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 ~~March~~June 3130, 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “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

Table of Contents

There were 55,~~775~~965,~~082~~415 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~~August 87, 2017.

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NEUSTAR, INC.

INDEX

PART I FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of December 31, 2016 and March 31, 2017 (unaudited)	4
	Consolidated Balance Sheets as of December 31, 2016 and June 30, 2017 (unaudited)	4
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2016 and 2017	6
	Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2017	6
	Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2017	7
	Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2017	7
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2017	8
	Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2017	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2832
Item 4.	Controls and Procedures	2832
PART II OTHER INFORMATION		2933
Item 1.	Legal Proceedings	2933
Item 1A.	Risk Factors	2933
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3033
Item 3.	Defaults Upon Senior Securities	3034
Item 4.	Mine Safety Disclosures	3034
Item 5.	Other Information	3034
Item 6.	Exhibits	3034
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 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, 2016		~~March~~June 3130, 2017
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	45,773	$	4794,~~048~~823
Restricted cash	2,283		2,~~141~~139
Accounts receivable, net of allowance for doubtful accounts of $6,572 and $7,743, respectively	207,595		188,930
Accounts receivable, net of allowance for doubtful accounts of $6,572 and $7,823, respectively	207,595		186,869
Unbilled receivables	19,795		15,~~618~~865
Prepaid expenses and other current assets	41,680		3536,~~867~~718
Deferred costs	11,469		10,~~909~~500
Income taxes receivable	13,586		~~612~~—
Total current assets	342,181		~~301~~346,~~125~~914
Property and equipment, net	145,821		~~149~~151,~~363~~810
Goodwill	1,168,982		1,~~172~~173,~~792~~203
Intangible assets, net	423,957		~~405~~384,~~429~~931
Other assets, long-term	17,771		16,~~670~~881
Total assets	$	2,098,712	$	2,~~045~~073,~~379~~739

See accompanying notes.

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NEUSTAR, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31, 2016			~~March~~June 3130, 2017
				(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21,095		$	22,~~569~~185
Accrued expenses	134,545			97104,~~959~~200
Deferred revenue	91,188			96100,~~035~~583
Notes payable	103,725			8974,~~219~~555
Capital lease obligations	1,457			~~470~~121
Other liabilities	11,632			9,306
Income taxes payable	—			22,621
Total current liabilities	363,642			315,558
Other liabilities	11,632			14,116
Deferred revenue, long-term	22,437			22,850
Total current liabilities	363,642			338,381
Notes payable, long-term	702,946			642,750
Deferred revenue, long-term	22,437			23,582
Deferred income tax liabilities, long-term	35,088			41,131
Notes payable, long-term	702,946			597,196
Other liabilities, long-term	53,298			53,257
Deferred income tax liabilities, long-term	35,088			34,554
Total liabilities	1,177,411			1,075,546
Other liabilities, long-term	53,298			51,694
Total liabilities	1,177,411			1,045,407
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, 2016 and March 31, 2017	—			—
Preferred stock, $0.001 par value; 100,000,000 shares authorized; no shares issued and outstanding as of December 31, 2016 and June 30, 2017	—			—
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 A common stock, par value $0.001; 200,000,000 shares authorized; 82,136,230 and 83,664,353 shares issued; and 54,896,659 and 55,956,914 shares outstanding at December 31, 2016 and June 30, 2017, respectively	82			84
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	—			—
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 June 30, 2017, respectively	—			—
Additional paid-in capital	771,450			~~789~~800,~~597~~784
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		)
Treasury stock, 27,239,571 and 27,707,439 shares at December 31, 2016 and June 30, 2017, respectively, at cost	(933,581		)	(949,232		)
Accumulated other comprehensive (loss) income	(1,785		)	1,~~124~~199
Retained earnings	1,085,135			1,~~130~~175,~~578~~497
Total stockholders’ equity	921,301			~~969~~1,~~833~~028,332
Total liabilities and stockholders’ equity	$	2,098,712		$	2,~~045~~073,~~379~~739

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2017			2016			2017
Revenue	$	~~287~~297,~~298~~565		$	~~293~~297,~~186~~938		$	584,863		$	591,124
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	9190,~~351~~237			87,~~916~~322			181,588			175,238
Sales and marketing	5554,~~323~~288			5653,~~557~~971			109,611			110,528
Research and development	75,~~549~~260			67,~~672~~604			12,809			14,276
General and administrative	27,~~518~~238			2827,~~360~~111			54,756			55,471
Depreciation and amortization	38,~~482~~829			3435,~~927~~452			77,311			70,379
Restructuring charges	26,~~664~~129			278,012			8,793			8,039
Separation costs	—4,218			~~1,789~~—			4,218			1,789
	222,887			216,248
	226,199			219,472			449,086			435,720
Income from operations	6471,~~411~~366			7678,~~938~~466			135,777			155,404
Other (expense) income:
Interest and other expense	(1715,~~111~~691		)	(1210,~~271~~630		)	(32,802		)	(22,901		)
Interest income	~~174~~67			7274			241			146
Income before income taxes	4755,~~474~~742			6467,~~739~~910			103,216			132,649
Provision for income taxes	1617,~~099~~621			1922,~~296~~991			33,720			42,287
Net income	$	3138,~~375~~121		$	4544,~~443~~919		$	69,496		$	90,362
Net income per common share:
Basic	$	0.5870		$	0.8280		$	1.28		$	1.63
Diluted	$	0.5769		$	0.8079		$	1.26		$	1.58
Weighted average common shares outstanding:
Basic	5354,~~953~~458			55,~~311~~865			54,205			55,589
Diluted	5455,~~940~~082			57,~~022~~029			54,980			57,019

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2017			2016		2017
Net income	$	3138,~~375~~121		$	4544,~~443~~919		$	69,496	$	90,362
Other comprehensive income, net of tax:
Available for sale investments, net of tax:
Change in net unrealized gains, net of tax	~~(57~~76		)	5542			19		97
Reclassification for gains included in net income, net of tax	—			~~(13~~—		)	—		(13		)
Net change in unrealized gains on investments, net of tax	~~(57~~76		)	42			19		84
Foreign currency translation adjustment, net of tax	2(1,~~798~~435		)	~~2,867~~33			1,363		2,900
Other comprehensive income, net of tax	2,741			2,909
Other comprehensive (loss) income, net of tax	(1,359		)	75			1,382		2,984
Comprehensive income	$	3436,~~116~~762		$	4844,~~352~~994		$	70,878	$	93,346

See accompanying notes.

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NEUSTAR, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2016			2017
Operating activities:
Net income	$	3169,~~375~~496		$	4590,~~443~~362
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3877,~~482~~311			3470,~~927~~379
Stock-based compensation	920,~~876~~474			920,~~469~~063
Amortization of deferred financing costs and original issue discount on debt	48,~~545~~890			35,~~177~~640
Tax benefit from equity awards	(~~323~~260		)	—
Deferred income taxes	101,~~020~~237			3(2,~~860~~993		)
Provision for doubtful accounts	13,~~800~~600			13,~~800~~600
Changes in operating assets and liabilities:
Accounts receivable	(2312,~~716~~459		)	16,~~857~~882
Unbilled receivables	3,~~598~~012			43,~~183~~945
Prepaid expenses and other current assets	(87,~~179~~630		)	67,~~549~~378
Deferred costs	(~~854~~3,018		)	~~784~~1,684
Income taxes	48,~~520~~526			1236,~~974~~207
Other assets	~~652~~3,051			~~1,123~~222
Other liabilities	~~1,257~~(842		)	~~(2,743~~469		)
Accounts payable and accrued expenses	(44,~~308~~538		)	(3427,~~087~~448		)
Deferred revenue	(2,~~477~~545		)	~~101~~(407		)
Net cash provided by operating activities	31124,~~222~~305			~~104~~225,~~417~~983
Investing activities:
Purchases of property and equipment	(923,~~870~~366		)	(1529,~~361~~092		)
Net cash used in investing activities	(9,870		)	(15,361		)
Businesses acquired, net of cash acquired	12			—
Net cash used in investing activities	(23,354		)	(29,092		)
Financing activities:
(Increase) decrease in restricted cash	(256		)	142
Decrease in restricted cash	73			144
Payments under notes payable obligations	(26126,~~881~~731		)	(77139,~~439~~878		)
Principal repayments on capital lease obligations	(12,~~459~~774		)	(~~987~~1,336		)
Proceeds from issuance of stock	~~150~~432			46,~~315~~161
Tax benefit from equity awards	~~323~~260			—
Repurchase of restricted stock awards and common stock	(1210,~~469~~762		)	(1312,~~604~~539		)
Net cash used in financing activities	(40139,~~592~~502		)	(87147,~~573~~448		)
Effect of foreign exchange rates on cash and cash equivalents	~~(13~~111		)	(~~208~~393		)
Net (decrease) increase in cash and cash equivalents	(1938,~~253~~440		)	149,~~275~~050
Cash and cash equivalents at beginning of period	89,097			45,773
Cash and cash equivalents at end of period	$	6950,~~844~~657		$	4794,~~048~~823

