Q3 2020 Comscore Inc Earnings Call
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He will be a question and answer session to ask a question during the session you'll need to press Star then one on your telephone. Please be advised that todays conference is being recorded if you require any further assistance. Please press star then zero.
I'd now like to hand, the conference over to one of your speakers today Mr., Kurt Christopher Ferris Director of Investor Relations. Sir. Please go ahead.
Thank you operator.
We begin our prepared remarks I'd like to remind all of you that the following discussion contains forward looking statements. These forward looking statements include comments about our plans expectations and prospects and are based on our view as of today November nine 2020, we.
We disclaim any duty or obligation to update our forward looking statements to reflect new information. After today's call. We will be discussing non-GAAP measures. During this call for which we've provided reconciliations in today's press release and on our website.
Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those related to the COVID-19 pandemic and economic impact. These.
These risks and uncertainties include those outlined in our 10-K 10-Q and other filings with the FCC, which you can find on our website www does he see that job I'll.
I'll now turn the call over to Comscores, Chief Executive Officer, Bill Livek Phil.
Thank you, Chris and thank you everyone for joining us today.
Let me begin by addressing our strategic review.
On our last earnings call, we committed to an announcement by today, our third quarter earnings call. While we cannot report a definitive agreement.
I'm pleased to say that we are in advanced discussions with respect to a recapitalization transaction with an anchor investor.
If consummated the transaction would result in a significant reduction in our outstanding debt enhanced our balance sheet and liquidity profile. In addition, the transaction will provide for an enhanced commercial relationships to support our growth initiatives.
Our management team Board and financial Advisors continue to work diligently toward a conclusion.
However, we cannot provide assurances regarding the timing or the outcome of this process and do not intend to provide additional updates until we determine further disclosure is not sure.
We also will not be able to answer questions about this beyond what is in our press release from this afternoon.
We appreciate the patience and the trust of all of our stakeholders who.
Who have all exhibited.
Great strength through this process now, let's turn to the quarter.
Again, I want to applaud our outstanding employees for their continued dedication. Despite his straying from the pandemic I. Thank them for their efforts and I'm proud to represent them on the call today.
Our business particular movies continued to be impacted by the pandemic and the third quarter as revenue generation fell short of our expectations. However, we saw positive signs across your business lines, our television business performed well in the quarter with National T.
I'd and addressable growing by double digit percentage is year over year.
We gained momentum with advertising agency clients, who are increasingly embracing our advanced audience metrics in a rallying around our local market currency.
Our local business remains strong and we continue to add to our roster of clients. One example is our progress and Sony Pinnacle advertising, who will be using comscore exclusively for buying from major advertisers, who spent millions of dollars in TV advertising.
Our core digital services stabilized with its flat quarter from our technology vertical where we signed new logos entering a new 100% of our enterprise wide clients. We believe this trend will continue in 2021.
I'm also pleased to say that in the third quarter, we generated $7.3 million in adjusted EBITDA, which are our second best quarter since the merger of Rentrak and Comscore.
Through the nine months of 2020, we have recognized $22 million positive swing in adjusted EBITDA compared to 2019 into our financial discipline, demonstrating that we are well positioned when the pandemic related.
Impact he says Greg will go into more details on the financial review later in the call.
Now I'd like to discuss how we're positioning comscore to win the future of media measurement and drive revenue growth in 2021 and beyond.
A few weeks ago, we announced a number of key advancements in our cross screen measurement capabilities, we have pivoted to a forward looking approach to an audience and impression based currency based on our groundbreaking solutions and enhanced advertising.
Outcome based attribution and exact commercial ratings, including our global leadership solutions in this cookie loose world.
Lucky to walk you through this plan and explain how we believe we will drive long term value.
Our media industry partners and of course, our shareholders.
As we head into 2021, we're at an inflection point in media and advertising with the pandemic accelerating the velocity of change in the media landscape. This.
This year, we've seen dramatic changes to immediate consumption behaviors.
