Comscore Reports Second Quarter 2019 Results

Comscore Reports Second Quarter 2019 Results

Continued Alignment of Strategic Priorities and Products to Drive to Future Profitability

PR Newswire

RESTON, Va., Aug. 6, 2019 /PRNewswire/ -- Comscore, Inc. (Nasdaq: SCOR), a trusted partner for planning, transacting, and evaluating media across platforms, today reported financial results for the quarter ended June 30, 2019.

New comScore logo (PRNewsFoto/comScore, Inc.)

Second Quarter 2019 Financial Results

  • Year-over-year revenue for the second quarter declined 4.4% to $96.9 million
  • Including 2019 non-cash impairment charges totaling $241.6 million, net loss of $279.5 million, or $(4.61) per share, compared to a net loss of $56.0 million, or $(1.02) per share in the year-ago quarter
  • Adjusted EBITDA loss of $3.2 million, compared to positive adjusted EBITDA of $1.3 million in the year-ago quarter
  • Cash, cash equivalents and restricted cash of $53.8 million, compared to $50.2 million as of December 31, 2018

"In the second quarter, we took significant steps to better prioritize, refocus and invest in our product portfolio, and provide our customers with innovative technologies and services which we believe will drive us to a position of profitability and growth faster and more efficiently," said Dale Fuller, director and interim chief executive officer of Comscore. "Additionally, we reduced core operating costs in the quarter, which provided greater financial flexibility as we seek to maximize our resources. The management team is exploring all aspects of the business and is conducting a comprehensive strategic review of all our options, making sure that our talent is focused on developing compelling products that our customers want and need. We believe this approach should ultimately allow us to generate break-even to positive operating cash flow later this year."

Second Quarter Summary Results
Total revenue in the second quarter of 2019 was $96.9 million, down from $101.4 million in the year-ago quarter.

Ratings and Planning revenue decreased to $68.9 million in the second quarter of 2019, compared to $70.5 million in the year-ago quarter. The decrease was the result of a decline in syndicated digital products offset by higher revenue in TV and cross-platform products. TV and cross-platform product revenue was higher on a year-over-year basis due to higher local TV revenue and increased deliveries of cross-platform products.

Analytics and Optimization revenue declined to $17.3 million in the second quarter of 2019, compared to $20.5 million in the year-ago quarter. The decrease was related to lower digital custom marketing solution sales and deliveries in the second quarter of 2019 as compared to the prior-year period. This decrease was offset, in part, by increased revenue from Activation products.

Movies Reporting and Analytics revenue was $10.7 million in the second quarter of 2019, compared to $10.4 million in the year-ago quarter. The increase was driven by revenue from new products and new customers.

Due in part to a decline in market capitalization and revenue, the company performed an interim impairment assessment as of the end of the quarter. As a result of the assessment, the company took non-cash impairment charges totaling $241.6 million relating to an intangible asset and goodwill. These non-cash impairment charges do not directly impact the company's liquidity, cash flows, compliance with debt covenants, or future operations.

During the second quarter of 2019, the company recorded a $5.0 million liability related to the previously disclosed SEC investigation, which management believes is a reasonable estimate of the company's probable liability for this matter.

Primarily as a result of the non-cash impairment charges and legal accrual, net loss for the second quarter of 2019 was $279.5 million, or $(4.61) per share, compared to a net loss of $56.0 million, or $(1.02) per share reported in the year-ago quarter.

For the second quarter of 2019, non-GAAP adjusted EBITDA loss was $3.2 million, compared to positive adjusted EBITDA of $1.3 million in the year-ago quarter. Non-GAAP adjusted EBITDA excludes stock-based compensation expense; investigation, litigation and audit-related expense; restructuring expense; change in fair value of financing derivatives; impairment charges; and other items as presented in the accompanying tables.

Balance Sheet and Liquidity
As of June 30, 2019, cash, cash equivalents and restricted cash were $53.8 million, including $4.9 million in restricted cash. The cash balance as of June 30, 2019 is inclusive of $20.0 million in initial cash proceeds that the company received from a capital transaction that was completed toward the close of the quarter. The transaction was intended to strengthen the company's balance sheet and maintain compliance with the minimum cash covenant in the company's senior secured convertible notes, which increases from $20.0 million to $40.0 million upon filing of the Form 10-Q for the quarter ended June 30, 2019. Total debt principal as of June 30, 2019, including $204.0 million of senior secured convertible notes, was $215.0 million.