See accompanying notes.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017



1.	DESCRIPTION OF BUSINESS AND ORGANIZATION

NeuStar, Inc. (the Company or Neustar) helps clients grow and guard their business with the most complete understanding of how to connect people, places, and things using its authoritative OneID^TM system. As the leader in connection science, the Company uses its expertise in real-time addressing, authentication, and analytics to provide marketing, risk security, registry, and communications solutions to over 11,000 clients. The Company’s 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 December 14, 2016, the Company entered into an Agreement and Plan of Merger (the Merger Agreement), with Aerial Topco, L.P. (the Parent), and Aerial Merger Sub, Inc., a subsidiary of Parent (Merger Sub), pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub will merge with and into Neustar. As a result of the merger, the Company will become a wholly-owned subsidiary of Parent. Parent and Merger Sub were formed by Golden Gate Private Equity, Inc. and GIC Special Investments Pte Ltd. On March 14, 2017, the Company’s stockholders voted in favor of the adoption of the Merger Agreement. ~~The~~On ~~merger~~August 8, 2017, ~~which~~Merger isSub ~~expected~~merged towith ~~close~~and nointo ~~later than~~ the ~~end~~Company ofpursuant to the ~~third~~Merger ~~quarter~~Agreement ofand ~~2017,~~the isCompany ~~subject~~became toa ~~the~~wholly-owned ~~receipt~~subsidiary of ~~required~~Parent ~~regulatory approvals from~~ (the ~~Committee~~Closing). As ona ~~Foreign~~result ~~Investment~~of in the ~~United~~Closing, ~~States~~Company ~~and~~stockholders ~~the~~are ~~Federal~~entitled ~~Communications~~to ~~Commission~~receive as$33.50 ~~well~~per asshare ~~the~~in ~~satisfaction~~cash oras ~~waiver~~merger ~~of other customary closing conditions~~consideration.



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 ~~three~~six months ended ~~March~~June 3130, 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, 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, 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 quantification of income tax 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.

~~Reclassifications~~Fair Value of Financial Instruments

~~Within~~Fair value is the ~~consolidated~~price ~~statement~~that ofwould ~~comprehensive~~be ~~income~~received ~~for~~in the ~~three~~sale ~~months~~of ~~ended~~an ~~March 31, 2016,~~asset ~~the~~or ~~company~~paid ~~reclassified~~to ~~$2.8~~transfer ~~million~~a ~~from~~liability ~~net change~~ in ~~unrealized~~an ~~gains~~orderly ontransaction ~~investments,~~between ~~net~~market ofparticipants ~~tax~~at tothe ~~foreign~~measurement ~~currency~~date. The ~~translation~~Fair ~~adjustment,~~Value ~~net~~Measurements ~~of tax~~ and ~~reclassified~~Disclosure ~~$0.1~~Topic ~~million~~of ~~from~~the ~~foreign~~Financial ~~currency~~Accounting ~~translation~~Standards ~~adjustment,~~Board ~~net~~(FASB) ofAccounting ~~tax~~Standards toCodification ~~net~~(ASC) ~~change~~establishes ina ~~unrealized~~fair ~~gains~~value onhierarchy ~~investments,~~that ~~net of tax.~~

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

~~Fair~~prioritizes ~~Value~~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 ~~Financial~~the ~~Instruments~~following three categories:

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 4), ~~the 2015 Incremental Term Facility (as defined in Note 4)~~ and the Amended 2013 Term Facility (as defined in Note 4), using pricing service quotations as quoted by Bloomberg (Level 2). The Company believes the carrying value of its Amended 2013 Revolving Facility (as defined in Note 4) approximates the fair value of the debt as the term and interest rate approximates the market rate (Level 2). 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).

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

	December 31, 2016				~~March~~June 3130, 2017
	CarryingAmount		Fair Value		CarryingAmount		Fair Value
2013 Amended Term Facility (including current portion, net of discount)	$	437,815	$	439,480	$	~~411~~384,~~363~~768	$	~~411~~385,~~884~~741
Amended 2013 Revolving Facility	85,000		85,000		~~35,000~~—		~~35,000~~—
Senior Notes (including current portion)	300,000		305,733		300,000		308,~~250~~364

Restricted Cash

As of December 31, 2016 and ~~March~~June 3130, 2017, cash of $2.3 million and $2.1 million, respectively, was restricted as collateral for certain of the Company’s outstanding letters of credit and for deposits on leased facilities.

Recent Accounting Pronouncements - Adopted

In March 2016, the FASB issued Accounting Standards Update (ASU) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. 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 Company adopted the standard on January 1, 2017. On a prospective basis, the Company began recognizing excess tax benefits on stock compensation as income tax benefits on its consolidated statements of operations and within operating activities on the consolidated statements of cash flows. During the three and six months ended ~~March 31~~June 30, 2017, the Company recognized excess tax benefits of $20.83 million and $3.1 million, respectively. 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.

Recent Accounting Pronouncements - Not Yet Effective

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under this standard, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective dates of the standard by one year. As a result, the standard will be effective for annual and interim periods beginning after December 15, 2017. Companies may adopt the standard as early as the original effective date (i.e. annual reporting periods beginning after December 15, 2016). The standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or a modified retrospective adoption, meaning the standard is applied only to the most current period presented.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

~~effective~~In ~~dates~~preparation for the adoption of the new accounting standard byon ~~one~~January 1, 2018, ~~year. As~~the Company reviewed a ~~result,~~representative sample of its client contracts and is evaluating the ~~standard~~provisions ~~will~~contained betherein ~~effective~~in ~~for~~light ~~annual~~of ~~and~~the ~~interim~~five-step ~~periods~~model ~~beginning~~specified ~~after~~by ~~December 15, 2017~~the new guidance. ~~Companies~~That ~~may~~five-step ~~adopt~~model includes: (1) determination of whether a contract exists; (2) identification of the ~~standard~~performance asobligations ~~early~~in asthe contract; (3) determination of the ~~original~~transaction ~~effective~~price; ~~date~~(4) allocation of the transaction price to the performance obligations in the contract; and (~~i.e.~~5) ~~annual~~recognition ~~reporting~~of ~~periods~~revenue ~~beginning~~when ~~after~~(or ~~December 15, 2016~~as) the performance obligation is satisfied. The Company is also evaluating the impact of the new standard ~~allows~~on its current practices, such as accounting for ~~either~~sales ~~full~~commissions. Under ~~retrospective~~this ~~adoption~~new guidance, ~~meaning~~sales commission expenditures may be recorded as an asset and recognized as an operating expense over the ~~standard~~period isthat ~~applied~~the Company expects to ~~all~~recover ofthe costs. Currently, the ~~periods~~Company ~~presented,~~expenses orsales acommissions ~~modified~~as ~~retrospective~~incurred. The ~~adoption,~~Company ~~meaning~~has not yet quantified the ~~standard~~potential impact of this or other potential impacts of the new guidance. The Company is ~~applied~~also ~~only~~continuing to evaluate the ~~most~~approach ~~current~~that ~~period~~it ~~presented~~will use when transitioning to this new guidance.

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 August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This standard clarifies how certain cash receipts and cash payments should be classified on the statement of cash flows. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, although early adoption is permitted. The Company currently intends to adopt this standard on January 1, 2018 and is currently evaluating the impact of adoption on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 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.



