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NeuStar, Inc. (NYSE:NSR)

Q2 2009 Earnings Call

July 30, 2009 4:30 pm ET

Executives

Brandon Pugh – Director of Finance & Investor Relations

Jeffrey E. Ganek – Chairman & Chief Executive Officer

Paul S. Lalljie – Senior Vice President & Chief Financial Officer

Analysts

Stephen Baker – Robert W. Baird

Nandan Amladi – Deutsche Bank

Saket Kalia – JPMorgan

Shaul Eyal – Oppenheimer & Company

Daniel Meron – RBC Capital Markets

John Bright – Avondale Partners

Operator

Ladies and gentlemen thank you for standing by. Welcome to the NeuStar Second Quarter Investor Conference Call. The company's release made earlier today is available from its website at www.neustar.biz. During the presentation all participants will be in a listen-only mode. Afterwards, securities, analysts and institutional portfolio managers will be invited to participate in the question-and-answer session. (Operator Instructions).

As a reminder this call is being recorded Thursday, July 30, 2009. A replay of the call will be accessible until midnight August 6 by dialing 888-203-1112 and entering conference ID 9119340. International callers should dial 719-457-0820. An archive of this call will also be available on the NeuStar website at www.neustar.biz. I would now like to turn the call over to Brandon Pugh, Senior Director of Finance, and Investor Relations of NeuStar. Please go ahead, sir.

Brandon Pugh

Thank you and good afternoon everyone. Welcome to our second quarter 2009 earnings call. Joining us today from NeuStar are Jeff Ganek, Chairman and Chief Executive Officer and Paul Lalljie, our 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 material 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, 2008 and its other subsequent and current periodic reports filed with the U.S. Securities and Exchange Commission. NeuStar assumes no obligation to update any forward-looking statements.

As you listen to today's call, we will discuss certain non-GAAP financial measures. We encourage you to have our press release in front of you, which can be found on our Investor Relations website and includes our financial results, metrics, commentary for the quarter and the reconciliation of certain non-GAAP measures with the most directly comparable GAAP measures. You'll find additional disclosures regarding non-GAAP measures under the Investor Relations tab on our website www.neustar.biz including reconciliation of these measures with the most directly comparable GAAP measures.

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

Jeffrey E. Ganek

Thanks Brandon. Welcome everyone to today's conference call. Through the first half of 2009 we performed well against out objectives. In the face of tough economic conditions, our priority has been profitability and cash flow. Specific to the second quarter our consolidated revenue totaled a $116 million and we produced an EBITDA margin of 43%. These results demonstrate NeuStar's ability to reliably produce profits in cash, while laying a solid foundation for growth in the future. Let me comment on our profit performance. The results derived from the falling factors. First, we have strong reliable and visible revenue streams.

Our LNP services, which produced more than 60% of our revenues provide the base of certainty for revenues. Additionally, revenues from outside of the LNP services for markets that are stable with some growth. So, their growth in 2009 has been slower than in the past. With high confidence in our revenue performance, profit performance is manageable. Second our business model and cost structure enable us to manage spending and direct response to revenue trends. As we demonstrated over the past years we can spend prudently to reliably produced profitability even as revenues vary. We are able to meet profitability target even while delivering high quality that earns high customer satisfaction has volumes continue to grow.

Our second quarter performance demonstrates our ability and commitment to produce profits and cash. We believe the second quarter performance reflects the strengths of the business and the sustainability of our profitability. Now, let me comment on customer demand in the market and our revenues. Customer demand for LNP services continue to grow as reflected by increased volumes of transactions in the first half of this year. Revenues from LNP services decreased 4% as anticipated and that's driven by the contract changes affected in January of this year. Our existing contracts provide for compounded annual growth in LNP revenues up 10% from 2009 through 2015. Specific to the second quarter customer demand was also strong for our ultra services.

Ultra Services provide our customers with advanced proprietary algorithms for global traffic management, enhance security features and performance monitoring. All of which improved our customers' Internet management systems for efficiency, scalability, and reliability. After weaker market conditions during the first quarter, customer demand in the second quarter stabilized that is our enterprise customer showed increased interest in the ROI benefits offered by Ultra's Outsourced in the Cloud solutions. Increased demand for Ultra Services paralleled growth in overall Internet traffic as measured by total Internet query counts, which were high on both sequential and year-over-year basis.

