Q3 2021 Comscore Inc Earnings Call

November 8, 2021

Ladies and gentlemen, this is the operator todays conference is scheduled to begin in one minute until that time your lines will again be placed on hold thank you for your patience.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Comscore third quarter 2021 financial results conference call.

At this time, all participants are in listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question. During this time, you will need to press star one on your telephone keypad.

Also please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your Speaker today, Mr. John Tinker. Thank you. Please go ahead Sir.

Thank you operator before 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 eight 2020, well, we disclaim any duty or obligation to update them.

Forward looking statements to reflect new information after today's call we will be discussing non-GAAP measures. During this call for which we have provided reconciliations in today's press release and on our website.

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 its economic impact. These risks and uncertainties include those outlined in our 10-K 10-Q and other filings with the SEC, which you can find on our website or at Www SEC Gov.

I'll now turn the call over to Commscope, Chief Executive Officer, Bill Lytic Bill.

Thank you John and thank you everyone for joining US today with me are Chris Wilson, Our Chief Commercial Officer, Mary Margaret Curry, our senior Vice President and controller and other members of management I would also like to officially welcome John Carpenter as our new CFO, who will be.

Joining us on November 29, John brings a world class background and leadership experience with several of the world's leading media and technology companies I look forward to all of you meeting John soon in hearing from him on our next earnings call.

Today, I'm very very profitable report that we're turning in a solid third quarter demonstrating that we our business again, we reported our highest revenue number in seven quarters, and our highest revenue growth rates in 11 quarters, we grew analytics.

And optimization business stabilized syndicated digital and closed agreements that we believe will have significantly improved our ratings and planning business in future quarters. We also reported adjusted EBITDA at a level, we haven't seen in many years, we are excited about.

A return to growth and the opportunities ahead.

We expect to build on this quarter's performance throughout the rest of 2021 and into next year.

We moved forward with new clients and our currency TV services, the turnaround of our digital business continued growth in our activation business and our movie business.

You know we have been in the measurement business for a long time with our DNA.

And is firmly.

Position in the digital census scale TV measurement business, we're right now at a tipping point, where the industry is looking for our type of currency that we've been working on for over a decade and you can see this from the signals in the market is trending and how brands can add.

Or types or decide to spend their money and make decisions for their business and as I recently said in an open letter to the industry on the future of measurement.

Future is now the future, it's comscore and make no mistake the change in the dollar, but it's already happening.

Only comscore produces a measurement solution that uses a single methodology in all tuner been can local markets that rolls up to our national service, along with customers digital usage and all 210 markets. This allows customers to understand.

The products that consumers buy and search for online, creating a unique service that enables brands to buying nationally and local advertising together.

Additionally, two significant catalysts that are driving the momentum of Comscore TV currency.

First is the media ratings Council also known as the MRC.

In September of this year, the MRC suspended accreditation for the legacy television ratings service for both the national and local TV measurement.

This suspension of accreditation followed a funding by the MRC that the legacy service had quoting now generally consistent pattern of underreporting dealing.

It's also important to note that the.

TB suspension comes on the heels of their digital AD ratings service, losing accreditation.

With this news comscore announce that our MRC audit for local and National TV measurement, which moved up from next year and now it's officially underway as of October 19.

Our MRC audit is important because we are seeking credit nation.

For the old small panel approach to measurement, but rather the future approach, we built by leveraging sensitive scale information.

Our innovative TV approach is consistent with the pioneering approach we took in our digital accreditation of media Metrix.

We made comscore the future of media measurement.

Second catalyst is that the agencies TV networks and local stations are very vocal about actively looking for a new currency debase their advertising inventory transactions on.

We are in the middle of discussions with National television networks to use comscore as measurement as currency.

Especially as we move into next year's upfront market.

That follows our expanded relationship with Fox networks, and Viacom CBS for traditional linear currency that we announced previously.

As local station spiked to address their concerns over diminished ratings and impressions from the legacy currencies shortfalls more and more businesses are turning to comscore for our stable and our reliable currency.

For example on Friday, we announced our exclusive arrangement with Univision as they were.

Local TV currency in several markets Roberto Ruiz Executive Vice President of research and insight at your innovation said quoting now with trusted audience measurement at an inflection point across the industry Univision surveyed the marketing quickly identified comscore. So.

Right partner for us to deliver reliable and advanced measurement beginning in these three markets. We are thrilled to be expanding our relationship with comscore in the linear TV space and are excited to have a seat at the table and helping to drive meaningful positive change.

Standards for how the Hispanic audience and audiences in general are measured.

As you can see from our Porto statement. The industry has reached a point where the risk of staying with the status quo is intolerable in my opinion.

And Comscore has become a clear choice for the future.

Now, let me discuss the quarter ratings and planning revenue was down 1% compared to a year ago.

We're pleased that we're seeing growth in both local and national TV, our local TV growth rate because become stronger over the year and we anticipate a strong fourth quarter.

Additionally, the rollout of Comscore consumer intelligence and all 210 local markets provides our customers with an added sales tool to compete with the periphery Asian of digital video inventory and local markets.

Our near real time innovative approach demonstrates our commitment to the future of measurement and our belief that local TV is a cornerstone for growth in 2022 and beyond.

Speaking of course, no stones, we recently signed an exclusive agreement with the agency called cornerstone Media group and imagine annuity, both who will exclusively use comscore local TV ratings as their currency I'm also excited to announce that spectrum reach.

Expect a rollout comscore as their preferred TV currency and all of their 89 markets, including New York and Los Angeles by year end.

This is following the successful launch and their southeast markets.

With this we believe that more agencies brands will be switching to comscore the bias television advertising.

It's another reason for television stations and other companies to subscribe to Comscore on top of our more than 1000 clients stations.

Turning to syndicated digital we achieved stabilization with revenue being sequentially flat.