3.	GOODWILL

The change in the carrying amount of the Company’s goodwill from December 31, 2016 to ~~March~~June 3130, 2017 is as follows (in thousands):

	December 31,2016			Foreign Currency Translation		~~March~~June 3130, 2017
Gross goodwill	$	1,262,584		$	34,~~810~~221	$	1,266,~~394~~805
Accumulated impairments	(93,602		)	—		(93,602		)
Net goodwill	$	1,168,982		$	34,~~810~~221	$	1,~~172~~173,~~792~~203

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017



4.	NOTES PAYABLE

Notes payable consist of the following (in thousands):

	December 31, 2016			~~March~~June 3130, 2017
Amended 2013 Term Facility (net of discount)	$	437,815		$	~~411~~384,~~363~~768
Amended 2013 Term Facility deferred financing fees	(5,016		)	(43,~~218~~535		)
Amended 2013 Revolving Facility	85,000			~~35,000~~—
Amended 2013 Revolving Facility deferred financing fees	(916		)	~~(325~~—		)
Senior Notes	300,000			300,000
Senior Notes deferred financing fees	(10,212		)	(9,~~851~~482		)
Total	806,671			~~731~~671,~~969~~751
Less: current portion, net of discount	(103,725		)	(8974,~~219~~555		)
Long-term portion	$	702,946		$	~~642~~597,~~750~~196

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 the 2013 Credit Facilities to provide for (i) the permissibility of an incremental term facility, (ii) the addition of a senior secured leverage financial 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 Credit Agreement and related security agreement.

On September 28, 2016, the Company entered into 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 the 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 Amended 2013 Term Facility, and together with the Amended 2013 Revolving Facility, the Amended 2013 Credit Facilities), (iii) set the annual amortization percentage of the Amended 2013 Term Facility at 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 (a) if the Consolidated Leverage 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 1 or greater, 3.25% and 2.25%, respectively.

The Company may voluntarily prepay the borrowings under theAmended 2013 Credit Facilities at any time in minimum amounts of $1 million or an integral multiple of $500,000 in excess thereof. The Amended 2013 Credit Facilities provide for 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 ~~March~~June 3130, 2017, there were no outstanding borrowings under the Amended 2013 Revolving Facility ~~were $35~~.~~0 million~~ Available ~~and available~~ borrowings under the same facility were $~~147~~182.0 million, exclusive of outstanding letters of credit totaling $18.0 million.

Senior 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 SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

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 ~~March~~June 3130, 2017, are as follows (in thousands):

2017	$	8254,~~318~~878
2018	49,889
2019	~~319~~284,~~369~~370
2020	—
2021	—
Thereafter	300,000
Total future principal payments	$	~~751~~689,~~576~~137



5.	STOCKHOLDERS’ EQUITY

As of ~~March~~June 3130, 2017, a total of 6,~~358~~519,~~400~~366 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~~.

Stock-based compensation expense recognized for the three months ended ~~March~~June 3130, 2016 and 2017 was $910.96 million and $912.50 million, respectively, and $20.5 million and $21.5 million for the six months ended June 30, 2016 and 2017, respectively. As of ~~March~~June 3130, 2017, total unrecognized compensation expense was estimated at $4737.02 million, which the Company expects to recognize over a weighted average period of approximately 1.31 years. Total unrecognized compensation expense as of ~~March 31~~June 30, 2017 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

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 for the six months ended June 30, 2017:

	Shares		Weighted-AverageExercisePrice		AggregateIntrinsicValue(in millions)		Weighted-AverageRemainingContractualLife(in years)
Outstanding at December 31, 2016	987,984		$	25.55
Granted	—		—
Exercised	(~~356~~429,~~814~~511	)	24.3351
Forfeited	—		—
Outstanding at March 31, 2017	631,170		$	26.24	$	1.5	2.4
Outstanding at June 30, 2017	558,473		$	26.35	$	1.1	2.0
Exercisable at March 31, 2017	524,830		$	26.21	$	1.1	2.0
Exercisable at June 30, 2017	452,133		$	26.34	$	0.7	1.5

The aggregate intrinsic value of options exercised for the ~~three~~six months ended ~~March~~June 3130, 2017 was $3.38 million.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

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 six months ended June 30, 2017:

	Shares		Weighted-AverageGrant DateFair Value		AggregateIntrinsicValue(in millions)
Non-vested at December 31, 2016	1,166,939		$	23.25
Granted	512,569		33.25
Vested	(~~437~~451,~~508~~700	)	23.7285
Forfeited	(~~288~~318,~~091~~977	)	24.2521
Non-vested at March 31, 2017	953,909		$	28.11	$	31.6
Non-vested at June 30, 2017	908,831		$	28.26	$	30.3

The aggregate intrinsic value of PVRSUs vested during the ~~three~~six months ended ~~March~~June 3130, 2017 was approximately $1415.61 million. The Company repurchased ~~169~~175,~~979~~314 shares of common stock for an aggregate purchase price of $5.78 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 six months ended June 30, 2017:

	Shares		Weighted-AverageGrant DateFair Value		AggregateIntrinsicValue(in millions)
Outstanding at December 31, 2016	2,226,948		$	27.13
Granted	45,750		33.15
Vested	(~~617~~646,~~519~~912	)	29.2210
Forfeited	(3781,~~435~~950	)	25.0234
Outstanding at March 31, 2017	1,617,744		$	26.55	$	53.6
Outstanding at June 30, 2017	1,543,836		$	26.58	$	51.5

The aggregate intrinsic value of restricted stock units vested during the ~~three~~six months ended ~~March~~June 3130, 2017 was approximately $2021.5 million. The Company repurchased ~~238~~249,~~630~~762 shares of common stock for an aggregate purchase price of $78.93 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 SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017



6.	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 March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2017		2016		2017
Computation of basic net income per common share:
Net income	$	3138,~~375~~121	$	4544,~~443~~919	$	69,496	$	90,362
Weighted average common shares and participating securities outstanding – basic	5354,~~953~~458		55,~~311~~865		54,205		55,589
Basic net income per common share	$	0.5870	$	0.8280	$	1.28	$	1.63
Computation of diluted net income per common share:
Weighted average common shares outstanding – basic	5354,~~953~~458		55,~~311~~865		54,205		55,589
Effect of dilutive securities:
Stock-based awards	~~987~~624		1,~~711~~164		775		1,430
Weighted average common shares outstanding – diluted	5455,~~940~~082		57,~~022~~029		54,980		57,019
Diluted net income per common share	$	0.5769	$	0.8079	$	1.26	$	1.58

Diluted net income per common share reflects the potential dilution of common stock equivalents such as options, to the extent the impact is dilutive. An aggregate of 2,002,992 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 June 30, 2016. There were no shares with an anti-dilutive effect for the three months ended June 30, 2017. An aggregate of 1,~~900~~877,~~569~~467 and 9484,~~408~~ 276 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~~six months ended ~~March~~June 3130, 2016 and 2017, respectively.



7.	INTEREST AND OTHER EXPENSE

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

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2017			2016		2017
Interest and other expense:
Interest expense	$	1615,~~566~~961		$	1110,~~646~~433		$	32,527	$	22,079
Gain on asset disposals	—			(14		)
Loss on asset disposals	8			274			8		260
Foreign currency transaction loss	545			639
Foreign currency transaction (gain) loss	(278		)	(77		)	267		562
Total interest and other expense	$	1715,~~111~~691		$	1210,~~271~~630		$	32,802	$	22,901



8.	INCOME TAXES

The Company’s effective tax rate, including discrete tax benefits of $3.29 million, decreased to 2931.89% for the ~~three~~six months ended ~~March~~June 3130, 2017 from 3332.97% for the ~~three~~six months ended ~~March~~June 3130, 2016, primarily due to the adoption of ASU 2016-09 in the first quarter of 2017. As a result of 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.

As of December 31, 2016 and ~~March~~June 3130, 2017, the Company had unrecognized tax benefits of $7.5 million and $7.89 million, respectively, of which $6.9 million and $7.23 million, respectively, would affect the Company’s effective tax rate if recognized.

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

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the three and six months ended June 30, 2016 and 2017, potential interest and penalties were insignificant. Interest and penalties are primarily due to uncertain tax positions assumed in acquisitions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

The Company files income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. The tax years 2010 through 2015 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Virginia Department of Taxation initiated an examination of the 2014 and 2015 corporate income tax returns for Neustar, Inc. and Subsidiaries. Management does not currently believe that the outcome will have a material adverse effect on the Company’s financial position, result of operations or cash flows. During 2017, the IRS completed an examination of the 2012 federal income tax return of Neustar, Inc. and its subsidiaries. No adjustments were made as a result of the audit.

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.



