comScore Inc. Q1 2023 Earnings Call
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Good day and thank you for standing by welcome to the Com score first quarter 2023 financial results Conference call.
At this time all participants are in a listen only mode.
The speaker's presentation there'll be a question and answer session to ask a question during that session you will need to press one one on your phone you wouldn't hear an automated message advising your hand is raised to withdraw your question. Please press star one one again. Please stay alive at today's conference is being recorded and I would not like to hand, the conference over to you.
Speak today, Mr. John Tinker, Vice President of Investor Relations.
Sir Please go ahead.
Thanks, you up right before we begin our prepared remarks I'd like to remind all of us at the following discussion contains forward looking statements. These forward looking statements include comments about our plans expectations prospects based on up you as of today may 9th 2023.
Our actual results in future periods may differ materially from those currently expected because of the number of risks and uncertainties. These risks and uncertainties include those outlined in our 10-K 10-Q and other filings with the SEC, which can find on our website or at www Dot SCC docked out with this.
Magnitude your obligation to update our forward looking statements reflect new information after today's call will be discussing non-GAAP measures. During this call, which we are providing reconciliations in today's press release on on our website. Please note that we will reflect the fights on this call which are also available on our website www Comscore dot com under Investor Relations.
Events and presentations I'll now turn the call over to Commscope, Chief Executive Officer, John Carpenter John .
Thanks, John and good evening, everyone. Thanks for joining us to talk about our first quarter Tonight.
Before we get into the businesses I wanted to touch on our first quarter results. It's.
It's clear that the end markets were serving remained soft, particularly as it relates to customer deliverables, coupled with a more cautionary ad spend environment.
As a result, the financial print for the quarter came in below our expectations.
That said the operational progress, we're making is significant.
And despite the challenging environment, the strategic wins, we've announced and we'll announce in the future give me great confidence that our strategies on point and positions as well for the balance of the year and going forward.
As it relates to our full your guide we're maintaining our revenue range. However, we do know pressure on achieving the top end of that range and from an adjusted EBITDA standpoint, we remain confident in the guidance. We previously provided.
With that we've had an action packed first quarter with meaningful progress and areas critical to transforming our business.
For starters.
Youtube selected Comscore campaign ratings are cross platform Admeasurement product as their solution for NFL Sunday ticket.
Measuring campaign performance for the multi billion dollar investment they've made in Sunday ticket says a lot to me about the progress we've made with CCR.
Building on our success here too we also announced Comscore campaign ratings is now available to their advertisers for the measurement of campaigns on their streaming service.
And we've recently reached an agreement with Roku.
That is tied to both CCR and our brand survey lift products, which were now just getting off the ground.
Youtube Toby and Roku join a number of other major media clients signing up for CCR, So far in 2023.
We've also had no shortage of progress with cross platform and we're just getting started.
Anticipate that we'll see that progress continue to accelerate and I'm looking forward to sharing that with you in future quarters.
Also this quarter proximity by Comscore are targeting an activation business has added several platform integrations for our privacy safe predictive audience this product, including one of the largest and most important platforms in the market. We now have thousands of advertisers using predict of audiences.
Warner Brothers Discovery announced Comscore was one of their two currencies for national advertisers to transact on during the 23 24 upfront season, and last Thursday, IPG media brands announced the renewal of our agreement, which adds local television data and advanced audiences across all 210 markets to our expanded.
Partnership this move compliments are steady progress for Holdco adoption of Comscore currency offerings.
We've also continued to build out our team and this past quarter. We added another industry veteran Adam Laue to our commercial and leadership team as we continue to position comscore for meaningful growth, adding leaders like Adam is an important part of our strategy.
We've definitely packed a lot of progress into the first quarter and we're just scratching the surface as we remained focused on providing clients with the most complete view of audiences, regardless of device or platform for both content and ads, that's our vision and that's what I and all of our employees wake up each morning excited.
To deliver on.
With that let's jump into some updates across a few areas of the business starting with television.
Scale and interoperability or key Kenneth store success, both are essential to our ability to deliver value for our clients to innovate and to win in the market and we believe that one of our biggest differentiators is our big data scale through our set top box integrations, we're measuring linear television across 103 households, we've got data for more than 100.
