occur;
 
    
    sales of our Class A common stock due to a required divestiture under the terms of our
certificate of incorporation; and
 
    
    changes in general economic or market conditions and broad market fluctuations.
  Delaware law and provisions in our certificate of incorporation and bylaws could make a merger,
tender offer or proxy contest difficult, and the market price of our Class A common stock may be
lower as a result.
  
    
    authorize the issuance of blank check preferred stock that could be issued by our
board of directors to thwart a takeover attempt;
 
    
    prohibit cumulative voting in the election of directors, which would otherwise enable
holders of less than a majority of our voting securities to elect some of our directors;
 
    
    establish a classified board of directors, as a result of which the successors to the
directors whose terms have expired will be elected to serve from the time of election and
qualification until the third annual meeting following election;
 
    
    require that directors only be removed from office for cause;
 
    
    provide that vacancies on the board of directors, including newly-created directorships,
may be filled only by a majority vote of directors then in office;
 
    
    disqualify any individual from serving on our board if such individuals service as a
director would cause us to violate our neutrality requirements;
 
    
    limit who may call special meetings of stockholders;
 
    
    prohibit stockholder action by written consent, requiring all actions to be taken at a
meeting of the stockholders; and
 
    
    establish advance notice requirements for nominating candidates for election to the
board of directors or for proposing matters that can be acted upon by stockholders at
stockholder meetings.
 In order to comply with our neutrality requirements, our certificate of incorporation contains
ownership and transfer restrictions relating to telecommunications service providers and their
affiliates, which may inhibit potential acquisition bids that our stockholders may consider
favorable, and the market price of our Class A common stock may be lower as a result.
  43




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##### 




    
    if one of our stockholders experiences a change in status or other event that results in
the stockholder violating this restriction, or if any transfer of our stock occurs that, if
effective, would violate the 5% restriction, we may elect to purchase the excess shares
(i.e., the shares that cause the violation of the restriction) or require that the excess shares be sold to a third-party whose ownership will not violate the restriction;
 
    
    pending a required divestiture of these excess shares, the holder whose beneficial
ownership violates the 5% restriction may not vote the shares in excess of the 5%
threshold; and
 
    
    if our board of directors, or its permitted designee, determines that a transfer,
attempted transfer or other event violating this restriction has taken place, we must take
whatever action we deem advisable to prevent or refuse to give effect to the transfer,
including refusal to register the transfer, disregard of any vote of the shares by the
prohibited owner, or the institution of proceedings to enjoin the transfer.
    
    
    discourage industry participants that might have otherwise been interested in acquiring
us from making a tender offer or proposing some other form of transaction that could
involve a premium price for our shares or otherwise be in the best interests of our
stockholders; and
 
    
    discourage investment in us by other investors who are telecommunications service
providers or who may be deemed to be affiliates of a telecommunications service provider.
  
    
    owns 10% or more of the total outstanding equity of the other party;
 
    
    has the power to vote 10% or more of the securities having ordinary voting power for the
election of the directors or management of the other party; or
 
    
    has the power to direct or cause the direction of the management and policies of the
other party.
 44




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##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Maximum Number(or ApproximateTotal
    
    
    
    
    
    
    Total Number of
    
    
    Dollar Value) ofNumber of
    
    
    
    
    
    
    Shares Purchased
    
    
    Shares that MayShares
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet Be PurchasedPurchased
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plans orMonth
    
    (1)
    
    
    per Share
    
    
    or Programs
    
    
    ProgramsJanuary 1 through January 31, 2010
    
    
    3,079
    
    
    $
    23.50
    
    
    
    
    
    
    $
    February 1 through February 28, 2010
    
    
    8,678
    
    
    
    22.61
    
    
    
    
    
    
    
    March 1 through March 31, 2010
    
    
    1,321
    
    
    
    24.52
    
    
    
    
    
    
    
    Total
    
    
    13,078
    
    
    $
    23.01
    
    
    
    
    
    
    $
    
 
 (1)
    
    The number of shares purchased consists of shares of common stock tendered by employees to us
to satisfy the employees tax withholding obligations arising as a result of vesting of restricted
stock grants under our stock incentive plan. We purchased these shares for their fair market value
on the vesting date. None of these share purchases were part of a publicly announced program to
purchase our common stock. 
 Item 3. Defaults upon Senior Securities
  
 Item 4. [Removed and Reserved]
 
 Item 5. Other Information
  45




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##### 



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 3.2 to NeuStars Current
Report on Form 8-K, filed September 16, 2008.10.3.1
    
    Amendments to the National Thousands-Block
Pooling Administration agreement awarded to
NeuStar, Inc. by the Federal Communications
Commission.10.4.1
    
    Amendments to the North American Numbering Plan
Administrator agreement awarded to NeuStar, Inc.
by the Federal Communications Commission.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.
 46




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##### 



SIGNATURES
  NeuStar, Inc.Date:  April 28, 2010
    By:
    /s/ Paul S. LalljiePaul S. LalljieChief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer) 47




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##### 



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 3.2 to
NeuStars Current Report on Form 8-K, filed
September 16, 2008.10.3.1
    
    Amendments to the National Thousands-Block
Pooling Administration agreement awarded to
NeuStar, Inc. by the Federal Communications
Commission.10.4.1
    
    Amendments to the North American Numbering
Plan Administrator agreement awarded to
NeuStar, Inc. by the Federal Communications
Commission.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.