Q2 2024 comScore Inc Earnings Call
John: 2024 has not played out as we had expected. It's certainly frustrating for our stakeholders, especially our employees who bust their humps every day to deliver. And that certainly weighs heavily on me, and as I know it does on the rest of the leadership team.
<unk> has not played out as we had expected and certainly frustrating for our stakeholders.
Especially our employees, who butzer humps everyday to deliver and it certainly weighs heavily on me and as I know it does the rest of the leadership team.
John: Despite that frustration and the financial print here in the quarter, we are making progress with the turnaround of this company. The path we're on is one that will take us from being a company that was heavily reliant on syndicated revenue from products focused on legacy markets, undergoing tremendous disruption to a company that drives growth via a transactional model tied to solving the rapidly growing problems that will define the future of media measurement.
Despite that frustration and the financial print here in the quarter, we are making progress with the turnaround of this company.
<unk> is one that will take us from being a company that was heavily reliant on syndicated revenue from products focused on legacy markets undergoing tremendous disruption to accompany that drives growth via transactional model tied to solving the rapidly growing problems that will define the future of media measurement.
Speaker Change: I think it's fair to say that the pace of that turnaround isn't what we expected it would be at this point in the year.
John: However, given what we're seeing in the market, we're convinced that we're moving in the right direction as we execute our playbook. The pressure that we've seen on our clients and what I'd refer to as the legacy media segments, with our syndicated digital and TV products being down in the first half, certainly helps point to the rough first half we've had, but it also highlights why the turnaround we're executing is the right one.
However, given what we're seeing in the market. We're convinced that we're moving in the right direction as we execute our playbook.
The pressure that we've seen on our clients and what I'd refer to as the legacy media segments with our syndicated digital and TV products being down in the first half certainly helps point to the rough first half we've had but it also highlights why the turnaround we're executing is the right one.
John: While much of the industry is obsessing over yesterday's problems, Comscore is unapologetically focused on the emerging areas that will enable the future of media and advertising measurement, areas where Comscore has a unique set of assets and capabilities to deliver durable value within a rapidly changing media environment. We're seeing encouraging strength in our cross-platform offerings, specifically our Proxemic business, and in terms of our cross-platform ad campaign measurement product, CCR. The pace of adoption isn't accelerating as quickly as we had hoped or as quickly as we needed it to offset some of the weakness we see in certain parts of our traditional business.
John: But while we fully expect CCR to ramp up as we move through the back half of the year, it's clear that the timeline for that ramp is going to look a bit more similar to the activation business when we integrate a new platform than what we had originally anticipated. To give you an example of what I mean by that, we launched our predictive audience segment as part of Proxemic in a major programmatic platform in May of 2023.
John: The first month with the product in that platform, we saw a relatively small revenue bump, which remained the case for several months before it started to scale meaningfully. Today, the monthly revenue from predictive audiences as part of Proxemic on that platform is more than 100 times the early months, and we're now closing in on nearly a million dollars per month in that one platform alone. I bring that up as an example because there are some significant parallels to CCR being integrated into these same platforms.
John: In both cases, we're integrating value-added, differentiated products into some of the most important channels within the programmatic ad ecosystem. I'll have more to come, but with that, I just turn it over to Mary Margaret here to speak about the second quarter report.
Mary Margaret: Total revenue for the second quarter was $85.8 million, down 8.4% from $93.7 million the same quarter a year ago. Content and ad measurement revenue of $72.2 million was down 6.7% from 2023, primarily due to lower revenue from our syndicated audience offering. As John mentioned earlier, the pressure that our legacy media clients are under has created headwinds for our syndicated offering, and the impacts have been felt most notably in our national TV and syndicated digital products. However, our movies business remained solid in the second quarter with revenue growth of 5% over the prior year.
Operator: Cross-platform revenue did decline in the second quarter, primarily driven by a decline in CCR revenue due to a pause in usage with a large enterprise client while we worked to integrate across their ad platform. The CCR decline was predominantly offset by growth in proxemic revenue, which also came in slightly lower than we expected. Proximic is integrated inside Oracle's ad platform, and we benefit from the campaign flowing through there, which significantly reduced in number during Q2 when Oracle announced they were shutting down their ad.
Operator: As John will highlight later, we view this as a short-term setback, but the bigger picture should be another revenue catalyst for Proximate. Research and Insight Solutions revenue of $13.6 million was down 16.5% in 2023, primarily due to lower deliverables of custom digital solutions and lift products as a result of the pullback that we've been seeing on discretionary ad spend from certain clients. Adjusted EBITDA for the second quarter was $6.9 million, down 22.8 percent from the prior year quarter, resulting in an adjusted EBITDA margin of 8.1 percent.
Operator: Our disciplined cost execution, fueled by the restructuring efforts we've made over the past couple of years, allowed us to maintain a reasonable adjusted even margin for the quarter, even though revenue came in lower than we expected. As we continue to focus on operational efficiency, we're also investing in new products and capabilities, including enhancements to existing products, upgrading our tech stack, and providing faster data delivery, as well as some promising new areas, which John will speak about shortly.
Speaker Change: We saw in the first half of 'twenty 'twenty four coupled with what we expect to be continued pressure on our syndicated audience offerings in the back half of the year.
Speaker Change: Along with our expectation that we'll see further softness in revenue from our more bespoke custom offerings in the coming months it is necessary for us to reset expectations for the remainder of 2024.
