UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2016~~2017



¨	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.

(Exact name of registrant as specified in its charter)



Delaware		52-2141938
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

21575 Ridgetop Circle

Sterling, Virginia 20166

(Address of principal executive offices) (zip code)

(571) 434-5400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, ~~and~~ “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

There were 54,572,524 shares of Class A common stock, $0.001 par value, and 1,864 shares of Class B common stock, $0.001 par value, outstanding at October 24, 2016.

Table of Contents

There were 55,775,082 shares of Class A common stock, $0.001 par value, and 1,864 shares of Class B common stock, $0.001 par value, outstanding at May 8, 2017.

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NEUSTAR, INC.

INDEX

PART I FINANCIAL INFORMATION		34
Item 1.	Financial Statements	34
	Consolidated Balance Sheets as of December 31, 2015 and September 30, 2016 (unaudited)	3
	Consolidated Balance Sheets as of December 31, 2016 and March 31, 2017 (unaudited)	4
	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2016	5
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2016 and 2017	6
	Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2016	6
	Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2017	7
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2016	7
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2017	8
	Notes to Unaudited Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2924
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3628
Item 4.	Controls and Procedures	3628
PART II OTHER INFORMATION		3629
Item 1.	Legal Proceedings	3629
Item 1A.	Risk Factors	3729
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3730
Item 3.	Defaults Upon Senior Securities	3730
Item 4.	Mine Safety Disclosures	3730
Item 5.	Other Information	3730
Item 6.	Exhibits	3730
Signatures
EX – 31.1
EX – 31.2
EX – 32.1
EX – 101 INSTANCE DOCUMENT
EX – 101 SCHEMA DOCUMENT
EX – 101 CALCULATION LINKBASE DOCUMENT
EX – 101 DEFINITION LINBASE DOCUMENT
EX – 101 DEFINITION LINKBASE DOCUMENT
EX – 101 LABELS LINKBASE DOCUMENT
EX – 101 PRESENTATION LINKBASE DOCUMENT

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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, 2015		September 30, 2016
	December 31, 2016		March 31, 2017
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8945,~~097~~773	$	5647,~~199~~048
Restricted cash	2,~~363~~283		2,~~287~~141
Accounts receivable, net of allowance for doubtful accounts of $4,512 and $6,257, respectively	167,593		195,799
Accounts receivable, net of allowance for doubtful accounts of $6,572 and $7,743, respectively	207,595		188,930
Unbilled receivables	1719,~~712~~795		1415,~~001~~618
Prepaid expenses and other current assets	3041,~~216~~680		3135,~~942~~867
Deferred costs	611,~~676~~469		910,~~591~~909
Income taxes receivable	513,~~883~~586		~~41,324~~612
Total current assets	~~319~~342,~~540~~181		~~351~~301,~~143~~125
Property and equipment, net	~~147~~145,~~764~~821		~~141~~149,~~862~~363
Goodwill	1,~~186~~168,~~983~~982		1,172,~~765~~792
Intangible assets, net	~~529~~423,~~279~~957		~~447~~405,~~902~~429
Other assets, long-term	1817,~~681~~771		1816,~~482~~670
Total assets	$	2,~~202~~098,~~247~~712	$	2,~~132~~045,~~154~~379

See accompanying notes.

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NEUSTAR, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31, 2015			September 30, 2016
	December 31, 2016			March 31, 2017
				(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2821,~~392~~095		$	1922,~~096~~569
Accrued expenses	134,~~632~~545			~~106~~97,~~548~~959
Deferred revenue	91,~~006~~188			9396,~~661~~035
Notes payable	~~131~~103,~~272~~725			~~100~~89,~~977~~219
Capital lease obligations	41,~~791~~457			~~2,028~~470
Other liabilities	1011,~~875~~632			129,~~267~~306
Total current liabilities	~~400~~363,~~968~~642			~~334~~315,~~577~~558
Deferred revenue, long-term	22,~~998~~437			2122,~~535~~850
Notes payable, long-term	~~957~~702,~~509~~946			~~819~~642,~~793~~750
Capital lease obligations, long-term	1,831			60
Deferred income tax liabilities, long-term	35,088			41,131
Deferred income tax liabilities, long-term	38,701			36,649
Other liabilities, long-term	53,298			53,257
Other liabilities, long-term	56,741			52,080
Total liabilities	1,177,411			1,075,546
Total liabilities	1,478,748			1,264,694
Commitments and contingencies	—			—
Stockholders’ equity:
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of December 31, 2015 and September 30, 2016	—			—
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of December 31, 2016 and March 31, 2017	—			—
Class A common stock, par value $0.001; 200,000,000 shares authorized; 80,233,896 and 81,786,092 shares issued; and 53,516,287 and 54,570,683 shares outstanding at December 31, 2015 and September 30, 2016, respectively	80			82
Class A common stock, par value $0.001; 200,000,000 shares authorized; 82,136,230 and 83,548,071 shares issued; and 54,896,659 and 55,769,589 shares outstanding at December 31, 2016 and March 31, 2017, respectively	82			84
Class B common stock, par value $0.001; 100,000,000 shares authorized; 2,270 and 1,864 shares issued and outstanding at December 31, 2015 and September 30, 2016, respectively	—			—
Class B common stock, par value $0.001; 100,000,000 shares authorized; 1,864 and 1,864 shares issued and outstanding at December 31, 2016 and March 31, 2017, respectively	—			—
Additional paid-in capital	~~729~~771,~~273~~450			~~759~~789,~~742~~597
Treasury stock, 26,717,609 and 27,215,409 shares at December 31, 2015 and September 30, 2016, respectively, at cost	(920,439		)	(932,515		)
Treasury stock, 27,239,571 and 27,778,482 shares at December 31, 2016 and March 31, 2017, respectively, at cost	(933,581		)	(951,550		)
Accumulated other comprehensive (loss) income	(1,~~904~~785		)	1,~~135~~124
Retained earnings	~~916~~1,~~489~~085,135			1,~~039~~130,~~016~~578
Total stockholders’ equity	~~723~~921,~~499~~301			~~867~~969,~~460~~833
Total liabilities and stockholders’ equity	$	2,~~202~~098,~~247~~712		$	2,~~132~~045,~~154~~379

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

2015

2016

2015

2016

2017

Revenue

~~261~~287,~~653~~298

~~300~~293,~~081~~186

~~769,808~~

~~884,944~~

Operating expense:

Cost of revenue (excluding depreciation and amortization shown separately below)

6791,~~108~~351

9387,~~560~~916

~~198,817~~

~~275,148~~

Sales and marketing

4855,~~911~~323

5056,~~824~~557

~~146,587~~

~~160,435~~

Research and development

67,~~009~~549

6,~~041~~672

~~18,460~~

~~18,850~~

General and administrative

2827,~~617~~518

28,~~040~~360

~~78,003~~

~~82,796~~

Depreciation and amortization

3038,~~272~~482

4934,~~701~~927

~~89,634~~

~~127,012~~

Restructuring charges

—2,664

~~2,629~~27

—

~~11,422~~

Separation costs

—

21,~~135~~789

—

~~6,353~~

180,917

232,930

531,501

682,016

222,887

216,248

Income from operations

8064,~~736~~411

6776,~~151~~938

~~238,307~~

~~202,928~~

Other (expense) income:

Interest and other expense

(617,~~775~~111

)

(2212,~~179~~271

)

~~(19,978~~

)

~~(54,981~~

)

Interest income

7174

5072

~~302~~

~~291~~

Income before income taxes

7347,~~968~~474

4564,~~022~~739

~~218,631~~

~~148,238~~

Provision (benefit) for income taxes

23,686

(8,009

)

77,077

25,711

Provision for income taxes

16,099

19,296

Net income

5031,~~282~~375

5345,~~031~~443

~~141,554~~

~~122,527~~

Net income per common share:

Basic

0.9358

0.9782

~~2.57~~

~~2.26~~

Diluted

0.9157

0.9680

~~2.52~~

~~2.22~~

Weighted average common shares outstanding:

Basic

5453,~~123~~953

5455,~~542~~311

~~55,153~~

~~54,318~~

Diluted

5554,~~125~~940

5557,~~432~~022

~~56,078~~

~~55,127~~

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2015			2016			2015			2016
	2016			2017
Net income	$	5031,~~282~~375		$	5345,~~031~~443		$	~~141,554~~		$	~~122,527~~
Other comprehensive (loss) income, net of tax:
Other comprehensive income, net of tax:
Available for sale investments, net of tax:
Change in net unrealized gains, net of tax	(5057		)	6655			~~(81~~		)	85
Reclassification for gains included in net income, net of tax	~~(15~~—		)	2(13		)	~~(38~~		)	2
Net change in unrealized gains on investments, net of tax	(6557		)	6842			~~(119~~		)	87
Foreign currency translation adjustment, net of tax:
Foreign currency translation adjustment, net of tax	2,798			2,867
Change in foreign currency translation adjustment, net of tax	(2,067		)	1,589			(3,134		)	2,952
Other comprehensive income, net of tax	2,741			2,909
Reclassification adjustment included in net income, net of tax	158			—			572			—
Comprehensive income	$	34,116		$	48,352
Foreign currency translation adjustment, net of tax	(1,909		)	1,589			(2,562		)	2,952
Other comprehensive (loss) income, net of tax	(1,974		)	1,657			(2,681		)	3,039
Comprehensive income	$	48,308		$	54,688		$	138,873		$	125,566

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2015			2016
	2016			2017
Operating activities:
Net income	$	~~141~~31,~~554~~375		$	~~122~~45,~~527~~443
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8938,~~634~~482			~~127~~34,~~012~~927
Stock-based compensation	289,~~111~~876			329,~~087~~469
Loss on debt modification and extinguishment	—			6,354
Amortization of deferred financing costs and original issue discount on debt	4,545			3,177
Amortization of deferred financing costs and original issue discount on debt	2,561			13,438
Tax benefit from equity awards	(323		)	—
Tax benefit from equity awards	(341		)	(267		)
Deferred income taxes	10,020			3,860
Deferred income taxes	(2,301		)	13,172
Provision for doubtful accounts	1,800			1,800
Provision for doubtful accounts	5,982			5,399
Gain on disposal of assets	(678		)	—
Changes in operating assets and liabilities:
Accounts receivable	(723,~~644~~716		)	~~(34~~16,~~458~~857		)
Unbilled receivables	~~(777~~3,598		)	34,~~705~~183
Prepaid expenses and other current assets	(48,~~406~~179		)	(16,~~047~~549		)
Deferred costs	(~~1,357~~854		)	~~(4,317~~784		)
Income taxes	~~(856~~4,520		)	~~(38~~12,~~453~~974		)
Other assets	~~(264~~652		)	41,~~160~~123
Other liabilities	31,~~457~~257			(32,~~749~~743		)
Accounts payable and accrued expenses	5(44,~~395~~308		)	(3634,~~869~~087		)
Deferred revenue	(72,~~393~~477		)	8101
Net cash provided by operating activities	~~250~~31,~~677~~222			~~208~~104,~~702~~417
Investing activities:
Purchases of property and equipment	(229,~~448~~870		)	(3815,~~030~~361		)
Businesses acquired, net of cash acquired	(84,130		)	12
Net cash used in investing activities	(9,870		)	(15,361		)
Net cash used in investing activities	(106,578		)	(38,018		)
Financing activities:
(Increase) decrease in restricted cash	(~~188~~256		)	76142
Payments under notes payable obligations	(626,~~094~~881		)	(~~179~~77,~~170~~439		)
Debt issuance costs	—			(10,201		)
Principal repayments on capital lease obligations	(1,459		)	(987		)
Principal repayments on capital lease obligations	(3,887		)	(4,547		)
Proceeds from issuance of stock	150			4,315
Proceeds from issuance of stock	7,676			562
Tax benefit from equity awards	323			—
Tax benefit from equity awards	341			267
Repurchase of restricted stock awards and common stock	(12,469		)	(13,604		)
Repurchase of restricted stock awards and common stock	(109,605		)	(11,027		)
Net cash used in financing activities	(40,592		)	(87,573		)
Net cash used in financing activities	(111,757		)	(204,040		)
Effect of foreign exchange rates on cash and cash equivalents	(13		)	(208		)
Effect of foreign exchange rates on cash and cash equivalents	(493		)	458
Net (decrease) increase in cash and cash equivalents	(19,253		)	1,275
Net increase (decrease) in cash and cash equivalents	31,849			(32,898		)
Cash and cash equivalents at beginning of period	89,097			45,773
Cash and cash equivalents at beginning of period	326,577			89,097
Cash and cash equivalents at end of period	$	69,844		$	47,048
Cash and cash equivalents at end of period	$	358,426		$	56,199

See accompanying notes.

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017



1.	DESCRIPTION OF BUSINESS AND ORGANIZATION

NeuStar, Inc. (the Company or Neustar) ~~offers~~helps clients grow and guard their business with the most complete understanding of how to connect people, places, and things using its authoritative OneIDTM system. As the leader in connection science, ~~hard~~the Company uses its expertise in real-~~to-replicate~~time ~~data~~addressing, ~~sets~~authentication, and ~~proprietary~~ analytics ~~that~~to provide ~~insights~~marketing, torisk ~~help~~security, ~~clients~~registry, ~~promote~~ and ~~protect~~communications ~~their~~solutions ~~businesses~~to over 11,000 clients. The Company’s ~~proprietary,~~ cloud-based platforms and differentiated data sets offer informative, real-time analytics, which enable clients to make actionable, data-driven decisions. The Company provides chief marketing officers a comprehensive suite of services to plan their media spend, identify and locate desired customers, invest effectively in marketing campaigns, deliver relevant offers and measure the performance of these activities. Security professionals use the Company’s solutions to maximize web performance and protect against malicious attacks. The Company enables the exchange of essential operating information across multiple carriers to provision and manage services, assisting clients with fast and accurate order processing and immediate routing of customer inquiries. The Company provides communications service providers in the United States critical infrastructure that enables the dynamic routing of calls and text messages.

On ~~June 21~~December 14, 2016, the Company ~~announced~~entered ~~its intention to separate~~ into ~~two~~an ~~independent~~Agreement and ~~publicly~~Plan ~~traded~~of ~~companies. One~~Merger ~~company~~(the ~~will~~Merger ~~consist~~Agreement), ofwith Aerial Topco, L.P. (the ~~majority~~Parent), ofand ~~the~~Aerial ~~Company's~~Merger ~~Information~~Sub, ~~Services~~Inc., ~~which~~a ~~consists~~subsidiary of ~~Marketing~~Parent ~~Services~~(Merger Sub), ~~Security~~pursuant ~~Services~~to ~~and~~which, ~~related~~subject ~~Data~~to ~~Services. The~~the ~~other~~satisfaction ~~company~~or ~~will~~waiver ~~focus~~of onthe ~~providing~~conditions ~~Order~~therein, ~~Management~~Merger Sub will merge with and ~~Numbering~~into ~~Services~~Neustar. ~~Order~~As ~~Management~~a ~~and~~result ~~Numbering~~of ~~Services~~the ~~will~~merger, ~~provide~~the ~~Local~~Company ~~Number~~will ~~Portability~~become ~~Administration,~~a ~~number~~wholly-owned ~~administration~~subsidiary ~~and~~of ~~ancillary~~Parent. Parent ~~numbering~~and ~~services~~Merger asSub ~~well~~were asformed ~~order~~by ~~and~~Golden ~~inventory~~Gate ~~management~~Private ~~solutions~~Equity, Inc. ~~The~~ ~~Company~~and ~~intends~~GIC toSpecial ~~accomplish~~Investments Pte Ltd. On March 14, 2017, the ~~separation~~Company’s ~~through~~stockholders avoted ~~tax-free~~in ~~spin-off,~~favor ~~which~~of the ~~Company~~adoption ~~expects~~of tothe ~~occur~~Merger ~~in 2017~~Agreement. The ~~separation~~merger, which is ~~subject~~expected to ~~final~~close ~~approval~~no bylater than the ~~Company's~~end ~~Board~~of the third quarter of ~~Directors~~2017, asis ~~well~~subject asto athe ~~number~~receipt of ~~market~~required ~~and~~ regulatory ~~conditions,~~approvals ~~including,~~from ~~among~~the ~~others,~~Committee ~~effectiveness~~on ofForeign Investment in the ~~Form 10~~United toStates beand ~~filed~~the ~~with~~Federal Communications Commission as well as the ~~Securities~~satisfaction ~~and~~or ~~Exchange~~waiver ~~Commission.~~of other customary closing conditions.