Being the stage for a return to growth we have consistently seen solid renewals from our large customers now we're starting to see the same with our smaller customers two.

Former customers are returning because they appreciate comscore is quality versus that of our competitors do.

During the quarter, we signed new syndicated digital agreements with Talon grew a job and advertising platform. The publishers desk, which provides publishers with custom tailored strategies for increasing the monetization of their digital platforms. We also saw on <unk>.

The renewal rates with small digital publishers, who use our services to help operate their businesses every day.

There've been a number of recent events signaling comp scores role as a busy SD video currency. For example, we announced a deal with Jam loop the connected TV demand side advertising platform that helps brands reach screening television audiences.

Comscore is robust.

<unk> digital segmentation capabilities, our household level audience targeting and our demographic segments.

Also at our recent variety entertainment and technology summit. It was great to hear during a panel discussion, where Disney's read a terrible precedent of advertising sales and partnerships and responsible for selling advertising on Hulu stake.

Comp score as one of our great partners.

Furthermore, on that panel warrant immediate head of advertising sales J P. <unk> stated that they were working very closely with Comscore on the first national addressable measurement at scale independent working with us since 2020.

I'm also very excited about our growing partnership with Google.

We expect continued growth in 2022, we recently announced the expansion of our integration with Google AD data offers.

Which adds connected TD impressions from Youtube and Youtube Tvs inventory in our cross platform advertising measurement currency.

Comscore campaign ratings or what we refer to as CCR.

This accomplishment marks too.

Important milestones first Comscore is the first measurement provider to measure advertising on Youtube and Youtube TV and connected televisions.

This measurement includes co viewing.

Which provide that for Thai change with the most comprehensive view of their audience.

Second the addition of Youtube and Youtube TV expand CCR, enabling comprehensive cross platform measurement.

As previously published by Comscore more than 80% of CTV reach in the United States Paulson only five streaming services.

Those five only to Hulu and Youtube are AD supported I hope you can see by that why we're so excited about the Youtube arrangement.

CCR measurement, including Youtube and Youtube TV is now available to our buy side clients for their ad campaigns.

Turning to analytics and optimization, we reported a revenue increase of 29% compared to the prior year.

Driven by digital activation.

The activation on transactional business model is very attractive to us.

Many major platforms in this space use comscore to place their buys.

Here is why I like to refer to this area as our new digital business, we get paid based on media spend not research budgets.

Activation are targeting tweak for digital with the privacy centric focus is building momentum with Comscore is predictive audiences, which is our cookie free targeting solution that enables advertisers to reach audiences based on granular consumer behave.

<unk> and privacy friendly contextual signals.

Apple is giving users the choice to block the IBSA identifier.

And as many of you know some leading digital accurate titers reported lower revenue due to this change.

At Teck word world operates an IP based cookie targeting which is going to be going away in 2023, suggesting the difficulty of measuring will only increase however, comscore is measurement is not reliant on the IBSA comp scores.

AI contextual engine and our global opt in panelists enables us to create next generation cookie free audience segments that performed well.

Cookie based segments.

This is an alternative solution.

<unk> is identifying where substitutes. However, many of the identifier substitutes do not have the full scale and an advertiser cannot reach the same amount of bodies by contrast, the scale of our predictive audiences replace the need for identifiers.

We are seeing strong interest in a predictive audiences and recently added the L. Two political couple of segments here to help audiences to reach ahead of the 2022 political season, which I think we all would agree will be very active.

Our emphasis on activation reflects our commitment to security and privacy friendly product development and the responsible use of information for the benefit of both advertisers and consumers as a reflection of this commitment we recently received.

The prestigious ISO certification for information security and privacy information management systems, ISO 27, or one and ISO 27 701.

I am so proud of our security and privacy teams for this accomplishment.

Another emerging market opportunity is out of home measurement, we recently signed agreements with true a leading U S place based media company and this star media, a leading global provider of programmatic technology for digital out of home.

This year, we've already signed three leading digital out of home advertising companies and expect our new out of home offering to be an incremental revenue generator.

Finishing with the movie business revenue in the third quarter was up 5% sequentially, we expanded our relationship with Sony to include certain international offerings.

Our global multi currency provides a critical view of box office for every major studio every many major studio and prominent interim independent.

Independent distributors in the worldwide theatrical industry.

During the third quarter movie theaters, reopen and most major markets worldwide.

The first time since the pandemic began.

Theaters are seen as an essential delivery channel for Hollywood Studios. The evidence that we believe this studio saw.

Disney to release of the life of the tender range smashing the record for labor day openings, which many in the industry has taken proof of the power of the theatrical on Libre lifts.

No time to die the James Bond movie had the highest UK opening weekend for any bond movie.

Ever.

We expect box office revenue to return to pre pandemic levels in 2022.

I hope you can hear the excitement we have about the industry, we serve and the opportunity that we and our customers collectively have.

Comscore plans to take advantage of this opportunity to capture market share in TV and in video, which will enable us to continue to develop and enhance the next generation of measurement tools, our customers need and want.

Our focus is on building a unified framework that uses currency grade data to drive real time analytics for all media types in a trusted environment.

Finally, I'd like to thank all of our Comscore employees for their hard work and dedication throughout the pandemic.

And Mary Margaret Curry and the rest of the financial team for so ably managing our financials at this time now I would like to turnover the call to Mary Margaret to provide some specific financial details Mary Margaret.

Thank you Bill.

Today, we reported third quarter revenue of $92 $5 million up 5% from $88 million in the third quarter of last year.

Revenue from ratings and planning was $62 $1 million down just 1% from the $62 $7 million reported in the same prior year quarter the.

The year over year decrease was the result of lower syndicated digital revenue offset by continued revenue increases in both national and local television.

As Bill mentioned TV is experiencing higher growth from new partnerships and increased agency adoption.