50 million connected Tvs, along with hundreds of millions of mobile and desktop devices.
It's worth every now and again stepping back and reminding ourselves and the market that collecting the raw material is one thing attorney it into a product that can be relied on to transact billions of dollars of advertising is a completely different ball game and it's at the core of what Comscore does every day, so what makes us unique and positions us to deliver for <unk>.
The buy and sell side going forward.
You may recall that I mentioned in my first earnings call, a CEO that we need to be easier for our clients to work with and that's what interoperability is all about eliminating the friction for our clients.
One area that I'm excited to talk about when it comes to interoperability as our efforts in the area of personification and today Comscore television measures consumption and households to measure that's critical to many use cases for our clients. For example, this includes advanced audiences, where clients like <unk> and others are using comscore as currency.
However, we also recognize that our clients have historically planned and transacted based on measurement, where people are the unit of measure rather than households were committed to meeting our clients, where they are and we will continue to make it easier for them to use comscore data to drive their businesses. This efforts well underway will have initial data and clients hands. This month and we anticipate.
Having it in Comscore television for clients later this year for both national and local starting with the largest market. This is a critical milestone for comscore and our clients.
Shifting gears, we realize that our digital business has underperformed the last few years and that's simply unacceptable to me.
Our digital capabilities and offerings are critical piece for cross platform execution and I'd like to spend some time, taking us through our strategy and how we plan to unlock growth.
Comscore digital has been the leader and independent audience measurement for well over a decade fundamentally our value proposition has always been about enabling publishers to monetize their audiences and for advertisers to reach their desired audiences with confidence that value proposition is help produce a business that is driven more than $200 million.
Annual revenue across 3500 clients in more than 10000 publisher integrations.
In fact, <unk> recently reported Comscore as the leading currency for this year's new fronts up substantially from a year ago, highlighting the progress we continue to make.
Comscore is still the leader in digital measurement in so many ways that hasn't changed despite the evolution and how digital advertising is transacted.
We know that today nearly all digital advertising is know transacted programmatically and privacy is changing the foundation of how audiences are measured and targeted.
That's important because all of those changes have resulted in an audience Addressability gap that I think is worth taking a second to fully understand.
Because of signal loss from privacy changes like third party cookie deprecation accurate audiences are increasingly hard for advertisers to reach in.
In fact, 60% of programmatic inventory doesn't have an Ivy from a third party cookie or from an alternative I D associated with it.
60% of digital AD inventory that is incredibly hard to target. This means advertisers and publishers need to find ways to take control of their inventory inventory and embraced new idea frameworks and measurable contextual solutions at scale.
The signal loss is it just making things harder to do it's cutting AD revenue for publishers by a third to a half that's a problem that comscore as well positioned to help solve and solving is a key part of our strategy moving forward.
It's with that backdrop that I think about our strategy for growth and first it starts with measuring audiences. This court, who we are what we've always done second it's about enabling our publishers and advertisers to transact against those audiences programmatically and finally, it's about enriching their audiences to make a publisher's inventory more valuable and help <unk>.
Advertisers reached the consumers they need to target.
On the measurement side of things, we're investing in the methodology that drives Comscore total digital this new methodologies, a privacy centric approach to measuring audiences without things like third party cookies ultimately, helping her pop partners mitigate the impact of the signal loss. This work has been done in partnership with the <unk>.
And clients that include some of the biggest publishers in the world and Comscore is leading the innovation here.
When it comes to transact and programmatically our strategy is to leverage the more than 10000 publisher integrations, we have to directly assist our clients ability to transact programmatically in the absence of third party cookie data.
One of the first steps that I am incredibly excited about is a partnership we're launching with the trade desk.
With this strategy, we will ness unified Ivy ciudadano into our publisher integrations.
This will ease the integration for publishers with a leading identity framework and represents one of the largest expansion opportunities for <unk> to date.
By partnering with companies like the tray desk to support the advancement of alternative Ivy frameworks top scores enhancing our core products ability to deliver value for our publishers and.
And maximize their audience monetization opportunities while at the same time, providing advertisers visibility into the audience is they're trying to reach your privacy compliant executions.