Note that demand for our Ultra Services is driven by total queries not by the narrower measure of click-throughs that characterize the Internet advertising model. As Internet traffic continues to grow, we anticipate that demand for Ultra Services will solidify and that overtime our historical growth patterns will reemerge. This view is consistent with what we've seen recently in other key drivers of demand for Ultra Services. Customer wins and upgrades to higher levels of traffic usage for Ultra Services were both strong in the second quarter and we've not seen further degradation in sales cycle lengths, churn or average deal sizes. Still economic conditions are uncertain, so we are happy to see continued growth in revenues for Ultra.

We are cautiously confident about continuing growth for the immediate future and we are hopeful about the long-term prospects when economic prosperity returns. Another driver of reliable revenue growth for us this past quarter was Registry Services. Like many of our revenue streams, Registry Services is less sensitive to the macro environment. Revenue growth, demand name new ads and renewal rates were all positive albeit at lower rates than they were before the recession. So, overall our revenue performance for the quarter demonstrated that there is continued demand for our services that our services continue to provide value to our customers worldwide and importantly that the factors providing us confident visibility into future revenues are robust.

Now, I would like to briefly discuss actions we've taken to strengthen the foundation, NeuStar will need to grow at faster rates in the future. In this economic downturn, we are taking the opportunity to emerge stronger, we intend to be positioned and prepared for the economies recovery and growth that we think is just inevitable. Prime example for positioning for the future is progress we've realized on enabling our LNP clearing house to serve the future Internet protocol or IP needs of the industry.

We recently signed an amendment to our LMP contracts to adopt and implement certain IP fields and functions that serve voice, SMS and MMS over IP networks. In the near-term demand and volume for these IP Directory Services will be limited. However, in the future as IP technologies come pervasive across our customers networks, NeuStar will have the technologies products and quality to market needs to make IP services work. As our customers raise to transition to the world of next-generation networks, we will provide IP Directory Services that meet the markets emerging needs for reliability, quality, security and interoperability across all communication service providers. By building on our existing strengths, we will stand uniquely able of serving the great requirements of the future, incremental growth for NeuStar will result.

At our Ultra Services unit we are building new capabilities even as we capture growth in today’s tough market. Internally, our management sales capabilities have been strengthened we are developing new products and features, we've broaden the distribution channels for our successful products. An example is our recent reseller agreement with Rackspace Hosting, which allows customers to get our innovative DNS services and to obtain top class hosting services in data centers across the world.

Rackspace is a recognized leader in the hosting industry. We are excited about this initiative and its growth potential. So, as you can see, we are today taking important steps, building infrastructure will be required for faster growth in the future, our customer base and technology are already unmatched. Strengthened products and delivery capabilities will be the base from which growth in the future flows. To support the future vision of a faster growing NeuStar, we have unveiled a new branding program. The brand is built around the theme of who we are and what we do.

NeuStar, making network smarter. You will see a bright new logo and you will hear about the new NeuStar with a bright future in the emerging IP world. So let me summarize, profitability and cash flow remain our areas of focus, profitability for the second quarter was a solid 21% resulting from reliable revenue streams and the high operational leverage we get from our scalable expense structure. Our near-term revenue is highly visible and reliable, solid near term revenue growth will come existing service offerings especially LMP and Ultra Services. Our long-term revenue growth will come established services that already have market-leading positions and proven track records as well as from our early leadership positions in new markets for next-generation services that will grow large in the future.

Although, in the early stage now our IP initiatives will help fuel growth in the coming years. Powerful market trends are driving growth in the markets that we serve with our unmatched, trusted, and scalable operations will be poised for the growth to come. We have a strong cash position and we expect to continue producing large amounts of cash. Given recent and uncertain conditions in financial markets, we will maintain our prudent strategy for cash.

As appropriate we'll use the cash to reinvest into the company for future top-line growth. We will regularly monitor market conditions to determine how to best manage the cash to serve our shareholders value interest. We have decided not to do any stock buybacks or to issue dividends at this time. In closing, perhaps the most important development at NeuStar over the recent quarter is the continued strengthening of our leadership team.

Paul Lalljie has been appointed Senior Vice President and Chief Financial Officer. Paul is a long-term NeuStar Executive. He has demonstrated a deep understanding of the business. Strong financial management capability and he has earned the confidence of investors, the board, and management.