9.	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 and six months ended June 30, 2016 and 2017, and geographic area property and equipment as of December 31, 2016 and June 30, 2017 are as follows (in thousands):

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2017		2016		2017
Revenue by geographical areas:
United States	$	~~264~~271,~~692~~752	$	~~269~~274,~~786~~156	$	536,444	$	543,942
International	2225,~~606~~813		23,~~400~~782		48,419		47,182
Total revenue	$	~~287~~297,~~298~~565	$	~~293~~297,~~186~~938	$	584,863	$	591,124
Revenue by service:
Marketing Services	$	5763,~~671~~923	$	6567,~~039~~796	$	121,594	$	132,835
Security Services	4849,~~647~~323		4647,~~875~~455		97,970		94,330
Data Services	5355,~~156~~808		5354,~~005~~761		108,964		107,766
NPAC Services	~~127~~128,~~824~~511		~~128~~127,~~267~~926		256,335		256,193
Total revenue	$	~~287~~297,~~298~~565	$	~~293~~297,~~186~~938	$	584,863	$	591,124

	December 31, 2016		~~March~~June 3130, 2017
Property and equipment, net
United States	$	143,560	$	~~147~~149,~~453~~900
Australia	1,378		~~1,057~~926
Other	883		~~853~~984
Total property and equipment, net	$	145,821	$	~~149~~151,~~363~~810

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017



10.	SUPPLEMENTAL GUARANTOR INFORMATION

The following schedules present condensed consolidating financial information of the Company as of December 31, 2016 and ~~March~~June 3130, 2017 and for the three and six months ended ~~March~~June 3130, 2016 and 2017 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 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.

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2016

(in thousands)



	NeuStar, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	21,871	$	15,037	$	8,865	$	—		$	45,773
Restricted cash	1,260		1,023		—		—			2,283
Accounts receivable, net	100,686		102,565		4,344		—			207,595
Unbilled receivables	3,829		14,652		1,314		—			19,795
Prepaid expenses and other current assets	32,799		7,039		1,842		—			41,680
Deferred costs	2,232		5,964		3,273		—			11,469
Income taxes receivable	17,481		—		1,007		(4,902		)	13,586
Intercompany receivable	9,990		1,365		—		(11,355		)	—
Total current assets	190,148		147,645		20,645		(16,257		)	342,181
Property and equipment, net	133,759		9,636		2,426		—			145,821
Goodwill	94,153		968,116		106,713		—			1,168,982
Intangible assets, net	10,967		368,068		44,922		—			423,957
Net investments in subsidiaries	1,490,889		—		—		(1,490,889		)	—
Other assets, long-term	11,686		3,206		2,879		—			17,771
Total assets	$	1,931,602	$	1,496,671	$	177,585	$	(1,507,146	)	$	2,098,712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,733	$	9,578	$	784	$	—		$	21,095
Accrued expenses	84,782		41,458		8,305		—			134,545
Income taxes payable	—		4,902		—		(4,902		)	—
Deferred revenue	24,503		48,753		17,932		—			91,188
Notes payable	103,725		6,849		3,141		(9,990		)	103,725
Capital lease obligations	1,457		—		—		—			1,457
Other liabilities	6,564		4,936		132		—			11,632
Intercompany payable	938		—		427		(1,365		)	—
Total current liabilities	232,702		116,476		30,721		(16,257		)	363,642
Deferred revenue, long-term	8,426		8,360		5,651		—			22,437
Notes payable, long-term	702,946		—		—		—			702,946
Deferred income tax liabilities, long-term	9,493		19,616		5,979		—			35,088
Other liabilities, long-term	41,411		5,313		6,574		—			53,298
Total liabilities	994,978		149,765		48,925		(16,257		)	1,177,411
Total stockholders’ equity	936,624		1,346,906		128,660		(1,490,889		)	921,301
Total liabilities and stockholders’ equity	$	1,931,602	$	1,496,671	$	177,585	$	(1,507,146	)	$	2,098,712

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NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED BALANCE SHEET

~~MARCH~~JUNE 3130, 2017

(in thousands)

NeuStar, Inc.

GuarantorSubsidiaries

Non-GuarantorSubsidiaries

Eliminations

Consolidated

ASSETS

Current assets:

Cash and cash equivalents

3278,~~012~~860

76,~~333~~483

79,~~703~~480

—

4794,~~048~~823

Restricted cash

1,260

~~881~~879

—

2,~~141~~139

Accounts receivable, net

~~104~~98,~~585~~408

7882,~~639~~740

5,~~706~~721

—

~~188~~186,~~930~~869

Unbilled receivables

21,~~159~~284

12,~~484~~818

~~975~~1,763

—

15,~~618~~865

Prepaid expenses and other current assets

2730,~~268~~023

64,~~397~~861

21,~~202~~834

—

3536,~~867~~718

Deferred costs

21,~~327~~979

4,~~923~~728

3,~~659~~793

—

10,~~909~~500

Income taxes receivable

~~4,125~~—

—410

1,~~866~~187

(51,~~379~~597

)

~~612~~—

Intercompany receivable

9,~~893~~796

~~1,365~~448

—5,919

(1116,~~258~~163

)

—

Total current assets

~~183~~221,~~629~~610

~~112~~113,~~022~~367

2229,~~111~~697

(1617,~~637~~760

)

~~301~~346,~~125~~914

Property and equipment, net

~~138~~141,~~540~~413

8,~~799~~423

21,~~024~~974

—

~~149~~151,~~363~~810

Goodwill

94,153

968,116

110,~~523~~934

—

1,~~172~~173,~~792~~203

Intangible assets, net

109,~~345~~721

~~349~~331,~~902~~738

4543,~~182~~472

—

~~405~~384,~~429~~931

Net investments in subsidiaries

1,~~441~~440,~~413~~432

—

(1,~~441~~440,~~413~~432

)

—

Other assets, long-term

1011,~~440~~147

32,~~193~~641

3,~~037~~093

—

16,~~670~~881

Total assets

1,~~878~~918,~~520~~476

1,~~442~~424,~~032~~285

~~182~~189,~~877~~170

(1,458,~~050~~192

)

2,~~045~~073,~~379~~739

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

1113,~~245~~457

118,~~176~~020

~~148~~708

—

22,~~569~~185

Accrued expenses

6773,~~718~~798

24,~~674~~970

5,~~567~~432

—

97104,~~959~~200

Deferred revenue

26,~~258~~966

4951,~~262~~722

2021,~~515~~895

—

96100,~~035~~583

Notes payable

8974,~~219~~555

6,~~731~~612

3,~~162~~184

(9,~~893~~796

)

8974,~~219~~555

Capital lease obligations

~~470~~121

—

~~470~~121

Income taxes payable

—24,218

~~5,379~~—

—

(51,~~379~~597

)

—22,621

Other liabilities

610,~~532~~797

23,~~717~~103

57216

—

914,~~306~~116

Intercompany payable

16,~~621~~367

~~1,022~~—

—

(26,~~643~~367

)

—

Total current liabilities

~~203~~230,~~063~~279

~~100~~94,~~961~~427

2931,~~449~~435

(17,~~915~~760

)

~~315~~338,~~558~~381

Deferred revenue, long-term

8,~~178~~119

89,~~576~~195

6,~~096~~268

—

2223,~~850~~582

Notes payable, long-term

~~642~~597,~~750~~196

—

~~642~~597,~~750~~196

Deferred income tax liabilities, long-term

1614,~~771~~951

1811,~~039~~033

65,~~321~~561

—3,009

4134,~~131~~554

Other liabilities, long-term

4140,~~122~~598

54,~~117~~399

76,~~018~~697

—

5351,~~257~~694

Total liabilities

~~911~~891,~~884~~143

~~132~~119,~~693~~054

4849,~~884~~961

(1714,~~915~~751

)

1,~~075~~045,~~546~~407

Total stockholders’ equity

~~966~~1,~~636~~027,333

1,~~309~~305,~~339~~231

~~133~~139,~~993~~209

(1,~~440~~443,~~135~~441

)

~~969~~1,~~833~~028,332

Total liabilities and stockholders’ equity

1,~~878~~918,~~520~~476

1,~~442~~424,~~032~~285

~~182~~189,~~877~~170

(1,458,~~050~~192

)