2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the full fiscal year. The consolidated balance sheet as of December 31, ~~2015~~2016 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 filed with the Securities and Exchange Commission.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Significant estimates and assumptions are inherent in the analysis and the measurement of deferred tax assets; the identification and ~~valuation~~quantification of ~~acquired~~income ~~intangible~~tax ~~assets~~liabilities due to uncertain tax positions; and recoverability of goodwill. The Company bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results could differ from those estimates.

~~Separation Costs~~Reclassifications

InWithin the ~~second~~consolidated ~~quarter~~statement of comprehensive income for the three months ended March 31, 2016, the ~~Company~~company ~~announced~~reclassified ~~its~~$2.8 ~~intention~~million from net change in unrealized gains on investments, net of tax to ~~separate~~foreign ~~into~~currency ~~two~~translation ~~independent~~adjustment, ~~and~~net ~~publicly~~of ~~traded~~tax ~~companies~~and reclassified $0. ~~Separation~~1 ~~costs~~million ~~are~~from ~~expensed~~foreign ascurrency ~~incurred~~translation ~~and~~adjustment, ~~include~~net ~~professional~~of ~~fees~~tax ~~for~~to ~~outside~~net ~~advisory~~change ~~services~~in ~~including~~unrealized ~~legal,~~gains ~~finance~~on investments, ~~accounting~~net ~~and~~of ~~related services~~tax.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

Reclassifications

Within the consolidated statement of cash flows for the nine months ended September 30, 2015, the Company reclassified $9.0 million from cash provided by operating activities to cash used in financing activities related to the exercise of equity awards and presentation of tax benefits to conform with current period presentation.

Fair Value of Financial Instruments

Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurements and Disclosure Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:


•	Level 1. Observable inputs, such as quoted prices in active markets;


•	Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


•	Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level at which to classify them for each reporting period. Due to their short-term nature, the carrying amounts reported in the accompanying unaudited consolidated financial statements approximate the fair value for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The Company determines the fair value of its term loan facilities, the 2013 Term Facility (as defined in Note 54), the 2015 Incremental Term Facility (as defined in Note 54) and the Amended 2013 Term Facility (as defined in Note 54), using pricing service quotations as quoted by Bloomberg (Level 2) ~~(see Note 5)~~. The Company believes the carrying value of its Amended 2013 Revolving Facility (as defined in Note 54) approximates the fair value of the debt as the term and interest rate approximates the market rate (Level 2) ~~(see Note 5)~~. The Company determines the fair value of its Senior Notes using a secondary market price on the last trading day in each period as quoted by Bloomberg (Level 2) ~~(see Note 5)~~.

The estimated fair values of the Company’s financial instruments are as follows (in thousands):

	December 31, 2015				September 30, 2016
	December 31, 2016				March 31, 2017
	CarryingAmount		Fair Value		CarryingAmount		Fair Value
2013 Term Facility (including current portion, net of discount)	$	300,328	$	296,013	$	—	$	—
2013 Amended Term Facility (including current portion, net of discount)	$	437,815	$	439,480	$	411,363	$	411,884
2015 Incremental Term Facility (including current portion, net of discount)	337,947		341,326		—		—
Amended 2013 Revolving Facility	85,000		85,000		35,000		35,000
2013 Amended Term Facility (including current portion, net of discount)	—		—		464,292		465,466
Senior Notes (including current portion)	300,000		305,733		300,000		308,250
2013 Revolving Facility	175,000		175,000		—		—
Amended 2013 Revolving Facility	—		—		175,000		175,000
Senior Notes (including current portion)	300,000		249,000		300,000		273,213

Restricted Cash

As of December 31, ~~2015~~2016 and ~~September~~March 3031, ~~2016~~2017, cash of $2.4 3 million and $2.3 1 million, respectively, was restricted as collateral for certain of the Company’s outstanding letters of credit and for deposits on leased facilities.

~~Identifiable~~Recent ~~Intangible~~Accounting ~~Assets~~Pronouncements - Adopted

~~Identifiable~~In ~~intangible~~March ~~assets~~2016, ~~are~~the ~~amortized~~FASB ~~over~~issued ~~their~~Accounting ~~respective~~Standards ~~estimated~~Update ~~useful~~(ASU) ~~lives~~2016-09, ~~using~~Compensation-Stock aCompensation ~~method~~(Topic of718): ~~amortization~~Improvements ~~that~~to ~~reflects~~Employee Share-Based Payment Accounting. This standard makes several modifications to Topic 718 related to the ~~pattern~~accounting infor ~~which~~forfeitures, employer tax withholding on share-based compensation and the ~~economic~~financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted the ~~intangible~~standard ~~assets~~on ~~are~~January 1, 2017. On ~~consumed~~a orprospective ~~otherwise~~basis, ~~used~~the Company began recognizing excess tax benefits on stock compensation as income tax benefits on its consolidated statements of operations and ~~are~~within ~~periodically~~operating ~~reviewed~~activities ~~for~~on ~~impairment~~the consolidated statements of cash flows. During the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2016~~ 2017, the Company ~~recorded~~recognized anexcess tax benefits of $2.8 million. The Company elected to continue to estimate the number of awards expected to be forfeited. Payments to satisfy income tax withholding obligations continue to be reported as a financing activity on the consolidated statements of cash flows. The Company’s adoption of this standard did not have a material impact on its consolidated financial statements.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

intangible asset impairment charge of $11.1 million related to an asset group (see “Impairment of Long-Lived Assets” below). There were no intangible asset impairment charges recognized during the three and nine months ended September 30, 2015.

The Company’s identifiable intangible assets are amortized as follows:

	Years	Method
Acquired technologies	3 – 8	Straight-line
Client lists and relationships	3 – 13	Straight-line
Trade names and trademarks	3	Straight-line
Non-compete agreement	3	Straight-line

Amortization expense related to identifiable intangible assets is included in depreciation and amortization expense in the consolidated statements of operations.

Impairment of Long-Lived Assets

In accordance with Property, Plant and Equipment Topic of the FASB ASC, the Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures recoverability of assets to be held and used by comparing the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. Recoverability measurement and estimating undiscounted cash flows are performed at the lowest possible level for which there are identifiable cash flows. If the carrying amount of the assets exceeds the future undiscounted cash flows expected to be generated by those assets, such assets fail the recoverability test and an impairment charge would be recognized and measured as the amount by which the carrying amount of the assets exceeds the fair value. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.

During the third quarter of 2016, the Company determined that it will discontinue the use of certain technology acquired from Aggregate Knowledge, Inc. (AKI). The Company performed an impairment analysis and concluded that the carrying amount of the AKI asset group exceeded the estimated future undiscounted cash flows of the AKI asset group. The Company performed a recoverability test, determined that the fair value of these long-lived assets was less than the carrying value, and recorded a total impairment charge of $11.1 million, consisting of charges of $10.1 million to write down the carrying value of acquired technology and $1.0 million to write down the carrying value of customer lists and relationships (see Note 4). This $11.1 million impairment charge is included in depreciation and amortization expense on the consolidated statement of operations.

Recent Accounting Pronouncements - Effective

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (Topic 805): Business Combinations, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The standard is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The guidance is to be applied prospectively to adjustments to provisional amounts that occur after the effective date of the standard, with earlier application permitted for financial statements that have not been issued. The Company’s adoption of this ASU did not impact its consolidated financial statements.

Recent Accounting Pronouncements - Not Yet Effective

In ~~August~~May ~~2016~~2014, the FASB issued ASU ~~No. 2016~~2014-1509, ~~Statement~~Revenue offrom ~~Cash~~Contracts ~~Flows~~with Customers (Topic ~~230~~606)~~: Classification of Certain Cash Receipts and Cash Payments~~. ~~This~~Under this standard, ~~clarifies~~revenue ~~how~~is ~~certain~~recognized ~~cash~~when ~~receipts~~promised ~~and~~goods ~~cash~~or ~~payments~~services ~~should~~are betransferred ~~classified~~to oncustomers ~~the~~in ~~statement~~an ofamount ~~cash~~that ~~flows. The~~reflects ~~standard~~the isconsideration ~~effective~~to ~~for~~which ~~interim~~a ~~and~~company ~~annual~~expects ~~reporting~~to ~~periods~~be ~~beginning~~entitled ~~after~~in ~~December 15, 2017,~~exchange ~~although~~for ~~early~~those ~~adoption~~goods isor ~~permitted~~services. On ~~The Company currently intends to adopt this standard on January~~July 19, ~~2018~~2015, ~~and~~the isFASB ~~currently~~deferred ~~evaluating~~ the ~~impact of adoption on its consolidated financial statements.~~

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

effective dates of the standard by one year. As a result, the standard will be effective for annual ~~reporting~~and interim periods beginning after December 15, ~~2016,~~2017. Companies ~~although~~may adopt the standard as early ~~adoption~~as isthe ~~permitted. The~~original ~~Company~~effective ~~currently~~date ~~intends~~(i.e. toannual ~~adopt~~reporting ~~this~~periods ~~standard~~beginning onafter ~~January~~December 115, ~~2017~~2016). The ~~and~~standard isallows ~~currently~~for ~~evaluating~~either full retrospective adoption, meaning the ~~impact~~standard is applied to all of the periods presented, or a modified retrospective adoption, onmeaning ~~its~~the ~~consolidated~~standard ~~financial~~is ~~statements~~applied only to the most current period presented.

In preparation for the adoption of the new accounting standard on January 1, 2018, the Company reviewed a representative sample of its client contracts and is evaluating the provisions contained therein in light of the five-step model specified by the new guidance. That five-step model includes: (1) determination of whether a contract exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The Company is also evaluating the impact of the new standard on its current practices, such as accounting for sales commissions. Under this new guidance, sales commission expenditures will be recorded as an asset and recognized as an operating expense over the period that the Company expects to recover the costs. Currently, the Company expenses sales commissions as incurred. The Company has not yet quantified the potential impact of this or other potential impacts of the new guidance. The Company is also continuing to evaluate the approach that it will use when transitioning to this new guidance.

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires that long-term lease arrangements be recognized on the balance sheet. The standard is effective for interim and annual periods beginning after December 31, 2018, and early adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In ~~May~~August ~~2014~~2016, the FASB issued ASU ~~2014~~No. 2016-0915, ~~Revenue~~Statement ~~from~~of ~~Contracts~~Cash ~~with~~Flows ~~Customers~~ (Topic ~~606~~230)~~. Under~~: ~~this~~Classification ~~standard,~~of ~~revenue~~Certain isCash ~~recognized~~Receipts ~~when~~and ~~promised~~Cash ~~goods~~Payments. This orstandard ~~services~~clarifies ~~are~~how ~~transferred~~certain tocash ~~customers~~receipts inand ancash ~~amount~~payments ~~that~~should ~~reflects the consideration to which a company expects to~~ be ~~entitled~~classified inon ~~exchange for those goods or services. On July 9, 2015,~~ the ~~FASB~~statement ~~decided to defer by one year the effective dates~~ of ~~the~~cash ~~standard~~flows. AsThe ~~a result, the~~ standard ~~will~~is be effective for ~~annual~~interim and ~~interim~~annual reporting periods beginning after December 15, 2017~~. Companies~~, ~~may~~although ~~adopt the standard as~~ early ~~as the original effective date (i.e. annual reporting periods beginning after December 15, 2016). Early~~ adoption ~~prior to that date~~ is ~~not~~ permitted. The ~~standard~~Company ~~allows~~currently ~~for~~intends ~~either~~to ~~full~~adopt ~~retrospective~~this ~~adoption, meaning the~~ standard ison ~~applied to all of the periods presented~~January 1, 2018 orand ~~a modified retrospective adoption, meaning the standard~~ is ~~applied only to the most current period presented. The Company is~~ currently evaluating the impact of adoption on its consolidated financial statements.

3In February 2017, the FASB issued ASU No. ~~ACQUISITIONS~~2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard simplifies the accounting for goodwill impairment by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

~~Bombora~~3. ~~Acquisition~~GOODWILL

OnThe ~~July 30, 2015,~~change in the ~~Company~~carrying ~~acquired~~amount ~~Bombora~~of ~~Technologies Pty Ltd (Bombora) and expanded~~ the Company’s ~~registry~~goodwill ~~services. As~~from ~~of September~~December 3031, 2016, ~~the~~to ~~final purchase price was $87.7 million. During the nine months ended September 30~~March 31, ~~2016,~~2017 ~~the~~is ~~Company~~as ~~completed~~follows ~~the allocation of the purchase price, which did not result~~ (in ~~any~~thousands): material changes to either the purchase price or the preliminary valuation of acquired assets and assumed liabilities. Pro forma financial information for this acquisition has not been presented because the financial impact is not material.

MarketShare Acquisition



	December 31, 2016			Foreign Currency Translation		March 31, 2017
Gross goodwill	$	1,262,584		$	3,810	$	1,266,394
Accumulated impairments	(93,602		)	—		(93,602		)
Net goodwill	$	1,168,982		$	3,810	$	1,172,792

On December 9, 2015, the Company completed its acquisition of MarketShare Partners, LLC (MarketShare), a marketing analytics technology provider to major brands. The acquisition of MarketShare expanded the Company’s marketing services by creating a complete data-driven solution for Chief Marking Officers as they plan, optimize and allocate their entire marketing budget and resources across all channels.

The transaction was accounted for under the acquisition method of accounting in accordance with the Business Combination Topic of the FASB ASC. The total preliminary purchase price was $442.4 million, consisting of cash consideration of $429.1 million and non-cash consideration of $13.3 million paid in shares of NeuStar Class A Common Stock, which shares are subject to certain transfer restrictions. During the nine months ended September 30, 2016, the Company recorded working capital and escrow adjustments of $1.3 million, reducing the preliminary purchase price to $441.1 million. In addition, the Company adjusted its preliminary valuation of acquired assets and assumed liabilities based upon new information that was received pertaining to acquisition date fair values. During the nine months ended September 30, 2016, the Company adjusted the preliminary valuation the deferred tax asset balance by $16.7 million, the accounts payable and accrued expenses balance by $1.0 million, and the accounts receivable balance by $0.3 million.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

~~The allocation of the preliminary purchase price is pending the finalization of the fair value of acquired deferred income tax assets and assumed income and non-income based tax liabilities~~4. ~~The~~ ~~following~~NOTES table summarizes the current preliminary purchase price allocation based on the estimated fair value of the acquired assets and assumed liabilities and reflects the measurement period adjustments recorded during the nine months ended September 30, 2016 (in thousands):PAYABLE

Notes payable consist of the following (in thousands):

Cash and cash equivalents	$	7,504
	December 31, 2016			March 31, 2017
Accounts receivable	8,954
Amended 2013 Term Facility (net of discount)	$	437,815		$	411,363
Prepaids and other assets	6,344
Amended 2013 Term Facility deferred financing fees	(5,016		)	(4,218		)
Accounts payable and accrued expenses	(9,330		)
Amended 2013 Revolving Facility	85,000			35,000
Deferred revenue	(2,062		)
Amended 2013 Revolving Facility deferred financing fees	(916		)	(325		)
Deferred tax asset	5,844
Senior Notes	300,000			300,000
Net tangible assets acquired	17,254
Senior Notes deferred financing fees	(10,212		)	(9,851		)
Customer relationships	30,000
Total	806,671			731,969
Acquired identified technology	100,000
Less: current portion, net of discount	(103,725		)	(89,219		)
Goodwill	293,832
Long-term portion	$	702,946		$	642,750
Total preliminary purchase price allocation	$	441,086

As of September 30, 2016, of the total goodwill balance of $293.8 million, approximately $203.0 million is expected to be deductible for tax purposes.

Pro Forma Financial Information for the MarketShare Acquisition

The following unaudited pro forma financial information summarizes the Company’s results of operations for the period indicated as if the Company’s acquisition of MarketShare had been completed as of the beginning of the earliest period presented. These pro forma amounts (unaudited and in thousands) are not indicative of the results that would have actually been obtained if the acquisition occurred as of the beginning of the periods presented and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity. The pro forma financial information for all periods presented also includes the effect of the related 2015 acquisition financing, amortization expense from the acquired intangible assets, adjustments to interest expense and related tax effects.