The third leg of our strategy is creating value for a publisher clients by leveraging our proprietary technology to add value to their audiences predictable are predictive audiences product already used by thousands of advertisers also enables us to enhance a publisher's inventory where they lack sufficient first party data.
It also uses the same taxonomies as the advertisers we're trying to reach those audiences, but this ultimately means is that a publisher can assign advanced audience traits. Despite not having the first party dated data needed to do that.
These traits are things like an interest in baseball a holiday shopper for young children or interest in buying a new car audience definitions that advertisers are looking to reach.
These three elements of our digital strategy will may Comscore digital stickier with our clients and align the buy and sell sides around common contextual taxonomies <unk>.
Execution here and leaning in with partners like the trade desk and others will re establish our digital offerings in the marketplace as continued must have solutions for our clients.
Having discussed television digital it makes sense to bring it all together and talk about cross platform measurement.
I believe in our strategy for growth and leadership in the industry is predicated on the idea that what matters more than ever is accurate cross platform audience measurement.
After all <unk> and impressions.
Don't make purchase decisions audiences in households, do with audience fragmentation accelerating our clients are looking for scaled interoperable solutions that help them demonstrate the value of their audiences. The frequency there were reached and the outcomes delivered regardless of screen. This is what comscore is focused on every single day.
And with our television and digital audience assets were not just focused on the projected $67 billion a television advertising, we're focused on creating value in the context of the full $400 billion Tan and projected at spend in the U S. <unk>.
Seizing that opportunity comes down to our focus on listening to what the market needs and executing to help clients drive revenue and advertise effectively reaching the right audience and delivering the right outcomes matter far more than the screen the audience is on.
I'm bullish on our ability to drive durable growth and wind in this market Comscore covers a scale of measurement that is unmatched we're measuring at least a trillion events per month across mobile connected TB laptops and set top box devices.
And we are measuring those events and nearly all 41700, <unk> zip codes across the 210 markets in the U S. It's this precision down to a hyper local level that I believe differentiates our approach.
The combination of those two things is why we can deliver the most complete view of audiences and are so well positioned to deliver the cross platform measurement that the market is looking for it's for these reasons that industry leaders like Youtube for one shows Comscore campaign ratings to measure cross platform.
Cross platform performance for their investment and NFL Sunday ticket.
In the months since I stepped into the CEO role, we've been focused on execution with the wind we have so far this year I'm confident we're well on our way to delivering for our clients and our shareholders.
With that let's let's talk about the first quarter results in more detail and for that I will turn it over to Mary Margaret.
Thank you John .
Total revenue for the first quarter with $91.6 million down $2.4 million from the same quarter a year ago.
Cross platform solutions revenue of $41.1 million, but slightly up from $48 million in the first quarter of 2022, primarily driven by double digit growth in local television and the continued strength.
Yeah.
National television revenue declined in the first quarter due to a one time customer deliverable in the prior year.
Revenue from the movies business, very seven 3% to $8 8 million from $8.2 million a year ago.
Revenue from digital AD solutions of $54 million was down 5.1% compared to $53 $1 million a year ago.
What we've seen in the last couple of quarters.
Decline was primarily driven by a soft advertising market, which resulted in lower customer deliverables for our digital products.
This trend while down is an improvement over the last two quarters.
We expect the current macroeconomic condition to continue to challenge our digital business as we move through the first half of the year.
Adjusted EBITDA was $5 2 million down $1.6 million from the prior year quarter, resulting in an adjusted EBITDA margin of 5.7%.
I wanted to take a minute to unpack adjusted EBITDA in touch on a few contributing factors that are important to call out.
When I look at the result year every year, there was an almost $2 million clean and the impact of foreign currency transactions.
If you exclude that impact from adjusted EBITDA. This year's first quarter result is actually up 4.7% over the prior year.
This result, and also a testament to our focused on cost execution.
Our core operating expenses were down 6% year over year with a large part of that due to lower employee compensation.
We're continuing to execute on the restructuring plan, we put in place last year.
And let me see.
Okay.
Thank you.
For the year.
We've also identified and are accelerating other initiatives to transform our business operation and drive additional efficiencies in the latter part of 2023 and enter 2024.
