NeuStar Reports Results for Second Quarter and Updates Guidance for 2008

STERLING, Va., Aug. 5 /PRNewswire-FirstCall/ -- NeuStar, Inc. (NYSE: NSR),
a provider of essential clearinghouse services to the communications and
Internet industry, today announced consolidated results for the quarter ended
June 30, 2008, reaffirmed its prior revenue and profitability guidance and
increased its transaction guidance for 2008. (Logo:
http://www.newscom.com/cgi-bin/prnh/20080310/NEUSTARLOGO )

Summary of Second Quarter Results

Revenue totaled $120.2 million, an increase of 21% from $99.7 million in
the second quarter of 2007. Net income totaled $22.9 million, or $0.31 per
diluted share, compared to $19.1 million, or $0.24 per diluted share, in the
second quarter of 2007.
Discussion of Second Quarter Results
NeuStar's year-over-year quarterly revenue growth was driven primarily by
increases in infrastructure transactions under its contracts to provide
telephone number portability services in the United States. The company also
saw significant year-over-year increases in revenue from Ultra Services and
Common Short Codes.
Transactions under NeuStar's contracts to provide telephone number
portability services in the United States totaled 89.8 million for the second
quarter of 2008, 21% higher than the 74.4 million transactions for the second
quarter of 2007, and 8% above the transaction guidance provided in May.
EBITDA for the quarter totaled $50.3 million, or $0.67 per diluted share,
compared to $40.8 million, or $0.52 per diluted share, in the corresponding
quarter of 2007.
Total operating expense increased to $80.2 million in the second quarter
of 2008, compared to $68.3 million in the second quarter of 2007.
As of June 30, 2008, NeuStar had $72.2 million in cash, cash equivalents
and short-term investments, compared to $86.5 million at March 31, 2008 and
$198.7 million at December 31, 2007. During the second quarter, the company
repurchased 802,431 shares of its Class A common stock at an average price of
$26.25 per share, which brought the total repurchases by NeuStar in 2008 to
4,837,109 shares for a total purchase price of $125 million. This repurchase
was in accordance with the share repurchase program announced on February 19,
2008.
Business Outlook for 2008
NeuStar reaffirmed its revenue and profitability guidance provided on May
7, 2008, and also increased its full-year transaction projection:
-- Full year revenue to range between $500 and $515 million.
-- Net income to exceed $70 million, resulting in net income per diluted
share in excess of $0.91 based on a diluted share total of 77.0 million; this
2008 net income forecast includes the goodwill impairment charge of $29.0
million recorded in the first quarter of 2008.
-- Full year EBITDA to exceed $177 million, or $2.30 per diluted share
based on a diluted share total of 77.0 million; this 2008 EBITDA forecast
includes the goodwill impairment charge of $29.0 million previously discussed
from the first quarter of 2008.
-- Full year transactions under its contracts to provide telephone number
portability services in the United States to grow to at least 360 million in
2008, 10 million transactions higher than previously projected.
Management Commentary
Jeff Ganek, NeuStar's Chairman and Chief Executive Officer, said, "The
second quarter was strong for NeuStar from a revenue, profitability and cash
flow perspective. This reflects NPAC transaction growth and the initial
benefits of our cost control measures. We are also seeing continued growth in
Ultra Services and Common Short Codes, as well as revenue and operational
progress at NGM, where we now have launches completed at 75% of the 36 mobile
network operators under contract."
Jeff Babka, NeuStar's Chief Financial Officer, added, "On the strength of
our NPAC transactions in the second quarter and our visibility into the second
half of the year, we are increasing our NPAC guidance for 2008 by 10 million
transactions. This increase, coupled with our revenue forecast for our other
service offerings and continued benefits expected from our cost control
initiatives, gives us confidence in our ability to attain the revenue and
profitability guidance we re-affirmed today."
Reconciliation of Non-GAAP Financial Measures
In this press release, NeuStar presented certain non-GAAP financial data.
To place this data in an appropriate context, the following is a
reconciliation of net income to EBITDA for the three and six months ended June
30, 2007 and 2008, and the years ended December 31, 2007 and 2008:

Three Months Ended Six Months Ended Year Ended
June 30, June 30, December 31,
2007 2008 2007 2008 2007 2008(1)
(in thousands, except per share data)
(unaudited)
Net income $19,149 $22,856 $37,117 $18,396 $92,335 $70,000
Add: Depreciation
and amortization 9,375 10,286 18,439 20,406 37,731 40,500
Less: Other
expense (income) (1,060) 1,633 (1,359) 483 (3,465) (3,000)
Add: Provision
for income taxes 13,312 15,499 24,975 32,138 60,776 69,500
EBITDA $40,776 $50,274 $79,172 $71,423 $187,377 $177,000
EBITDA per
diluted share 0.52 0.67 1.00 0.93 2.36 2.30
Weighted average
diluted common
shares
outstanding 79,040 74,904 79,037 76,999 79,235 77,000

(1) The amounts expressed in this column are based on current estimates as
of the date of this press release. For purposes of creating a
reconciliation to net income, the amounts expressed in this column are
based on an estimated net income of $70 million.

EBITDA and EBITDA per diluted share are not measures of financial
performance under GAAP and have no standardized measurement prescribed by
GAAP. Management believes that both measures will enhance our investors'
understanding of our financial performance and the comparability of the
company's operating results to prior periods, as well as against the
performance of other companies. However, these non-GAAP financial measures may
not be comparable with similar non-GAAP financial measures used by other
companies and should not be considered in isolation from, or as a substitute
for, financial information prepared in accordance with GAAP. The company
provides the foregoing historical and forward-looking reconciliations to the
most directly comparable GAAP financial measures to allow investors to
appropriately consider each non-GAAP financial measure.
In this press release and from time to time, NeuStar describes what its
net income, EBITDA and other financial measures would have been in the absence
of the $29.0 million goodwill impairment charge recorded in the first quarter
of 2008 relating to the company's NGM business segment, as well as the
resulting net income and EBITDA per diluted share amounts associated with
those measures. NeuStar has provided this information because the company
believes that it will give investors a better understanding of the impact the
goodwill impairment charge had on the company's results for the quarter, and
will serve as useful data by which to compare the company's operational
performance to the prior period in 2008 and future periods. As with EBITDA
information provided by the company, this information should not be considered
in isolation from, or as a substitute for, financial information prepared in
accordance with GAAP.
Conference Call
As announced on July 14, 2008, NeuStar will conduct an investor conference
call to discuss the company's results today at 5:00 p.m. (Eastern Time). Prior
to the call, accompanying slides will be posted to the NeuStar website so that
investors may access the conference call and the accompanying slides over the
Internet via the Investor Relations tab of the company's website
(http://www.NeuStar.biz). Those listening via the Internet should go to the
site 15 minutes early to register, download and install any necessary audio
software.
The conference call is also accessible via telephone by dialing
(888) 801-6507 (international callers dial (913) 312-0658). For those who
cannot listen to the live broadcast, a replay will be available through
Midnight (Eastern Time) Tuesday, August 12, 2008 by dialing (888) 203-1112
(international callers dial (719) 457-0820) and entering replay PIN 3797849,
or by going to the Investor Relations tab of the company's website
(http://www.NeuStar.biz).
NeuStar will take live questions from securities analysts and
institutional portfolio managers; the complete call is open to all other
interested parties on a listen-only basis.
This press release, the financial tables and other supplemental
information, including the reconciliations of certain non-GAAP measures to
their nearest comparable GAAP measures that may be used periodically by
management when discussing the company's financial results with investors and
analysts, are available on the company's website under the Investor Relations
tab.
About NeuStar, Inc.
NeuStar (NYSE: NSR) is a provider of essential clearinghouse services to
the North American communications industry and Internet service providers
around the world. Visit NeuStar online at http://www.NeuStar.biz.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995
This press release includes information that constitutes forward-looking
statements made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements about our expectations, beliefs and business results in the future.
We have attempted, whenever possible, to identify these forward-looking
statements using words such as "may," "will," "should," "projects,"
"estimates," "expects," "plans," "intends," "anticipates," "believes" and
variations of these words and similar expressions. Similarly, statements
herein that describe our business strategy, prospects, opportunities,
outlooks, objectives, plans, intentions or goals are also forward-looking
statements. We cannot assure you that our expectations will be achieved or
that any deviations will not be material. Forward-looking statements are
subject to many assumptions, risks and uncertainties that may cause future
results to differ materially from those anticipated. These potential risks and
uncertainties include, among others, the uncertainty of future revenue and
profitability and potential fluctuations in quarterly operating results due to
such factors as disruptions to our clearinghouse operations, modifications to
our material contracts, our ability to successfully integrate and support the
operations of businesses we acquire, increasing competition, market acceptance
of our existing services, our ability to successfully develop and market new
services, the uncertainty of whether new services will achieve market
acceptance or result in any revenue, and business, regulatory and statutory
changes in the communications industry. More information about potential
factors that could affect our business and financial results is included in
our filings with the Securities and Exchange Commission, including, without
limitation, our Annual Report on Form 10-K for the year ended December 31,
2007 and subsequent periodic and current reports. All forward-looking
statements are based on information available to us on the date of this press
release, and we undertake no obligation to update any of the forward-looking
statements after the date of this press release.

NEUSTAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008
(unaudited)

Revenue:
Addressing $26,857 $32,268 $53,860 $62,429
Interoperability 13,030 16,551 27,962 32,991
Infrastructure and
other
59,806 71,390 115,319 142,202
Total revenue 99,693 120,209 197,141 237,622

Operating expense:
Cost of revenue
(excluding depreciation
and amortization shown
separately below) 23,246 26,811 46,324 51,300
Sales and marketing 17,649 20,219 36,285 38,943
Research and
development 6,751 7,754 13,320 15,302
General and
administrative 11,271 15,151 22,040 31,633
Depreciation and
amortization 9,375 10,286 18,439 20,406
Impairment of goodwill - - - 29,021
68,292 80,221 136,408 186,605

Income from operations 31,401 39,988 60,733 51,017
Other (expense) income:
Interest and other
expense (86) (3,106) (322) (3,324)
Interest income 1,146 1,473 1,681 2,841
Income before income
taxes 32,461 38,355 62,092 50,534
Provision for income
taxes 13,312 15,499 24,975 32,138
Net income $19,149 $22,856 $37,117 $18,396

Net income per common
share:
Basic $0.25 $0.31 $0.49 $0.25
Diluted $0.24 $0.31 $0.47 $0.24

Weighted average common
shares outstanding:
Basic 75,825 72,985 75,258 74,616
Diluted 79,040 74,904 79,037 76,999

NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

December 31, June 30,
2007 2008
ASSETS (audited) (unaudited)
Current assets:
Cash, cash equivalents and short-term
investments $198,678 $72,155
Restricted cash 488 557
Accounts receivable, unbilled receivables, net 77,015 70,002
Prepaid expenses and other current assets 20,048 22,693
Income tax receivable - 10,425
Deferred tax assets 13,907 13,399
Total current assets 310,136 189,231

Property and equipment, net 56,191 67,850
Goodwill and intangible assets, net 240,944 218,035
Other non-current assets 9,390 45,195
Total assets $616,661 $520,311

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $57,243 $50,531
Income taxes payable 3,254 -
Deferred revenue 32,236 33,048
Notes payable and capital lease obligations 6,012 8,264
Accrued restructuring reserve 413 439
Other liabilities 108 881
Total current liabilities 99,266 93,163

Deferred revenue, long-term 18,063 14,709
Notes payable and capital lease obligations,
long-term 10,923 12,454
Accrued restructuring reserve, long-term 1,793 1,562
Deferred tax liabilities, long-term 2,215 3,878
Other liabilities, long-term 3,866 4,644
Total liabilities 136,126 130,410

Total stockholders' equity 480,535 389,901
Total liabilities and stockholders' equity $616,661 $520,311

SOURCE NeuStar, Inc.

Investor Relations, Brandon Pugh, +1-571-434-5659, brandon.pugh@neustar.biz,
or Media, John Schneidawind, +1-571-434-5596, john.schneidawind@neustar.biz,
both of NeuStar, Inc.