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NeuStar, Inc. (NSR)

Q4 2008 Earnings Call

February 10, 2009 5:30 pm ET


Brandon Pugh – IR

Paul Lalljie – Interim CFO

Jeff Ganek – CEO


Katherine Egbert – Jefferies & Company

Tom Ernst – Deutsche Bank

John Bright – Avondale Partners

William Power – Robert W. Baird

Philip Winslow – Credit Suisse

Jonathan Ho – William Blair



Welcome to the NeuStar conference call discussing fourth quarter and year end 2008 earnings call. The company's release made earlier today is available from its website at (Operator Instructions). I would now like to turn the conference call over Mr. Brandon Pugh, Director of Finance, and Investor Relations at NeuStar; please go ahead, sir.

Brandon Pugh

Good afternoon everyone. Welcome to our fourth quarter 2008 earnings call. Joining us today from NeuStar are Jeff Ganek, Chairman and Chief Executive Office and Paul Lalljie, our Interim Chief Financial Officer .

Our call today will begin with comments from Jeff Ganek . Then Paul Lalljie will follow with a discussion of our financial performance after which we will open the line to questions from qualified investors and research analysts.

Before we begin, I’d like to remind everyone that some of the information discussed on this call including our projections regarding revenue and EBITDA for the coming year contain forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements and we cannot assure you that our expectations will be achieved or that any deviations will not be material.

Additional information concerning these risks and uncertainties can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2007, and other subsequent and current periodic reports filed with the US Securities and Exchange Commission. NeuStar assumes no obligation to update any forward-looking statements.

As you listen to today's call we encourage you to have our press release in front of you, that can be found on our Investor Relations website. This document includes our financial results, metrics, and commentary for the quarter, as well as the reconciliation of certain non-GAAP measures with the most directly comparable GAAP measures.

With that I'm pleased to introduce NeuStar's Chairman and Chief Executive Officer, Jeff Ganek.

Jeff Ganek

Thanks Brandon, welcome to today's conference call. I am please to speak with you this afternoon about NeuStar’s fourth quarter performance and 2009 outlook.

The current recession is the first we faced since becoming a public company. I can report to you that we've taken action to ensure that we prosper through the recession and that we are positioned for strong growth in the future when the economy turns around.

For the immediate turn we have made visibility and certainty of a revenues key priorities along with prudent spending. Our focus is on strong profitability and cash flow well we grow as fast as market conditions allow. For the longer-term we are positioning NeuStar for growth in the markets turn up, that is, we are strengthening our existing unmanaged customer relationships, we are strengthening our essential high-quality reliable services and we are laying the foundation for new innovative services that will be essential to future IP networks.

Let me first discuss our high-level results for the fourth quarter and for the full year 2008. Paul Lalljie, NeuStar’s interim CFO will provide you with further details after my prepared remarks.

Revenue for the full year 2008 grew 14% demonstrating solid growth in a volatile market environment. Under our contracts to provide telephone number portability services in the United States transactions grew 17% from 2007. This growth in transaction volumes gives evidence of the strong demand for our services.

With the revenue growth we managed strong profitability absence of fiscal year 2008 impairment charges related to NGM, net income for 2008 grew 17%, and we continue to generate large amounts of cash. This performance is evidence of the strength of our business and focused management. Over all our performance and results in 2008 demonstrate that NeuStar operates in growing markets where we have strong footholds with competitive advantages increasingly in the area of the IP.

Our business has operating leverage that allows for both growth as allowed by market conditions and cost management. Let me expand on that, two weeks ago we announced changes to the contracts under which we provide telephone number portability in the United States. This amendment changed our impact pricing from a transaction-based model to an annual fixed fee with annual escalators.

The fixed fee provides contractually guaranteed revenues that will grow at a compounded annual rate of 10% through 2015. We now have improved visibility into and predictability for a significant portion of our business. The amendments also strengthens our prospects for additional growth from new innovative services. It provides incentives for the industry to gain further utility from NPAC through use of the first IP fields to be included in NPAC.

It also incents the industry to put additional telephone numbers into the database with a IP capabilities and a larger population of telephone numbers, NeuStar has unmatched capabilities that will be key to serving emerging market requirements for trusted reliable provider of directory services IP will depend upon.

Those capabilities build on our existing strengths, that is the NPAC is today the hub infrastructure that all US operators connect to for essential data, so we already have the largest community of users. The new amendment incents the industry to expand its use of the existing NeuStar infrastructure by adopting the first of many IP fields in the near term.

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