Conference Call Information for Today, Tuesday, August 6 at 5:00 p.m. ET
Management will provide commentary on the company's results in a conference call today at 5:00 p.m. ET. To access the call, dial +1 844-229-7593 (domestic) or +1 314-888-4258 (international) and reference conference ID # 8974238. Participants are advised to dial in at least 10 minutes prior to the call to register. Additionally, a live webcast of the conference call will be available on the Investor Relations section of the company's website at ir.comscore.com/events-presentations. Following the conference call, a replay will be available by dialing +1 855-859-2056 (domestic) or +1 404-537-3406 (international) with passcode # 8974238. The replay will also be available via webcast at ir.comscore.com/events-presentations.

About Comscore
Comscore (Nasdaq: SCOR) is a trusted partner for planning, transacting and evaluating media across platforms. With a data footprint that combines digital, linear TV, over-the-top and theatrical viewership intelligence with advanced audience insights, Comscore allows media buyers and sellers to quantify their multiscreen behavior and make business decisions with confidence. A proven leader in measuring digital and TV audiences and advertising at scale, Comscore is the industry's emerging, third-party source for reliable and comprehensive cross-platform measurement.

Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal and state securities laws, including, without limitation, Comscore's expectations, forecasts, plans and opinions regarding future growth, profitability and cash flow, product development and innovation, customer agreements, financial flexibility and compliance with financial covenants, management's strategic review, legal proceedings, and the impact of non-cash impairment charges. These statements involve risks and uncertainties that could cause actual events to differ materially from expectations, including, but not limited to, Comscore's ability to achieve its expected strategic, financial and operational plans. For additional discussion of risk factors, please refer to Comscore's respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and other filings that Comscore makes from time to time with the U.S. Securities and Exchange Commission (the "SEC"), which are available on the SEC's website (www.sec.gov).

Investors are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Comscore does not intend or undertake, and expressly disclaims, any duty or obligation to publicly update any forward- looking statements to reflect events, circumstances or new information after the date of this press release, or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, we are disclosing herein non-GAAP net income (loss) and adjusted EBITDA, which are non-GAAP financial measures used by our management to understand and evaluate our core operating performance and trends. We believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, as they permit our investors to view our core business performance using the same metrics that management uses to evaluate our performance. Nevertheless, our use of these non-GAAP financial measures has limitations as an analytical tool, and investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Instead, you should consider these measures alongside GAAP-based financial performance measures, net income (loss), various cash flow metrics, and our other GAAP financial results.

Set forth below are reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. These reconciliations should be carefully evaluated.

COMSCORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



As of


As of


June 30, 2019


December 31, 2018


(Unaudited)



Assets




Current assets:




Cash and cash equivalents

$

48,963



$

44,096


Restricted cash

4,863



6,102


Accounts receivable, net of allowances of $1,598 and $1,597, respectively

71,231



75,609


Prepaid expenses and other current assets

15,579



19,972


Total current assets

140,636



145,779


Property and equipment, net

32,819



27,339


Operating right-of-use assets

39,377




Other non-current assets

5,984



8,898


Deferred tax assets

2,783



3,991


Intangible assets, net

93,458



126,945


Goodwill

416,775



641,191


Total assets

$

731,832



$

954,143


Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$

40,303



$

29,836


Accrued expenses

54,803



58,140


Contract liability

58,933



64,189


Customer advances

5,926



6,688


Warrants liability

10,798




Current operating lease liabilities

6,548




Other current liabilities

10,996



10,083


Total current liabilities

188,307



168,936


Financing derivatives

25,000



26,100


Senior secured convertible notes

180,909



177,342


Non-current operating lease liabilities

45,928




Deferred rent



10,304


Deferred tax liabilities

314



5,527


Other non-current liabilities

21,298



14,367


Total liabilities

461,756



402,576


Commitments and contingencies




Stockholders' equity:




Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at June 30, 2019 and December 31, 2018; no shares issued or outstanding as of June 30, 2019 and December 31, 2018




Common stock, $0.001 par value per share; 150,000,000 shares authorized as of June 30, 2019 and December 31, 2018; 70,056,765 shares issued and 63,291,969 shares outstanding as of June 30, 2019, and 66,154,626 shares issued and 59,389,830 shares outstanding as of December 31, 2018