Regarding our full year guidance I'll reiterate what John mentioned at the top of the call.
We're maintaining our guidance for revenue growth of low to mid single digits over 2022. However, we do note pressure on achieving the high end of that range.
Even with the top line pressure, we remain confident in the guidance that we previously provided for adjusted EBITDA.
With that I'll turn it back over to John closing remarks.
Thanks, Mary Margaret and thanks, everyone for joining this evening, we continue to have a tremendous opportunity in front of us and I couldn't be more excited about our growth prospects and the value we will create for shareholders.
I also wanted to take a moment to think our employees, who work tirelessly every day to deliver for our clients without them none of what we spoke about today.
As possible.
With that operator, we can open it up for questions.
Thank you.
As a reminder to ask a question. Please post all one one on your phone and wait for your name to be announced to withdraw your question. Please but I saw one one again.
<unk> is a composite Q&A roster.
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One moment please for our first question.
Now first question will come from Jason Crier of Craig Hallum Capital Group. Your line is open.
Hey, this is Caroline here for Jason So just a couple of for me first question can you just kind of talk through maybe the cadence of the quarter and.
Maybe go a little deeper on where you're kind of Saab business off in a little more than you expected.
Yeah, I can take that thanks for the question and then Mary Margaret Jeanette in I think it's a continuation of what we're seeing in the second half where.
Generally discretionary customer deliverables.
Has continued to be put on hold.
Coupled with.
Quite frankly, a softer.
Then I think anyone expected AD market I mean, the reality is we're selling into a pretty difficult.
And market and we're seeing we're seeing pressure on things that end up being discretionary particularly around <unk>.
<unk> customer deliverables spur.
Specifically.
Perfect and then a second one Johnny allow you to talk a lot about you know the wealth of consumer data that Comscore has and it sounds like you're starting to tap into that with the approximate <unk> and some industry partnership. So can you talk a little bit about where you see that progressing from here.
Yeah as I mentioned in my comments those partnerships are critically important as we think about.
Not just measuring.
Audiences for our clients, but enabling our publisher ecosystem to transact programmatically with ease and the partnerships that we've struck in the quarter and will continue to announce your going forward are critical for our digital AD business and that publisher network.
Think from a from an economic standpoint, the more of those partnerships that we stand up.
More sticky we are.
More always on inside those big platforms.
We continue to participate in the attic anomic step flow through those those platforms on a regular basis, so critically important to to our success here in digital.
Perfect. Thank you so much.
Thank you.
One moment please for our next question.
Oh next question will come from surrender thinned of Geoffrey's. Your line is open.
Thank you.
So the first question I would like to ask about is just you.
You were talking about having measurement at the household level.
It sounded like you are beginning to end measurement at the individual level can you provide a bit more color. If I heard you correctly on that in terms of the test market. The timeline scheduled rowboats anything like that.
One moment please.
But later this year.
And the September timeframe.
Okay, I apologize Jong I don't know if it's something happened on the phone, but I literally heard the last for the just set so we can take that off line I guess I'm not sure. If there is a technical difficulty but.
Can you hear us okay surrender I can hear you now.
Okay, but it literally we I'm not sure what happened the way I would think about a personification as you've got a you've got a set of clients that obviously like to to transact.
On Ah on advanced audience basis at a household level you've got.
Still a large portion of the marketplace that likes to transact on traditional demos and that's what we mean by personifying, our data set and so by enabling personification and are offering opens up the optionality for our clients.
Really choose how they want to transact with us and as I mentioned.
Our data that data will be available.
Largely for test purposes, and for planning purposes. Later this month and then fully available in Comscore Teevee.
Kind of early fall timeframe.
Got it that's helpful. And then you also talked about.
Headwinds from kind of like I guess, it was characterized as signal loss right as as we move towards more privacy centric.
Walled gardens, or just a broader environment.
Broadly speaking.
Can you talk about is there a secular headwind here that you.
You can actually fully counter or is it going to be some level of signal lawsuit you can't recover and therefore.
The amount that advertisers are willing to pay for is is going to be lower than it has been.
Store.
Yeah, No I think from our perspective are offering is pretty unique in terms of our ability to help our publisher network counter the impact of of signal loss and the the degradation in value that they're seeing from an <unk> standpoint, due to that signal loss.