	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Pro forma revenue	$	275,183	$	807,648
Pro forma income from operations	$	73,573	$	209,037
Pro forma net income	$	41,112	$	103,061

Caller Authentication Assets Acquisition

On December 18, 2015, the Company acquired caller authentication assets from Transaction Network Services, Inc., enhancing its position in the caller authentication market that includes subscriber data storage, database management, caller identification and verification services. As of September 30, 2016, the estimated preliminary purchase price was $220.0 million, of which $22.0 million was deposited into escrow to satisfy post-closing indemnification claims. The preliminary purchase price is subject to the finalization of the acquisition date fair value of acquired deferred income tax assets and assumed non-income based tax liabilities. Pro forma financial information for this acquisition has not been presented because the financial impact is not material.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company’s goodwill as of December 31, 2015 and September 30, 2016 is as follows (in thousands):

	December 31,2015			Acquisitions		Adjustments (1)			Foreign Currency Translation		September 30, 2016
Gross goodwill	$	1,280,585		$	—	$	(17,655	)	$	3,437	$	1,266,367
Accumulated impairments	(93,602		)	—		—			—		(93,602		)
Net goodwill	$	1,186,983		$	—	$	(17,655	)	$	3,437	$	1,172,765

(1) During the nine months ended September 30, 2016, the Company adjusted the preliminary purchase price paid for certain of its 2015 acquisitions based on adjustments to the preliminary valuation of assets acquired and liabilities assumed in the 2015 acquisitions (see Note 3).

Intangible Assets

Intangible assets consist of the following (in thousands):

	December 31, 2015			September 30, 2016			Weighted-AverageAmortizationPeriod(in years)
Intangible assets:
Client lists and relationships	$	578,085		$	581,685		8.9
Accumulated amortization	(196,806		)	(247,205		)
Client lists and relationships, net	381,279			334,480
Acquired technology	214,212			204,451			6.2
Accumulated amortization	(66,335		)	(91,029		)
Acquired technology, net	147,877			113,422
Trade name	8,030			8,011			3.0
Accumulated amortization	(7,919		)	(8,011		)
Trade name, net	111			—
Non-compete agreement	100			100			3.0
Accumulated amortization	(88		)	(100		)
Non-compete agreement, net	12			—
Intangible assets, net	$	529,279		$	447,902

During the third quarter of 2016, the Company performed a recoverability test of its AKI asset group and determined that the fair value of these long-lived assets was less than the carrying value. The Company recorded an impairment charge of $11.1 million, consisting of charges of $10.1 million to write down the carrying value of acquired technology and $1.0 million to write down the carrying value of customer lists and relationships.

Amortization expense related to intangible assets, which is included in depreciation and amortization expense, was approximately $16.5 million and $23.8 million for the three months ended September 30, 2015 and 2016, respectively, and $48.0 million and $72.4 million for the nine months ended September 30, 2015 and 2016, respectively. Amortization expense related to intangible assets for the years ended December 31, 2016, 2017, 2018, 2019, 2020 and thereafter is expected to be

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

approximately $94.1 million, $82.6 million, $79.3 million, $72.9 million, $43.9 million and $147.6 million, respectively. Intangible assets as of September 30, 2016 will be fully amortized during the year ended December 31, 2028.

5. NOTES PAYABLE

	December 31, 2015			September 30, 2016
2013 Term Facility (net of discount)	$	300,328		$	—
2013 Term Facility deferred financing fees	(1,683		)	—
2015 Incremental Term Facility (net of discount)	337,947			—
2015 Incremental Term Facility deferred financing fees	(9,012		)	—
Amended 2013 Term Facility (net of discount)	—			464,292
Amended 2013 Term Facility deferred financing fees	—			(5,798		)
2013 Revolving Facility	175,000			—
2013 Revolving Facility deferred financing fees	(2,162		)	—
Amended 2013 Revolving Facility	—			175,000
Amended 2013 Revolving Facility deferred financing fees	—			(2,147		)
Senior Notes	300,000			300,000
Senior Notes deferred financing fees	(11,637		)	(10,577		)
Total	1,088,781			920,770
Less: current portion, net of discount	(131,272		)	(100,977		)
Long-term portion	$	957,509		$	819,793

Credit Facilities and Senior Notes

On January 22, 2013, the Company entered into a credit facility that provided for a $325 million senior secured term loan facility (2013 Term Facility) and a $200 million senior secured revolving credit facility (2013 Revolving Facility, and together with the 2013 Term Facility, the 2013 Credit Facilities). In addition, the Company closed an offering of $300 million aggregate principal amount of senior notes (Senior Notes).

On December 9, 2015, the Company amended ~~its~~the 2013 Credit Facilities to provide for (i) the permissibility of an incremental term facility ~~under the 2013 Credit Agreement (the 2013 Credit Agreement)~~, (ii) the addition of a senior secured leverage financial ~~measurement~~maintenance covenant; (iii) streamlined conditions for the incurrence of an incremental term facility to be used for a permitted acquisition; (iv) a required escrow and prepayment (such prepayment to be for the benefit of the incremental facility lenders) by the Company under certain specified circumstances; and (v) certain tax related changes favorable to the Company to the terms of the ~~2013~~ Credit Agreement and related security agreement.

On ~~December~~September 928, ~~2015~~2016, the Company ~~borrowed~~entered ~~$350~~into ~~million~~the third amendment to the 2013 Credit Facilities to (i) extend the maturity date of the 2013 Revolving Facility (the Amended 2013 Revolving Facility) to January 22, 2019, (ii) consolidate the remaining principal balance outstanding under ~~its~~the ~~incremental~~2013 Term Facility and the 2015 Incremental Term Facility into a single term loan facility of $499 million and extend the maturity date of the consolidated term loans to January 22, 2019 (the ~~2015~~Amended ~~Incremental~~2013 Term Facility, and together with the Amended 2013 Revolving Facility, the Amended 2013 Credit Facilities)~~. The~~, ~~proceeds~~(iii) set the annual amortization percentage of the ~~2015~~Amended ~~Incremental~~2013 Term Facility ~~were~~at ~~used~~22% through December 31, 2017 and 10% thereafter and (iv) lower the eurodollar rate margin and base rate margin for the Amended 2013 Term Facility to ~~consummate~~(a) if the ~~acquisition~~Consolidated ofLeverage ~~MarketShare~~Ratio (as defined in the Credit Agreement) is less than 2 to 1 after March 1, 2017, 3% and 2%, respectively, and (b) if the Consolidated Leverage Ratio is 2 to ~~pay~~1 ~~related~~or ~~fees~~greater, 3.25% and ~~expenses~~2.25%, respectively.

OnThe ~~September 28, 2016, the~~ Company ~~entered~~may ~~into~~voluntarily prepay the ~~third~~borrowings ~~amendment~~under to the Amended 2013 Credit Facilities toat ~~(i)~~any ~~extend~~time ~~the~~in ~~maturity~~minimum ~~date~~amounts of ~~the~~$1 ~~2013~~million ~~Revolving~~or ~~Facility~~an ~~(the~~integral ~~Amended~~multiple ~~2013~~of ~~Revolving Facility) to January 22~~$500,000 ~~2019,~~in ~~(ii)~~excess ~~consolidate~~thereof. The ~~the~~Amended ~~remaining~~2013 ~~principal~~Credit ~~balance~~Facilities ~~outstanding~~provide ~~under~~for ~~the~~mandatory ~~2013~~prepayments ~~Term~~with ~~Facility and~~ the ~~2015~~net ~~Incremental~~cash ~~Term~~proceeds ~~Facility~~of ~~into~~certain adebt ~~single~~issuances, ~~term~~insurance ~~loan facility (the Amended 2013 Term Facility~~receipts, and ~~together~~dispositions. The ~~with the~~ Amended 2013 ~~Revolving Facility, the Amended 2013~~ Credit Facilities) ~~and~~also ~~provide~~contain acertain ~~maturity~~events ~~date~~ of ~~January 22~~default, ~~2019,~~ ~~(iii)~~upon ~~set~~ the ~~annual~~occurrence ~~amortization percentage~~ of ~~the Amended 2013 Term Facility at 22% through December 31~~which, ~~2017~~ and ~~10%~~so ~~thereafter~~long ~~and~~as ~~(iv)~~such ~~lower~~event ~~the~~of ~~eurodollar~~default ~~rate~~is ~~margin~~continuing, ~~and base rate margin for~~ the ~~Amended~~amounts ~~2013~~outstanding ~~Term~~may, ~~Facility~~at ~~to (a) if~~ the ~~Consolidated~~option ~~Leverage~~of ~~Ratio (as defined in~~ the ~~Credit~~required ~~Agreement)~~lenders, isaccrue ~~less~~interest ~~than~~at 2an toincreased 1rate ~~after March 1, 2017, 3%~~ and ~~2%,~~payments ~~respectively,~~of ~~and~~such ~~(b)~~outstanding ifamounts ~~the~~could ~~Consolidated~~be ~~Leverage~~accelerated, ~~Ratio is 2 to 1~~ or ~~greater,~~other ~~3.25%~~remedies ~~and 2~~undertaken.~~25%, respectively.~~

~~The~~As ~~Company~~of ~~may~~March 31, ~~voluntarily~~2017, ~~prepay~~outstanding ~~the~~ borrowings under the Amended 2013 ~~Credit~~Revolving ~~Facilities~~Facility atwere ~~any~~$35.0 million ~~time~~and inavailable ~~minimum~~borrowings ~~amounts~~under ofthe $1same ~~million~~facility orwere ~~an integral multiple of~~ $~~500~~147.0 million,~~000~~ inexclusive ~~excess~~of ~~thereof. The~~outstanding ~~Amended~~letters ~~2013~~of ~~Credit~~credit ~~Facilities~~totaling ~~provide~~$18.0 million. ~~for~~

14Senior Notes

On January 22, 2013, the Company closed an offering of $300 million aggregate principal amount of 4.50% senior notes due 2023. The Senior Notes are the general unsecured senior obligations of the Company and are guaranteed on a senior unsecured basis by certain of its domestic subsidiaries, or the Subsidiary Guarantors. Interest is payable on the Senior Notes semi-annually in arrears at an annual rate of 4.50%, on January 15 and July 15 of each year, beginning on July 15, 2013.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

mandatory prepayments with the net cash proceeds of certain debt issuances, insurance receipts, and dispositions. The Amended 2013 Credit Facilities also contain certain events of default, upon the occurrence of which, and so long as such event of default is continuing, the amounts outstanding may, at the option of the required lenders, accrue interest at an increased rate and payments of such outstanding amounts could be accelerated, or other remedies undertaken.

As of September 30, 2016, outstanding borrowings under the Amended 2013 Revolving Facility were $175.0 million and available borrowings under the same facility were $7.0 million, exclusive of outstanding letters of credit totaling $18.0 million.

Senior Notes

If the Company experiences certain changes of control together with a ratings downgrade, it will be required to offer to purchase all of the Senior Notes then outstanding at a purchase price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. If the Company sells certain assets and does not repay certain debt or reinvest the proceeds of such sales within certain time periods, it will be required to offer to repurchase the Senior Notes with such proceeds at 100.00% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

The Senior Notes contain customary events of default, including among other things, payment default, failure to provide certain notices and defaults related to bankruptcy events. The Senior Notes also contain customary negative covenants.

Future Principal Payments

Future principal payments under the Amended 2013 Credit Facilities and the Senior Notes as of ~~September~~March 3031, ~~2016~~2017, are as follows (in thousands):

2016	$	27,439
2017	$	82,318
2017	109,757
2018	49,889
2019	~~459~~319,369
2020	—
2021	—
Thereafter	300,000
Total future principal payments	$	~~946~~751,~~454~~576

~~In October 2016, the Company made $40~~5.0 ~~million~~STOCKHOLDERS’ ~~in voluntary prepayments towards the outstanding principal balance of its Amended 2013 Credit Facilities.~~ EQUITY

~~Deferred~~As ~~Financing~~of ~~Costs~~March 31, 2017, a total of 6,358,400 shares were available for grant or award under the Company’s stock incentive plans and a total of 87,716 shares were available to be issued under the Company’s Employee Stock Purchase Plan.

OnStock-based ~~September~~compensation ~~28,~~expense ~~2016,~~recognized for the ~~Company~~three ~~amended~~months ~~its~~ended ~~2013~~March 31, ~~Credit~~2016 ~~Facilities. Certain creditors in the 2013 Term Facility~~ and ~~the~~2017 ~~2015~~was ~~Incremental~~$9.9 million ~~Term Facility reinvested in the Amended 2013 Term Facility~~ and ~~the~~$9.5 million, ~~change~~respectively. As ~~in the present value~~ of ~~future~~March 31, ~~cash~~2017, ~~flows~~total ~~between~~unrecognized ~~the~~compensation ~~investments~~expense was ~~less~~estimated ~~than 10%~~at $47. ~~Accordingly~~0 million, which the Company ~~accounted~~expects ~~for~~to ~~this~~recognize ~~refinancing~~over ~~event for these creditors as~~ a ~~debt~~weighted ~~modification. Previously~~average ~~deferred~~period ~~fees and costs for existing debt will be amortized over the term~~ of ~~the~~approximately ~~Amended~~1.3 ~~2013 Term Facility~~years. ~~Fees~~Total ~~paid~~unrecognized tocompensation ~~the~~expense ~~creditors~~as inof ~~connection~~March ~~with~~31, ~~the~~2017 ~~amendment~~is ~~were~~estimated ~~included~~based ~~in the loss~~ on ~~debt~~outstanding ~~extinguishment. The~~non-vested ~~proportionate~~stock ~~fees~~options, ~~incurred~~non-vested ~~with~~restricted ~~third~~stock ~~parties~~units ~~directly~~and ~~related~~non-vested toperformance ~~the~~vested ~~modification~~restricted ~~were~~stock ~~included~~units ~~in debt modification expense~~(PVRSUs). ~~Certain~~Stock-based ~~investors~~compensation inexpense ~~the~~may ~~2013~~increase ~~Term Facility and the 2015 Incremental Term Facility either did not invest in the Amended 2013 Term Facility~~ or ~~the~~decrease ~~change~~ in ~~the present value of~~ future ~~cash~~periods ~~flows between the investments was greater than 10%. Accordingly, the Company accounted~~ for ~~this~~subsequent ~~refinancing~~grants ~~event~~or ~~for these investors as a debt extinguishment~~forfeitures. Previously deferred fees and costs for existing debt were included in the loss on debt extinguishment. Fees paid to the creditors in connection with the amendment will be amortized over the term of the Amended 2013 Term Facility. The proportionate fees incurred with third parties directly related to the modification will be amortized over the term of the Amended 2013 Term Facility.

15Stock Options

The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock options granted. The following table summarizes the Company’s stock option activity:



	Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted- Average Remaining Contractual Life (in years)
Outstanding at December 31, 2016	987,984		$	25.55
Granted	—		—
Exercised	(356,814	)	24.33
Forfeited	—		—
Outstanding at March 31, 2017	631,170		$	26.24	$	1.5	2.4
Exercisable at March 31, 2017	524,830		$	26.21	$	1.1	2.0

The aggregate intrinsic value of options exercised for the three months ended March 31, 2017 was $3.3 million.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

Further, the borrowing capacity of certain investors under the Amended 2013 Revolving Facility was greater than or equal to the borrowing capacity under the 2013 Revolving Facility. Accordingly, fees and costs incurred related to the amendment on September 28, 2016, as well as unamortized deferred financing costs, associated with the 2013 Revolving Facility, will be amortized over the term of the Amended 2013 Revolving Facility. The borrowing capacity of certain investors under the Amended 2013 Credit Facility was less than the borrowing capacity under the 2013 Revolving Facility. Accordingly, fees paid in 2016 to the creditor and third-party costs incurred in connection with the amendment on September 28, 2016 will be amortized over the term of the Amended 2013 Revolving Facility. Unamortized deferred financing costs associated with the 2013 Revolving Facility were written off in proportion to an investor's decrease in borrowing capacity.

In applying debt modification accounting, the Company recorded $6.4 million in interest and other expense, comprised of $6.0 million in loss on debt extinguishment and $0.4 million in debt modification expense, in connection with this refinancing event.

