NeoMedia Technologies, Inc (NEOM)

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10-K FOR NEUSTAR is out...
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Total revenue. Total revenue decreased $8.5 million primarily due to a decrease of $28.5 million in revenue as a result of a reduction in the effective price per transaction under our seven regional contracts in the United States with NAPM effective as of January 2009. The pricing model for the use of existing telephone number portability services under the NAPM contracts changed from a transaction-based model in effect in 2008 to an annual fixed-fee with price escalators. This decrease was partially offset by a $20.0 million increase in revenue from services provided outside of our NAPM contracts to provide telephone number portability services in the United States as a result of increased internet traffic and increased demand for our secure, reliable and scalable Ultra Services.

Addressing. Addressing revenue increased $3.5 million due to the expanded range of DNS services, consisting of a $12.0 million increase in revenue from our Ultra Services resulting from an increase in demand from customers who rely on us to meet their increasingly complex DNS requirements and a $2.1 million increase in revenue from an increased number of domain names under management. These increases were partially offset by a decrease of $10.5 million in revenue as a result of a lower effective price per transaction under our contracts to provide telephone number portability services in the United States.

Interoperability. Interoperability revenue decreased $5.6 million due to a decrease of $5.2 million in revenue from our Clearinghouse business segment and a decrease of $0.4 million in revenue from our NGM business segment. The decrease in our Clearinghouse revenue of $5.2 million was primarily due a decrease of $3.4 million in revenue as a result of a lower effective price per transaction under our contracts to provide telephone number portability services in the United States. In addition, revenue decreased $1.0 million from our revenue from telephone number portability services in Canada and decreased $0.9 million from our order management services. The decrease in NGM revenue of $0.4 million was driven by a decrease in the inter-carrier mobile messaging services our customers are utilizing.

Infrastructure and other. Infrastructure and other revenue decreased $6.4 million, of which $5.2 million was attributable to our Clearinghouse business segment and $1.2 million was attributable to our NGM business segment. The decrease in our Clearinghouse revenue of $5.2 million was driven by a decrease in revenue of $14.6 million as a result of a lower effective price per transaction under our contracts to provide telephone number portability services in the United States. This decrease was partially offset by a $9.4 million increase in other revenue comprised of revenue from on-going support services for telephone number portability solutions outside of the United States and one-time functionality improvements requested by our customers. The decrease in NGM revenue of $1.2 million was due to a decrease in the intra-carrier mobile messaging services our customers are utilizing.

Expense

Cost of revenue. Cost of revenue increased $7.7 million due to a $9.8 million increase in cost of revenue of our Clearinghouse business segment, partially offset by a $2.1 million decrease in cost of revenue of our NGM business segment. The increase in Clearinghouse cost of revenue of $9.8 million was primarily driven by an increase of $6.8 million in personnel and personnel-related expense and an increase of $1.7 million due to outsourced services. In addition, royalty expense related to U.S. Common Short Code services increased $1.0 million. The $2.1 million decrease in NGM cost of revenue was due primarily to a decrease of $1.5 million in personnel and personnel-related expense primarily as a result of headcount reductions related to our NGM restructuring.

Sales and marketing. Sales and marketing expense increased $9.2 million. Our Clearinghouse business segment sales and marketing expense increased $18.1 million, partially offset by an $8.9 million decrease attributable to our NGM business segment. The increase in Clearinghouse sales and marketing expense of $18.1 million was primarily driven by an increase of $10.6 million in personnel and personnel-related expense and a $7.1 million increase in professional fees, both primarily related to our focus on branding and our expanded service offerings. The $8.9 million decrease in NGM sales and marketing expense was due to a decrease in personnel and personnel-related expense primarily as a result of headcount reductions related to our NGM restructuring.

Research and development. Research and development expense decreased $11.4 million, of which $3.2 million was attributable to our Clearinghouse business segment and $8.2 million was attributable to our

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