Eric Burger has been appointed Senior Vice President and Chief Technology Officer. Eric comes with rich experience in IP technologies and in the development of the Internet. His background at BEA Systems and in mobile IP developments will be of great advantage to us. I am fortunate to work with Paul, Eric and the rest of the NeuStar team. Jack Dziak has joined us as Chief Strategy Officer. Previously, he served as Senior Vice President for Strategy at Sprint and in Senior Executive positions at MCI and Accenture.

Paul, Eric and Jack joined Lisa Hook our President and COO. Lisa joined us 18 months ago after leading a large business unit at AOL. Along with the rest of the NeuStar team, including Jerry Kovach, Martin Lowen, Sean Corcoran, Alan Stiffler and all the others too numerous to name here we now have in place the leader ship needed to guide the company to continued and larger success.

With that I now hand the call over to Paul Lalljie for his comments. Paul?

Paul S. Lalljie

Thanks, Jeff and good afternoon everyone. As we shared with you at the beginning of the year our plan is to position the business for growth, while delivering profitability and cash flows. To that end, I am pleased to report revenue for the quarter of $115.8 million with net income of $24.5 million, EBITDA of $49.4 million, a margin of 43% and cash, cash equivalents and short-term investments of $267.5 million as of June 30. These results showed a disciplined execution of our plan and the commitment of our employees to succeed in the marketplace.

Now, for a closer look at our results starting with revenue. Revenue for the quarter decreased 4% from the second quarter of 2008. This anticipated decrease was driven by a $7.1 million reduction in LNP revenue under our recently amended contracts. As previously discussed these amendments established a new baseline for revenue in each of the contract years. For 2009, this baseline revenue is $285 million recognized on a straight-line basis, which compares to $321 million in 2008.

While LNP revenue will be down from last year the amendments provide for double-digit growth in the near-term and allow for upside over time as customers gain further utility from our services. Note that revenue from our LNP contracts is recorded in each of the revenue categories. Now for a review of revenue by category; Addressing revenue for the quarter totaled 31.5 million down 700,000 or 2% from the second quarter of 2008 driven by a decrease of 3.4 million in LNP revenue. This revenue was primarily offset by an increase of 2.1 million from Ultra Services as we continue to – to sign up new customers and began to see Internet traffic rebound.

Interoperability revenue totalled $13.9 million down $2.7 million our 16% form the second quarter of 2008 driven by decreases of $1.8 million from our Order Management Services and $900,000 in LNP revenue. Infrastructure revenue totaled $70.3 million, down $1 million or 1% from the second quarter of last year. Additionally, revenue NGM business segment totaled $3.1 million, compared to $3.3 million for the second quarter of 2008. In summary the modest year-over-year decline in revenue was driven primarily by a reminded LNP contract, which was partially offset by a 6% year-over-year growth from our non-LNP revenue. These increases were primarily from Ultra Services, Domain Registry Services and Common Short Codes.

As of today, our pipeline for LNP transactions and key leading indicators of the business remain favorable. The recent adoption of the three contractually defined IT fields and the impact is a positive first step, which strengthens our long-term position. In our non-LNP businesses, we have seen stabilization and in some cases an improvement in leading demand indicators such as the number of qualified sales leads. Now for a discussion of expenses. OpEx for the quarter totaled $75.7 million, a 6% decrease from $80.2 million for the second quarter of 2008. Reflecting the run rate reduction in OpEx in our NGM business segment and operational efficiencies in our clearing house business segment.

For a more detailed discussion of cost by category let's start with cost of revenue. Cost of revenue grew to $28.3 million from $26.8 million in the second quarter of 2008. This increase was driven primarily at a heightened demand for services in our clearinghouse business segment and in addition royalty expenses increased year-over-year. Sales and marketing expense totalled $19.2 million down from $20.2 million in the second quarter of 2008. This was a direct result of refinements to our sales processes. In the second quarter, R&D spend totaled $4.5 million down from $7.8 million in the same quarter of last year. This decrease reflects the reduction in personnel and personnel related cost associated with the improvement of our R&D processes, which led to increased productivity from the R&D team.

G&A for the second quarter totaled $14.3 million down from $15.2 million in the second quarter of last year primarily driven by a reduced cost in personnel and personnel related expenses for the company. Total operating expenses for the NGM business segment, totaled $9.5 million, compared to $14.9 million in the second quarter of 2008. This decrease reflects the restructuring of this business, which started in December of 2008. On our first quarter earnings call, I pointed out that we expected to be back in our full-year spending plan starting in the second quarter. While we have started to spend our second quarter results reflect a slower ramp and disciplined spend around projects with longer-time horizon. However, to position the business for growth second half 2009 spending will be in accordance with our business plan to achieve our EBITDA margin guidance of at least 40%.