6. STOCKHOLDERS’ EQUITY

As of September 30, 2016, a total of 2,736,526 shares were available for grant or award under the Company’s stock incentive plans and a total of 176,474 shares were available to be issued under the Company’s Employee Stock Purchase Plan. On June 15, 2016, at the Company’s annual meeting of stockholders, the Company’s stockholders approved a proposal to make an additional 3,000,000 shares available for grant under the Company’s stock incentive plans. These shares will become available for grant once registered on a Form S-8 filed with the SEC.

Stock-based compensation expense recognized for the three months ended September 30, 2015 and 2016 was $10.4 million and $11.6 million, respectively, and $28.1 million and $32.1 million for the nine months ended September 30, 2015 and 2016, respectively. As of September 30, 2016, total unrecognized compensation expense was estimated at $54.6 million, which the Company expects to recognize over a weighted average period of approximately 1.4 years. Total unrecognized compensation expense as of September 30, 2016 is estimated based on outstanding non-vested stock options, non-vested restricted stock units and non-vested performance vested restricted stock units (PVRSUs). Stock-based compensation expense may increase or decrease in future periods for subsequent grants or forfeitures.

Stock Options

	Shares		Weighted-AverageExercisePrice		AggregateIntrinsicValue(in millions)		Weighted-AverageRemainingContractualLife(in years)
Outstanding at December 31, 2015	1,356,904		$	24.70
Granted	—		—
Exercised	(133,794	)	16.28
Forfeited	(172,559	)	26.77
Outstanding at September 30, 2016	1,050,551		$	25.44	$	1.5	2.2
Exercisable at September 30, 2016	944,211		$	25.33	$	1.5	1.9

The aggregate intrinsic value of options exercised for the nine months ended September 30, 2016 was $1.0 million.

Performance Vested Restricted Stock Units

The fair value of a PVRSU is measured by reference to the closing market price of the Company’s common stock on the date of the grant. The Company recognizes the estimated fair value of PVRSUs, net of estimated forfeitures, as stock-based compensation expense over the vesting period, which considers each performance period or tranche separately, based upon the Company’s determination of the level of achievement of the performance target.

The following table summarizes the Company’s non-vested PVRSU activity for the three months ended March 31, 2017:

During the three months ended September 30, 2016, the Company revised its estimate of the level of achievement of the performance target for the 2016 performance year, resulting in a decrease in stock-based compensation expense. The



	Shares		Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in millions)
Non-vested at December 31, 2016	1,166,939		$	23.25
Granted	512,569		33.25
Vested	(437,508	)	23.72
Forfeited	(288,091	)	24.25
Non-vested at March 31, 2017	953,909		$	28.11	$	31.6

16The aggregate intrinsic value of PVRSUs vested during the three months ended March 31, 2017 was approximately $14.6 million. The Company repurchased 169,979 shares of common stock for an aggregate purchase price of $5.7 million pursuant to the participants’ rights under the Company’s stock incentive plans to elect to use common stock to satisfy their minimum tax withholding obligations.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

Company’s consolidated net income for the three and nine months ended September 30, 2016 was $53.0 million and $122.5 million, respectively, and diluted net income per common share was $0.96 and $2.22 per share, respectively. If the Company had continued to use the previous estimate of achievement for each respective period, the as adjusted net income for the three and nine months ended September 30, 2016 would have been approximately $52.2 million and $121.0 million, respectively, and the as adjusted diluted net income per common share would have been approximately $0.94 and $2.19 per share, respectively.

	Shares		Weighted-AverageGrant DateFair Value		AggregateIntrinsicValue(in millions)
Non-vested at December 31, 2015	1,366,572		$	26.78
Granted	1,123,061		24.08
Vested	(882,243	)	28.29
Forfeited	(211,584	)	26.94
Non-vested at September 30, 2016	1,395,806		$	23.63	$	37.1

The aggregate intrinsic value of PVRSUs vested during the nine months ended September 30, 2016 was approximately $21.8 million. The Company repurchased 339,783 shares of common stock for an aggregate purchase price of $8.4 million pursuant to the participants’ rights under the Company’s stock incentive plans to elect to use common stock to satisfy their minimum tax withholding obligations.

Restricted Stock Units

The following table summarizes the Company’s restricted stock units activity for the three months ended March 31, 2017:

	Shares		Weighted-AverageGrant DateFair Value		AggregateIntrinsicValue(in millions)
Outstanding at December 31, 2015	2,074,120		$	30.42
Outstanding at December 31, 2016	2,226,948		$	27.13
Granted	145,~~172,334~~750		2433.0015
Vested	(~~535~~617,~~753~~519	)	3229.1222
Forfeited	(~~231~~37,~~194~~435	)	2825.3902
Outstanding at September 30, 2016	2,479,507		$	27.21	$	66.0
Outstanding at March 31, 2017	1,617,744		$	26.55	$	53.6

The aggregate intrinsic value of restricted stock units vested during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 was approximately $1320.05 million. The Company repurchased ~~191~~238,~~249~~630 shares of common stock for an aggregate purchase price of $47.69 million pursuant to the participants’ rights under the Company’s stock incentive plans to elect to use common stock to satisfy their minimum tax withholding obligations.

1714

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

76. BASIC AND DILUTED NET INCOME PER COMMON SHARE

The following table provides a reconciliation of the numerators and denominators used in computing basic and diluted net income per common share (in thousands, except per share data):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

2015

2016

2015

2016

2017

Computation of basic net income per common share:

Net income

5031,~~282~~375

5345,~~031~~443

~~141,554~~

~~122,527~~

Weighted average common shares and participating securities outstanding – basic

5453,~~123~~953

5455,~~542~~311

~~55,153~~

~~54,318~~

Basic net income per common share

0.9358

0.9782

~~2.57~~

~~2.26~~

Computation of diluted net income per common share:

Weighted average common shares outstanding – basic

5453,~~123~~953

5455,~~542~~311

~~55,153~~

~~54,318~~

Effect of dilutive securities:

Stock-based awards

~~1,002~~987

~~890~~1,711

~~925~~

~~809~~

Weighted average common shares outstanding – diluted

5554,~~125~~940

5557,~~432~~022

~~56,078~~

~~55,127~~

Diluted net income per common share

0.9157

0.9680

~~2.52~~

~~2.22~~

Diluted net income per common share reflects the potential dilution of common stock equivalents such as options ~~and warrants~~, to the extent the impact is dilutive. ~~Common~~An ~~stock options to purchase an~~ aggregate of ~~754~~1,~~059~~900,569 and 194,~~190,512~~408 shares were excluded from the calculation of the denominator for diluted net income per common share due to their anti-dilutive effect for the three months ended ~~September 30~~March 31, ~~2015 and~~ 2016, ~~respectively. Common stock options to purchase an aggregate of 776,001~~ and 12017,~~433,707 shares~~ ~~were excluded from the calculation of the denominator for diluted net income per common share due to their anti-dilutive effect for the nine months ended September 30, 2015 and 2016,~~ respectively.

87. ~~RESTRUCTURING~~INTEREST ~~CHARGES~~AND OTHER EXPENSE

Interest and other expense consists of the following (in thousands):

2016 Restructuring



	Three Months Ended March 31,
	2016		2017
Interest and other expense:
Interest expense	$	16,566	$	11,646
Gain on asset disposals	—		(14		)
Foreign currency transaction loss	545		639
Total interest and other expense	$	17,111	$	12,271

~~During the three and nine months ended September 30, 2016, the Company recorded restructuring charges of $2~~8.~~6 million~~ ~~and~~INCOME ~~$11.4 million, respectively, related to estimated severance and severance-related costs.~~ TAXES

The Company’s effective tax rate, including discrete tax benefits of $3.2 million, decreased to 29.8% for the three months ended March 31, 2017 from 33.9% for the three months ended March 31, 2016, primarily due to the adoption of ASU 2016-09 in the first quarter of 2017. As ~~INTEREST~~a ~~AND~~result ~~OTHER~~of ~~EXPENSE~~the adoption of this standard, the Company recognizes excess tax benefits on stock compensation as a discrete item within income tax benefits on its consolidated statements of operations. Prior to the adoption of this standard, excess tax benefits were recognized in additional paid-in capital on the Company’s consolidated balance sheet.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2016			2015			2016
Interest and other expense:
Interest expense	$	6,475		$	15,191		$	19,321		$	47,718
Loss on debt modification and extinguishment	—			6,354			—			6,354
Gain on asset disposals	(23		)	(123		)	(277		)	(115		)
Foreign currency transaction loss	323			757			934			1,024
Total interest and other expense	$	6,775		$	22,179		$	19,978		$	54,981

As of December 31, 2016 and March 31, 2017, the Company had unrecognized tax benefits of $7.5 million and $7.8 million, respectively, of which $6.9 million and $7.2 million, respectively, would affect the Company’s effective tax rate if recognized.

10The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During ~~INCOME~~the ~~TAXES~~three months ended March 31, 2016 and 2017, potential interest and penalties were insignificant. Interest and penalties are primarily

The Company’s effective tax rate, including discrete tax benefits of $26.4 million, decreased to 17.3% for the nine months ended September 30, 2016 from 35.3% for the nine months ended September 30, 2015, primarily due to a discrete 15

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

~~income~~due ~~tax~~to ~~benefit~~uncertain oftax ~~$23.1~~positions ~~million~~assumed ~~recorded~~ in acquisitions. To the ~~third~~extent ~~quarter~~interest ofand ~~2016~~penalties ~~for~~are anot ~~worthless~~assessed ~~stock deduction associated~~ with ~~the~~respect ~~liquidation~~to ofuncertain ~~one of the Company’s domestic subsidiaries for~~ tax ~~purposes. The~~positions, ~~Company~~amounts ~~intends~~accrued towill ~~treat~~be ~~the~~reduced ~~common~~and ~~stock~~reflected ~~of this subsidiary~~ as ~~worthless~~a ~~for~~reduction ~~U.S.~~of ~~income~~the ~~tax~~overall ~~purposes on its 2016 U.S. federal and state~~ income tax ~~returns~~provision.

AsThe ofCompany ~~December 31,~~files ~~2015~~income ~~and~~tax ~~September 30,~~returns ~~2016,~~in the ~~Company~~United ~~had~~States ~~unrecognized~~federal ~~tax~~jurisdiction ~~benefits~~and ofin ~~$7.5 million~~many state and $7foreign jurisdictions.~~7 million,~~ The ~~respectively,~~tax ofyears 2010 through 2015 remain open to examination by the major taxing jurisdictions to which ~~$6.9 million~~the ~~and~~Company $7is subject.~~0 million,~~ During ~~respectively~~2017, ~~would~~the ~~affect~~IRS completed an examination of the ~~Company’s~~2012 ~~effective~~federal income tax ~~rate~~return ifof ~~recognized~~Neustar, Inc. and its subsidiaries. No adjustments were made as a result of the audit.

The Company ~~recognizes~~anticipates ~~interest~~that ~~and~~the ~~penalties~~amount ~~related~~of toreasonably ~~uncertain~~possible unrecognized tax ~~positions~~benefits inthat ~~income~~could ~~tax~~decrease ~~expense. During~~over the ~~three~~next ~~and nine~~ 12 months ~~ended~~due ~~September 30, 2015~~to ~~and~~the ~~2016,~~expiration ~~potential~~of ~~interest~~certain ~~and~~statutes ~~penalties~~of ~~were~~limitations ~~insignificant. Interest~~ and ~~penalties~~settlement ~~are~~of ~~primarily due to uncertain~~ tax ~~positions~~audits ~~assumed~~is ~~in acquisitions. To the extent interest and penalties are~~ not ~~assessed~~material ~~with respect~~ to ~~uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of~~ the ~~overall~~Company’s ~~income~~consolidated ~~tax~~financial ~~provision~~statements.

~~The Company files income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions~~9. ~~The~~ ~~tax~~SEGMENT years 2009 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject. During the first quarter of 2016, the IRS completed an examination of the 2010 federal income tax return of Neustar Information Services, Inc. No adjustments were made as a result of the audit. INFORMATION

The Company anticipates that the amount of reasonably possible unrecognized tax benefits that could decrease over the next 12 months due to the expiration of certain statutes of limitations and settlement of tax audits is not material to the Company's consolidated financial statements.

11. SEGMENT INFORMATION

The Company engages in business activities as a single entity and the chief operating decision maker reviews consolidated operating results and allocates resources based on consolidated reports. The Company has a single operating segment.

Enterprise-Wide Disclosures

Revenue by geographical areas is based on the billing addresses of the Company’s clients. Geographic area revenue and service revenue from external clients for the three months ended March 31, 2016 and 2017, and geographic area property and equipment as of December 31, 2016 and March 31, 2017 are as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

2015

2016

2015

2016

2017

Revenue by geographical areas:

United States

~~240~~264,~~652~~692

~~274~~269,~~212~~786

~~713,696~~

~~810,656~~

International

2122,~~001~~606

2523,~~869~~400

~~56,112~~

~~74,288~~

Total revenue

~~261~~287,~~653~~298

~~300~~293,~~081~~186

~~769,808~~

~~884,944~~

Revenue by service:

Marketing Services

4157,~~108~~671

6365,~~277~~039

~~119,224~~

~~184,871~~

Security Services

4348,~~150~~647

5146,~~020~~875

~~123,243~~

~~148,990~~

Data Services

5153,~~198~~156

5853,~~155~~005

~~148,592~~

~~167,119~~

NPAC Services

~~126~~127,~~197~~824

~~127~~128,~~629~~267

~~378,749~~

~~383,964~~

Total revenue

~~261~~287,~~653~~298

~~300~~293,~~081~~186

~~769,808~~

~~884,944~~



	December 31, 2016		March 31, 2017
Property and equipment, net
United States	$	143,560	$	147,453
Australia	1,378		1,057
Other	883		853
Total property and equipment, net	$	145,821	$	149,363

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

	December 31, 2015		September 30, 2016
Property and equipment, net
United States	$	145,077	$	139,791
Australia	2,171		1,431
Other	516		640
Total property and equipment, net	$	147,764	$	141,862



10.	SUPPLEMENTAL GUARANTOR INFORMATION

12The following schedules present condensed consolidating financial information of the Company as of December 31, 2016 and March 31, 2017 and for the three months ended March 31, 2016 and 2017 for (a) Neustar, Inc., ~~SUPPLEMENTAL~~the ~~GUARANTOR~~parent ~~INFORMATION~~company; (b) certain of the Company’s 100% owned domestic subsidiaries (collectively, the Subsidiary Guarantors); and (c) certain wholly-owned domestic and foreign subsidiaries of the Company (collectively, the Non-Guarantor Subsidiaries). Investments in subsidiaries are accounted for using the equity method; accordingly, entries necessary to consolidate the parent company and all of the guarantor and non-guarantor subsidiaries are reflected in the eliminations column. Intercompany amounts that will not be settled between entities are treated as contributions or distributions for purposes of these consolidated financial statements. The guarantees, as outlined in Note 4, are full and unconditional and joint and several. A Subsidiary Guarantor will be released from its obligations under the Senior Notes when: (a) the Subsidiary Guarantor is sold or sells substantially all of its assets; (b) the Subsidiary Guarantor is designated as an unrestricted subsidiary as defined by the Senior Notes; (c) the Subsidiary Guarantor’s guarantee of indebtedness under the Senior Notes is released (other than discharge through repayment); or (d) the requirements for legal or covenant defeasance or discharge of the indenture have been satisfied.