Looting increased streaming game digital spending mobile shopping just to name a few.
And its media content, particularly video becomes increasingly cross platform in nature media buying and selling shifting away from traditional age and gender demographics in gross rating points to audiences and impression based measurement.
This trend is a positive for comscore as we extend the impression based currency in digital for many years and been providing advanced audiences for TV for more than a decade.
These rapid changes required consistency and measurement across the premium video put footprint from linear to digital go Teachey, it's what our customers need from us in this new landscape the traditional approach.
Do you see age and gender demographics simply does not meet the advertisers' needs and they need to understand the de duplicated reach other advertising spend to inform their decisions.
Comscore has had a poor say to address this new approach had.
Have been built currency designed for this new era impress.
Impressions, just not an average rating will be used to evaluate success, but planners and buyers regardless of where the content and new advertising are viewed by consumers.
We call this new impression based currency that leverages, our unmatched advanced advertising insights exact commercial ratings a solution that is already available as a television currency in the local national and addressable market places it's in.
Important to remember that Comscores media measurement solutions are made possible by our massive data footprint of hundreds of millions of connected devices 60 million yen set top boxes 12 million Smart Tvs hundred 15 million video on demand screens.
117.7 million desktops, and 230 million plus mobile devices, plus our strong digital panel.
We have spent nearly two decades building. This infrastructure no. One else has the experience or has built a machine like comscore is to provide comprehensive level of media measurement across devices.
This year, we have worked to perfect our national addressable advertising solution.
For this new media landscape.
Our measurement provides impressions for national programmer minutes across the largest M.D.P.D. east along with connected Tvs to provide the deepest well have information to measure national addressable ad inventory.
This and PPD connected TV centric approach enables measurement for more than 15 million households by far the largest footprint of addressable homes.
We expect to offer right operationalize. This first independently measured national advertising system for buyers and sellers of addressable ads in 2021. This will allow advertisers to use a common impression level metric for national.
Average rents boule inventory that also reconciles with non addressable minutes and improves accountability across the system as traditional average commercial ratings become less important.
The demand for the addressable market is growing fast representing a greenfield opportunity for Comscore. We believe we have a unique first mover advantage to capitalize on this in the coming quarters. This.
This quarter with an eye toward cross platform solutions, we expanded our connected TV measurement footprint with an agreement with Samba TV one of the leading cross screen data measurement companies and TV.
Providing information globally to us smart.
Smart Tvs are a piece of the data possible and the addition of samba to our portfolio's connected TV partners strengthens our cross platform measurement capabilities and expands our portfolio, helping brands better quantify the impact of their advertising.
Its across platforms. The launch of international connected TV measurement will peak in European markets, where we already have new customers with an aggressive expansion plan over time.
Comscores commitment to innovation continues with the rollout of new solutions to our customers as we noted in a press release a few weeks ago, we expect to launch an array of new and enhanced products in 2021, including the integration of over 10 million.
Additional households, and torn measurement footprint for Comscore TV, our local and our National Cross platform solutions, our national addressable solutions that will build on our local capabilities.
The leading edge first poverty privacy focused solutions for cookie lists world and our outcome based attribution product with like grant.
The motivation for these new products is clear the growth of premium video across the eco system demands more accountability and better tools to monetize inventory comscores connected TV conceptual activation solutions for both on demand and lights.
Green allow clients to increase their monetization through enhanced direct sales open exchange in programmatic sales. This.
This focus dovetails with our life ramped partnership to develop new and innovative privacy focused services across the AFE for Kashi NAPCO system.
Last month, we unveiled our next generation outcome based measurement added plus now powered by Comscore. This.
This new offering marks the first gogan market milestone with our expanded life ramp partnership to develop new and innovative services for the advertising ecosystem.
Our partnership is already generating revenue in and we look forward to collaborating with them on additional projects in the coming quarters.