I will now move on to selected balance sheet items beginning with cash. Cash, cash equivalents, and short-term investments totaled $267.5 million as of June 30, 2009, compared to $161.7 million as of December 31, 2008. The June 30 balance includes $41.3 million related to auction rate securities, which we intend to redeem within the next 12 months. Absent this reclassification cash, cash equivalents, and short-term investments would have increased $64.6 million for the first two quarters of 2009 and $21.2 million for the second quarter.

Of note, NeuStar paid $28.2 million of cash taxes in the second quarter, compared to zero in the first quarter of 2009. In addition, CapEx for the second quarter totaled $11.3 million. Accounts receivable at the end of the quarter totaled $63.9 million, compared to $72.6 million as of December 31, 2008. This decrease was primarily driven by a reduction in revenue from our amended LNP contract. Before I move on to our guidance discussion let me provide some key metrics that investors and analysts will find useful. For the second quarter, stock-based compensation totaled $4.5 million. U.S. Common Short Codes under management totaled approximately 300,000, a decrease from the approximate 3,100 in the second quarter of 2008. Domain names under management totaled approximately $4 million, an increase from the approximate $3.8 million in the second quarter of 2008. Now, let me move on to a discussion of our guidance for the year.

Today, we are reaffirming our prior guidance, which calls for full year 2009 revenue to range between $460 million and $490 million with a corresponding EBITDA margin of at least 40%. Also the other assumptions we provided in our last earnings call still holds that is CapEx for 2009 is expected to range between $25 million and $35 million. Our effective annual tax-rate is anticipated to be 40% and our fully diluted weighted average shares outstanding is expected to be $76 million for the year.

To conclude we are pleased with our first half 2009 performance. Our second quarter results highlight the strength of our business model and our continuing focus on operating efficiencies. Despite unpredictable demand for some of our services and challenging markets, we delivered revenue, profitability, and cash flows that provide a strong momentum going into the second half of the year.

That concludes our formal remarks. Operator, you may now open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And your first question comes from Will Power with Robert W. Baird.

Stephen Baker – Robert W. Baird

Hi, guys. This is Stephen Baker for Will Power. Just a couple of question, one I was wondering if you could give us an update on the NGM cost cutting process and just what things are looking like there. And then two, I was wondering if you could talk a little bit more about the data fields you added to the LNP clearinghouse and just what exactly those would be used for? Thanks.

Paul S. Lalljie

Thank you. On the NGM business segment we have commenced an alignment of cost with revenue starting in December of 2008 as we announced in an 8-K and in a press release that we provided at that point in time. We are confident that we will get to the EBITDA break-even number, EBITDA crossover that is during the fourth quarter of 2009. We are still in the process of aligning cost with revenue and also adding some efficiencies to the business processes that allow us to do more with less as we've made changes throughout the first and second quarter of the year.

Jeffrey E. Ganek

Okay. And let me respond to the question about IP fields in the clearinghouse LNP directory. The industry that is telecommunication service providers who are our customers talk together and agreed that they needed to have at least three data fields in the impact database each of those fields will have an IP value in it that is with any particular telephone number the first of the fields will be an IP address for voice traffic that's designed for the telephone number associated with that record, the second of the three IP fields is for SMS text messages directed to that telephone number. And the third IP field will be for MMS or Mobile Media Service, this is a best example or the photos that you take with a mobile phone and send to an another phone, that's an MMS driven service.

Those three fields have been specified by the industry have been contracted for, the industry is currently working with NeuStar to activate those fields in our clearinghouse and we expect commercial service up well before the end of the year, we do not expect large volume anytime soon, these fields represent a material technology innovation and change for the industry that will all take sometime, but the industry the network operators will be able to get NeuStar reliability and universal connectivity to all carriers for these three fields. Importantly, we believe this is an example of a foundation, we are laying today during tough economic times, foundation from which substantial faster growth will emerge in the future.

Stephen Baker – Robert W. Baird

Great. Thanks guys.

Operator

And your next question comes from Tom Ernst with Deutsche Bank.