The following schedules present condensed consolidating financial information of the Company as of December 31, 2015 and September 30, 2016 and for the three and nine months ended September 30, 2015 and 2016 for (a) Neustar, Inc., the parent company; (b) certain of the Company’s 100% owned domestic subsidiaries (collectively, the Subsidiary Guarantors); and (c) certain wholly-owned domestic and foreign subsidiaries of the Company (collectively, the Non-Guarantor Subsidiaries). Investments in subsidiaries are accounted for using the equity method; accordingly, entries necessary to consolidate the parent company and all of the guarantor and non-guarantor subsidiaries are reflected in the eliminations column. Intercompany amounts that will not be settled between entities are treated as contributions or distributions for purposes of these condensed consolidated financial statements. The guarantees are full and unconditional and joint and several. A Subsidiary Guarantor will be released from its obligations under the Senior Notes when: (a) the Subsidiary Guarantor is sold or sells substantially all of its assets; (b) the Subsidiary Guarantor is designated as an unrestricted subsidiary as defined by the Senior Notes; (c) the Subsidiary Guarantor’s guarantee of indebtedness under the Senior Notes is released (other than discharge through repayment); or (d) the requirements for legal or covenant defeasance or discharge of the indenture have been satisfied.17

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, ~~2015~~2016

(in thousands)

	NeuStar, Inc.		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	4821,~~061~~871	$	2715,~~092~~037	$	138,~~944~~865	$	—		$	8945,~~097~~773
Restricted cash	1,260		1,~~103~~023		—		—			2,~~363~~283
Accounts receivable, net	91100,~~899~~686		71102,~~062~~565		4,~~632~~344		—			~~167~~207,~~593~~595
Unbilled receivables	23,~~357~~829		14,~~694~~652		~~661~~1,314		—			1719,~~712~~795
Prepaid expenses and other current assets	2332,~~080~~799		87,~~551~~039		1,~~868~~842		~~(3,283~~—		)	3041,~~216~~680
Deferred costs	12,~~119~~232		25,~~876~~964		23,~~681~~273		—			611,~~676~~469
Income taxes receivable	1017,~~661~~481		—		—1,007		(4,~~778~~902		)	513,~~883~~586
Intercompany receivable	269,~~030~~990		—1,365		—		(2611,~~030~~355		)	—
Total current assets	~~204~~190,~~467~~148		~~125~~147,~~378~~645		2320,~~786~~645		(3416,~~091~~257		)	~~319~~342,~~540~~181
Property and equipment, net	~~135~~133,~~445~~759		9,~~302~~636		32,~~017~~426		—			~~147~~145,~~764~~821
Goodwill	94,153		~~984~~968,~~017~~116		~~108~~106,~~813~~713		—			1,~~186~~168,~~983~~982
Intangible assets, net	1310,~~751~~967		~~462~~368,~~848~~068		5244,~~680~~922		—			~~529~~423,~~279~~957
Net investments in subsidiaries	1,~~545~~490,~~227~~889		—		—		(1,~~545~~490,~~227~~889		)	—
Other assets, long-term	1611,~~071~~686		13,~~283~~206		2,~~635~~879		~~(1,308~~—		)	1817,~~681~~771
Total assets	$	21,~~009~~931,~~114~~602	$	1,~~582~~496,~~828~~671	$	~~190~~177,~~931~~585	$	(1,~~580~~507,~~626~~146	)	$	2,~~202~~098,~~247~~712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1810,~~945~~733	$	79,~~522~~578	$	~~1,925~~784	$	—		$	2821,~~392~~095
Accrued expenses	9884,~~761~~782		2941,~~262~~458		68,~~609~~305		—			134,~~632~~545
Income taxes payable	—		34,~~068~~902		~~1,496~~—		(4,~~564~~902		)	—
Deferred revenue	24,~~929~~503		4648,~~153~~753		1917,~~924~~932		—			91,~~006~~188
Notes payable	~~131~~103,~~272~~725		—6,849		3,~~283~~141		(39,~~283~~990		)	~~131~~103,~~272~~725
Capital lease obligations	31,~~927~~457		—		~~864~~—		—			41,~~791~~457
Other liabilities	96,~~937~~564		~~279~~4,936		~~659~~132		—			1011,~~875~~632
Intercompany payable	—938		~~18,199~~—		~~7,831~~427		(261,~~030~~365		)	—
Total current liabilities	~~287~~232,~~771~~702		~~104~~116,~~483~~476		4230,~~591~~721		(3316,~~877~~257		)	~~400~~363,~~968~~642
Deferred revenue, long-term	8,~~239~~426		98,~~734~~360		5,~~025~~651		—			22,~~998~~437
Notes payable, long-term	~~957~~702,~~509~~946		—		—		—			~~957~~702,~~509~~946
Capital lease obligations, long-term	1,825		—		6		—			1,831
Deferred income tax liabilities, long-term	9,493		19,616		5,979		—			35,088
Deferred income tax liabilities, long-term	—		42,865		7,658		(11,822		)	38,701
Other liabilities, long-term	41,411		5,313		6,574		—			53,298
Other liabilities, long-term	41,978		8,652		6,111		—			56,741
Total liabilities	994,978		149,765		48,925		(16,257		)	1,177,411
Total liabilities	1,297,322		165,734		61,391		(45,699		)	1,478,748
Total stockholders’ equity	936,624		1,346,906		128,660		(1,490,889		)	921,301
Total stockholders’ equity	711,792		1,417,094		129,540		(1,534,927		)	723,499
Total liabilities and stockholders’ equity	$	1,931,602	$	1,496,671	$	177,585	$	(1,507,146	)	$	2,098,712
Total liabilities and stockholders’ equity	$	2,009,114	$	1,582,828	$	190,931	$	(1,580,626	)	$	2,202,247

2118

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED BALANCE SHEET

~~SEPTEMBER~~MARCH 3031, ~~2016~~2017

(in thousands)

	NeuStar, Inc.		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3632,~~354~~012	$	107,~~856~~333	$	87,~~989~~703	$	—		$	5647,~~199~~048
Restricted cash	1,260		~~1,027~~881		—		—			2,~~287~~141
Accounts receivable, net	98104,~~916~~585		9178,~~667~~639		5,~~216~~706		—			~~195~~188,~~799~~930
Unbilled receivables	12,~~897~~159		1112,~~398~~484		~~706~~975		—			1415,~~001~~618
Prepaid expenses and other current assets	2427,~~971~~268		46,~~739~~397		2,~~232~~202		—			3135,~~942~~867
Deferred costs	12,~~575~~327		4,~~622~~923		3,~~394~~659		—			910,~~591~~909
Income taxes receivable	414,~~952~~125		—		~~781~~1,866		(15,~~409~~379		)	~~41,324~~612
Intercompany receivable	129,~~506~~893		—1,365		—		(1211,~~506~~258		)	—
Total current assets	~~219~~183,~~431~~629		~~124~~112,~~309~~022		2122,~~318~~111		(1316,~~915~~637		)	~~351~~301,~~143~~125
Property and equipment, net	~~130~~138,~~503~~540		98,~~067~~799		2,~~292~~024		—			~~141~~149,~~862~~363
Goodwill	94,153		~~967~~968,~~320~~116		~~111~~110,~~292~~523		—			1,172,~~765~~792
Intangible assets, net	1110,~~590~~345		~~387~~349,~~189~~902		4945,~~123~~182		—			~~447~~405,~~902~~429
Net investments in subsidiaries	1,~~486~~441,~~252~~413		—		—		(1,~~486~~441,~~252~~413		)	—
Other assets, long-term	1210,~~639~~440		23,~~750~~193		3,~~093~~037		—			1816,~~482~~670
Total assets	$	1,~~954~~878,~~568~~520	$	1,~~490~~442,~~635~~032	$	~~187~~182,~~118~~877	$	(1,~~500~~458,~~167~~050	)	$	2,~~132~~045,~~154~~379
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1011,~~537~~245	$	711,~~908~~176	$	~~651~~148	$	—		$	1922,~~096~~569
Accrued expenses	6667,~~653~~718		3224,~~539~~674		75,~~356~~567		—			~~106~~97,~~548~~959
Deferred revenue	2226,~~595~~258		5249,~~555~~262		1820,~~511~~515		—			9396,~~661~~035
Notes payable	~~100~~89,~~977~~219		6,~~964~~731		3,~~124~~162		(109,~~088~~893		)	~~100~~89,~~977~~219
Capital lease obligations	~~2,002~~470		—		26—		—			~~2,028~~470
Income taxes payable	—		15,~~409~~379		—		(15,~~409~~379		)	—
Other liabilities	86,~~656~~532		2,~~568~~717		~~1,043~~57		—			129,~~267~~306
Intercompany payable	~~556~~1,621		—1,022		~~1,862~~—		(2,~~418~~643		)	—
Total current liabilities	~~211~~203,~~976~~063		~~103~~100,~~943~~961		3229,~~573~~449		(1317,915		)	~~334~~315,~~577~~558
Deferred revenue, long-term	8,~~255~~178		68,~~978~~576		6,~~302~~096		—			2122,~~535~~850
Notes payable, long-term	~~819~~642,~~793~~750		—		—		—			~~819~~642,~~793~~750
Capital lease obligations, long-term	60		—		—		—			60
Deferred income tax liabilities, long-term	16,771		18,039		6,321		—			41,131
Deferred income tax liabilities, long-term	9,438		20,247		6,964		—			36,649
Other liabilities, long-term	41,122		5,117		7,018		—			53,257
Other liabilities, long-term	39,757		5,598		6,725		—			52,080
Total liabilities	911,884		132,693		48,884		(17,915		)	1,075,546
Total liabilities	1,089,279		136,766		52,564		(13,915		)	1,264,694
Total stockholders’ equity	966,636		1,309,339		133,993		(1,440,135		)	969,833
Total stockholders’ equity	865,289		1,353,869		134,554		(1,486,252		)	867,460
Total liabilities and stockholders’ equity	$	1,878,520	$	1,442,032	$	182,877	$	(1,458,050	)	$	2,045,379
Total liabilities and stockholders’ equity	$	1,954,568	$	1,490,635	$	187,118	$	(1,500,167	)	$	2,132,154

2219

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	~~176~~166,~~980~~939		$	85118,~~273~~407		$	912,~~426~~560		$	(10,~~026~~608	)	$	~~261~~287,~~653~~298
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	4241,~~633~~676			2850,~~169~~927			47,~~680~~277			(8,~~374~~529		)	6791,~~108~~351
Sales and marketing	3430,~~789~~813			1522,~~452~~535			~~272~~3,179			(1,~~602~~204		)	4855,~~911~~323
Research and development	5,~~479~~471			~~526~~1,623			4455			—			67,~~009~~549
General and administrative	2522,~~633~~334			25,~~543~~872			~~491~~187			(50875		)	2827,~~617~~518
Depreciation and amortization	13,~~044~~324			1522,~~940~~796			12,~~288~~362			—			3038,~~272~~482
	121,578			62,630			6,735			(10,026		)	180,917
Restructuring charges	2,664			—			—			—			2,664
Income from operations	55,402			22,643			2,691			—			80,736
	116,282			103,753			13,460			(10,608		)	222,887
Income from operations	50,657			14,654			(900		)	—			64,411
Other (expense) income:
Interest and other expense	(616,~~719~~280		)	~~112~~(154		)	(~~168~~677		)	—			(617,~~775~~111		)
Interest income	(7113		)	570			(9		)	—			7174
Income before income taxes and equity income in consolidated subsidiaries	48,676			22,760			2,532			—			73,968
Income (loss) before income taxes and equity income in consolidated subsidiaries	34,490			14,570			(1,586		)	—			47,474
Provision for income taxes	28,303			(5,727		)	1,110			—			23,686
Provision (benefit) for income taxes	11,611			5,212			(724		)	—			16,099
Income before equity income in consolidated subsidiaries	20,373			28,487			1,422			—			50,282
Income (loss) before equity income in consolidated subsidiaries	22,879			9,358			(862		)	—			31,375
Equity income in consolidated subsidiaries	298,~~909~~496			~~296~~147			—			(308,~~205~~643		)	—
Net income	$	50,282		$	28,783		$	1,422		$	(30,205	)	$	50,282
Net income (loss)	$	31,375		$	9,505		$	(862	)	$	(8,643	)	$	31,375
Comprehensive income	$	5129,~~887~~517		$	289,~~837~~495		$	(23,~~211~~747	)	$	(308,~~205~~643	)	$	4834,~~308~~116

2320

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2016~~2017

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	170,~~937~~623		$	~~127~~121,~~628~~686		$	1314,~~735~~146		$	(1213,~~219~~269	)	$	~~300~~293,~~081~~186
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	42,~~051~~911			5750,~~563~~783			5,~~045~~414			(11,~~099~~192		)	9387,~~560~~916
Sales and marketing	2935,~~200~~396			1921,~~725~~717			21,~~900~~433			(1,~~001~~989		)	5056,~~824~~557
Research and development	54,~~636~~433			~~(79~~2,280		)	~~484~~(41		)	—			6,~~041~~672
General and administrative	2426,~~297~~282			2,~~988~~507			~~874~~(341		)	(~~119~~88		)	28,~~040~~360
Depreciation and amortization	13,~~788~~516			3319,~~462~~146			2,~~451~~265			—			4934,~~701~~927
Restructuring charges	1,190			951			488			—			2,629
Restructuring charges (recoveries)	36			(9		)	—			—			27
Separation costs	21,~~135~~789			—			—			—			21,~~135~~789
	118,297			114,610			12,242			(12,219		)	232,930
	124,363			96,424			8,730			(13,269		)	216,248
Income from operations	5246,~~640~~260			1325,~~018~~262			15,~~493~~416			—			6776,~~151~~938
Other (expense) income:
Interest and other expense	(2111,~~647~~902		)	(~~799~~238		)	~~267~~(131		)	—			(2212,~~179~~271		)
Interest income	~~502~~58			~~126~~127			(~~578~~113		)	—			5072
Income before income taxes and equity income in consolidated subsidiaries	3134,~~495~~416			1225,~~345~~151			15,~~182~~172			—			4564,~~022~~739
(Benefit) provision for income taxes	(17,090		)	9,553			(472		)	—			(8,009		)
Provision for income taxes	9,683			9,370			243			—			19,296
Income before equity income in consolidated subsidiaries	4824,~~585~~733			215,~~792~~781			14,~~654~~929			—			5345,~~031~~443
Equity income in consolidated subsidiaries	420,~~445~~710			~~194~~591			—			(421,~~639~~301		)	—
Net income	$	5345,~~030~~443		$	216,~~986~~372		$	14,~~654~~929		$	(421,~~639~~301	)	$	5345,~~031~~443
Comprehensive income	$	52,119		$	3,009		$	4,198		$	(4,638	)	$	54,688
Comprehensive income (loss)	$	43,592		$	(8,307	)	$	19,987		$	(6,920	)	$	48,352

2421

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2015

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries		Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	528,566		$	251,752	$	16,946		$	(27,456	)	$	769,808
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	130,888			81,323		10,081			(23,475		)	198,817
Sales and marketing	107,635			42,492		247			(3,787		)	146,587
Research and development	15,976			2,470		14			—			18,460
General and administrative	69,663			7,743		791			(194		)	78,003
Depreciation and amortization	39,245			48,534		1,855			—			89,634
	363,407			182,562		12,988			(27,456		)	531,501
Income from operations	165,159			69,190		3,958			—			238,307
Other (expense) income:
Interest and other expense	(20,004		)	142		(116		)	—			(19,978		)
Interest income	276			15		11			—			302
Income before income taxes and equity income in consolidated subsidiaries	145,431			69,347		3,853			—			218,631
Provision for income taxes	53,902			21,494		1,681			—			77,077
Income before equity income in consolidated subsidiaries	91,529			47,853		2,172			—			141,554
Equity income in consolidated subsidiaries	50,025			1,263		—			(51,288		)	—
Net income	$	141,554		$	49,116	$	2,172		$	(51,288	)	$	141,554
Comprehensive income	$	143,082		$	48,876	$	(1,797	)	$	(51,288	)	$	138,873

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2016

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	506,467		$	369,866		$	42,487		$	(33,876	)	$	884,944
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	125,522			160,651			18,493			(29,518		)	275,148
Sales and marketing	90,912			63,596			9,218			(3,291		)	160,435
Research and development	16,210			1,313			1,327			—			18,850
General and administrative	69,303			12,525			2,035			(1,067		)	82,796
Depreciation and amortization	40,727			79,056			7,229			—			127,012
Restructuring charges	7,559			2,919			944			—			11,422
Separation costs	6,353			—			—			—			6,353
	356,586			320,060			39,246			(33,876		)	682,016
Income from operations	149,881			49,806			3,241			—			202,928
Other (expense) income:
Interest and other expense	(53,952		)	(1,769		)	740			—			(54,981		)
Interest income	1,597			296			(1,602		)	—			291
Income before income taxes and equity income in consolidated subsidiaries	97,526			48,333			2,379			—			148,238
Provision (benefit) for income taxes	5,532			21,099			(920		)	—			25,711
Income before equity income in consolidated subsidiaries	91,994			27,234			3,299			—			122,527
Equity income in consolidated subsidiaries	30,532			505			—			(31,037		)	—
Net income	$	122,526		$	27,739		$	3,299		$	(31,037	)	$	122,527
Comprehensive income	$	120,835		$	27,741		$	8,026		$	(31,036	)	$	125,566