2,~~045~~073,~~379~~739

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2016

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	~~166~~168,~~939~~591		$	~~118~~123,~~407~~831		$	1216,~~560~~192		$	(1011,~~608~~049	)	$	~~287~~297,~~298~~565
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	41,~~676~~795			5052,~~927~~161			76,~~277~~171			(89,~~529~~890		)	9190,~~351~~237
Sales and marketing	30,~~813~~899			2221,~~535~~336			3,~~179~~139			(1,~~204~~086		)	5554,~~323~~288
Research and development	5,~~471~~103			~~1,623~~(231		)	~~455~~388			—			75,~~549~~260
General and administrative	22,~~334~~672			53,~~872~~665			~~187~~974			(~~875~~73		)	27,~~518~~238
Depreciation and amortization	13,~~324~~615			22,~~796~~798			2,~~362~~416			—			38,~~482~~829
Restructuring charges	23,~~664~~705			—1,968			—456			—			26,~~664~~129
	116,282			103,753			13,460			(10,608		)	222,887
Separation costs	4,218			—			—			—			4,218
Income from operations	50,657			14,654			(900		)	—			64,411
	122,007			101,697			13,544			(11,049		)	226,199
Income from operations	46,584			22,134			2,648			—			71,366
Other (expense) income:
Interest and other expense	(16,~~280~~025		)	(~~154~~816		)	~~(677~~1,150		)	—			(1715,~~111~~691		)
Interest income	~~113~~982			70100			(91,015		)	—			~~174~~67
Income (loss) before income taxes and equity income in consolidated subsidiaries	34,490			14,570			(1,586		)	—			47,474
Income before income taxes and equity income in consolidated subsidiaries	31,541			21,418			2,783			—			55,742
Provision (benefit) for income taxes	11,611			5,212			(724		)	—			16,099
Provision for income taxes	11,011			6,334			276			—			17,621
Income (loss) before equity income in consolidated subsidiaries	22,879			9,358			(862		)	—			31,375
Income before equity income in consolidated subsidiaries	20,530			15,084			2,507			—			38,121
Equity income in consolidated subsidiaries	817,~~496~~591			~~147~~164			—			(817,~~643~~755		)	—
Net income (loss)	$	31,375		$	9,505		$	(862	)	$	(8,643	)	$	31,375
Net income	$	38,121		$	15,248		$	2,507		$	(17,755	)	$	38,121
Comprehensive income	$	2939,~~517~~199		$	915,~~495~~237		$	~~3,747~~81		$	(817,~~643~~755	)	$	3436,~~116~~762

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2017

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Revenue	$	~~170~~171,~~623~~466		$	~~121~~126,~~686~~053		$	14,~~146~~968		$	(1314,~~269~~549	)	$	~~293~~297,~~186~~938
Operating expense:
Cost of revenue (excluding depreciation and amortization shown separately below)	4243,~~911~~126			50,~~783~~371			5,~~414~~465			(11,~~192~~640		)	87,~~916~~322
Sales and marketing	35,~~396~~078			2120,~~717~~212			1,~~433~~370			(12,~~989~~689		)	5653,~~557~~971
Research and development	45,~~433~~778			21,~~280~~925			(4199		)	—			67,~~672~~604
General and administrative	2624,~~282~~058			23,~~507~~292			(~~341~~19		)	(88220		)	2827,~~360~~111
Depreciation and amortization	1314,~~516~~110			19,~~146~~121			2,~~265~~221			—			3435,~~927~~452
Restructuring charges (recoveries)	36			(9		)	—			—			27
Restructuring charges	5,518			1,963			531			—			8,012
Separation costs	1,789			—			—			—			1,789
	127,668			96,884			9,469			(14,549		)	219,472
	124,363			96,424			8,730			(13,269		)	216,248
Income from operations	43,798			29,169			5,499			—			78,466
Income from operations	46,260			25,262			5,416			—			76,938
Other (expense) income:
Interest and other expense	(1110,~~902~~733		)	(~~238~~98		)	~~(131~~201		)	—			(1210,~~271~~630		)
Interest income	58			127			(~~113~~111		)	—			7274
Income before income taxes and equity income in consolidated subsidiaries	3433,~~416~~123			2529,~~151~~198			5,~~172~~589			—			6467,~~739~~910
Provision for income taxes	9,683			9,370			243			—			19,296
Provision (benefit) for income taxes	7,641			15,448			(98		)	—			22,991
Income before equity income in consolidated subsidiaries	2425,~~733~~482			1513,~~781~~750			45,~~929~~687			—			4544,~~443~~919
Equity income in consolidated subsidiaries	2019,~~710~~437			~~591~~649			—			(2120,~~301~~086		)	—
Net income	$	4544,~~443~~919		$	1614,~~372~~399		$	45,~~929~~687		$	(2120,~~301~~086	)	$	4544,~~443~~919
Comprehensive income (loss)	$	4344,~~592~~756		$	(824,~~307~~689	)	$	19(4,~~987~~365	)	$	(620,~~920~~086	)	$	4844,~~352~~994

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF ~~CASH FLOWS~~OPERATIONS

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	29,576		$	49,676		$	(5,616	)	$	(42,414	)	$	31,222
Revenue	$	335,530		$	242,238		$	28,752		$	(21,657	)	$	584,863
Investing activities:
Operating expense:
Purchases of property and equipment	(8,037		)	(1,833		)	—			—			(9,870		)
Cost of revenue (excluding depreciation and amortization shown separately below)	83,471			103,088			13,448			(18,419		)	181,588
Net cash used in investing activities	(8,037		)	(1,833		)	—			—			(9,870		)
Sales and marketing	61,712			43,871			6,318			(2,290		)	109,611
Financing activities:
Research and development	10,574			1,392			843			—			12,809
Increase of restricted cash	—			(256		)	—			—			(256		)
General and administrative	45,006			9,537			1,161			(948		)	54,756
Payments under notes payable obligations	(26,881		)	—			—			—			(26,881		)
Depreciation and amortization	26,939			45,594			4,778			—			77,311
Principal repayments on capital lease obligations	(1,459		)	—			—			—			(1,459		)
Restructuring charges	6,369			1,968			456			—			8,793
Proceeds from issuance of stock	150			—			—			—			150
Separation costs	4,218			—			—			—			4,218
Tax benefit from equity awards	323			—			—			—			323
	238,289			205,450			27,004			(21,657		)	449,086
Repurchase of restricted stock awards and common stock	(12,469		)	—			—			—			(12,469		)
Income from operations	97,241			36,788			1,748			—			135,777
(Distribution to) investment by parent	—			(42,962		)	548			42,414			—
Other (expense) income:
Net cash (used in) provided by financing activities	(40,336		)	(43,218		)	548			42,414			(40,592		)
Interest and other expense	(32,305		)	(970		)	473			—			(32,802		)
Effect of foreign exchange rates on cash and cash equivalents	1,099			(11		)	(1,101		)	—			(13		)
Interest income	1,095			170			(1,024		)	—			241
Net (decrease) increase in cash and cash equivalents	(17,698		)	4,614			(6,169		)	—			(19,253		)
Income before income taxes and equity income in consolidated subsidiaries	66,031			35,988			1,197			—			103,216
Cash and cash equivalents at beginning of period	48,061			27,092			13,944			—			89,097
Provision (benefit) for income taxes	22,622			11,546			(448		)	—			33,720
Cash and cash equivalents at end of period	$	30,363		$	31,706		$	7,775		$	—		$	69,844
Income before equity income in consolidated subsidiaries	43,409			24,442			1,645			—			69,496
Equity income in consolidated subsidiaries	26,087			311			—			(26,398		)	—
Net income	$	69,496		$	24,753		$	1,645		$	(26,398	)	$	69,496
Comprehensive income	$	68,716		$	24,732		$	3,828		$	(26,398	)	$	70,878

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF ~~CASH FLOWS~~OPERATIONS

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2017

(in thousands)