63



59


Additional paid-in capital

1,586,750



1,561,208


Accumulated other comprehensive loss

(10,565)



(10,621)


Accumulated deficit

(1,076,188)



(769,095)


Treasury stock, at cost, 6,764,796 shares as of June 30, 2019 and December 31, 2018

(229,984)



(229,984)


Total stockholders' equity

270,076



551,567


Total liabilities and stockholders' equity

$

731,832



$

954,143


 

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)




Three Months Ended June 30,


Six Months Ended June 30,



2019


2018


2019


2018

Revenues


$

96,888



$

101,389



$

199,182



$

207,308











Cost of revenues (1) (2)


51,994



51,526



105,401



98,780


Selling and marketing (1) (2)


23,329



29,647



48,169



55,552


Research and development (1) (2)


16,883



20,889



35,099



39,605


General and administrative (1) (2)


16,932



28,699



36,477



47,360


Investigation and audit related


2,354



4,883



3,196



36,750


Amortization of intangible assets


8,076



8,266



16,181



16,810


Impairment of goodwill


224,272





224,272




Impairment of intangible asset


17,308





17,308




Settlement of litigation, net


5,000



5,250



5,000



5,250


Restructuring (1)


2,949



3,833



2,879



5,090


Total expenses from operations


369,097



152,993



493,982



305,197


Loss from operations


(272,209)



(51,604)



(294,800)



(97,889)


Interest expense, net


(8,242)



(4,124)



(15,001)



(7,029)


Other (expense) income, net


(3,081)



807



(112)



884


(Loss) gain from foreign currency transactions


(464)



1,045



(426)



123


Loss before income taxes


(283,996)



(53,876)



(310,339)



(103,911)


Income tax benefit (provision)


4,463



(2,101)



3,292



(3,516)


Net loss


$

(279,533)



$

(55,977)



$

(307,047)



$

(107,427)


Net loss per common share:









Basic and diluted


$

(4.61)



$

(1.02)



$

(5.09)



$

(1.90)


Weighted-average number of shares used in per share calculation - Common Stock:









Basic and diluted


60,697,608



55,192,741



60,315,528



56,703,795


Comprehensive loss:









Net loss


$

(279,533)



$

(55,977)



$

(307,047)



$

(107,427)


Other comprehensive income (loss):









Foreign currency cumulative translation adjustment


677



(3,975)



56



(2,360)


Total comprehensive loss


$

(278,856)



$

(59,952)



$

(306,991)



$

(109,787)











(1) Stock-based compensation expense is included in the line items above as follows:





Three Months Ended June 30,


Six Months Ended June 30,



2019


2018


2019


2018

Cost of revenues


$

636



$

3,774



$

1,484



$

3,987


Selling and marketing


1,087



5,792



2,403



6,367


Research and development


668



3,972



1,394



4,316


General and administrative


1,913



9,461



5,976



10,210


Restructuring


(266)





(266)




Total stock-based compensation expense


$

4,038



$

22,999



$

10,991



$

24,880




(2) Excludes amortization of intangible assets, which is presented separately in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

 

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



Six Months Ended June 30,


2019


2018

Operating activities:




Net loss

$

(307,047)



$

(107,427)


Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation

6,111



8,839


Non-cash operating lease expense

2,747




Amortization expense of finance leases

1,361




Amortization of intangible assets

16,181



16,810


Impairment of goodwill

224,272




Impairment of intangible asset

17,308




Stock-based compensation

10,991



24,880


Deferred tax (benefit) provision

(3,983)



2,477


Change in fair value of financing derivatives

(1,100)



4,460


Change in fair value of investment in equity securities

2,016



(265)


Accretion of debt discount

3,042



1,978


Amortization of deferred financing costs

525



445


Other

(20)



510


Changes in operating assets and liabilities:




Accounts receivable

4,442



10,638


Prepaid expenses and other assets

3,190



(5,255)


Accounts payable, accrued expenses, and other liabilities

20,176



(18,138)


Contract liability and customer advances

(6,552)



(14,321)


Operating lease liabilities

(4,364)




Net cash used in operating activities

(10,704)



(74,369)






Investing activities:




Proceeds from sale of investment in equity securities

705




Purchases of property and equipment

(1,893)



(1,287)


Capitalized internal-use software costs

(5,619)



(5,228)


Net cash used in investing activities

(6,807)



(6,515)






Financing activities:




Proceeds from borrowings on senior secured convertible notes



100,000


Debt issuance costs



(5,123)