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2016

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	158,111		$	126,758		$	86,315		$	(120,507	)	$	250,677
Net cash provided by (used in) operating activities	$	29,576		$	49,676		$	(5,616	)	$	(42,414	)	$	31,222
Investing activities:
Purchases of property and equipment	(208,~~615~~037		)	(1,833		)	—			—			(229,~~448~~870		)
Business acquired, net of cash acquired	—			—			(84,130		)	—			(84,130		)
Net cash used in investing activities	(8,037		)	(1,833		)	—			—			(9,870		)
Net cash used in investing activities	(20,615		)	(1,833		)	(84,130		)	—			(106,578		)
Financing activities:
Increase of restricted cash	—			(~~188~~256		)	—			—			(~~188~~256		)
Payments under notes payable obligations	(626,~~094~~881		)	—			—			—			(626,~~094~~881		)
Principal repayments on capital lease obligations	(31,~~887~~459		)	—			—			—			(31,~~887~~459		)
Proceeds from issuance of stock	~~7,676~~150			—			—			—			~~7,676~~150
Tax benefit from equity awards	~~341~~323			—			—			—			~~341~~323
Repurchase of restricted stock awards and common stock	(~~109~~12,~~605~~469		)	—			—			—			(~~109~~12,~~605~~469		)
Distribution to parent	—			(120,384		)	(123		)	120,507			—
(Distribution to) investment by parent	—			(42,962		)	548			42,414			—
Net cash used in financing activities	(111,569		)	(120,572		)	(123		)	120,507			(111,757		)
Net cash (used in) provided by financing activities	(40,336		)	(43,218		)	548			42,414			(40,592		)
Effect of foreign exchange rates on cash and cash equivalents	(1,~~089~~099		)	(~~413~~11		)	(1,~~009~~101		)	—			(~~493~~13		)
Net increase in cash and cash equivalents	24,838			3,940			3,071			—			31,849
Net (decrease) increase in cash and cash equivalents	(17,698		)	4,614			(6,169		)	—			(19,253		)
Cash and cash equivalents at beginning of period	~~297~~48,~~565~~061			1927,~~606~~092			913,~~406~~944			—			~~326~~89,~~577~~097
Cash and cash equivalents at end of period	$	~~322~~30,~~403~~363		$	2331,~~546~~706		$	127,~~477~~775		$	—		$	~~358~~69,~~426~~844

2722

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND ~~2016~~2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2016~~2017

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	~~228~~110,~~264~~361		$	~~134~~63,~~944~~083		$	(~~7,935~~438	)	$	(~~146~~68,~~571~~589	)	$	~~208~~104,~~702~~417
Investing activities:
Purchases of property and equipment	(3613,~~197~~528		)	(1,833		)	—			—			(3815,~~030~~361		)
Businesses acquired, net of cash acquired	12			—			—			—			12
Net cash used in investing activities	(13,528		)	(1,833		)	—			—			(15,361		)
Net cash used in investing activities	(36,185		)	(1,833		)	—			—			(38,018		)
Financing activities:
Decrease of restricted cash	—			76142			—			—			76142
Payments under notes payable obligations	(~~179~~77,~~170~~439		)	—			—			—			(~~179~~77,~~170~~439		)
Debt issuance costs	(10,201		)	—			—			—			(10,201		)
Principal repayments on capital lease obligations	(987		)	—			—			—			(987		)
Principal repayments on capital lease obligations	(4,547		)	—			—			—			(4,547		)
Proceeds from issuance of stock	4,315			—			—			—			4,315
Proceeds from issuance of stock	562			—			—			—			562
Repurchase of restricted stock awards and common stock	(13,604		)	—			—			—			(13,604		)
Tax benefit from equity awards	267			—			—			—			267
(Distribution to) investment by parent	—			(69,087		)	498			68,589			—
Repurchase of restricted stock awards and common stock	(11,027		)	—			—			—			(11,027		)
Net cash (used in) provided by financing activities	(87,715		)	(68,945		)	498			68,589			(87,573		)
(Distribution to) investment by parent	—			(149,426		)	2,855			146,571			—
Effect of foreign exchange rates on cash and cash equivalents	1,023			(9		)	(1,222		)	—			(208		)
Net cash (used in) provided by financing activities	(204,116		)	(149,350		)	2,855			146,571			(204,040		)
Net increase (decrease) in cash and cash equivalents	10,141			(7,704		)	(1,162		)	—			1,275
Effect of foreign exchange rates on cash and cash equivalents	330			3			125			—			458
Cash and cash equivalents at beginning of period	21,871			15,037			8,865			—			45,773
Net decrease in cash and cash equivalents	(11,707		)	(16,236		)	(4,955		)	—			(32,898		)
Cash and cash equivalents at end of period	$	32,012		$	7,333		$	7,703		$	—		$	47,048
Cash and cash equivalents at beginning of period	48,061			27,092			13,944			—			89,097
Cash and cash equivalents at end of period	$	36,354		$	10,856		$	8,989		$	—		$	56,199

2823

Table of Contents



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

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements, including, without limitation, statements concerning the conditions in our industries, our operations and economic performance, and our business and growth strategy. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. These forward-looking statements are based on estimates and assumptions made by our management that we believe to be reasonable but are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those described in this report, in Part II, “Item 1A. Risk Factors” and in subsequent filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

Overview

~~Planned~~We ~~Company~~announced ~~Separation~~on December 14, 2016 that we entered into a definitive merger agreement to be acquired by a private investment group led by Golden Gate Capital. Under the terms of the merger agreement, our stockholders will be entitled to receive $33.50 per share following the closing of the proposed merger. On March 14, 2017, our stockholders voted in favor of the adoption of the merger agreement. The merger, which is expected to close no later than the end of the third quarter of 2017, is subject to the receipt of required regulatory approvals from the Committee on Foreign Investment in the United States and the Federal Communications Commission, or the FCC, as well as the satisfaction or waiver of other customary closing conditions.

OnPrior ~~June~~to ~~21,~~entering ~~2016~~into the merger agreement, we announced on June 21, 2016 our intention to separate into two independent and publicly traded companies through a tax-free spin-off. One company ~~will~~would ~~consist~~have consisted of the majority of our ~~Information~~information ~~Services~~services, ~~which~~including ~~consists of~~ Marketing Services, Security Services and related Data Services. The other company ~~will~~would ~~focus~~have focused on providing Order Management and Numbering Services~~. Order~~, ~~Management~~including ~~and Numbering Services will provide~~ Local Number Portability Administration, number administration and ancillary numbering services as well as order and inventory management solutions. We intend to accomplish the separation through a tax-free spin-off, which we expect to occur in 2017. The separation is subject to final approval by our Board of Directors, as well as a number of market and regulatory conditions, including, among others, effectiveness of the Form 10 to be filed with the Securities and Exchange Commission.

~~Third~~On ~~Quarter~~March ~~2016~~26, ~~Activity~~2015, the FCC approved a competitor to serve as the next Local Number Portability Administrator, or LNPA, and authorized the North American Portability Management LLC, or NAPM, to begin contract negotiations with that competitor. On April 6, 2015, we filed a Petition for Review asking the U.S. Court of Appeals for the District of Columbia Circuit to “hold unlawful, vacate, enjoin, and set aside” the FCC’s Order approving the North American Numbering Counsel’s recommendation. On June 19, 2015, the Court of Appeals granted the requests made by third-party petitioners to intervene in the case. On July 21, 2015, the Court of Appeals dismissed the FCC’s motion to hold the case in abeyance pending further FCC action and ruled that the issues raised in the FCC’s motion to dismiss should be addressed in the parties’ briefs on the merits. We filed our initial brief on September 21, 2015, the briefing schedule concluded on December 17, 2015, and oral argument before the Court of Appeals took place on September 13, 2016.

~~During~~On ~~the~~April ~~third~~7, ~~quarter~~2015, we ~~expanded~~amended our ~~highly~~seven ~~competitive~~regional ~~solutions~~contracts bywith ~~entering~~the ~~into~~NAPM. Under ~~new~~this ~~strategic~~amendment, ~~partnerships~~we will provide LNPA services for an annual fixed fee of $496. 1 million until the termination of these contracts. In ~~particular~~addition to LNPA services, we ~~entered~~are ~~into~~providing ancertain ~~advanced~~transition ~~marketing~~services ~~analytics~~under ~~partnership~~this ~~with~~amendment ~~Facebook~~on ~~and~~a ~~now~~cost-plus ~~have~~basis. On July 1, 2016, we received a ~~differentiated~~notice ~~solution~~of ~~that~~non-renewal ~~chief~~from ~~marketing~~the ~~officers~~NAPM ~~can~~informing ~~rely~~us of its election not to renew the master agreements that were due to expire on ~~for~~September 30, 2016. On ~~attribution~~July 25, 2016 ~~across~~the ~~various~~FCC ~~channels~~issued an Order approving the proposed contract between the NAPM and ~~for~~a ~~intelligent~~competitor ~~planning~~to ofserve ~~marketing~~as ~~spend~~the next LNPA. InOn ~~addition~~September 29, we2016, ~~developed~~the ~~new~~NAPM ~~features~~provided ~~for~~notice to extend the term of our ~~DDoS~~master ~~protection~~contracts ~~solution~~with the NAPM and opted not to license the source code that we use to provide services to the NAPM. ~~These~~We ~~features~~will ~~provide~~continue ~~improved~~to ~~speed~~provide services and ~~flexibility~~transition ~~through~~services ~~enhanced~~at ~~automation~~the pricing terms under the current contracts until the NAPM provides at least one termination notice to us, which must establish a termination date that is 180 days after the date of ~~traffic~~notice. We ~~flows~~cannot be certain how long we will provide LNPA services; however, ~~management~~we ~~and~~will ~~visibility~~continue to provide services under the current terms of the NAPM contracts for as long as required by NAPM. On April 20, 2016, the NAPM Transition Oversight Manager, or the TOM, published a transition timeline which extends the transition through the third quarter of 2017. The TOM subsequently issued a revised timeline that extends the transition through May 25, 2018.

~~During~~Prior ~~the~~to ~~third quarter, we generated revenue of $300.1 million, an increase of 15% from $261.7 million in~~ the ~~third~~April ~~quarter of~~ 2015~~. This~~ ~~increase~~amendment, ~~was~~we ~~driven~~provided byLNPA ~~revenue~~services ~~from~~under our ~~2015~~contracts ~~acquisitions~~with ~~and~~NAPM ~~continued demand~~ for ~~our~~a ~~solutions. Our~~fixed ~~Marketing~~fee ~~Services~~with ~~revenue~~a ~~for the quarter increased 54~~6.5% toannual ~~$63.3~~price ~~million from $41~~escalator.~~1 million~~ These incontracts ~~the~~were ~~third~~due ~~quarter~~to ofexpire ~~2015,~~on ~~and included revenue from the acquisition of MarketShare~~June 30, 2015. ~~Our~~ The ~~Security~~2015 ~~Services~~LNPA ~~revenue~~service ~~increased~~fixed ~~18%~~fee tounder ~~$51.0 million from $43.2 million in~~ the ~~third~~prior ~~quarter~~contract ofterms ~~2015,~~represents ~~and included revenue from~~ the ~~acquisition~~impact of ~~Bombora~~a ~~Technologies~~6. ~~Our Data Services revenue increased 14~~5% toannual ~~$58.2 million~~escalator ~~from~~on ~~$51.2 million, and included revenue from~~ the ~~caller~~2014 ~~authentication~~LNPA ~~assets~~service ~~acquired~~fixed ~~from~~fee ~~TNS. Our~~of ~~NPAC Services revenue increased 1% to~~ $~~127~~465.68 million ~~from $126.2 million due to revenue from transition services under our contracts to provide Local Number Portability Administrator~~, ~~or LNPA, services.~~

In addition to our continued growth in revenue, we improved our financial structure through the refinancing of our credit facilities. Specifically, we amended the terms of our 2013 Credit Facility to include a lower interest rate of LIBOR plus 325 basis points, subject to a pricing grid, and a reduced annual amortization of 22% until the end of 2017 and 10% thereafter. We also extended the maturity date by one year to January 22, 2019. This refinancing provides us with a lower cost of debt and greater financial flexibility.24

On March 26, 2015, the Federal Communications Commission, or FCC, approved a competitor to serve as the next LNPA and authorized the North American Portability Management LLC, or NAPM, to begin contract negotiations with that competitor. On April 6, 2015, we filed a Petition for Review asking the U.S. Court of Appeals for the District of Columbia Circuit to “hold unlawful, vacate, enjoin, and set aside” the FCC’s Order approving the North American Numbering Counsel’s recommendation. On June 19, 2015, the Court of Appeals granted the requests made by third-party petitioners to intervene in the case. On July 21, 2015, the Court of Appeals dismissed the FCC’s motion to hold the case in abeyance pending further FCC action and ruled that the issues raised in the FCC’s motion to dismiss should be addressed in the parties’ briefs on the

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~~merits. We~~resulting ~~filed~~in ~~our~~a ~~initial~~2015 ~~brief~~LNPA onservice ~~September~~fixed fee of $496.1 21million. Under the April 7, 2015 amendment, the ~~briefing~~annual ~~schedule~~LNPA ~~concluded~~service onfixed ~~December 17, 2015,~~fee ~~and~~remains ~~oral~~the ~~argument~~same ~~before~~at $496.1 million for the ~~Court~~duration of ~~Appeals~~the ~~took~~amended ~~place~~term onof ~~September 13, 2016~~the contracts.

On April 7, 2015, we amended our seven regional contracts with the NAPM. Under this amendment, we will provide LNPA services for an annual fixed fee of $496.1 million until the termination of these contracts. In addition to LNPA services, we are providing certain transition services under this amendment on a cost-plus basis. On July 1, 2016, we received a notice of non-renewal from the NAPM informing us of its election not to renew the master agreements that expire on September 30, 2016. On July 25, 2016 the FCC issued an Order approving the proposed contract between the NAPM and a competitor to serve as the next LNPA. On September 29, 2016, the NAPM provided notice to extend the term of our master contracts with NAPM and opted not to license the source code that we use to provide services to the NAPM. We will continue to provide services and transition services at the pricing terms under the current contracts until the NAPM provides at least one termination notice to us, which must establish a termination date that is 180 days after the date of notice. We cannot be certain how long we will provide LNPA services; however, we will continue to provide services under the current terms of the NAPM contracts for as long as required by NAPM. On April 20, 2016, the NAPM Transition Oversight Manager, or the TOM, published a preliminary transition timeline which extends the transition through the third quarter of 2017. The TOM subsequently issued a revised timeline that extends the transition through May 25, 2018. Based on this timeline, we do not expect that the NAPM will provide us with a termination notice establishing a termination date occurring during the next twelve months.

Prior to the April 2015 amendment, we provided LNPA services under our contracts with NAPM for a fixed fee with a 6.5% annual price escalator. These contracts were due to expire on June 30, 2015. The 2015 LNPA service fixed fee under the prior contract terms represents the impact of a 6.5% annual escalator on the 2014 LNPA service fixed fee of $465.8 million, resulting in a 2015 LNPA service fixed fee of $496.1 million. Under the April 7, 2015 amendment, the annual LNPA service fixed fee remains the same at $496.1 million for the duration of the amended term of the contracts. As a result, the amendment will not have an impact on our revenue growth rate for the year ended December 31, 2016.

Loss of the NPAC contracts will have a material adverse impact on our future operating results when compared to our current financial profile. We expect to lose approximately $500 million of annual revenue and this loss will adversely impact our income from operations and operating margin. Additionally, this loss may have a disproportionate material negative impact on our operating margin because of the largely fixed and shared cost structure that is designed to support all of our services. As a result of the uncertain contract end date and due to our cost structure, which is organized by function, we are currently analyzing the impact of the termination of the contracts on our income from operations in an effort to quantify such impacts. Our disclosure will expand as we evaluate the cost structure that will be in place to support our ongoing business or as we learn more about the timing of the contract termination.

Given the facts and circumstances described above, we determined that the structure of our organization is appropriate at this time.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements in accordance with U.S. GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenue and expense during a fiscal period. The U.S. Securities and Exchange Commission, or SEC, considers an accounting policy to be critical if it is important to a company’s financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. We have discussed the selection and development of the critical accounting policies with the audit committee of our Board of Directors, and the audit committee has reviewed our related disclosures in this report.

