Addressing revenue increased 24% to $23.4 million primarily due to the expanded range of DNS services offered by NeuStar as a result of the acquisition of UltraDNS and continued growth in new communications services, such as Common Short Codes. Specifically, six-digit Common Short Codes became operational this quarter, thus expanding the inventory of codes.

Interoperability revenue decreased 2% to $13.2 million primarily due to a higher level of transactions driven by industry consolidation activity in 2005.

Infrastructure and other revenue increased 52% to $45.6 million primarily due to increased demand for NeuStar's network management services in support of activities such as service disconnects, changes to the features and functions provided by service providers, as well as to the vendors that supply those features and functions and the implementation of new technologies.

Full year revenue is expected to range between $321 million and $326 million, representing growth in excess of 32% over 2005. Prior revenue guidance provided on May 5, 2006 was between $318 million and $324 million. This increase in revenue guidance is attributed to a projected increase of 7 million transactions under our contracts to provide telephone number portability services, offset by a decrease in projected revenue from our order management services contracts.

Guidance for the full year 2006 includes the effect of an aggregate $7.5 million in annual volume-based credits that are earned on all transactions in excess of the predetermined 100 million annual transaction volume threshold under NeuStar's contracts to provide telephone number portability services in the United States. Based on the strong growth in transaction volume in both the first and second quarters of 2006, the 100 million transaction volume threshold was surpassed in June, which resulted in the issuance of $2.1 million of volume credits during the second quarter of 2006. During the third quarter of 2006, the company anticipates that it will issue the remaining $5.4 million of these volume-based credits. In 2005, the 100 million transaction threshold was reached in August, resulting in credits being issued in the third and fourth quarters.

Full year net income is expected to range between $70 million and $72 million, or $0.90 and $0.92 per diluted share. Per share calculations are based on an estimated 78.2 million diluted weighted average shares outstanding. Prior net income guidance provided on May 5, 2006 was between $67 million and $71 million. The company's guidance includes an estimated $12.5 million in pre-tax, non-cash, stock-based compensation expense recorded in accordance with FASB Statement No. 123®.

Transactions under the company's contracts to provide telephone number portability services in the United States are projected to grow:

Management Commentary

"Our strong performance this quarter is attributable to our ability to continually deliver reliable services that enable our customers to respond to the challenges resulting from changes in the industry," said Jeff Ganek, NeuStar's Chairman and Chief Executive Officer. Ganek continued, "Of note during the second quarter were the fine results put forth by our newly- acquired UltraDNS business, which announced several new high-profile customer wins this quarter, and the operationalizing of six-digit Common Short Codes, which is just another example of our ability to strengthen our future revenue potential by expanding our customers' services base."

Jeff Babka, NeuStar's Chief Financial Officer added, "From both an operational and financial perspective, our results through June put us right on target with where we hoped we would be at this time, and we are pleased to be ahead of the guidance levels we provided earlier this year. We enter the second half of the year confident in our team's ability to execute on our operational game plan across the business and achieve the higher financial projections we are providing today."

Neustar Inc. (NYSE: NSR)