Syndicated digital revenue has declined at a lower rate throughout the year and while down from the prior year, what's sequentially flat when compared to the second quarter of this year.

For the third quarter television revenue comprised 43% of our ratings and planning revenue compared to 41% last year, while syndicated digital revenue comprised 46% of our ratings and planning revenue compared to 48% in the third quarter of 2020.

Analytics and optimization revenue was $22 $5 million in the third quarter up 29% from $17 $4 million in the prior year quarter.

The increase was related to higher revenue across all product offerings, including activation custom solutions lift and survey active.

Activation revenue experienced 38% in Europe, and your growth and 7% sequential growth as we continued to bring new solutions to the market.

Movies reporting and analytics revenue was $7 $9 million in the third quarter up 1% from $7 $8 million in the prior year quarter and up 5% sequentially now the theaters have reopened in most major markets worldwide. We expect revenue from the movie business to continue to experience sequential quarterly.

<unk> increases as consumers return to theaters.

Turning to operating costs, our core expenses expenses, which include our cost of revenues sales and marketing research and development and general and administrative expenses increased 6% to $93 million compared to $85 2 million in the prior year quarter.

Cost of revenues increased by $2 $7 million in the third quarter compared to the prior year, primarily due to higher data costs from our new commercial agreement, which were partially offset by lower panel cost.

Sales and marketing expenses and research and development expenses decreased by $1 $9 million and half a million dollars, respectively as compared to the year ago quarter, primarily due to lower employee cost.

General and administration administrative expenses increased by $4 $8 million as compared to the prior year quarter.

The primary drivers of this increase were higher professional fees related to the implementation of our new ERP system higher employee costs related to the departure of our former CFO and higher stock based compensation.

We expect our fourth quarter operating expenses to rise slightly from these levels as we continue to invest in new product offerings, including additional data in panel costs, which should result in revenue growth in future quarters.

And the third quarter, we reported net income of $2 million compared to a net loss of $11 $1 million in the same period last year, primarily as a result of lower interest expense.

Extinguishment of our debt earlier this year.

For the third quarter, adjusted EBITDA was $11 $3 million compared to $7 $3 million in the prior year quarter.

The increase is primarily related to higher revenue and favorable foreign exchange rates, which were partially offset by higher operating costs, including data costs and professional fees.

We ended the third quarter with total cash of $16 $7 million compared to $57 million at December 31st.

The decrease in cash is primarily related to the repayment of our secured term note in March transaction costs associated with the completion of our recapitalization transaction also in March.

The June dividend payment on our convertible preferred stock and lower collections on accounts receivable in recent months.

During the third quarter, we borrowed $16 million under our revolving credit agreement to settle H payables and support our working capital requirement.

We expect to see an improvement in our accounts receivable collections in the fourth quarter, which should bring our accounts receivable balance back to a more normal level and provide additional cash flow for operations in the near term.

Looking forward to the fourth quarter based on current trends and expectations. We are reaffirming the revenue and adjusted EBITDA guidance, we provided last quarter we.

We continue to believe that our full year 2021 revenue growth will be on the lower end of the 3% to 5% range over 2020, and we are still targeting an adjusted EBITDA margin of 6% to 8%.

Now, let me turn it back to the operator to take questions operator.

Yeah.

At this time I would like to remind everyone in order to ask your questions. You May Press Star then the number one on your telephone keypad.

Again, Thats star one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Alan Gould from Loop capital. Your line is open.

Thanks for taking the question. So can you go into a little bit more detail of how you're able to do measurement on digital one the incumbents are the on the digital platforms, which have all their local data are having problems with IBM.

Yeah.

Yes.

Got it thank talent, it's a very good question.

So.

David I'll turn all these online I may ask him to chime in but.

The most.

Most of the publishers are looking at that identifier and how they're selling impressions.

Because of we have an opt in platform and we also have data feeds.

From most of the major publishers, we think that we're in a unique position and that's what our clients tell us that they are getting very good results by using Comscore digital.

Chris would you like anything to add or David on that.

I'll, let David jump in on that.

And then I can add any color if he'd like.

Okay.

I think David on mute. So I think the short answer is is that so we have a number of assets that we've acquired over the years companies like <unk> like our panel information that's allowed us to be able to understand behavior on the web that allows us to move away from <unk>, we have been working for probably the last 18 months or so.

In anticipation of this 24 months.

Up with privacy compliant ways to be able to provide the solutions and services. We have both with our syndicated digital services and as Bill mentioned that predictive audiences, but allow us to do it in a way that really.

That protects the privacy it gives our customers a solution that fidelity they are used to without being reliant on Easter.

These third party cookies and information, we know isn't going to be available going forward, we actually feel that this type of trend in the marketplace is a competitive advantage.

Commscope because of the work that we put in to prepare for this.

Okay. Thanks, Chris if I can follow up on one other question.

Marci audit can you give us some sense of what the timeframe. It usually takes to get MRC accreditation and what the cost of that typically is.

We're not going to talk about the cost.

And.

But it is a process that.

It could take as long as a year.

Working to expedite this with the MRC were fully engaged with them. We have a lot of respect for the institution and what they do for the entire AD industry.

But we'll be talking about that more.

Subsequent earning calls as you know I said, we just entered it in October and will be giving periodic updates to our investors.

Okay.

Thank you gentlemen.

Your next question comes from the line of Jason <unk> from Craig Hallum. Your line is open.

Thank you gentlemen, good afternoon.

I wanted to start out on some of the spectrum commentary you provided it because it seems to suggest you've moved beyond the southeast region towards something more resembling nationwide and I'm just curious.

What you are hearing on the other end.

As this takes shape I mean, youre, having conversations with broadcasters and agencies about working more closely.

Is there more receptivity to engaging there or any specific color you've heard would be great.