Proceeds from private placement, net of issuance costs paid

19,894




Financing proceeds received on subscription receivable



4,676


Proceeds from sale-leaseback financing transaction

4,252




Proceeds from the exercise of stock options

1,191



164


Payments for taxes related to net share settlement of equity awards

(1,210)



(4,275)


Principal payments on finance leases

(1,417)




Principal payments on capital lease and software license arrangements

(1,662)



(5,359)


Net cash provided by financing activities

21,048



90,083


Effect of exchange rate changes on cash, cash equivalents and restricted cash

91



(1,136)


Net increase in cash, cash equivalents and restricted cash

3,628



8,063


Cash, cash equivalents and restricted cash at beginning of period

50,198



45,125


Cash, cash equivalents and restricted cash at end of period

$

53,826



$

53,188







As of June 30,


2019


2018

Cash and cash equivalents

$

48,963



$

46,589


Restricted cash

4,863



6,599


Total cash, cash equivalents and restricted cash

$

53,826



$

53,188


Reconciliation of Non-GAAP Financial Measures

The following table presents a reconciliation of net loss (GAAP) to adjusted EBITDA for each of the periods identified:


Three Months Ended June 30,


Six Months Ended June 30,

(In thousands)

2019
(Unaudited)


2018
(Unaudited)


2019
(Unaudited)


2018
(Unaudited)

Net loss (GAAP)

$

(279,533)



$

(55,977)



$

(307,047)



$

(107,427)










Income tax (benefit) provision

(4,463)



2,101



(3,292)



3,516


Interest expense, net

8,242



4,124



15,001



7,029


Depreciation

3,005



4,276



6,111



8,839


Amortization expense of finance leases

787





1,361




Amortization of intangible assets

8,076



8,266



16,181



16,810


EBITDA

(263,886)



(37,210)



(271,685)



(71,233)










Adjustments:








Stock-based compensation

4,304



22,999



11,257



24,880


Investigation and audit related

2,354



4,883



3,196



36,750


Settlement of litigation, net

5,000



5,250



5,000



5,250


Restructuring

2,949



3,833



2,879



5,090


Impairment of goodwill

224,272





224,272




Impairment of intangible asset

17,308





17,308




Private placement issuance cost

1,154





1,154




Other expense, net (1)

3,304



1,506



916



4,135


Adjusted EBITDA

$

(3,241)



$

1,261



$

(5,703)



$

4,872



(1) Adjustments to other expense, net, reflect non-cash changes in the fair value of financing derivatives and equity securities investment included in other (expense) income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.

The following table presents a reconciliation of net loss (GAAP) to non-GAAP net loss for each of the periods identified:


Three Months Ended June 30,


Six Months Ended June 30,

(In thousands)

2019
(Unaudited)


2018
(Unaudited)


2019
(Unaudited)


2018
(Unaudited)

Net loss (GAAP)

$

(279,533)



$

(55,977)



$

(307,047)



$

(107,427)










Adjustments:








Stock-based compensation

4,304



22,999



11,257



24,880


Investigation and audit related

2,354



4,883



3,196



36,750


Amortization of intangible assets (1)

8,076



8,266



16,181



16,810


Settlement of litigation, net

5,000



5,250



5,000



5,250


Restructuring

2,949



3,833



2,879



5,090


Impairment of goodwill

224,272





224,272




Impairment of intangible asset

17,308





17,308




Private placement issuance cost

1,154





1,154




Other expense, net (2)

3,304



1,506



916



4,135


Non-GAAP net loss

$

(10,812)



$

(9,240)



$

(24,884)



$

(14,512)



(1) In the fourth quarter of 2018, amortization of intangible assets was added as an adjustment in our calculation of non-GAAP net loss. Prior year non-GAAP net loss has been recast to include this adjustment, which is intended to better reflect our core operating performance.

(2) Adjustments to other expense, net, reflect non-cash changes in the fair value of financing derivatives and equity securities investment included in other (expense) income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.

We do not provide GAAP net income (loss) on a forward-looking basis because we are unable to predict with reasonable certainty our future stock-based compensation expense, investigation, audit-related and litigation expense, fair value adjustments for financing derivatives and warrants, variable interest expense for outstanding senior secured convertible notes, and any unusual gains or losses without unreasonable effort. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP. For this reason, we are unable without unreasonable effort to provide a reconciliation of adjusted EBITDA or non-GAAP net loss to the most directly comparable GAAP measure, GAAP net income (loss), on a forward-looking basis.