I'd also like to remind you of the progress, we're making with our expanded local TV offerings. As we look into 2021, we see three key drivers of growth for local it's the Comcast data integration, which is on track for implementation by the ended this year.
Providing us with an unmatched measurements sure because covering over 70 million TV sets.
Quick score, providing viewership insights within 24 hours in the top local.
Markets. The top 50 local markets. This product is available now and be met with excitement from our customers and number three comscores consumer intelligence for local markets. We're CCRI.
A new solution that ties local shopping behavior segments to TV viewership in category specific segments in near real time, we expect CCRI to be available by the end of the year. We expect all three of these enhancements degenerate increment.
Internal revenue growth for us beginning in 2021.
We also continued to invest in research and development for cross platform measurement during the quarter Comscore was awarded three new U.S. package, one for Halsall device identification.
One forward device co location identification and third for Halsall viewership aggregation. These achievements highlight our commitment to develop and enhance cross platform measurement solutions.
I T portfolio now includes more than 70, you asked patterns and underscores our privacy conscious TV and digital product innovation as part of a comprehensive roadmap for delivering superior measurement in a cookie lets world.
I would like to take this as an opportunity to highlight the greenfield measurement opportunity for Comscore and gaming gaming has been trending upward as a percentage of media usage for years and have seen a remarkable shift in any sports gaming like screaming behaviors during the path.
Endemic total AD spending in partnership to be sports increased over 40% over the past three years time spent viewing videos on desktops. This increased nearly 200% over the past three years.
Score has unique opportunity and ability to measure gaming live streaming audiences earlier this year, we announced a partnership with which to deliver live streaming audience measurement for E sports gaming and enhancing the advertisers' ability to understand the vertical.
Expect to hear more from us in the future about her gaming offerings.
I'd like to take a moment to address our movie business movies continues to be impacted by theater close should help.
Locally.
We are seeing positive signs.
In China, and Japan as an example, new releases are delivering large box office numbers. The industry clearly is not back to normal, but we believe it's not going away. We are the leader in box office measurement and we believe the business can return to prior levels.
Sales when the pandemic ends, but we think they will take US 12 to 18 months to get there.
Finally, I'd like to note the recent successes with customer renewals and wins across our product suite.
This quarter, we secured new business with new spring next door Newser fleet rape and true expert digital and we expanded our relationship with Grand Media Holdings, and Weichel broadcasting for local TV.
We secured in expansion with Dsps for the HCC network and also renewed the FCC network, we had and inspiring quarter when our agency vertical.
Canvas worldwide, you might know them better is the agency for Honda and Kia Motors expanded its national TV use cases with our solutions for on demand, we secured a renewal with Stx entertainment. Additionally, I'd like to highlight our exclusive currency deal.
So with the Pinnacle agency, a major independent agencies, representing whether check and other large advertisers that signed it and we'll be switching in January 2021 to exclusively using Comscore TV ratings.
We also launched our advanced streaming behavioral segments in the true optic marketplace for activation products.
And our movies business secured renewals with the number of clients even during the pandemic.
To wrap up it was a solid quarter with customer wins and renewals and we are excited for 2021, we are relentlessly innovating developing new measurement products and services.
While we're forging new relationships across the advertising ecosystem.
Now I would like to turn the call over to our Chief Financial Officer, Greg.
Thanks, Greg.
Thank you Bill today, we reported third quarter revenue of 88 billion compared to 94.3 million in the third quarter of last year.
Revenue from ratings and planning in the third quarter was 62.7 million compared to 65.3 million reported in the third quarter of last year.
The decrease continues to be primarily from our syndicated digital products.
Well enterprise customer renewals continued to be strong.
Syndicated digital revenue declined year over year, representing 48% of our ratings and planting revenue in the quarter compared to 51% in the third quarter of 2019. However.
However sequentially syndicated digital was down approximately 1% as we continue to sign new contracts from the exit of some competitors.
National TV revenue was higher compared to the prior year as we realized revenue from live ramp.