	NeuStar, Inc.			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	110,361		$	63,083		$	(438	)	$	(68,589	)	$	104,417
Revenue	$	342,089		$	247,739		$	29,114		$	(27,818	)	$	591,124
Investing activities:
Operating expense:
Purchases of property and equipment	(13,528		)	(1,833		)	—			—			(15,361		)
Cost of revenue (excluding depreciation and amortization shown separately below)	86,037			101,154			10,879			(22,832		)	175,238
Net cash used in investing activities	(13,528		)	(1,833		)	—			—			(15,361		)
Sales and marketing	70,474			41,929			2,803			(4,678		)	110,528
Financing activities:
Research and development	10,211			4,205			(140		)	—			14,276
Decrease of restricted cash	—			142			—			—			142
General and administrative	50,340			5,799			(360		)	(308		)	55,471
Payments under notes payable obligations	(77,439		)	—			—			—			(77,439		)
Depreciation and amortization	27,626			38,267			4,486			—			70,379
Principal repayments on capital lease obligations	(987		)	—			—			—			(987		)
Restructuring charges	5,554			1,954			531			—			8,039
Proceeds from issuance of stock	4,315			—			—			—			4,315
Separation costs	1,789			—			—			—			1,789
Repurchase of restricted stock awards and common stock	(13,604		)	—			—			—			(13,604		)
	252,031			193,308			18,199			(27,818		)	435,720
(Distribution to) investment by parent	—			(69,087		)	498			68,589			—
Income from operations	90,058			54,431			10,915			—			155,404
Net cash (used in) provided by financing activities	(87,715		)	(68,945		)	498			68,589			(87,573		)
Other (expense) income:
Effect of foreign exchange rates on cash and cash equivalents	1,023			(9		)	(1,222		)	—			(208		)
Interest and other expense	(22,635		)	(336		)	70			—			(22,901		)
Net increase (decrease) in cash and cash equivalents	10,141			(7,704		)	(1,162		)	—			1,275
Interest income	116			254			(224		)	—			146
Cash and cash equivalents at beginning of period	21,871			15,037			8,865			—			45,773
Income before income taxes and equity income in consolidated subsidiaries	67,539			54,349			10,761			—			132,649
Cash and cash equivalents at end of period	$	32,012		$	7,333		$	7,703		$	—		$	47,048
Provision for income taxes	17,324			24,818			145			—			42,287
Income before equity income in consolidated subsidiaries	50,215			29,531			10,616			—			90,362
Equity income in consolidated subsidiaries	40,147			1,240			—			(41,387		)	—
Net income	$	90,362		$	30,771		$	10,616		$	(41,387	)	$	90,362
Comprehensive income	$	88,348		$	30,763		$	15,622		$	(41,387	)	$	93,346

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2016

(in thousands)



	NeuStar, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	151,200		$	76,028		$	(9,505	)	$	(93,418	)	$	124,305
Investing activities:
Purchases of property and equipment	(21,533		)	(1,833		)	—			—			(23,366		)
Businesses acquired, net of cash acquired	12												12
Net cash used in investing activities	(21,521		)	(1,833		)	—			—			(23,354		)
Financing activities:
Decrease of restricted cash	—			73			—			—			73
Payments under notes payable obligations	(126,731		)	—			—			—			(126,731		)
Principal repayments on capital lease obligations	(2,774		)	—			—			—			(2,774		)
Proceeds from issuance of stock	432			—			—			—			432
Tax benefit from equity awards	259			—			1			—			260
Repurchase of restricted stock awards and common stock	(10,762		)	—			—			—			(10,762		)
(Distribution to) investment by parent	—			(95,596		)	2,178			93,418			—
Net cash (used in) provided by financing activities	(139,576		)	(95,523		)	2,179			93,418			(139,502		)
Effect of foreign exchange rates on cash and cash equivalents	420			(17		)	(292		)	—			111
Net (decrease) in cash and cash equivalents	(9,477		)	(21,345		)	(7,618		)	—			(38,440		)
Cash and cash equivalents at beginning of period	48,061			27,092			13,944			—			89,097
Cash and cash equivalents at end of period	$	38,584		$	5,747		$	6,326		$	—		$	50,657

Table of Contents

NEUSTAR, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2017

(in thousands)



	NeuStar, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	230,631		$	87,528		$	399		$	(92,575	)	$	225,983
Investing activities:
Purchases of property and equipment	(27,259		)	(1,833		)	—			—			(29,092		)
Net cash used in investing activities	(27,259		)	(1,833		)	—			—			(29,092		)
Financing activities:
Decrease of restricted cash	—			144			—			—			144
Payments under notes payable obligations	(139,878		)	—			—			—			(139,878		)
Principal repayments on capital lease obligations	(1,336		)	—			—			—			(1,336		)
Proceeds from issuance of stock	6,161			—			—			—			6,161
Repurchase of restricted stock awards and common stock	(12,539		)	—			—			—			(12,539		)
(Distribution to) investment by parent	—			(94,386		)	1,811			92,575			—
Net cash (used in) provided by financing activities	(147,592		)	(94,242		)	1,811			92,575			(147,448		)
Effect of foreign exchange rates on cash and cash equivalents	1,209			(7		)	(1,595		)	—			(393		)
Net increase (decrease) in cash and cash equivalents	56,989			(8,554		)	615			—			49,050
Cash and cash equivalents at beginning of period	21,871			15,037			8,865			—			45,773
Cash and cash equivalents at end of period	$	78,860		$	6,483		$	9,480		$	—		$	94,823

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

We announced 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~~are 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~~As ~~merger, which is expected to close no later than the end~~ of ~~the third quarter of~~ August 4, 2017, isall ~~subject to the receipt of~~ required regulatory approvals ~~from~~had ~~the~~been ~~Committee~~received ~~on Foreign Investment in the United States~~ and the ~~Federal~~merger ~~Communications~~was ~~Commission,~~completed oron ~~the FCC~~August 8, ~~as well as the satisfaction or waiver of other customary closing conditions~~ 2017.

~~Prior~~On March 26, 2015, the FCC approved a competitor to ~~entering~~serve ~~into~~as the ~~merger~~next ~~agreement,~~Local weNumber ~~announced~~Portability onAdministrator, ~~June~~or 21LNPA, ~~2016~~and ~~our~~authorized ~~intention~~the North American Portability Management LLC, or NAPM, to ~~separate~~begin ~~into~~contract ~~two~~negotiations ~~independent~~with ~~and~~that ~~publicly~~competitor. On ~~traded~~April 6, 2015, ~~companies~~we ~~through~~filed a ~~tax-free~~Petition ~~spin-off.~~for ~~One~~Review ~~company~~asking ~~would~~the ~~have~~U.S. ~~consisted~~Court of Appeals for the ~~majority~~District of ~~our~~Columbia ~~information~~Circuit ~~services,~~to ~~including~~“hold ~~Marketing~~unlawful, ~~Services~~vacate, ~~Security~~enjoin, ~~Services~~ and ~~related~~set ~~Data~~aside” ~~Services.~~the ~~The~~FCC’s ~~other~~Order ~~company~~approving ~~would~~the ~~have~~North ~~focused~~American onNumbering ~~providing~~Council’s ~~Order~~recommendation. The ~~Management~~Court ~~and~~of ~~Numbering~~Appeals ~~Services,~~issued ~~including~~its ~~Local~~decision ~~Number~~on ~~Portability Administration~~May 26, 2017 ~~number administration~~ and ~~ancillary~~denied ~~numbering~~our ~~services~~Petition asfor ~~well~~Review. We asare ~~order~~reviewing ~~and~~the ~~inventory management solutions~~decision.

On March 26, 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.

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 were due to 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 the 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 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.

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.

24Loss 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.

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~~resulting~~Our indisclosure awill ~~2015~~expand ~~LNPA~~as ~~service~~we ~~fixed~~evaluate ~~fee of $496.1 million. Under~~ the ~~April 7, 2015~~cost ~~amendment,~~structure ~~the~~that ~~annual~~will ~~LNPA~~be ~~service~~in ~~fixed~~place ~~fee~~to ~~remains~~support ~~the~~our ~~same~~ongoing atbusiness ~~$496.1 million~~or ~~for~~as ~~the~~we ~~duration~~learn ofmore about the ~~amended~~timing ~~term~~ of the ~~contracts~~contract termination.

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 I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2016, for certain matters that may bear on our results of operations.

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, 2016.