Speaker Change: Based on our current expectations, we are revising our full year revenue and adjusted EBITDA guidance.
Speaker Change: We now expect full year revenue for 2024 to be between $350 and $360 million, which is a decline of 3% to 6% over 2023.
Speaker Change: As John mentioned earlier, the slower than expected pace of CCR scaling is one driver of this change which has delayed some of the revenue growth needed to offset the impact of the weakness we've seen from our traditional media clients.
John: As such we expect revenue for the third quarter of 2024 to be down 4% to 6% over 2023.
Speaker Change: However, we do expect the revenue declines to moderate towards the end of the year as revenue from proximate and CCR Rams.
Speaker Change: Given these lower revenue expectations, along with the need to make investments in areas of the business, where we feel we have the most opportunity for growth. We're now targeting a minimum adjusted EBITDA margin of 10%.
Speaker Change: Finally, before turning it back to John I wanted to take a moment to give you an update on our progress as we work to strengthen our balance sheet, where we've made significant progress since our last earnings call.
John: In conjunction with the extension of our credit facility in May we paid down $6 million of our outstanding balance, leaving $10 million on the balance sheet.
Speaker Change: We're currently evaluating alternative financing options for the company.
John: Includes our cross platform.
John: Content planning a product that I mentioned and it includes continued investment.
John: In in sales and product development inside proximity and that's that's where we're going to continue to focus the lion's share of our investment because that's where we see.
John: The most significant growth going forward.
John: As we as we look out over the remainder of this year and certainly the early part of 'twenty five.
Operator: But I guess from a headwinds perspective, what's the risk that these headwinds remain material for a significant period of time and just masks the other parts of the business? I guess that's kind of what I was trying to get at. And are there maybe strategic alternatives or options that you can think about, for example, the movie business or
Speaker Change: Alright, I guess from a headwinds perspective.
Speaker Change: Whats the risk that these headwinds remained material for a significant period of time and just masking. The other parts of the business I guess, that's kind of what I was trying to get at.
Speaker Change: Are there maybe strategic alternatives or options that you can think about for example, the movies business or.
Speaker Change: Anything else, where it may be.
Speaker Change: Are you able to separate out some of the parts of the business.
Speaker Change: Yes, I understand the question.
Speaker Change: Im not going to comment on maybe some of the <unk>.
Speaker Change: Strategic points that you mentioned, if we've got an announcement to make will certainly.
Speaker Change: Sure.
Speaker Change: Make that available, but I think when we look at the balance of this year.
Speaker Change: What we put out for our thinking on 2025 as it relates to.
Speaker Change: The traditional businesses.
Speaker Change: Outside of custom, which does get choppy in the guide.
Speaker Change: Really stripped out any any kind of.
Speaker Change: Tried to account for any unknown in the custom business in the guide, but as it relates to the traditional products.
Speaker Change: <unk>.
Speaker Change: And digital.
Speaker Change: I think by the time, we get to the end of this year, we will have anniversaried.
Speaker Change: A lot of the.
Speaker Change: <unk>.
Speaker Change: I would say churn that we've seen in the digital.
Speaker Change: <unk> will have anniversaried some of the some of the big major renewals that.
Speaker Change: That we have this year that we had.
Speaker Change: In parts of last year. So just in terms of the visibility to that side of the business as we exit certainly the third quarter and the early parts of the fourth quarter. We've got we've got pretty good line of sight into what that how that business kind of stabilizes itself.
Operator: Got it. And final question, just you kind of gave an example.
Speaker Change: Got it and final question just you kind of gave an example.
Speaker Change: The ramp in proximity.
And then you kind of transition that to the commentary around <unk>, how should we be thinking about that is that a re measuring that.
Speaker Change: Quarters or how should we.
Speaker Change: Talk about where you want to be at a certain putting the target.
Speaker Change: Yes, I mean, I think what we've what we've learned here with CCR is that.
Speaker Change: We're integrating with some very big platforms.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Much of much of the timeline that we're talking about here is not always in our control in terms of the pace with which these things start to become visible inside those platforms.
Speaker Change: If anything I think we can look back and learn from <unk> and.
Speaker Change: And that was the example that I used.
Speaker Change: It took some time.
Speaker Change: We're now 15 months into that integration.
Speaker Change: As I mentioned on the call, we're doing over $1 million a month in one platform.
Speaker Change: Looking back on it it took it took three to six months to really start to see.
Speaker Change: Meaningful momentum build if you look at where we are with CCR. For example, the trade desk, which is one that we've talked about publicly.
Speaker Change: It really didn't get into the platform until the early part of July and that was certainly delayed from when we had initially expected it to be but.
Speaker Change: Gives you a sense for.
Speaker Change: CCR is still in the very early innings inside that platform specifically.
Speaker Change: So.
Speaker Change: I think we're talking about.
Speaker Change: <unk> in quarters as these things start to start to get scale. We've tried to account for that in terms of resetting our expectation for the growth that we can count on from that specifically in the in the balance of the second half.
Speaker Change: Okay.
Speaker Change: That's appreciate it thank you.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one on your Touchtone telephone.
Speaker Change: I'm showing no further questions in queue at this time I'd like to turn the call back to John Carpenter for closing remarks.
Speaker Change: Okay.
John Carpenter: Okay. Thanks, everybody for joining I appreciate everyone dialing into.
John Carpenter: To the call and I'm sure, we'll be talking to many of you shortly.
John Carpenter: Yes.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].