Although we believe that our judgments and estimates are appropriate and reasonable, actual results may differ from those estimates. In addition, while we have used our best estimates based on the facts and circumstances available to us at the time, we reasonably could have used different estimates in the current period. Changes in the accounting estimates we use are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations could be materially affected. See the information in our filings with the SEC from time to time, including Part III, Item 1A. “Risk Factors” in our ~~Quarterly~~Annual Report on Form 10-QK for our ~~quarter~~fiscal year ended ~~June 30, 2016,~~December ~~or June 2016 10-Q~~31, ~~filed with the SEC on July 28,~~ 2016, for certain matters that may bear on our results of operations.

30For a discussion of selected critical accounting policies refer to our critical accounting policies described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2016.

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For a discussion of selected critical accounting policies refer to our critical accounting policies described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Consolidated Results of Operations

Three Months Ended ~~September~~March 3031, ~~2015~~2016 Compared to Three Months Ended ~~September~~March 3031, ~~2016~~2017

The following table presents an overview of our results of operations for the three months ended March 31, 2016 and 2017:

	Three Months Ended September 30,
	Three Months Ended March 31,
	2015			2016			2015 vs. 2016
	2016			2017			2016 vs. 2017
	$			$			$ Change			% Change
	(unaudited)(dollars in thousands, except per share data)
Revenue	$	~~261~~287,~~653~~298		$	~~300~~293,~~081~~186		$	385,~~428~~888		142.70	%
Operating expense:
Cost of revenue (excludes depreciation and amortization shown separately below)	6791,~~108~~351			9387,~~560~~916			26(3,~~452~~435		)	39(3.48	)%
Sales and marketing	4855,~~911~~323			5056,~~824~~557			1,~~913~~234			32.92	%
Research and development	67,~~009~~549			6,~~041~~672			32(877		)	0(11.56	)%
General and administrative	2827,~~617~~518			28,~~040~~360			~~(577~~842		)	(23.01	)%
Depreciation and amortization	3038,~~272~~482			4934,~~701~~927			19(3,~~429~~555		)	64(9.2	)%
Restructuring charges	—2,664			~~2,629~~27			(2,~~629~~637		)	~~100~~(99.0	)%
Separation costs	—			21,~~135~~789			21,~~135~~789			100.0	%
	180,917			232,930			52,013			28.7	%
	222,887			216,248			(6,639		)	(3.0	)%
Income from operations	8064,~~736~~411			6776,~~151~~938			~~(13~~12,~~585~~527		)	~~(16~~19.84	)%
Other (expense) income:
Interest and other expense	(617,~~775~~111		)	(2212,~~179~~271		)	~~(15~~4,~~404~~840		)	~~227~~(28.43	)%
Interest income	7174			5072			43(102		)	~~614~~(58.36	)%
Income before income taxes	7347,~~968~~474			4564,~~022~~739			~~(28~~17,~~946~~265		)	~~(39~~36.14	)%
Provision (benefit) for income taxes	23,686			(8,009		)	(31,695		)	(133.8	)%
Provision for income taxes	16,099			19,296			3,197			19.9	%
Net income	$	5031,~~282~~375		$	5345,~~031~~443		$	214,~~749~~068		544.58	%
Net income per common share:
Basic	$	0.9358		$	0.9782
Diluted	$	0.9157		$	0.9680
Weighted average common shares outstanding:
Basic	5453,~~123~~953			5455,~~542~~311
Diluted	5554,~~125~~940			5557,~~432~~022

Revenue

Revenue. Revenue increased $385.~~4 million~~9 ~~driven by revenue from acquisitions closed in 2015 and demand for our Marketing and Security Services~~million. ~~Revenue from our~~ Marketing Services revenue increased $227.24 million driven by ~~a $14.9 million contribution from MarketShare, acquired in the fourth quarter of 2015, and~~ increased demand for our services that our clients use to make informed and high impact decisions to promote their products and services.

Security Services revenue ~~increased~~decreased $71.98 million ~~driven~~due byto ana ~~increase~~decrease in revenue of $43.71 million from ~~domain~~our ~~name~~DNS ~~registries~~services, ~~and~~partially anoffset ~~increase~~by ina ~~revenue of~~ $3.1.3 million ~~resulting from demand for our DNS services. The~~ increase in revenue from domain name registries. The ~~was~~decrease ~~driven~~in byrevenue ~~$3.4 million~~ from ~~the~~our ~~acquisition~~DNS ofservices ~~Bombora~~resulted ~~Technologies~~from ~~completed~~lower onchannel ~~July 30, 2015~~partner revenue. The ~~remaining~~ increase in domain name registries was driven by ~~continued~~ growth in the number of domain names under management.

Data Services revenue ~~increased~~decreased $7.0.2 million~~. Revenue~~ ~~from~~due ~~caller~~to ~~identification~~a ~~services~~decrease ~~increased~~in revenue of $191.5 million ~~driven~~from bycaller identification services and a decrease in revenue of $151.91 million ~~contribution~~ from ~~the~~user ~~caller~~ authentication ~~assets~~and werights ~~acquired~~management ~~from~~services, ~~TNS. This increase was~~ partially offset by aan ~~$10.0 million~~increase ~~decrease~~ in revenue ~~from the expiration~~ of ~~our~~$2.4 million ~~contract~~from tocarrier ~~serve~~provisioning ~~as the registry operator for U~~services.~~S. Common~~

31NPAC Services revenue increased $0.4 million driven by revenue from transition services under our contracts to provide LNPA services.

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Short Codes in 2015. In addition, revenue from user authentication and rights managements services decreased $2.6 million.

Revenue from our NPAC Services increased $1.4 million driven by revenue from transition services under our contracts to provide LNPA services.

Expense

Cost of revenue. Cost of revenue ~~increased~~decreased $263.~~5 million, including $18.~~4 million ~~of operating expense related to acquisitions. This increase of $26.5 million was~~ due to andecreases ~~increase~~ of $151.32 million in costs related to our information technology and systems, ~~and an increase of~~ $80.38 million in personnel and personnel-related expense~~. The increase in costs related to our information technology and systems was driven by increased data processing~~, ~~telecommunications, maintenance and hardware costs. The increase of~~ $80.~~3 million in personnel and personnel-related expense was due to a $~~7.9 million ~~increase~~ in ~~personnel costs driven by headcount growth and a $0.4 million increase in stock-based compensation. In addition, royalty costs increased $1.7 million and~~ contractor costs ~~increased $1.1 million.~~

Sales and marketing. Sales and marketing expense increased $1.9 million, including $7.1 million of operating expense related to acquisitions. This increase of $1.9 million was due to an increase of $3.5 million in personnel and personnel-related expense and an increase of $0.3 million in maintenance and general facilities costs. The increase of $3.5 million in personnel and personnel-related expense was due to a $3.8 million increase in personnel costs, partially offset by a $0.3 million decrease in stock-based compensation. These increases were partially offset by a $1.9 million decrease in advertising and marketing costs.26

Research and development. Research and development expense for the three months ended September 30, 2016 was comparable to the research and development expense for the three months ended September 30, 2015.

General and administrative. General and administrative expense decreased $0.6 million, including $1.4 million of operating expense related to acquisitions completed in 2015. This decrease of $0.6 million was due to a decrease of $2.3 million in professional fees, partially offset by an increase of $1.4 million in general facilities costs and an increase of $0.3 million in personnel and personnel-related expense. The decrease in professional fees was driven by a reduction of costs to pursue new business opportunities. The increase of $0.3 million in personnel and personnel-related expense was due to a $1.1 million increase in stock-based compensation, partially offset by a $0.8 million decrease in personnel costs.

Depreciation and amortization. Depreciation and amortization expense increased $19.4 million, including $7.8 million in depreciation and amortization expense related to assets acquired as part of our 2015 acquisitions. During the quarter, we recorded an $11.1 million impairment charge to write down long-lived intangible assets. Amortization expense increased $7.3 million related to other acquired intangible assets. In addition, depreciation expense increased $1.0 million.

Restructuring charges. Restructuring charges increased $2.6 million in connection with a restructuring initiated in the third quarter of 2016 to achieve efficiencies in connection with the integration of our recent acquisitions and the review of our go-to-market strategy.

Separation costs. During the three months ended September 30, 2016, we incurred separation costs of $2.1 million. In the second quarter of 2016, we announced our intention to separate into two independent and publicly traded companies through a tax-free spin-off. Separation costs recorded in the third quarter related to activities supporting the planned separation. These costs include professional fees for outside advisory services including legal, finance, accounting and related services.

Interest and other expense. Interest and other expense increased $15.4 million due to an increase of $8.7 million in interest expense, a $6.4 million loss on debt modification and extinguishment recorded in connection with the Amended 2013 Credit Facilities, and a net increase of $0.4 million in foreign currency transaction losses. The increase in interest expense was driven by borrowings under the 2015 Incremental Term Facility and an increase in the interest rate under our 2013 Term Facility. On September 28, 2016, we amended our credit facilities and among other things, consolidated the remaining principal outstanding under our 2013 Term Facility and our 2015 Incremental Term Facility into a single term loan facility, or the Amended 2013 Term Facility.

Interest income. Interest income for the three months ended September 30, 2016 was comparable to the interest income for the three months ended September 30, 2015.

Provision (benefit) for income taxes. Our effective tax rate, including discrete items, for the three months ended September 30, 2016 was (17.8)%, a decrease from 32.0% for the three months ended September 30, 2015. During the third quarter of 2016, we liquidated one of our domestic subsidiaries for tax purposes. We intend to treat the common stock of this subsidiary as worthless for U.S. income tax purposes on our 2016 U.S. federal and state income tax returns. We recorded a discrete tax benefit of $23.1 million associated with this worthless stock deduction in the third quarter of 2016. Excluding all

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~~discrete tax items, our effective tax rate was approximately 35.1%~~ and 36$0.~~3% for the three months ended September~~7 ~~30, 2016~~million ~~and~~in ~~2015,~~royalty ~~respectively~~costs.

~~Nine~~Sales ~~Months~~and ~~Ended~~marketing. Sales ~~September~~and ~~30,~~marketing ~~2015~~expense ~~Compared~~increased $1.2 million due to ~~Nine~~an ~~Months~~increase ~~Ended~~of ~~September~~$2.1 million 30in personnel and personnel-related expense, ~~2016~~partially offset by a $1.0 million decrease in advertising and marketing costs.

	Nine Months Ended September 30,
	2015			2016			2015 vs. 2016
	$			$			$ Change			% Change
	(unaudited)(dollars in thousands, except per share data)
Revenue	$	769,808		$	884,944		$	115,136		15.0	%
Operating expense:
Cost of revenue (excludes depreciation and amortization shown separately below)	198,817			275,148			76,331			38.4	%
Sales and marketing	146,587			160,435			13,848			9.4	%
Research and development	18,460			18,850			390			2.1	%
General and administrative	78,003			82,796			4,793			6.1	%
Depreciation and amortization	89,634			127,012			37,378			41.7	%
Restructuring charges	—			11,422			11,422			100.0	%
Separation costs	—			6,353			6,353			100.0	%
	531,501			682,016			150,515			28.3	%
Income from operations	238,307			202,928			(35,379		)	(14.8	)%
Other (expense) income:
Interest and other expense	(19,978		)	(54,981		)	(35,003		)	175.2	%
Interest income	302			291			(11		)	(3.6	)%
Income before income taxes	218,631			148,238			(70,393		)	(32.2	)%
Provision for income taxes	77,077			25,711			(51,366		)	(66.6	)%
Net income	$	141,554		$	122,527		$	(19,027	)	(13.4	)%
Net income per common share:
Basic	$	2.57		$	2.26
Diluted	$	2.52		$	2.22
Weighted average common shares outstanding:
Basic	55,153			54,318
Diluted	56,078			55,127

Research and development. Research and development expense decreased $0.9 million due to a decrease in personnel and personnel-related expense.

~~Revenue~~General and administrative. General and administrative expense increased $0.8 million due to an increase of $5.2 million in merger-related costs. This increase was partially offset by decreases of $2.5 million in personnel and personnel-related expense, $2.1 million in professional fees, and $0.2 million in general facilities and other costs.

~~Revenue. Revenue~~Depreciation ~~increased $115.1 million driven by revenue from acquisitions closed in 2015~~ and ~~demand for our Marketing and Security Services~~amortization. ~~Revenue~~Depreciation ~~from~~and ~~our~~amortization ~~Marketing~~expense ~~Services~~decreased ~~increased~~ $653.6 million ~~driven~~due byto a ~~$40.6 million~~decrease ~~contribution from MarketShare, acquired~~ in ~~the~~amortization ~~fourth quarter~~ of ~~2015,~~intangible ~~and increased demand for our services that help clients make informed and high impact decisions to promote their products and services~~assets.

~~Security~~Restructuring ~~Services revenue increased $25~~charges.~~7 million~~ Restructuring ~~driven~~charges bydecreased ~~an increase in revenue of~~ $212.76 million ~~from~~related ~~domain~~to ~~name~~restructuring ~~registries~~charges ~~and~~recorded anduring ~~increase in revenue of $4.0 million resulting from demand for our DNS services. The increase in revenue from domain name registries was driven by $16.5 million from~~ the ~~acquisition~~three ofmonths ~~Bombora~~ended ~~Technologies completed on July~~March 3031, ~~2015,~~2016 which ~~included~~did ~~$4.1 million~~not inrecur ~~revenue resulting from the consolidation of the customer base. The remaining increase~~ in ~~domain name registries was driven by continued growth in~~ the ~~number~~first quarter of ~~domain names under management~~2017.

~~Data~~Separation ~~Services revenue increased $18~~costs.~~5 million.~~ ~~Revenue~~During ~~from~~the ~~caller~~three ~~identification~~months ~~services~~ended ~~increased~~March ~~$55.7 million~~31, ~~driven~~2017, ~~by a $48.2 million contribution from the caller authentication assets~~ we ~~acquired~~incurred ~~from~~separation ~~TNS. This~~costs ~~increase~~of ~~was partially offset by a~~ $291.08 million. Separation ~~decrease~~costs inrelated ~~revenue~~to ~~from~~activities supporting the ~~expiration~~planned ofseparation ~~our~~including ~~contract~~professional tofees ~~serve~~for asoutside ~~the~~advisory ~~registry~~services ~~operator~~including ~~for~~legal, ~~U.S.~~finance, ~~Common~~accounting ~~Short~~and ~~Codes~~related ~~in 2015~~services. InAs ~~addition,~~a ~~revenue~~result ~~from~~of ~~user~~the ~~authentication~~execution and ~~rights~~shareholder ~~managements~~approval ~~services~~of ~~decreased~~the ~~$5.5 million~~merger agreement, ~~and~~we ~~revenue~~are ~~from~~focusing ~~carrier~~on ~~provisioning~~completing ~~services decreased $2.7 million due to~~ the ~~completion of client projects~~merger.

33Interest and other expense. Interest and other expense decreased $4.8 million due to a decrease in interest expense driven by lower borrowings under the Amended 2013 Credit Facilities.

~~Table~~Interest ofincome. Interest ~~Contents~~income for the three months ended March 31, 2017 was comparable to the interest income for the three months ended March 31, 2016.

~~Revenue~~Provision ~~from~~for ~~our~~income ~~NPAC~~taxes. Our ~~Services~~effective ~~increased~~tax ~~$5.2~~rate, including discrete items, for the three months ended March ~~million~~31, ~~driven~~2017 bywas ~~revenue~~29.8%, a decrease from ~~transition~~33.9% ~~services~~for ~~under~~the three months ended March 31, 2016. This decrease was primarily due to the adoption of Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718). As a result of the adoption of this standard, we recognized excess tax benefits on stock-based compensation as a discrete item within income tax benefits on our ~~contracts~~consolidated statements of operations for the three months ended March 31, 2017. Prior to ~~provide~~the ~~LNPA~~adoption ~~services~~of this standard, excess tax benefits were recognized in additional paid-in capital on our consolidated balance sheet. Excluding all discrete tax items, our effective tax rate was approximately 34.8% and 34.7% for the three months ended March 31, 2017 and 2016, respectively.

Expense

Cost of revenue. Cost of revenue increased $76.3 million, including $60.9 million of operating expense related to acquisitions. This increase of $76.3 million was due to an increase of $39.1 million in costs related to our information technology and systems and an increase of $27.9 million in personnel and personnel-related expense. The increase in costs related to our information technology and systems was driven by increased data processing, telecommunications, maintenance and hardware costs. The increase of $27.9 million in personnel and personnel-related expense was due to a $26.2 million increase in personnel costs driven by headcount growth and a $1.7 million increase in stock-based compensation. In addition, royalty costs increased $5.6 million and contractor costs increased $3.6 million.