Thanks, Jason and thanks for the question, it's a very good one.

Those of you, who followed us for a while.

For adoption per currency do occur you need critical mass of <unk>.

Sellers and buyers so when we look at our future success I personally looked at our embedded client base of 3000, new customers that are using us for one application and it's very easy to move over for the currency application. So specifically in the southeast what we saw it develop.

<unk> was the folks at spectrum and they have a very large sales organization that was going to say ubiquitous.

Typically the cable interconnect sales operations are far larger than a multiple of television stations. So with that they reach a wide group of advertisers and they along with TV stations are trusted consultants. So we saw in the southeast ad agencies.

Starting to subscribe to us in a more rapid rate as regional advertisers start to two stations saw greater utility so with that excitement.

Jason they decided to roll it out across the country, including there are two largest markets. So we think that's fully deployed through the remainder of the year that will yield us revenue and usage that will.

Power more stations to subscribe and also give us.

A better pricing dynamic when we discuss with TV stations renewables. So that's how the company really moves to currency.

It's a process it doesn't become a proclamation so we're well down the road of that process and local.

And obviously you put up a nice quarter you reiterated your outlook for the balance of the year and now you're giving a lot of really good context around how at least the spectrum engagement is rolling out can you kind of shape the contribution from that for us.

What is the time towards those agreements materializing into revenue and should we just think of more of all of this is a 'twenty two event.

Yeah, I mean, the reason we use.

Heard my prepared remarks.

I'm excited about the quarter that we're in right now because of the things that are happening.

I don't think its coincidental that some of the Univision stations that we signed up exclusively here.

Couple of them are in that southeast region.

Really healthy dynamic that's happening.

So this is a.

Happening now and certainly throughout 'twenty, two we have momentum.

Said at the opening we have returned as a growth business.

Okay. One more for me I, just wanted to get an update on on local markets.

Specifically I mean, it seems like you're winning a lot more business on that front. So can you maybe do two things can you size the opportunity in local markets and then again, maybe some specific.

No.

Commentary from these wins on why you're landing some of these new contracts.

Well, we're landing the wins, because our competitors showing fewer AD impressions based on what I believe is dynamic acquainted methodology. When you have a method where youre getting return path information. So as we talked about during the pandemic.

At our television viewing was consistent we showed periods, where it was versus our competitor. So the pandemic didn't create the.

The problems for the other surface. It just highlighted the problems and with that the risk.

Of not changing just because.

And tolerable.

No.

Having inertia works until it doesn't work and right now it no longer works because of what happened. So the reason I'm excited about local we think it's directly going to feed into national because AD agencies, who are chartered with the brands of executing the buys.

Can only use.

We think they will only use comscore in the future because they can build a national buy where all 210 local markets feed together, so you're sitting up in Minneapolis, but there is a national buy for a product they can see whether Minneapolis Saint Paul under delivers an over delivers and have.

The confidence that the rating service merges into it.

So they can look at that sensitivity. So we're really excited about the movement local because it is a cornerstone for moving the entire TV business.

And we talked for a long time that we believe there'll be a small basket of currencies that everyone will tradeoff, we'd been a currency for a while we think will take on increasing importance as the year concludes and we get into 'twenty two.

Alright, thanks for the color I appreciate it.

Thank you Jason.

Your next question comes from the line of Florida Martin from Needham Your line is open.

Great results, especially on the margin side congratulations.

Thank you Laura.

Let's start with the industry.

Roku has said that it was seen supply chain headwinds to add growth in the fourth quarter trade desk. This morning, saying they're seeing.

<unk> growth in the fourth quarter and took our estimates.

You look at Comscore from an industry wide point of view.

Can you talk about headwinds you're seeing in auto because of shortages or supply chain shortages or labor shortages could you talk about headwinds if you're seeing any in the fourth quarter. Please.

Yes.

It feels like the pandemic is over even though people are still suffering.

First our clients.

Speak with him every day, they're feeling really good about their businesses and auto clearly or chip shortages, but theres still advertising.

And as.

As they look into 'twenty two.

I was talking with the station group head just yesterday and they are incredibly optimistic so.

<unk>.

This environment feels really good for our customers from what I see and it also feels good for our businesses all of our businesses are firing well our television business, our digital business, our activation business and our movie business is.

In a good place so we feel good lor, okay, great and then my second one out of three is I want to step up to that I guess stepped down from the 30000 and go to the national.

Viacom announced during the quarter that it was going to extend the video Amp is a second currency. If you will and I'm wondering if it's your point of view because it had its comscore.

Increasingly see these national advertisers.

Allow or accept other currencies like formally accept other currencies.

Do you think comps will get to be named the second currency accepted for some of these national advertisers.

Great question Laura.

As you know a couple of quarters ago, Viacom CBS talked about you've seen us is currency and you've been following us for a long time and you know we've been talking about this basket of currencies that I believe today would come that advertisers would trade looking at multiple currency.

And I think those multiple currencies. How this is panning out have different use cases, we believe our core data imports gives us current seek rate, meaning the data trends. It's predictable you can do reach and frequency analysis and some of the <unk>.

Other products are tools that help add some context around so I do think nationally Laura there will be a small basket.

Of suppliers that do very well and I am.

I'm very optimistic that we will do very well in this changing environment.

Okay.

Then my third one is.

Trade desk, which was up 30% today on the earnings and you guys are on your way there right now, but anyway. They said that they are.

He talks about Universal 92.0, it's like replacing cookies and better than cookies, and maybe I'm conflating measurement with targeting because he does targeting can you talk about when you think about the currency what we've talked about for a long time comscore currency. He talks about you I D to b.

Currency.

So are those complementary or their interoperable do they compete with each other can you talk about.

How those relate to each other I'd be very interested.

Well, if we have data back on line.

Ask him to comment further.

When it comes to the trade desk or segments or on the trade desk and.