Supplemental Non-GAAP Disclosure

The following tables present a reconciliation of certain non-GAAP expense line items (to be discussed on today's conference call) to the most directly comparable GAAP expense line items. GAAP expense line items have been adjusted to exclude the effects of stock-based compensation.


Three Months Ended June 30,


2019

(Unaudited)


2018

(Unaudited)

(In thousands)

As
reported
(GAAP)


Less: stock-
based
compensation


As
adjusted
(non-
GAAP)


% of
GAAP
Revenue


As

 reported
(GAAP)


Less: stock
-based
compensation


As
adjusted
(non-
GAAP)


% of
GAAP
Revenue

Revenues

$

96,888







100.0

%


$

101,389







100.0

%

Cost of revenues

51,994



$

636



$

51,358



53.0

%


51,526



$

3,774



$

47,752



47.1

%

Gross profit

44,894



(636)



45,530



47.0

%


49,863



(3,774)



53,637



52.9

%

Selling and marketing

23,329



1,087



22,242



23.0

%


29,647



5,792



23,855



23.5

%

Research and development

16,883



668



16,215



16.7

%


20,889



3,972



16,917



16.7

%

General and administrative

16,932



1,913



15,019



15.5

%


28,699



9,461



19,238



19.0

%

Restructuring

2,949



(266)



3,215



3.3

%


3,833





3,833



3.8

%




Six Months Ended June 30,


2019

(Unaudited)


2018

(Unaudited)

(In thousands)

As
reported
(GAAP)


Less: stock-
based
compensation


As
adjusted
(non-
GAAP)


% of
GAAP
Revenue


As
reported
(GAAP)


Less: stock-
based
compensation


As
adjusted
(non-
GAAP)


% of
GAAP
Revenue

Revenues

$

199,182







100.0

%


$

207,308







100.0

%

Cost of revenues

105,401



$

1,484



$

103,917



52.2

%


98,780



$

3,987



$

94,793



45.7

%

Gross profit

93,781



(1,484)



95,265



47.8

%


108,528



(3,987)



112,515



54.3

%

Selling and marketing

48,169



2,403



45,766



23.0

%


55,552



6,367



49,185



23.7

%

Research and development

35,099



1,394



33,705



16.9

%


39,605



4,316



35,289



17.0

%

General and administrative

36,477



5,976



30,501



15.3

%


47,360



10,210



37,150



17.9

%

Restructuring

2,879



(266)



3,145



1.6

%


5,090





5,090



2.5

%

We do not provide GAAP cost of revenues, selling and marketing, research and development, general and administrative, and restructuring expense on a forward-looking basis because we are unable to predict with reasonable certainty our future stock-based compensation expense without unreasonable effort. Stock-based compensation expense is uncertain, depends on various factors, and could be material to results computed in accordance with GAAP. For this reason, we are unable without unreasonable effort to provide a reconciliation of non-GAAP operating expense to the most directly comparable GAAP measure on a forward-looking basis.

Revenues

Revenues from our three offerings of products and services are as follows:


Three Months Ended June 30,





(In thousands)

2019
(Unaudited)


% of
Revenue


2018
(Unaudited)


% of
Revenue


$ Variance


% Variance

Ratings and Planning

$

68,922



71.1

%


$

70,501



69.5

%


$

(1,579)



(2.2)

%

Analytics and Optimization

17,293



17.9

%


20,533



20.3

%


(3,240)



(15.8)

%

Movies Reporting and Analytics

10,673



11.0

%


10,355



10.2

%


318



3.1

%

Total revenues

$

96,888



100

%


$

101,389



100

%


$

(4,501)



(4.4)

%








Six Months Ended June 30,





(In thousands)

2019
(Unaudited)


% of
Revenue


2018
(Unaudited)


% of
Revenue


$ Variance


% Variance

Ratings and Planning

$

139,499



70.0

%


$

140,070



67.6

%


$

(571)



(0.4)

%

Analytics and Optimization

38,751



19.5

%


46,264



22.3

%


(7,513)



(16.2)

%

Movies Reporting and Analytics

20,932



10.5

%


20,974



10.1

%


(42)



(0.2)

%

Total revenues

$

199,182



100

%


$

207,308



100

%


$

(8,126)



(3.9)

%

 

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