Revenue from analytics and optimization in the third quarter was 17.4 million compared to 18.3 million in the third quarter of last year.
The decrease was due to lower custom digital marketing solutions revenue compared to the third quarter of last year and was in part offset by higher activation revenue.
Movies reporting and analytics revenue in the third quarter was 7.8 million compared to 10.7 billion in the prior year quarter.
Revenue continues to be impacted by ongoing theater closures as a result of the pandemic.
For the timing of theaters reopening at scale is uncertain, we do expect theater closure to continue to have any impact on movies revenue.
Turning to operating costs, our core operating expenses, which includes cost of revenue sales and marketing R&D NGL day.
Declined over 10 million year over year for the quarter.
A significant reduction in operating costs relates to the actions we implemented throughout last year further reductions we took in 2020.
Cost of revenues decreased by 900000 in the third quarter compared to the year ago quarter due to lower headcount and professional fees.
Selling and marketing expenses declined 3.3 billion as compared to the year ago quarter, and R&D decreased 4.6 million from staffing reductions and decreases in most areas of our cost base.
DNA expense for the third quarter decreased 1.9 billion compared to the prior year quarter from lower headcount and professional fees.
We do expect our cost to rise from these levels as we continue to expand our product offerings.
Additionally, in the third quarter of 2020, we begin to focus our hiring efforts to expand our capabilities in regions outside of the U.S.
Over the long term this will allow us to increase headcount to support the growth initiatives, we've been putting in place throughout the year, while continuing to maintain our focus on cost. However.
However in the short term, we expect to have an increase in compensation expenses as we work through this transition.
In the third quarter, we reported a net loss of $11.1 million compared to a net loss of 10.6 million in the same period last year.
For the third quarter, adjusted EBITDA was 7.3 million compared to $6.4 million for the same period last year. Despite.
Despite the business challenges from the pandemic and lower revenue, we have generated nearly 23 million in adjusted EBITDA through the first nine months of 2020 compared to less than 1 billion for the first nine months of last year.
We ended the third quarter with total cash of 51.8 million compared to 66.8 million at December 31 2019.
The decrease in cash was primarily a result of cash interest payment.
Looking forward, we expect revenue to continue to be impacted by AD spending in movies we.
We are optimistic that new agreements and partnerships. We have signed during 2020 will benefit us in the near and long term, particularly if the economic headwinds abate.
However, we remain cautious about revenue growth until we have better visibility into it spending computer reopening.
Now, let me turn it back to the operator to take questions.
Thank you ladies.
Ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
To prevent any background noise, we ask that you. Please place your line on mute. Once your question has been stated.
Our first question comes from the line of Laura Martin from Needham. Your line is open. Please go ahead.
Hi, guys can you hear me Hello of course, Laura How're you are right that Don. Thank you. So maybe a couple I remember rentrak used to have big political quarter. So I'm wondering what you think the political advertising is in Threeq and maybe fourq here to date.
For the for Comscore and then secondly.
One of the thing I'm, what also wondering Greg for you.
Much of calm cost costs will end up being in this year, because I know that revenue delays. So how much cost are eating to integrate Comcast in this fiscal year, whereas we won't see the revenue probably till next year. Thanks.
Thank you Laura I'll start out with political and then I'll hand, it over to Greg on the cost question.
Political was clearly an unusual year the Democratic party primaries staggered out what I would call quote unquote normal where the candidates. We're looking out for our segments for highly targeted to be then that throws a pandemic happened political advertising pretty much.
Stop and then towards the end you basically had both candidates not doing targeted media. They were just doing carpet bombing, what I will call and there wasn't a lot its harkening going on.
But I think what we saw with the Seachange setting us up for future cycles and the off presidential cycle.
And the presidential cycle as voters got used to an extended voting period of time.
There is not enough money to be in my opinion to cover that long period of time, so candidates will revert back to.
Highly targeted.
In the future I believe.
But this year the political for US was softer than we had anticipated even though whats important Greg on the Comcast question. Please.