Our information is being used their customers will use a particular target and then if they have better results on one target versus another.

Usage increases and that's in our activation suites that we've talked about for few quarters now of how it's growing so I think in this cookie less world, we're going to do very well in it.

But there will be other suppliers, it's not going to be one company, Laura I belief that there will be a few in.

Beginning in ASN Bonk with this with along with other folks David If we still have you is there anything else you'd like to add there.

I can jump in.

It sounds like and David have any technical issues. So Laura so I would say I would see them as complementary as far it because the new idea is more of an idea of the spine.

And that is we leverage ideally spines as it relates to our audience targeting.

We facilitate.

Our customers ability to be able to understand.

The audiences of who theyre going to reach within a particular media, which is a trade desk because it is a large partner of ours already we do a lot of business with them as it relates to that.

I think youre right. There is sometimes the word currency gets used loosely at times.

Referring to currency as it relates to ratings and planning in our TV and cross platform business and the digital business it relates to more of the traditional reach and frequency.

Measurement.

And the ability to leverage our census level data to really provide kind of future measurement as it relates to leveraging our scale to understand.

Who's being reached by particular media is being able to understand how to push that out.

And have a services MRC accredited for that for those purposes, but we do we do play in both wells, but we see the identity spine as a complementary.

Component to what it is that we do at Comscore.

Very helpful. Thank you so much guys for taking a charge.

Thank you Laura.

Okay.

There are no questions at this time presenters. Please continue.

Thank you operator, and thank you everyone for joining us today I want to close by highlighting our return to growth and our unwavering focus on driving change in the industry. The industry is looking for our type of currency that we've been working on for over a decade.

Time for change is here and the choice is clear we think the future is now and the futures Comscore. Thank you for joining us today, and we look forward to visiting with you on our next quarter.

Have a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Comscore third quarter 2021 financial results conference call.

At this time, all participants are in listen only mode.

After the speaker presentation, there will be a question and answer session.

Ask a question. During this time, you will need to press star one on your telephone keypad.

Also please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your Speaker today, Mr. John Tinker. Thank you. Please go ahead Sir.

Aspects and are based on our view as of today November.

<unk> 2020, while 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 have provided reconciliations in today's press release and on our website 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 its economic impact. These risks and uncertainties include those outlined in our 10-K 10-Q and other filings with the SEC, which you can find on our website or at Www SEC Gov.

I'll now turn the call over to Commscope, Chief Executive Officer, Bill <unk> Bill.

In November 20th that John brings a world class background and leadership experience with several of the world's leading media and technology companies I look forward to all of you and meeting John soon in hearing from him on our next earnings call.

Today I'm very very proud to report that we're turning in a solid third quarter demonstrating that we are a growth business again.

We reported our highest revenue number in the second quarters, and our highest revenue growth rates in 11 quarters, we grew analytics and optimization business stabilized syndicated digital and closed an agreement that we believe will have significantly improved our ratings and planning business.

In future quarters, we also reported adjusted EBITDA at a level, we haven't seen in many years. We are excited about our return to growth and the opportunities ahead, we expect to build on this quarter's performance throughout the rest of 2021 and into next year.

As we move forward with new clients and our currency TV services.

Turnaround of our digital business continued growth in our activation business and our movie business.

You know we have been in the measurement business for a long time with our DNA.

And it's firmly.

Position in the digital insensitive scale TV measurement business, we're right now at a tipping point, where the industry is looking for our type of currency that we've been working on for over a decade and you can see this from the signals in the market is trending and how brands and efforts.

So I decided to spend their money and make decisions for their business and as I recently said in an open letter to the industry on the future of measurement.

The future is now the future, it's comscore and make no mistake the changing of the guard is already happening.

Only comscore produces a measurement solution that uses a single methodology in all 210 local markets that rolls up to our national service, along with customers digital usage and all 210 markets and this allows customers to understand.

And the products that consumers buy and search for online, creating a unique service that enables brands to buy nationally and local advertising together.

Additionally, two significant catalysts that are driving the momentum of Comscore TV currency, but first is the media rating Council also known as the MRC.

In September of this year, the MRC suspended accreditation for the legacy television ratings service for both national and local TV measurement.

This suspension of accreditation followed a finding by the MRC that the legacy service had quoting now generally consistent pattern of underreporting dealing.

It's also important to note that the TB suspension comes on the heels of their digital AD ratings service, losing accreditation.

With this news comscore announce that our MRC audit for local and National TV measurement, which moved up from next year and now it's officially underway as of October 19.

Our MRC audit is important because we are seeking accreditation.

For the old small panel approach to measurement, but rather the future approach, we built by leveraging sensitive scale information.

<unk> innovated TV approach is consistent with the pioneering approach we took in our digital accreditation of media Metrix.

We made comscore the future of media measurement.

Second catalyst is that the agencies TV networks and local stations are very vocal about actively looking for a new currency debase their advertising inventory transactions on.

We are in the middle of discussions with National television networks to use comscore as measurement as currency.

Especially as we move into next year's upfront market.

That follows our expanded relationship with Fox networks, and Viacom CBS for traditional linear currency that we announced previously.

As local stations spike to address their concerns over diminished ratings and impressions from the legacy currency shortfalls more and more businesses are turning to comscore for our stable and a reliable currency.

For example, on Friday, we announced our exclusive arrangement with Univision as their local TV currency in several markets Roberto Ruiz Executive Vice President of research and insight at your innovation said quoting now with trust in audience measurement and an inflection.

Across the industry utilization surveyed the marketing quickly identified comscore is the right partner for us to deliver reliable and advanced measurement beginning in these three markets. We are thrilled to be expanding our relationship with comscore in the linear TV space and.

We're excited to have a seat at the table and helping to drive meaningful positive change in standards for housing Hispanic audience and audiences in general are measured.