We feel like those integrations by nesting in.
The <unk> framework gives them the.
The ability to participate in economics inside that those platforms that don't exist for them today, because they've got no first party data, we can and so are our products.
Are kind of a vehicle that allow them to to unlock that opportunity. If you will Steve would you add anything to that.
I think that.
Being able to be able to identify and measure.
Secondly, and providers.
Yeah.
It's our obligation.
Golly.
Also.
No allowance.
Dash.
Around.
Framework, there sorry tumors.
You are.
Got it thanks, and then just one one other quick one.
Marie.
There was talk of driving additional efficiencies beyond what you already had any any color where you can quantify or what what has been what is actually being pursued.
To generate those efficiencies.
Yeah, I mean, I think we're we're still in the planning and then early implementation phase of these additional initiatives. So I think it's still a bit too early to really put a number around it.
A lot of what was built into the restructuring plan that we implemented last year.
Related to very specific.
Initiatives and actions that we wanted to take and those were based on on some of the analysis that we had done at that time as we have moved.
And so you're looking at some of the additional details and really understanding and taking a step back and looking at how our business operates.
We have identified additional ways to become more efficient as it relates to cleaning up our tech that as it relates to.
How were ingesting data.
You know the cost of the data that we're getting the cost of some of our other vendors and whether or not they're opportunities to find similar.
Similar similar services for lower costs.
Where where scribing really hard I think we've we've got a healthy list of additional initiatives that leads started working thrill and we're hoping to to really start implementing in the back half of the year.
Got it and then just a point of clarification here versus the original plan.
How.
How much is in the run rate and how much is left but you can still take out.
Oh for the restructuring surrender at that is correct yes.
Yeah. So I think we've through the first quarter, what would you say, where we think we are kind of identified everything even million as far as what we've actually taken from a cost perspective.
I think I think are are updated range of where we think we're going to land somewhere between 10, and 15 million and we still got between three and $8 million left.
Got it okay. Thank you very helpful.
Thank you.
And again to ask a question. Please press one one on your phone and wait for your name to be announced to withdraw your question. Please post all one one again.
One moment for our next question.
Next question will come from Laura Martin of Needham Your line is open.
Hi, Yeah, a couple of things.
So one of the things.
You have a big cost structure in the set top boxes.
And my question is.
And can you give us some of the 75 nine.
You're all set top boxes or get a lower price because their value is becoming less.
Over time.
Uhm.
David.
Hey, Laura Thanks, I think in some cases are contracts contemplate.
Minimum requirements on household deliverables. So someone will be your question is is is yes, but it depends on the on the contracts.
Many of our contracts we also have.
Access to additional rights beyond just what's coming in the through the set top box feed.
Okay, So you're paying Friday.
And then I've got this slide that you have that breaks out like the growth and local.
At all.
Helpful and I guess my question is.
Downdraft in digital.
Yeah.
Alicia.
An old mediate Comscore media Metrix project product.
Is there something cause it looked like local still growling and movies are still growing.
Alright is there something.
We would've been really low now and that old media Metrix products sweet so.
The private sale shrinking 5% year over year.
No that product or other.
Weakness bleeding into other products from your piss outside.
So.
You are talking about the media Metrix business obviously.
Hi, nine figure.
Business I think there is there is chern and some of the smaller clients for sure no doubt about it.
The clients that are more enterprise in nature are very sticky continued to be very sticky and rely on us heavily for digital measurement, I think where where we where we have historically.
Augmented our digital offering is with some of the more kind of bespoke one off customer deliverables and digital that complement the syndicated offering.
I think really since the second half of last year, that's really where we've seen.
Downward pressure and softness and that that's definitely continued.
Here in the first quarter.
So anyway, so obviously cookie deprecation in the mix there too complicates. This this further which we tried to address in the comments I made during the call.
Uhm.
Okay, great. Thanks very much.
Thank you.
Thank you.
Hi, I'm seeing no further questions in the queue.
I would now like to turn the confidence back to John Carpenter for closing remarks.
Thanks, everybody for joining and we look forward to talking to everyone. Soon thank you.
This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
Mmm.
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