Yes, Laura Thanks, appreciate it and I know that you.
I think we've shared before that we don't speak specifically about about contract, but what I will say I think we've shared this before we are expenses and Comcast in 2020 so.
We've done that since.
Q2, when we begin.
The integration so when you think about it on a comparable basis moving forward 2021 would have you know similar obviously it will be a full year cost to those that are already embedded in the 2020 run rate. So.
I think the the long and short answer is we don't provide specific I think you have some estimate.
But 2021 would would have a similar run rate to to the run rate we're seeing today.
Thank you.
Thank you Laura.
Thank you and our next question comes from the line of Matthew Thornton with Truest Securities. Your line is open. Please go ahead.
Hey, good afternoon, Bill good afternoon, Greg.
I came on a little bit late so I apologize if I if I Miss any of this maybe first question just around.
Digital housekeeping digital mix as a percentage of our ratings and planning any update there and just.
I don't know maybe is for bill, but digital comp we've talked about that stabilize or the hope is that what kind of stabilize as we look forward to kind of any latest thinking there.
Secondly in the.
Strategic update that you guys put out this afternoon, you talk a little about enhanced commercial relationships with this particular potential anchor investor I'm kind of curious if you could put any more meat.
On that or any more color around what that might mean without getting into specifics about the partner obviously.
And then maybe third just any color on you talked about revenue growth.
Being a bit cautious I'm just curious fourq is typically a good sequential quarter Im just wondering if you'd be willing to give us any thoughts about how we can think about modeling revenue in the in the Fourq here. Thanks, guys appreciate it.
Well Theres a lot there on the strategic review that one's easy we can't say anything more than it is in the press release, but thank you for the question on digital we're seeing what we had predicted the bottoming out we had 100% renewal with our enterprise wide clients, but we believe we will continue our.
Into 2021, our digital service, we believe has a lot of potential out there because of the increased focus on privacy. So we are excited about that the sequential.
Process that we are seeing great.
Greg do you want to take the other questions.
And that has let me sure let me just say.
Matt If you if you missed that 48% of Rick for ratings and planning. This this Q3 versus 51 last Q3, I think the thing to point out is from Q2 to Q3 syndicated digital was down about 1%. So we're starting to see the flattening out that we expected as you as you know.
As we signed clients. It takes time for that revenue to come into the stream for a full quarter. So we are starting to see that stabilization as bill pointed out, but Q4 is a large quarter for us as far as contract renewals and we're looking for that follow through that we saw in Q3.
As to your last question around Q4 revenue, you're you're correct Q4 tends to be one of the best quarters of the year for us tends to be typically higher due to do any of the analytics and optimization projects that happened there and while we're not giving any guidance.
Because of a fair amount of uncertainty in AD spending in areas like activation and whether or not we'll have all of those projects certain things earlier in the year.
Were held back.
I do expect that.
Things things are returning you'll you'll see that some.
Some of those projects that are recurring we expect to occur in the fourth quarter.
Great. Thanks, guys appreciate it.
Thank you Matt.
Thank you and our next question comes from the line of Alan Gould with Loop capital. Your line is open. Please go ahead.
Thank you Hi, Bill Hi, Greg two questions first what impact you think idea phase going to have on your business and the second one is with respect to this new pivot on cross platform measurement. When do you think we will start seeing revenue coming out of cross platform.
Well, it's the idea hey first.
It's going to have an impact on the industry. So we think that we're positioned well because of the data assets that we have including our panel in digital so we're optimistic there.
That our solutions that we're working on and we'll talk about them more in the future are the right solutions in terms of cross platform.
For in 2020, Weve been laying the groundwork here to have any to capitalize on the impression based audience base piece of the puzzle. We think that this is going to shift away from C. C. C. Seven C 28 days that is.
No longer will be less relevant in the future I won't say not relevant but a lot less relevant and we believe that were set up perfectly because of our sense. This approach to capitalize on revenue in 2021 there.
Okay. Thank you.