Sales and marketing. Sales and marketing expense increased $13.8 million, including $27.1 million of operating expense related to acquisitions. This increase of $13.8 million was due to an increase of $15.4 million in personnel and personnel-related expense and an increase of $1.3 million in maintenance and general facilities costs. The increase of $15.4 million in personnel and personnel-related expense was due to a $14.5 million increase in personnel costs and a $0.9 million increase in stock-based compensation. These increases were partially offset by a $3.0 million decrease in advertising and marketing costs.

Research and development. Research and development expense increased $0.4 million, including $2.1 million of operating expense related to acquisitions. This increase of $0.4 million was due to personnel and personnel-related expense.

General and administrative. General and administrative expense increased $4.8 million, including $6.3 million of operating expense related to acquisitions completed in 2015. This increase of $4.8 million was due to an increase of $2.9 million in personnel and personnel-related costs, a $2.1 million gain from the sale of certain and assets and liabilities in the second quarter of 2015 with no comparable benefit in the second quarter of 2016, and an increase of $2.1 million in general facilities costs. The increase of $2.9 million in personnel and personnel-related expense was due to a $1.7 million increase in personnel costs and a $1.2 million increase in stock-based compensation. These increases were partially offset by a $2.4 million decrease in professional fees.

Depreciation and amortization. Depreciation and amortization expense increased $37.4 million, including $21.8 million in depreciation and amortization expense related to assets acquired as part of our 2015 acquisitions. During the third quarter, we recorded an $11.1 million impairment charge to write down long-lived intangible assets. Amortization expense increased $24.4 million related to other acquired intangible assets. In addition, depreciation expense increased $2.0 million.

Restructuring expense. Restructuring charges increased $11.4 million due to plans initiated in the first and third quarters of 2016 to achieve efficiencies in connection with the integration of our recent acquisitions and the review of our go-to-market strategy.

Separation costs. During the nine months ended September 30, 2016, we incurred separation costs of $6.4 million. In the second quarter of 2016, we announced our intention to separate into two independent and publicly traded companies through a tax-free spin-off. Separation costs recorded during the nine months ended September 30, 2016 related to activities supporting the planned separation. These costs include professional fees for outside advisory services including legal, finance, accounting and related services.

Interest and other expense. Interest and other expense increased $35.0 million due an increase of $28.4 million in interest expense, a $6.4 million loss on debt modification and extinguishment recorded in connection with the Amended 2013 Credit Facilities, and a net increase of $0.2 million in losses on asset disposals. The increase in interest expense was driven by borrowings under the 2015 Incremental Term Facility and an increase in the interest rate under our 2013 Term Facility. On September 28, 2016, we amended our credit facilities and among other things, consolidated the remaining principal outstanding under our 2013 Term Facility and our 2015 Incremental Term Facility into a single term loan facility, or the Amended 2013 Term Facility.

Interest income. Interest income for the nine months ended September 30, 2016 was comparable to the interest income for the nine months ended September 30, 2015.

Provision for income taxes. Our effective tax rate, including discrete items, for the nine months ended September 30, 2016 was 17.3%, a decrease from 35.3% for the nine months ended September 30, 2015. During the third quarter of 2016, we liquidated one of our domestic subsidiaries for tax purposes. We intend to treat the common stock of this subsidiary as worthless for U.S. income tax purposes on our 2016 U.S. federal and state income tax returns. We recorded a discrete tax benefit of $23.1 million associated with this worthless stock deduction in the third quarter of 2016. Excluding all

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discrete tax items, our effective tax rate was approximately 35.1% and 36.3% for the nine months ended September 30, 2016 and 2015, respectively.

Liquidity and Capital Resources

Our principal source of liquidity ~~has~~is ~~been~~ cash provided by our operating ~~and financing~~ activities. Our principal uses of cash ~~have~~were ~~been~~for ~~to fund acquisitions, share repurchases,~~ debt service requirements and capital expenditures. We anticipate that our principal uses of cash in the future will be for debt service requirements and capital expenditures. Total cash and cash equivalents were $5647.20 million at ~~September~~March 3031, ~~2016~~2017, aan ~~decrease~~increase of $321.93 million from $8945.18 million at December 31, ~~2015~~2016. This ~~decrease~~increase in cash and cash equivalents was ~~driven~~due byto cash ~~used~~provided toby ~~reduce~~operations, ~~the~~partially ~~outstanding~~offset ~~principal~~by ~~under~~cash ~~the~~used ~~2013~~for ~~Credit~~principal ~~Facilities,~~payments ~~partially~~under ~~offset~~our bycredit ~~cash~~facilities ~~provided~~and bycapital ~~operating activities~~expenditures.

We believe that our existing cash and cash equivalents and cash from operations will be sufficient to fund our operations for at least the next twelve months.

Credit Facilities and Senior Notes

OnAs ~~January~~of March 2231, ~~2013, we entered into a credit facility that provided for a $325~~ ~~million senior secured term loan facility~~2017, ~~or 2013 Term Facility, and a $200 million senior secured revolving credit facility, or~~ the ~~2013~~outstanding ~~Revolving~~principal ~~Facility,~~balance ~~and~~due ~~together~~under ~~with~~our ~~the~~Amended 2013 ~~Term Facility, the 2013~~ Credit Facilities~~. In~~ ~~addition,~~and ~~we closed an offering of $300 million aggregate principal amount of senior notes, or~~ Senior Notes~~. On~~ ~~December 9, 2015,~~was ~~we amended our 2013 Credit Facilities to provide for a~~ $~~350~~751.6 million ~~incremental~~and ~~term~~available ~~loan,~~borrowings ~~or the 2015 Incremental Term Facility. On September 28, 2016 we further amended our 2013 Credit Facilities to (i) consolidate the remaining principal outstanding~~ under our ~~2013 Term Facility and our 2015 Incremental Term Facility into a single term loan facility, (ii) provide a maturity date of January 22, 2019, (iii) set the annual amortization percentage of the~~ Amended 2013 ~~Term~~Revolving Facility atwas ~~22% through December~~$147.0 31, 2017 and 10% thereafter and (iv) lower the eurodollar rate margin and base rate margin for the Amended 2013 Term Facility to (a) if the Consolidated Leverage Ratio (as defined in the Credit Agreement) is less than 2 to 1 after March 1, 2017, 3million.~~00% and 2.00%, respectively, and (b) if the Consolidated Leverage Ratio is 2 to 1 or greater, 3.25% and 2.25%, respectively.~~ The third amendment also provides that upon consummation of a spin-off separating our business into two separate companies, the commitments under the revolving credit facility will be permanently reduced to zero and we must prepay all outstanding advances under the Amended 2013 Credit Facilities.

For further discussion of this debt, refer to Note 7 to our Consolidated Financial Statements in Item 8 of Part II in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 and Note 54 to our Financial Statements in Item 1 of Part I of this report.

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Discussion of Cash Flows

Cash flows from operations

Net cash provided by operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 was $~~208~~104.74 million, as compared to $~~250~~31.72 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016. This $4273.02 million ~~decrease~~increase in net cash provided by operating activities was the result of aan ~~decrease~~increase in net income of $1914.01 million, ana ~~increase~~decrease in non-cash adjustments of $7411.2 million and aan ~~decrease~~increase in net changes in operating assets and liabilities of $9770.23 million.

Non-cash adjustments ~~increased~~decreased $7411.2 million, driven by ana ~~increase~~decrease of $376.4 2 million in ~~depreciation~~deferred ~~and~~income ~~amortization expense~~taxes, ana ~~increase~~decrease of $153.56 million in ~~deferred~~depreciation ~~income~~and ~~taxes~~amortization expense, ana ~~increase~~decrease of $101.94 million in amortization of deferred financing costs and original issue discount on debt, a ~~loss~~decrease ~~on debt modification and extinguishment~~ of $60.4 million ~~recorded~~ in ~~the fourth quarter related to our Amended 2013 Credit Facilities, an increase of $4.0 million in~~ stock-based compensation, ~~a decrease of $0.7 million in gain on asset disposals,~~ and a decrease of $0.13 million in tax benefit from equity awards~~. These~~ ~~total~~due ~~increases~~to ofthe ~~$75.0 million~~adoption ~~in non-cash adjustments were partially offset by a decrease~~ of ~~$0.6~~ASU ~~million in the provision for doubtful accounts~~2016-09.

Cash provided by net changes in operating assets and liabilities ~~decreased~~increased $9770.23 million primarily due to aan ~~decrease~~increase of $4241.32 million in accounts ~~payable~~ and ~~accrued~~unbilled ~~expenses~~receivables, aan ~~decrease~~increase of $378.65 million in income taxes, aan ~~net~~ increase of $2214.37 million in ~~accounts~~prepaid expenses and ~~unbilled~~other ~~receivables~~current assets, aan ~~decrease~~increase of $710.2 million in ~~other~~accounts ~~liabilities,~~payable and aaccrued ~~decrease~~expenses, an increase of $31.06 million in deferred costs, and an increase of $0.5 million in other assets. These total ~~decreases~~increases of $~~112~~76.47 million in net changes in operating assets and liabilities were partially offset by ana ~~increase~~decrease of $7.4 ~~million in deferred revenue, an increase of $4~~.40 million in other ~~assets,~~liabilities and ana ~~increase~~decrease of $32.4 million in ~~prepaid~~deferred ~~expenses and other current assets~~revenue.

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Cash flows from investing

Net cash used in investing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 was $3815.04 million, as compared to $~~106~~9.69 million for ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016. This $685.65 million ~~decrease~~increase in net cash used in investing activities was due to ~~a decrease of $84.1 million in cash used for acquisitions, partially offset by an increase of $15.6 million in cash used for~~ purchases of property and equipment.

Cash flows from financing

Net cash used in financing activities was $~~204~~87.06 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017, as compared to $~~111~~40.86 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016. This $9247.30 million increase in net cash used in financing activities was due to an increase of $~~173~~50.16 million in principal payments under our Amended 2013 Credit Facilities, an increase of $101.~~2 million in debt issuance costs, a decrease of $7.~~1 million in cash ~~proceeds~~used ~~from~~for the ~~issuance~~net ofdown ~~stock, an increase~~ of ~~$0.7 million~~employee inshares ~~cash used in principal repayments on capital lease obligations,~~ and a decrease of $0.13 million in tax ~~benefit~~benefits from equity awards due to the adoption of ASU 2016-09. These total net increases of $~~191~~52.2 0 million in cash used in financing activities ~~was~~were partially offset by aan ~~decrease~~increase of $984.62 million in cash ~~used~~proceeds ~~for~~from ~~share~~the ~~repurchases~~issuance ~~and~~of ~~for~~stock, ~~the~~a ~~net~~decrease ~~down~~ of ~~employee~~$0.5 million ~~shares~~in cash used in principal repayments on capital lease obligations, and ~~cash~~a ~~provided~~decrease of $0.34 million due to a net change in restricted cash.

Recent Accounting Pronouncements

See Note 2 to our Financial Statements in Item 1 of Part I of this report for a discussion of the effects of recent accounting pronouncements.

Off-Balance Sheet Arrangements

None.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about our market risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016. Our exposure to market risk has not changed materially since December 31, ~~2015~~2016.



Item 4.	Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance ~~of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.~~

As of September 30, 2016, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at the reasonable assurance level.28

InTable ~~addition, there were no changes in our internal control over financial reporting that occurred in the third quarter~~ of ~~2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~Contents

of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of March 31, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and were operating at the reasonable assurance level.

In addition, there were no changes in our internal control over financial reporting that occurred in the first quarter of 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION



Item 1.	Legal Proceedings

On April 6, 2015, we filed a Petition for Review asking the U.S. Court of Appeals for the District of Columbia Circuit to “hold unlawful, vacate, enjoin, and set aside” the FCC Order issued on March 27, 2015, approving a recommendation by the ~~North~~NANC ~~American Numbering Council~~ for a competitor to serve as the next LNPA. Among other things, we believe the FCC Order violates the notice and comment rulemaking requirements of the Administrative Procedure Act, violates the FCC’s rules by selecting an entity that is not impartial or neutral to serve as the next LNPA and is arbitrary, capricious, an abuse of discretion or otherwise contrary to law. On June 19, 2015, the Court of Appeals granted the requests made by third-party petitioners to intervene in the case. On July 21, 2015, the Court of Appeals dismissed the FCC’s motion to hold the case in abeyance pending further FCC action and ruled that the issues raised in the FCC’s motion to dismiss should be addressed in the parties’ briefs on the merits. We filed our initial brief on September 21, 2015, the briefing schedule concluded on December 17, 2015, and oral argument before the Court of Appeals took place on September 13, 2016.

36We, along with other parties to the merger agreement and our Board of Directors, were named as defendants in a class action complaint filed on January 20, 2017, in the United States District Court for the District of Delaware, entitled Parshall v. NeuStar, Inc. et al., Case 1:17-cv-00060-LPS. We and our Board also were named as defendants in a class action complaint filed on February 1, 2017, in the United States District Court for the District of Delaware, entitled Rubin v. NeuStar, Inc. et al., Case 1:17-cv-00104. The complaints alleged violations of the federal securities laws by the defendants in connection with the preliminary proxy statement on Schedule 14A filed by us with the SEC with a filing date of January 7, 2017. The complaints sought, among other things, an injunction preventing the consummation of the merger, rescission of the merger if it was consummated or rescissory damages, and attorneys’ fees and costs. On March 28, 2017, the plaintiffs of these complaints voluntarily dismissed their cases without any payment.

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Item 1A.	Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in Part III, Item 1A. “Risk Factors” in our ~~Quarterly~~Annual Report on Form 10-QK for our ~~quarter~~fiscal year ended ~~June~~December 3031, 2016, ~~or June 2016 10-Q,~~ filed with the SEC on ~~July~~March 281, 2017 (our “2016 Form 10-K”). The risks discussed in our ~~June~~ 2016 Form 10-QK could materially affect our business, financial condition and future results. The risks described in our ~~June~~ 2016 Form 10-QK are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

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

The following table is a summary of our repurchases of common stock during each of the three months in the quarter ended ~~September~~March 3031, ~~2016~~2017:

Month	TotalNumber ofSharesPurchased(1)	AveragePrice Paidper Share
July 1 through July 31, 2016	2,049	$	23.98
January 1 through January 31, 2017	106,086	$	33.30
August 1 through August 31, 2016	3,089	24.18
February 1 through February 28, 2017	133,021	33.57
September 1 through September 30, 2016	2,271	26.35
March 1 through March 31, 2017	299,804	33.29
Total	7538,~~409~~911	$	2433.7936


(1)	The number of shares purchased includes shares of common stock tendered by employees to us to satisfy the employees’ minimum tax withholding obligations arising as a result of the vesting of restricted stock grants under our stock incentive plan. We purchased these shares for their fair market value on the vesting date.



Item 3.	Defaults Upon Senior Securities

None.



Item 4.	Mine Safety Disclosures

Not applicable.



Item 5.	Other Information

None.



Item 6.	Exhibits

See exhibits listed under the Exhibit Index below.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NeuStar, Inc.
Date:	~~October~~May 2710, ~~2016~~2017	By:	/s/ Paul S. Lalljie
		Paul S. Lalljie
		Chief Financial Officer
		(Principal Financial and Accounting Officer and Duly Authorized Officer)

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EXHIBIT INDEX

Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference. All other exhibits are provided as part of this electronic submission.

Exhibit No.		Description
(3.1)		Third Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1.2 to our Quarterly Report on Form 10-Q, filed October 29, 2015.
(3.2)		Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q, filed October 29, 2015 and Amendment to Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed December 14, 2016.
(10.48)		Amendment No. 3 to the Credit Agreement, dated as of September 28, 2016, by and among Neustar, Inc., certain subsidiaries of Neustar, Inc. party thereto as Guarantors, Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent, and the Lenders party thereto, incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed September 28, 2016.
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.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation
101.DEF		XBRL Taxonomy Extension Definition
101.LAB		XBRL Taxonomy Extension Label
101.PRE		XBRL Taxonomy Extension Presentation

~~† Compensation arrangement.~~32

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