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Consolidated Results of Operations

Three Months Ended ~~March~~June 3130, 2016 Compared to Three Months Ended ~~March~~June 3130, 2017

The following table presents an overview of our results of operations for the three months ended June 30, 2016 and 2017:

	Three Months Ended March 31,
	Three Months Ended June 30,
	2016			2017			2016 vs. 2017
	$			$			$ Change			% Change
	(unaudited)(dollars in thousands, except per share data)
Revenue	$	~~287~~297,~~298~~565		$	~~293~~297,~~186~~938		$	~~5,888~~373		2.0.1	%
Operating expense:
Cost of revenue (excludes depreciation and amortization shown separately below)	9190,~~351~~237			87,~~916~~322			(32,~~435~~915		)	(3.82	)%
Sales and marketing	5554,~~323~~288			5653,~~557~~971			~~1,234~~(317		)	2(0.26	)%
Research and development	75,~~549~~260			67,~~672~~604			~~(877~~2,344		)	~~(11~~44.6	)%
General and administrative	27,~~518~~238			2827,~~360~~111			~~842~~(127		)	3(0.15	)%
Depreciation and amortization	38,~~482~~829			3435,~~927~~452			(3,~~555~~377		)	(98.27	)%
Restructuring charges	26,~~664~~129			278,012			(21,~~637~~883		)	~~(99~~30.07	)%
Separation costs	—4,218			~~1,789~~—			1(4,~~789~~218		)	(100.0	)%
	222,887			216,248			(6,639		)	(3.0	)%
	226,199			219,472			(6,727		)	(3.0	)%
Income from operations	6471,~~411~~366			7678,~~938~~466			127,~~527~~100			199.49	%
Other (expense) income:
Interest and other expense	(1715,~~111~~691		)	(1210,~~271~~630		)	45,~~840~~061			(2832.3	)%
Interest income	~~174~~67			7274			~~(102~~7		)	~~(58~~10.64	)%
Income before income taxes	4755,~~474~~742			6467,~~739~~910			1712,~~265~~168			3621.48	%
Provision for income taxes	1617,~~099~~621			1922,~~296~~991			35,~~197~~370			1930.95	%
Net income	$	3138,~~375~~121		$	4544,~~443~~919		$	146,~~068~~798		4417.8	%
Net income per common share:
Basic	$	0.5870		$	0.8280
Diluted	$	0.5769		$	0.8079
Weighted average common shares outstanding:
Basic	5354,~~953~~458			55,~~311~~865
Diluted	5455,~~940~~082			57,~~022~~029

Revenue

Revenue. Revenue increased $50.94 million. Marketing Services revenue increased $73.49 million driven by 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 decreased $1.89 million due to a decrease in revenue of $32.14 million from ~~our~~domain ~~DNS~~name ~~services~~registries, partially offset by aan ~~$1.3 million~~ increase in revenue of $0.5 million from ~~domain~~our ~~name~~DNS ~~registries~~services. The decrease in revenue from ~~our~~domain ~~DNS~~name ~~services~~registries ~~resulted~~was ~~from~~driven ~~lower~~by ~~channel~~consolidation ~~partner~~of ~~revenue. The~~the ~~increase~~customer base in ~~domain~~the ~~name~~second ~~registries~~quarter ~~was~~of ~~driven~~2016. The byincrease ~~growth~~ in ~~the~~revenue ~~number~~from ofour ~~domain~~DNS ~~names~~services ~~under~~resulted ~~management~~from greater channel partner revenue.

Data Services revenue decreased $01.20 million due to a decrease in revenue of $1.57 million from caller identification services and a decrease in revenue of $1.15 million from user authentication and rights management services, partially offset by an increase in revenue of $2.42 million from carrier provisioning services.

NPAC Services revenue ~~increased~~decreased $0.46 million driven by a decrease in revenue from transition services under our contracts to provide LNPA services.

Expense

Cost of revenue. Cost of revenue decreased $32.49 million due to decreases of $1.24 million in ~~costs~~royalty ~~related to our information technology and systems~~costs, $01.81 million in personnel and personnel-related expense, and $0.79 million in contractor costs. These decreases were partially offset by an increase of $0.5 million in costs related to our information technology and systems.

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Sales and marketing. Sales and marketing expense decreased $0.73 million due a decrease of $1.8 million in ~~royalty~~advertising and marketing costs, partially offset by increases of $1.0 million in personnel and personnel-related expense and $0.5 million in maintenance and general facilities costs.

~~Sales~~Research and ~~marketing~~development. ~~Sales~~Research and ~~marketing~~development expense increased $1.2.3 million due to an increase ~~of $2.1 million~~ in personnel and personnel-related expense~~, partially offset by a $1~~.~~0 million decrease in advertising and marketing costs.~~

~~Research~~General and ~~development~~administrative. ~~Research~~General and ~~development~~administrative expense decreased $0.91 million due to adecreases ~~decrease~~of $2.9 million in personnel and personnel-related expense, $0.6 million in professional fees, and $0.3 million in general facilities and other costs. These decreases were partially offset by an increase of $3.7 million in merger-related costs.

~~General~~Depreciation and ~~administrative~~amortization. ~~General~~Depreciation and ~~administrative~~amortization expense ~~increased~~decreased $03.84 million due to ana ~~increase~~decrease ~~of $5.2 million~~ in ~~merger-related~~amortization ~~costs. This increase was partially offset by decreases~~ of ~~$2.5 million~~intangible ~~in personnel and personnel-related expense, $2~~assets.~~1 million in professional fees, and $0.2 million in general facilities and other costs.~~

~~Depreciation~~Restructuring ~~and amortization~~charges. ~~Depreciation~~Restructuring ~~and~~charges ~~amortization~~increased ~~expense decreased~~ $31.69 million due to aan ~~decrease~~increase in ~~amortization~~severance ofand ~~intangible~~severance-related ~~assets~~expense.

~~Restructuring~~Separation ~~charges~~costs. ~~Restructuring~~During ~~charges~~the ~~decreased~~three months ended June 30, 2016, we incurred separation costs of $24.62 million. Prior ~~related~~to entering into the merger agreement, we announced in the second quarter of 2016 our intention to ~~restructuring~~separate ~~charges~~into ~~recorded~~two ~~during~~independent and publicly traded companies through a tax-free spin-off. Separation costs related to activities supporting the ~~three~~planned ~~months~~separation ~~ended~~including ~~March 31~~professional fees for outside advisory services including legal, ~~2016~~ ~~which~~finance, ~~did~~accounting ~~not~~and ~~recur~~related inservices. As a result of the ~~first~~execution ~~quarter~~and shareholder approval of the merger agreement, our focus was completing the merger. The merger was completed on August 8, 2017.

~~Separation~~Interest ~~costs~~and other expense. ~~During~~Interest ~~the~~and ~~three~~other ~~months~~expense ~~ended~~decreased ~~March~~$5.1 million ~~31,~~due ~~2017,~~to wea ~~incurred~~decrease ~~separation costs~~ of $15.85 million~~. Separation~~ ~~costs~~in ~~related~~interest toexpense ~~activities~~driven ~~supporting~~by ~~the~~lower ~~planned~~borrowings ~~separation~~under ~~including~~the ~~professional~~Amended ~~fees~~2013 ~~for~~Credit ~~outside~~Facilities, ~~advisory~~partially ~~services~~offset ~~including~~by ~~legal,~~an ~~finance,~~increase ~~accounting~~of ~~and related services~~$0. As5 million ain ~~result~~foreign ofcurrency ~~the~~transaction ~~execution~~ and ~~shareholder~~asset ~~approval~~disposal ~~of the merger agreement, we are focusing on completing the merger~~losses.

Interest ~~and other expense~~income. Interest ~~and~~income ~~other~~for ~~expense~~the ~~decreased~~three ~~$4.8~~months ended June ~~million~~30, ~~due~~2017 towas acomparable ~~decrease~~to inthe interest ~~expense~~income ~~driven~~for ~~by lower borrowings under~~ the ~~Amended~~three ~~2013~~months ~~Credit~~ended ~~Facilities~~June 30, 2016.

~~Interest~~Provision for income taxes. ~~Interest~~Our ~~income~~effective tax rate, including discrete items, for the three months ended ~~March~~June 3130, 2017 was ~~comparable~~33.9%, an increase from 31.6% for the three months ended June 30, 2016. This increase was primarily due to the ~~interest~~reversal ~~income~~of certain unrecognized tax benefits during the second quarter of 2016 upon the expiration of certain statutes of limitations. Excluding all discrete tax items, our effective tax rate was approximately 34.8% and 34.5% for the three months ended ~~March~~June 3130, 2017 and 2016, respectively.

~~Provision for income taxes. Our effective tax rate, including discrete items, for the three months ended March 31, 2017 was~~ 29.8%, a decrease from 33.9% for 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 consolidated statements of operations for the three months ended March 31, 2017. Prior to the adoption 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.