As you can see from Roberto statement. The industry has reached a point where the risk of staying with the status quo is intolerable in my opinion.

And Comscore has become a clear choice for the future.

Now, let me discuss the quarter ratings and planning revenue was down 1% compared to a year ago.

We're pleased that we're seeing growth in both local and national TV, our local TV growth rate has become stronger over the year and we anticipate a strong fourth quarter.

Additionally, the rollout of Comscore consumer intelligence and all 210 local markets provides our customers with an added sales tool to compete with the corporation of digital video inventory and local markets.

Our near real time innovative approach demonstrates our commitment to the future of measurement and our belief that local TV is a cornerstone for growth in 2022 and beyond.

Speaking of course stones, we recently signed an exclusive agreement with the agency called cornerstone Media group and imagine annuity, both who will exclusively use comscore local TV ratings as their currency I'm also excited to announce that spectrum reach.

Expect the rollout comscore as their preferred TV currency and all of their 89 markets, including New York and Los Angeles by year end.

This is following the successful launch and their southeast markets.

With this we believe that more agencies brands will be switching to comscore device television advertising.

That's another reason for television stations and other companies that subscribe to Comscore on top of our more than 1000 clients stations.

Turning to syndicated digital we achieved stabilization with revenue being sequentially flat setting the stage for a return to growth we have consistently seen solid renewals from our large customers now we're starting to see the same with our smaller customers to form.

Customers are returning because they appreciate comscore is quality versus that of our competitors.

During the quarter, we signed new syndicated digital agreements with Talon grew a job and advertising platform. The publisher of staff, which provides publishers with custom tailored strategies for increasing the monetization of their digital platforms.

We also saw improved renewal rates with small digital publishers, who use our services to help operate their businesses every day.

There've been a number of recent events signaling Comscore is grow as SD video currency. For example, we announced the deal with Jamul that connected TV demand side advertising platform that helps brands reach screening TV audiences they need.

Tom scores robust audience digital segmentation capabilities, our household level audience targeting and our demographic segments.

Also at our recent variety entertainment and technology summit. It was great to hear during a panel discussion where.

Disney's read a terrible price net of advertising sales and partnerships and responsible for selling advertising on Hulu stake Comscore is one of our great partners.

I'm also very excited about our growing partnership with Google.

We expect continued growth in 2022.

We recently announced the expansion of our integration with Google AD data offers.

Which adds connected tdm progressions from Youtube and Youtube Tvs inventory in our cross platform advertising measurement currency.

Comscore campaign ratings or what we referred to as CCR.

This accomplishment marks too.

Important milestones first Comscore is the first measurement provider to measure advertising on Youtube and Youtube TV and connected televisions.

This measurement includes co viewing which provide the advertising with the most comprehensive view of their audience.

The addition of Youtube and Youtube TV expand CCR, enabling comprehensive cross platform measurement.

As previously published by Comscore more than 80% of CTV reach in the United States Paulson only five streaming services.

Also five only to Hulu and Youtube are AD supported I hope you can see by that why we're so excited about the Youtube arrangement.

<unk> measurement, including Youtube and Youtube TV is now available to our buy side clients for their ad campaigns.

Turning to analytics and optimization, we reported a revenue increase of 29% compared to the prior year in part driven by digital activation.

The activation of more transactional business model is very attractive to us many.

Many major platforms in this space use comscore to place their buys here is why I like to refer to this area as our new digital business, we get paid based on media spend not research budgets.

Activation are targeting suite for digital with a privacy centric focus is building momentum with Comscore is predictive audiences, which is our cookie free targeting solution that enables advertisers to reach audiences based on granular consumer behavior.

<unk> and privacy friendly contextual signals Apple is giving users the choice to block the identifier and.

And as many of you know some leading digital accurate kaiser's reported lower revenue due to this change.

Word world operates an IP based cookie targeting which is going to be going away in 2023, suggesting the difficulty of measuring will only increase however, comscore as measurement is not reliant on the idea.

Comscore is AI contextual engine and our global often panelists enables us to create next generation cookies create audience segments that performed well.

Cookie based segments.

This is an alternative solution.

<unk> is identifying where substitutes. However, many of the identifier substitutes do not have the full scale and an advertiser cannot reach the same amount of audience. By contrast, the scale of our predictive audiences replace the need for identifiers.

We've seen strong interest in our predictive audiences and have recently added the ELD to political couple of segments here to help audiences reach ahead of the 2022 political season, which I think we all would agree will be very active.

The prestigious.

So certification for information security and privacy information management systems, ISO 27, or one and ISO 27 701.

I am so proud of our security and privacy teams for this accomplishment.

This year, we've already signed three leading digital out of home advertising companies and expect our new out of home offering to be an incremental revenue generator.

Finishing with the movie business revenue in the third quarter was up 5% sequentially, we expanded our relationship with Sony to include certain international offerings.

Our global multi currency provides a critical view of box office for every major studio.

Many major studio and prominent interim.

Independent distributors in the worldwide theatrical industry.

The third quarter movie theaters, reopen and most major markets worldwide for us.

The first time since the pandemic began.

Theaters are seen as an essential delivery channel for Hollywood Studios. The evidence that we believe the students saw with Disney to release of the lesson of the tender range smashing the record for labor day openings, which many in the industry has taken proof of the power of the theatrical.

On labor lips.

No time to die the James Bond movie had the highest UK opening weekend for any bond movie effort. We expect box office revenue to return to pre pandemic levels in 2022.

Hope you can hear the excitement we have about the industry, we serve and the opportunity that we and our customers collectively app.

Our focus is on building a unified framework that uses currency grade data to drive real time analytics for all media types in a trusted environment.

Finally, I'd like to thank all of our Comscore employees for their hard work and dedication throughout the pandemic and Mary Margaret Curry and the rest of the financial team for so ably managing our financials at this time now I would like to turn it over the call to Mary Margaret.

