STERLING, Va. -- NeuStar, Inc. (NYSE: NSR - News), a provider of essential clearinghouse services to the communications and Internet industry, today announced results for the quarter ended June 30, 2007, reaffirmed its revenue and profitability guidance and increased its transaction guidance for full year 2007.

Summary of Second Quarter Results

Revenue totaled $99.7 million, up from $82.3 million in the second quarter of 2006, an increase of 21%. Net income totaled $19.1 million, or $0.24 per diluted share, compared to $20.0 million, or $0.26 per diluted share, in the second quarter of 2006.

Revenue in the quarter included the impact of reduced pricing on the company's contracts to provide telephone number portability services in the United States, under the September 2006 amendments to these contracts previously announced by the company. Based on the per-transaction rate that would have applied absent these amendments, this new pricing resulted in a reduction to revenue of approximately $4.0 million for the quarter.

Non-GAAP Adjusted Net Income totaled $23.7 million, or $0.30 per diluted share, compared to $22.6 million, or $0.29 per diluted share, in the second quarter of 2006. Non-GAAP Adjusted Net Income excludes the impact of pre-tax, non-cash, acquisition-related amortization of intangibles and stock-based compensation expense recognized in accordance with FASB Statement No. 123®. See discussion under the heading "Non-GAAP Reconciliation Table" below.

Discussion of Second Quarter Results

NeuStar's year-over-year quarterly revenue growth of 21% was driven by increases in infrastructure transactions under its contracts to provide telephone number portability services in the United States, its expanded range of DNS services including those coming from the acquisition of UltraDNS Corporation, and growth in the use of U.S. Common Short Codes.

Transactions under NeuStar's contracts to provide telephone number portability services in the United States totaled 74.4 million for the second quarter of 2007, up 27% from 58.6 million transactions for the second quarter of 2006, in line with prior projections.

Comparing other second quarter 2007 results to the corresponding period in 2006:

Total operating expense for the second quarter of 2007 increased 38% to $68.3 million from $49.5 million in the comparable quarter in 2006. This increase is primarily attributable to additional expenses NeuStar incurred as a result of operational costs associated with the businesses acquired in April and November of 2006. As of June 30, 2007, the company had $110.5 million in cash, cash equivalents and short-term investments, compared to $72.1 million at March 31, 2007 and $58.3 million at December 31, 2006.

Business Outlook for 2007

NeuStar provides the following revenue and profitability guidance, which is consistent with the company's prior guidance provided on May 8, 2007:

The company's guidance includes an estimated $17.0 million in pre-tax, non-cash, stock-based compensation expense recognized in accordance with FASB Statement No. 123®.

In addition, NeuStar provides the following guidance for transactions under the company's contracts to provide telephone number portability services in the United States:

Non-GAAP Measures

Management Commentary

Jeff Ganek, NeuStar's Chairman and Chief Executive Officer stated, "Once again, our core business continues to perform well with NPAC transactions for the quarter exceeding the estimates we provided in May and we are on track for another stellar year. In addition, the Ultra and NGM businesses we acquired in 2006 are winning new customers, adding new and expanded service offerings, and building stable, recurring revenue streams that should provide strong sources of revenue growth and profitability in future years. With the portfolio of services we have already assembled, NeuStar is well-positioned to keep pace with the ever-changing requirements brought about by the introduction of new communications technologies throughout the world."

Jeff Babka, NeuStar's Senior Vice President and Chief Financial Officer added, "NeuStar produced another quarter of revenue and profit growth and we are on target to achieve our full year guidance while covering the reduction in projected 2007 revenue in our Next Generation Messaging business segment. We are very pleased with the product delivery and roadmap for revenue growth in our Next Generation Messaging services which emanated from the focused review we initiated in April. The additional investment that we are making in that business puts us on a good trajectory to deliver significant growth in future years."

Neustar Inc. (NYSE: NSR)