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Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2017

The following table presents an overview of our results of operations for the six months ended June 30, 2016 and 2017:



	Six Months Ended June 30,
	2016			2017			2016 vs. 2017
	$			$			$ Change			% Change
	(unaudited) (dollars in thousands, except per share data)
Revenue	$	584,863		$	591,124		$	6,261		1.1	%
Operating expense:
Cost of revenue (excludes depreciation and amortization shown separately below)	181,588			175,238			(6,350		)	(3.5	)%
Sales and marketing	109,611			110,528			917			0.8	%
Research and development	12,809			14,276			1,467			11.5	%
General and administrative	54,756			55,471			715			1.3	%
Depreciation and amortization	77,311			70,379			(6,932		)	(9.0	)%
Restructuring charges	8,793			8,039			(754		)	(8.6	)%
Separation costs	4,218			1,789			(2,429		)	(57.6	)%
	449,086			435,720			(13,366		)	(3.0	)%
Income from operations	135,777			155,404			19,627			14.5	%
Other (expense) income:
Interest and other expense	(32,802		)	(22,901		)	9,901			(30.2	)%
Interest income	241			146			(95		)	(39.4	)%
Income before income taxes	103,216			132,649			29,433			28.5	%
Provision for income taxes	33,720			42,287			8,567			25.4	%
Net income	$	69,496		$	90,362		$	20,866		30.0	%
Net income per common share:
Basic	$	1.28		$	1.63
Diluted	$	1.26		$	1.58
Weighted average common shares outstanding:
Basic	54,205			55,589
Diluted	54,980			57,019

Revenue

Revenue. Revenue increased $6.3 million. Marketing Services revenue increased $11.2 million driven by 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 decreased $3.6 million due to a decrease in revenue of $2.6 million in revenue from our DNS services and a decrease in revenue of $1.1 million from domain name registries. The decrease in revenue from our DNS services resulted from lower channel partner revenue. The decrease in revenue from domain name registries was driven by consolidation of the customer base in the second quarter of 2016.

Data Services revenue decreased $1.2 million due to a decrease in revenue of $3.2 million from caller identification services and a decrease in revenue of $2.6 million from user authentication and rights management services, partially offset by an increase in revenue of $4.6 million from carrier provisioning services.

NPAC Services revenue for the six months ended June 30, 2017 was comparable to the six months ended June 30, 2016.

Expense

Cost of revenue. Cost of revenue decreased $6.4 million due to decreases of $2.2 million in royalty costs, $2.0 million in personnel and personnel-related expense, $1.6 million in contractor costs, and $0.6 million in in costs related to our information technology and systems.

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Sales and marketing. Sales and marketing expense increased $0.9 million due an increase of $3.1 million in personnel and personnel-related expense and $0.6 million in maintenance and general facilities costs. These increases were partially offset by a decrease of $2.8 million in advertising and marketing costs.

Research and development. Research and development expense increased $1.5 million due to an increase in personnel and personnel-related expense.

General and administrative. General and administrative expense increased $0.7 million due to an increase of $8.8 million in merger-related costs. This increase was partially offset by decreases of $5.4 million in personnel and personnel-related expense and $2.7 million in professional fees.

Depreciation and amortization. Depreciation and amortization expense decreased $6.9 million due to a decrease in amortization of intangible assets.

Restructuring charges. Restructuring charges decreased $0.8 million due to a decrease in severance and severance-related expense.

Separation costs. Separation costs decreased $2.4 million. Separation costs related to activities supporting the planned separation including professional fees for outside advisory services including legal, finance, accounting and related services. As a result of the execution and shareholder approval of the merger agreement, our focus was completing the merger. The merger was completed on August 8, 2017.

Interest and other expense. Interest and other expense decreased $9.9 million due to a decrease of $10.4 million in interest expense driven by lower borrowings under the Amended 2013 Credit Facilities, partially offset by an increase of $0.5 million in foreign currency transaction and asset disposal losses.

Interest income. Interest income for the six months ended June 30, 2017 was comparable to the interest income for the six months ended June 30, 2016.

Provision for income taxes. Our effective tax rate, including discrete items, for the six months ended June 30, 2017 was 31.9%, a decrease from 32.7% for the six months ended June 30, 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 consolidated statements of operations for the three and six months ended June 30, 2017. Prior to the adoption 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 34.5% for the six months ended June 30, 2017 and 2016, respectively.

Liquidity and Capital Resources

Our principal source of liquidity is cash provided by our operating activities. Our principal uses of cash were for 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 $4794.08 million at ~~March~~June 3130, 2017, an increase of $149.31 million from $45.8 million at December 31, 2016. This increase in cash and cash equivalents was due to cash provided by operations, partially offset by cash used for principal payments under our credit facilities and capital 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

As of ~~March 31~~June 30, 2017, the outstanding principal balance due under our Amended 2013 Credit Facilities and Senior Notes was $~~751~~689.61 million and available borrowings under our Amended 2013 Revolving Facility was $~~147~~182.0 million.

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, 2016 and Note 4 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 ~~three~~six months ended ~~March~~June 3130, 2017 was $~~104~~226.40 million, as compared to $31124.23 million for the ~~three~~six months ended ~~March~~June 3130, 2016. This $73101.27 million increase in net cash provided by operating activities was the result of an increase in net income of $1420.19 million, a decrease in non-cash adjustments of $1114.26 million and an increase in net changes in operating assets and liabilities of $7095.34 million.

Non-cash adjustments decreased $1114.26 million driven by a decrease of $6.29 million in ~~deferred~~depreciation ~~income~~and ~~taxes~~amortization expense, a decrease of $34.62 million in ~~depreciation~~deferred ~~and~~income ~~amortization expense~~taxes, a decrease of $13.43 million in amortization of deferred financing costs and original issue discount on debt, a decrease of $0.4 million in stock-based compensation, and a decrease of $0.3 million in tax benefit from equity awards due to the adoption of ASU 2016-09.

Cash provided by net changes in operating assets and liabilities increased $7095.34 million primarily due to an increase of $4130.23 million in accounts and unbilled receivables, an increase of $827.57 million in income taxes, an increase of $1417.71 million in accounts payable and accrued expenses, an increase of $15.0 million in prepaid expenses and other current assets, an increase of $104.27 million in ~~accounts~~deferred ~~payable and accrued expenses~~costs, an increase of $12.61 million in deferred ~~costs~~revenue, and an increase of $01.53 million in other ~~assets~~liabilities. These total increases of $7698.72 million in net changes in operating assets and liabilities were partially offset by a decrease of $42.08 million in other ~~liabilities and a decrease of $2~~assets.~~4 million in deferred revenue.~~

Cash flows from investing

Net cash used in investing activities for the ~~three~~six months ended ~~March~~June 3130, 2017 was $1529.41 million, as compared to $923.94 million for ~~three~~six months ended ~~March~~June 3130, 2016. This $5.57 million increase in net cash used in investing activities was due to purchases of property and equipment.

Cash flows from financing

Net cash used in financing activities was $87147.64 million for the ~~three~~six months ended ~~March~~June 3130, 2017, as compared to $40139.65 million for the ~~three~~six months ended ~~March~~June 3130, 2016. This $477.09 million increase in net cash used in financing activities was due to an increase of $5013.61 million in ~~principal~~ payments under our Amended 2013 Credit Facilities, an increase of $1.18 million in cash used for the net down of employee shares, and a decrease of $0.3 million in tax benefits from equity awards due to the adoption of ASU 2016-09. These total net increases of $5215.02 million in cash used in financing activities were partially offset by an increase of $45.27 million in cash proceeds from the issuance of stock, a decrease of $01.54 million in cash used in principal repayments on capital lease obligations, and a decrease of $0.41 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, 2016. Our exposure to market risk has not changed materially since December 31, 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

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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~~June 3130, 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~~second 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 NANC 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. The Court of Appeals issued its decision on May 26, 2017 and denied our Petition for Review. We are reviewing the decision.

We, 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.



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 I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2016, filed with the SEC on March 1, 2017 (our “2016 Form 10-K”). The risks discussed in our 2016 Form 10-K could materially affect our business, financial condition and future results. The risks described in our 2016 Form 10-K 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 ~~March~~June 3130, 2017:

Month	TotalNumber ofSharesPurchased(1)	AveragePrice Paidper Share
January 1 through January 31, 2017	106,086	$	33.30
April 1 through April 30, 2017	2,590	$	33.24
February 1 through February 28, 2017	133,021	33.57
May 1 through May 31, 2017	5,043	33.11
March 1 through March 31, 2017	299,804	33.29
June 1 through June 30, 2017	8,834	33.15
Total	~~538~~16,~~911~~467	$	33.3615


(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.

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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:	~~May~~August 109, 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.

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

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