Nandan Amladi – Deutsche Bank

Hi. Good afternoon. Nandan Amladi on behalf of Tom. You talked about the pipeline for both Ultra and NGM starting to stabilize particularly for Ultra. Can you provide a little more detail on, what verticals or regions you are seeing the strength in?

Jeffrey E. Ganek

What that the stability has happened across the board there is certainly we are not selling as much to financial service providers as we had – as we were selling a year ago, but otherwise virtually all across the country and virtually all of our vertical segments we saw a stabilizing of demand that had really softened in the first quarter as procurement decisions at our customer just got frozen and in the first quarter we saw longer sales cycles and we stopped seeing those clients of trends. Importantly, eCommerce providers who are our customers, large eCommerce providers who depend upon NeuStar for what is becoming an essential service to manage their high volumes of lifeblood IP traffic. eCommerce providers in this quarter reported good numbers for us.

Nandan Amladi – Deutsche Bank

Thank you.

Operator

And your next question comes from Saket Kalia with JPMorgan.

Saket Kalia – JPMorgan

Hi, guys its Saket here for Sterling. Two questions from my side Paul what were transactions from the impact database this quarter I know the contract is fixed, but just to clarify what were transactions in the quarter?

Paul S. Lalljie

Transactions in the quarter increased approximately 7% year-over-year and approximately $96 million.

Saket Kalia – JPMorgan

Okay. And then Paul you also talked about, given the better than expected margin performance in the first half and the at least 40% EBITDA margins for the full-year. I guess I was just wondering where the spending uptick should come in the second half?

Paul S. Lalljie

Saket, generally in economies like this positioning the business for growth is key. Winners in the aftermarket are going to be the ones with the technology, the services, and distribution channel and the best methods of delivering that service to their customers after the demand for services return and the market changes. We believe if we can invest in bulking up our product development teams, our distribution channels in our operations and our service delivery capabilities. We believe that when the market returns we will be winners because we have positioned the business for growth in those areas. So specifically we will invest in new technologies, we will invest in marketing capabilities such as distribution channel, lead generation processes, brand recognition, Jeff mentioned the branding efforts that we are doing I think those are some of the key areas that positioned the business well when the market returns.

Saket Kalia – JPMorgan

Got it. Thanks.

Operator

And your next question comes from Shaul Eyal with Oppenheimer & Company.

Shaul Eyal – Oppenheimer & Company

Thank you. Hi, good afternoon guys. And congrats on a very solid quarter and maintain guidance. The Common Short Codes 3000 this quarter and the domain name I recall correctly about 4 million for the quarter what was the sequential trend of both these segments?

Paul S. Lalljie

This is Paul here. The first quarter sequential trends was relatively flat it was approximately 3,000 in the first quarter and 3,000 in the second quarter also and as you know our primary customers in this area are the mobile marketing, mobile advertising type customers and in an market environment such as this those are customers that tend to soften sooner rather than later.

Shaul Eyal – Oppenheimer & Company

Got it. And I would imagine the same trends would applied to the domain name as well?

Paul S. Lalljie

Domain names to a lesser extent, domain names in the first quarter was approximately 4 million also, but domain names is a lot more stabler if you will the changes are not as magnified if you will from quarter-to-quarter and its less sensitive on a sequential basis, on a year-over-year basis it did increase.

Jeffrey E. Ganek

Common Short Code volumes are driven principally by media and advertising, domain name registrations vary along with Internet usage, which has suffered less from the recession than marketing and advertising.

Shaul Eyal – Oppenheimer & Company

All right. Thank you very much. Very helpful.

Operator

And your next question will come from Daniel Meron with RBC Capital Markets.

Daniel Meron – RBC Capital Markets

Thank you. Hi Jeff and Paul Congrats on a very good execution. First, can you give us a sense on whether you expect acceleration in implementation IP field. LTE comes closer to life here?

Jeffrey E. Ganek

So this is a topic to talk about late at night its' a that one we are talking with friends, as a practical matter LTE we think is farther away then had been earlier suggested by the first projections. We think when LTE happens it will increase demand for our services, but this is something that is probably three to four to five years away.

Daniel Meron – RBC Capital Markets

Okay, that's fair. And then can you just give us a sense on the international expansion ahead, are you seeing any acceleration in the demand when it comes to known portability overseas and how you're going to tackle that?