To provide some specific financial details Mary Margaret.

Thank you Bill.

We reported third quarter revenue of $92 $5 million up 5% from $88 million in the third quarter of last year.

Revenue from ratings and planning was $62 $1 million down just 1% from the $62 $7 million reported in the same prior year quarter the.

The year over year decrease was the result of lower syndicated digital revenue offset by continued revenue increases in both national and local television.

As Bill mentioned TV is experiencing higher growth from new partnerships and increased agency adoption.

Syndicated digital revenue has declined at a lower rate throughout the year and while down from the prior year was sequentially flat when compared to the second quarter of this year.

Analytics and optimization revenue was $22 $5 million in the third quarter up 29% from $17 $4 million in the prior year quarter. The increase was related to higher revenue across all product offerings, including activation custom solutions lift and survey.

Activation revenue experienced 38% year over year growth and 7% sequential growth as we continued to bring new solutions to the market.

The increases as consumers return to theaters.

General and administration administrative expenses increased by $4 8 million as compared to the prior year quarter.

And the third quarter, we reported net income of $2 million compared to a net loss of $11 1 million in the same period last year, primarily as a result of lower interest expense.

Extinguishment of our debt earlier this year.

For the third quarter, adjusted EBITDA was $11 $3 million compared to $7 $3 million in the prior year quarter.

The increase is primarily related to higher revenue and favorable foreign exchange rates, which were partially offset by higher operating costs, including data costs and professional fees.

We ended the third quarter with total cash of $16 $7 million compared to $57 million at December 31st.

The decrease in cash is primarily related to the repayment of our secured term note in March transaction costs associated with the completion of our recapitalization transaction also in March.

The June dividend payment on our convertible preferred stock and lower collections on accounts receivable in recent months.

During the third quarter, we borrowed $16 million under our revolving credit agreement to settle H payables and support our working capital requirements, we expect to see an improvement in our accounts receivable collections in the fourth quarter, which should bring our accounts receivable balance back to a more normal level and provide additional cash flow for our operations.

<unk> in the near term.

Looking forward to the fourth quarter based on current trends and expectations. We are reaffirming the revenue and adjusted EBITDA guidance that we provided last quarter.

We continue to believe that our full year 2021 revenue growth will be on the lower end of the 3% to 5% range over 2020, and we are still targeting an adjusted EBITDA margin of 6% to 8%.

Now, let me turn it back to the operator to take questions operator.

At this time I would like to remind everyone in order to ask your questions. You May Press Star then the number one on your telephone keypad.

Again, Thats star one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Alan Gould from Loop capital. Your line is open.

Thanks for taking the question Bill can you go into a little bit more detail of how you're able to do measurement on digital one the incumbents are the on the.

The digital platforms, which have all their local data are having problems with IBM.

Yeah.

Yes, we've got it thanks talent so very good question.

So David I'll turn out as an online MBA ask him to chime in but.

<unk>.

Most of the publishers are looking at that identifier and how they're selling impressions.

Because we have an opt in platform and we also have data feeds.

From most of the major publishers, we think that we're in a unique position and that's what our clients tell us that they are getting very good results by using Comscore digital.

Chris would you like anything to add or data on that.

I'll, let David jump in on that.

And then I can add any color if he'd like.

Okay.

I think David on mute so.

I think the short answer is is that so we have a number of assets that we've acquired over the years companies like Procter or less our panel information that's allowed us to be able to understand behavior on the web that allows us to move away from <unk>, we've been working for probably the last 18 months or so.

In anticipation of this 24 months.

And coming up with privacy compliant ways to be able to provide the solutions and services. We have both with our syndicated digital services and as Bill mentioned that predictive audiences, but allow us to do it in a way that really.

Protects the privacy it gives our customers a solution that fidelity they are used to without being reliant on.

These third party cookies and information, we know isn't going to be available going forward, we actually feel that this type of trend in the marketplace is a competitive advantage for.

Commscope because of the work that we put in.

Repair for this.

Okay. Thanks, Chris if I can follow up on one other question.

Marci audit can you give us some sense of what the timeframe. It usually takes to get MRC accreditation and what the cost of that typically is.

We're not going to talk about the cost.

And.

But this is a process that.

It could take as long as a year.

Working to expedite this with the MRC were fully engaged with them. We have a lot of respect for the institution and what they do for the entire AD industry.

But we'll be talking about that more.

Subsequent earning calls as you know I said, we've just entered it in October and will be giving periodic updates to our investors.

Okay.

Gentlemen.

Your next question comes from the line of Jason <unk> from Craig Hallum. Your line is open.

Thank you gentlemen, good afternoon.

I wanted to start out on some of the spectrum commentary you provided because it seem to suggest you've moved beyond the southeast region towards something more resembling nationwide and I'm just curious.

What you are hearing on the other end.

As this takes shape I mean, youre, having conversations with broadcasters and agencies about.

Working more closely.

Is there more receptivity to engaging there or any specific color you've heard would be great.

Thanks, Jason and thanks for the question, it's a very good one.

Those of you, who followed us for a while.

For adoption for currency to occur you need critical mass of sellers and buyers. So when we look at our future success I personally looked at our embedded client base of 3000, new customers that are using us for one application that's very easy to move over.

<unk> for the currency application so specifically in the southeast what we saw develop was the folks at spectrum and they have a.

Very large sales organization and I was going to say ubiquitous.

Starting to subscribe to us in a more rapid rate as regional advertisers start the two stations saw greater utility so with that excitement.

Power more stations to subscribe and also give us.

A better pricing dynamic when we discuss with TV stations renewables. So that's how the company really moves to currency.

It's a process it doesn't become a proclamation so we're well down the road of that process and local.