Thank you and again, ladies and gentlemen, if you have a question at this time. Please press Star then one.
And our next question comes from the line of Richard Kramer with Arete Research. Your line is open. Please go ahead.
Thanks very much.
A quick one on the strategic.
Partner and maybe this is something you can't answer is this going to be the same investor you had before or change given that you have so many issues with the previous or the existing investor.
And then my two sort of fundamental questions. The first one is.
You talked about growth in local national and addressable TV, given the pressures than TV. Its faces here and you know your main rival claiming to have revenue secured on multi year agreements do you expect there can be a round of retendering measurement deals and then theres going to be more on programs or do you think this is a year, where I think as you are.
Client here in Q4, then there may be some restrictions on variable spend going into next year.
And then a longtime Don you talked about the new product pipeline for next year and usually when companies come out with the new product pipeline. They have to go into a mile long sales cycle for EPS.
How do you think about your sales and marketing expense next year.
Now one of the reasons behind the times finally resetting the.
The investment profile for the company. So that you can go out and sell those products to the market. How do you think about margins next year. Thanks.
I'll, let Greg answer ones, but.
The top one that you had on the strategic review.
As I. Appreciate the question are we cannot comment further than what is in the press release.
If you compare second question was about.
Contracts being opened up with Crestor in advertising.
As I've said before on previous quarterly calls, there's a number of great attributes of our business.
On the syndicated business. One is often times, we have long term contracts and also in a downturn the sellers have to sell harder and being in the information business is a good place during the difficult economic period. So we're optimistic as we look forward.
To it the investment that we made in our local and national product with the addition of Comcast that will be done by the end of the year is going to give us unprecedented coverage with the advanced audiences along with those impressions that ad agencies.
Okay.
AD agencies using mass is a precursor to more stations in more media.
Utilizing as I cannot overemphasize the importance of Pinnacle, you would know them better as to whether Teck ads.
You see on television switching to us exclusively why are they doing it because we have a service that fits where theyre falling campus that has Han died in here they looked at our information being helpful on the national side of understanding outcome.
Base through a variety of products there so on the cycle that we're looking at for sales and marketing that process has already started but any more specifics I'll turn it over to Greg on expense.
Yes, I think you talked a little bit about the sales cycle. What I would say is you know these solutions have been being developed over the course of the entire year and our sales staff is pretty adept at what they're going to be in having those conversations already so those things are already in the works as we look to integrate the Comcast data we've been talking about that.
Now for some time, so I think people are already jumped up and geared up for that as we're working towards the end of the year and into 2021. So we feel good about that on the cost side, the sales and marketing cost side I think we are focused on.
<unk> cost as we always have but I do think we understand that there will be incremental costs associated with doing this but.
But I think that the incremental revenue that we think that we will generate and that we expect to generate and while we've given no guidance.
We obviously believe that these enhancements will provide significant benefit to the bottom line as we move through 2021.
Okay, and maybe just one last sort of housekeeping one can you give us a sense of the contribution from data must match on this quarter and just how much how much was that and is that expected to ram considerably as that one off or is that ongoing.
Right I mean, we don't we don't provide specific.
Around any one specific product or solution.
I would say is that as Bill mentioned, we're excited about that relationship. It's generating revenue that we think there's opportunities for us as we move forward to continue to enhance that.
Okay. Thanks.
Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to your CEO Bill Lovette for any further remarks.
Thank you operator, we remain excited about the future as we manage through this unprecedented period I'm pleased with the progress that we made as a company in 2020. Despite all the challenges that we've talked about on behalf of myself and our entire comscore team I'd like to send.
Herb Wild West best wishes and thank you to our front line workers seamless pandemic, including first responders healthcare workers and a central employees. Thank you operator, and thank you guessed in investors for joining us today, and we look forward to sharing our progress and results.
The coming quarters. Thank you for joining us today.
Ladies and gentlemen. This concludes today's program. Thank you for participating you may now disconnect.
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