Jeffrey E. Ganek

So, we've talked about local number portability outside the United States and most of that are quarterly earnings call and the view I have described in the past I think is still pretty much the same that is we do, do lot of the local number portability in Canada, in Taiwan and in Brazil we monitor closely developments elsewhere most other countries that have and are considering local number portability are doing so with rules and constraints around the technology that will make it difficult for local number portability volumes and service revenues to grow as they have here in North America. So, we have not made it a high strategic priority within NeuStar to pursue national franchises for local number portability. We do see opportunities for expansion outside of North America in our other offerings in particular the PathFinder offering that we are delivering to the market in partnership with the worldwide GSM association, we think that has great opportunities in Europe, Asia, and Latin America.

Daniel Meron – RBC Capital Markets

Okay, very good thank you. Good Luck.

Operator

(Operator Instructions). And we will go next to John Bright with Avondale Partners.

John Bright – Avondale Partners

Paul, congratulations on the appointment.

Paul S. Lalljie

Thank you, John

John Bright – Avondale Partners

You're welcome. So, if UltraDNS was $12.9 million I think in revenue and NGM was $3.1 million, if those are right. Can you talk to us about the where the profitability stands for UltraDNS and NGM respectively?

Paul S. Lalljie

John with NGM we had revenue of $3.1 million, OpEx of $7.6 million. So, from a non-GAAP measure if you look at EBITDA its approximately $4.6 million to the negative. We are expecting to continue to benefit from the efficiencies and some of the measures that we've put in place in the first and second quarter and get to an EBITDA crossover as we get into the fourth quarter at November, December at the end of the year. From an Ultra Services perspective that is a business that we have continuously continued to invest in that business and while that business maybe delivering margins that are below our corporate average, we do not measure margins by each of our service groups, we look at the margin on a consolidated basis and we look at our next dollar of investment and that return and that next dollar of investment as a company as we make management decisions to invest the next dollar.

John Bright – Avondale Partners

Okay. And the follow-up question is on operating expenses, Paul you've mentioned that they may you delayed some in the first quarter into the second quarter and I think you mentioned in your prepared remarks that you were pushing us back to the second half of '09, could you quantify the order of magnitude and what you're talking about?

Paul S. Lalljie

A few things here John, as we got into the first and second quarters into the year, we were on chartered territories if you will from a market condition perspective. We wanted to push short-term spent at a right as much as possible so that we can align that with the revenues that we were expecting and also the growth opportunities that we were expecting. I think with the first half of the year behind us and not having a good handle in terms of predictability of demand in our non-LNP businesses, I am not sure I am going to position to totally quantify the back half of the year incremental spend if you will, but I think it’s the difference of the 200 basis points between the margins that we have come in at for the first six months versus the 40% and as we get through the back half of the year, the key point that we want to make here John is that we are not starving the business for growth. We are making sure we invest the requisite dollars into the business in the back half of the year. So, in 2010, 2011, 2012, when the market returns, our present Chief Operating Officer get the tools, the things that she needs to deliver revenue growth in those outer years. We have to invest in the business in the back half of the year so that she has a distribution channel, so that she has a service offering, so that she has the service delivery capabilities to generate that revenue in those outer years. So while I may not be able to answer your questions specifically with a dollar magnitude, those are the thoughts around which we make that decision of what we spent towards the back half of the year. We will deliver at least 40% EBITDA towards the back half of the year irrespective of what the revenue comes in at between the range of 460 and 490 and we will aim for, to pass with that range.

John Bright – Avondale Partners

Gentlemen. Thank you much.

Paul S. Lalljie

I appreciate it.

Operator

(Operator Instructions) That concludes the question and answer session today. At this time I would like to turn the conference back over to Jeff Ganek for any additional or closing comments.

Jeffrey E. Ganek

Thanks everybody for joining us. We are very, very happy with the state of the business and the results that we have produced today. Let me see if I can sum up what NeuStar is today and where we are aiming in a tough economic environment we are focused on producing profit and cash, the results from the second quarter and from the first half overall demonstrate the power of the business model that allows us to produce those reports and as Paul described just a moment ago, while we are producing great profits and cash, we've got the resources and the energy and the commitment to put it in place the foundation, this company will need in order to grow at faster rates when the economy turns around, we are in great markets that are still growing, when the economy turns around, we expect fast growth in demand will be standing with new technology, strong processes ready to catch the growth. With that thank you very much. Have a good evening.

Operator

That concludes today's conference. We thank you for your participation.

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