What is the time towards those agreements materializing into revenue and should we just think of more of all of this is a 'twenty two event.

Yes, I mean, the reason we use.

Heard my prepared remarks.

I am excited about the quarter that we're in right now because of the things that are happening.

I don't think its coincidental that some of the Univision stations that we signed up exclusively here.

Couple of them are in that southeast region.

Really healthy dynamic that's happening.

So this is.

Happening now and certainly throughout 'twenty, two we have momentum.

Said at the opening we have returned as a growth business.

Okay. One more for me I, just wanted to get an update on on local markets.

Specifically I mean, it seems like you're winning a lot more business on that front. So can you maybe do two things can you size the opportunity in local markets and then again, maybe some specific.

No.

Commentary from these wins on why you are landing some of these new contracts.

Well, we're landing in the wins, because our competitors showing fewer AD impressions based on what I believe is dynamic acquainted methodology. When you have a method where youre getting return path information. So as we talked about during the pandemic.

Our television viewing was consistent we showed periods, where it was versus our competitor. So the pandemic didn't create the.

The problems with the other surface it just highlighted the problems and with that the risk.

Of not changing it's become.

And tolerable.

No.

Having inertia works until it doesn't work and right now it no longer works because of what's happened. So the reason I'm excited about local we think it's directly going to feed into national because AD agencies, who are chartered with the brands of executing the buys.

Can only use.

The confidence that the ratings service merges into it.

So they can look at that sensitivity.

So we're really excited about the movement local because it is a cornerstone for moving the entire TV business.

And we've talked for a long time that we believe there'll be a small basket of currencies that everyone will trade off we've been of currency for a while we think we will take on increasing importance as the year concludes and we get into 'twenty two.

Alright, thanks for the color I appreciate it.

Thank you Jason.

Your next question comes from the line of Laura Martin from Needham Your line is open.

Hi, Dara great results, especially on the margin side congratulation.

Thank you Laura.

Let's start with the industry, one Roku said that it was seen supply chain headwinds to add growth in the fourth quarter trade desk. This morning, saying, they're seeing no headwinds to growth in the fourth quarter and took our customers. So when you look at Comscore from an industry wide point of view.

Do you see can you talk about headwinds you're seeing in auto because of shortages or supply chain shortages or labor shortages could you talk about headwinds if youre seeing any in the fourth quarter. Please.

Yes.

Also it feels like the pandemic is over even those people are still suffering of course our clients.

To speak with them every day, they're feeling really good about their businesses and auto clearly or chip shortages, but theres still advertising.

And.

As they look into 'twenty two.

Talking with the station group head just yesterday and they are incredibly optimistic so.

In a good place so we feel good lor, okay, great and then my second one out of three is I want to step up to their orders I guess stepped down from the 30000 and then go to the national.

Viacom announced during the quarter that it was going to extend video Amp is a second currency. If you will and I'm wondering if it's your point of view because it had its comscore.

To increasingly see these national advertisers.

Allow or accept other currencies like formally accept other currencies. How do you think comscore will get to be named the second currency accepted for some of these national advertisers.

Great question Laura.

As you know a couple of quarters ago, Viacom CBS talked about you've seen us as currency and you've been following us for a long time and <unk> been talking about this basket of currencies that I believe today would come that advertisers would trade looking at multiple currency.

<unk> and I think those multiple currencies. How this is panning out have different use cases, we believe our core data imports gives us current seek rate, meaning the data trends. It's predictable you can do a reach and frequency analysis and some of the.

Other products are tools that help add some context around so I do think nationally Laura there will be a small basket.

Of suppliers that do very well and.

I'm very optimistic that we will do very well in this changing environment.

Okay.

And then my third one is.

Turning to ask which was up 30% today on the earnings and you guys are on your way there right now, but anyway. They said that they are.

CEO talks about universal I need to point out is like replacing cookies and better than cookies, and maybe I'm conflating measurement with targeting because he does targeting.

You talk about when you think about the currency what we've talked about for a long time comscore currency. She talks about you I D to B a currency.

So are those complementary or their interoperable do they compete with each other can you talk about.

How those relate to each other I'd be very interested.

Well, if we have data back on line.

Ask him to comment further.

When it comes to the trade desk or segments or on the trade desk and.

Our information is being used their customers will use a particular target and then if they have better results on one target versus another.

Usage increases and that's in our activation suites that we've talked about for a few quarters now of how it's growing so I think in this cookie less world, we're going to do very well in it.

And but there will be other suppliers, it's not going to be one company, Laura I belief that there will be a few.

Beginning in ASN volatile with this with along with other folks David If we still have you is there anything else you'd like to add there.

I can jump in.

David have any technical issues. So Laura so I would say I would see them as complementary as far it because the new idea is more of an identity spine.

And that is we leverage ideally spines as it relates to our audience targeting.

We facilitate.

Our customers ability to be able to understand.

The audiences of who theyre going to reach within a particular media, which is a trade desk because it is a large partner of ours already we do a lot of business with them as it relates to that.

I think youre right. There is sometimes the word currency gets used loosely at times.

Referring to currency as it relates to ratings and planning in our TV and cross platform business, our digital business it relates to more of the traditional reach and frequency.

Measurement.

And the ability to leverage our census level data to really provide kind of future measurement as it relates to leveraging our scale to understand.

Who's being reached by particular media is being able to understand how to post that out.

And have a services MRC accredited for that for those purposes, but we do we do play in both wells, but we see the identity spine as a complementary.

Component to what it is that we do at Comscore.

Very helpful. Thank you so much guys for taking the sure.

Thank you Laura.

Okay.

There are no questions at this time presenters. Please continue.

Time for change this here and the choice is clear we think the future is now and the futures Comscore. Thank you for joining us today, and we look forward to visiting with you on our next quarter.

Have a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Q3 2021 Comscore Inc Earnings Call

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