Q3 2024 comScore Inc Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the CommScore 3rd Quarter 2024 Financial Results Call.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Speaker Change: Please be advised that today's conference is being recorded. Thank you. I would now like to turn the call over to John Tinker, Head of Investor Relations. Please go ahead.
John Tinker: 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.
John Tinker: These four looking statements include comments about our plans, expectations and prospects and are based on our view as of today.
John Tinker: November 12, 2024. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties.
John Tinker: We disclaim any duty or obligation to update our forward-looking statements to reflect new information after today's call.
John Tinker: We'll be discussing non-GAAP measures during this call, for which we have provided reconciliations in today's press release and on our website. Please note that we will be referring to slides on this call, which are also available on our website, www.comscore.com, under Investor Relations Events and Presentations.
Speaker Change: Now I'll turn the call over to Comscore's Chief Executive Officer, Jon Carpenter. Jon.
Jon Carpenter: Thank you and thanks everyone for joining us this evening. During the third quarter we made steady progress in our efforts to transform Comscore into a global leader in measuring consumer behaviors across platforms.
Jon Carpenter: We're focused on scoring and analyzing audiences to help our advertiser and publisher clients reach and measure consumers and their viewing habits wherever they are.
Jon Carpenter: Our teams have worked hard to simplify and streamline our offerings, ensuring that our investment is tied directly to the things that will move the needle for our clients, and I'm pleased with the progress that we've made.
Jon Carpenter: We see mounting evidence that the changes we're making are delivering value to our clients.
Jon Carpenter: During the quarter, we renewed key agreements that expanded partnerships with some of our most important partners. This includes a new three-year commitment from a major agency, Holco. These renewals couple both our syndicated audience offerings with our cross-platform capabilities.
to deliver incremental value for our client set.
Jon Carpenter: We know we've got work left to do, but we have and we will continue to take meaningful steps to address our cost structure and to better align our focus towards the areas of the business where there's clear line of sight to long-term growth.
Jon Carpenter: Taking a closer look at our cross-platform performance in the third quarter, we saw progress in some key areas.
Jon Carpenter: Our proxemic business and especially our predictive audiences offering, which is our ID-free, AI-enabled audience activation product, had another strong quarter. With the disruption of Oracle's sudden announcement in the second quarter largely behind us, we've seen clients leading in to Comscore's offerings.
Jon Carpenter: Predictive audiences revenue more than doubled versus the third quarter of 2023, and the business has recovered meaningfully from the second quarter to the third quarter of this year. Our privacy-forward, ID-free solutions have attracted advertisers struggling with an increasingly complex privacy landscape, and as a result, we've seen adoption accelerate.
Jon Carpenter: For Comscore campaign ratings where we measure advertising across linear connected television in digital, we've seen recovery from disruptions earlier in the year. As a result, at the end of October, we're measuring more than five times the number of ad campaigns than we were at the beginning of the year.
Jon Carpenter: This progress is in large part due to some key platform integrations that have begun to scale. These integrations place Comscore cross-platform measurement directly into the programmatic transaction flow, making it easy for advertisers to choose CCR to measure their campaigns.
Jon Carpenter: While still small in terms of its revenue impact in the quarter, the leaning indicators are encouraging, and we expect the resulting revenue will continue to scale as we move into 2025.
Jon Carpenter: On the topic of critical integrations, today we're announcing the completion of an integration with meta-platforms into CCR measurement.
Jon Carpenter: This enhancement to our coverage provides advertisers the ability to measure their social ads running across Facebook and Instagram in one deduplicated view while getting comp score verified reach and demographics for their meta campaigns.
Jon Carpenter: With this partnership, Comscore is able to deduplicate meta ad buys with linear TV and other digital inventory, allowing advertisers to quantify the impact social has overall and on incremental reach.
Jon Carpenter: Our teams continue to work on integrations with the most important platforms. Platforms that command a lion's share of audience time and attention, as well as advertising dollars.
Jon Carpenter: I'm looking forward to sharing more of our progress in the coming quarters.
Jon Carpenter: As we look ahead, the environment that we're operating in is changing rapidly. In just the past four years, connected TV has gone from roughly 30% of viewing to more than 60% of viewing on a monthly basis.
Jon Carpenter: The fragmentation created by such a sizable shift is creating a number of challenges for the market. And these challenges make it harder for advertisers to reach their target audiences while also creating tens of billions of dollars in wasted ad spend.
Jon Carpenter: Addressing this requires cross-platform solutions that are built on big data, innovative data science, and AI, and that's exactly what we're doing.
Jon Carpenter: One of the key things to understand about this fragmentation is that the shift in viewing isn't a one-for-one change when it comes to advertising.
Jon Carpenter: The ad load on connected TV is a fraction of what it is on linear. So as viewing shifts to include more connected TV viewing, advertisers can't just replace ads that ran on linear with ads that run on CTV. There just isn't enough inventory for that.
Jon Carpenter: It's this dynamic specifically that's forcing advertisers to think about campaigns that are planned from the ground up to be cross-platform in nature, because they simply can't reach their target audiences via any one of these channels on its own.
Jon Carpenter: So what does that mean as we think about our product road maps and how we deliver long-term growth? As we look to the future, we see plenty of room for these cross-platform offerings to continue to grow. For starters...
Jon Carpenter: We're addressing a massive market with programmatic ad spend in the U.S. alone growing at 12% CAGR and projected to be nearly 200 billion by 2026. The TAM here is several times the size of the traditional linear TV ad market alone.
Jon Carpenter: As we see it, there are three keys to our continued growth in cross-platform. First, given the continued evolution of privacy regulations, our predictive audience product is ideally aligned with what the market needs most.
Jon Carpenter: Scaling predictive audiences and delivering the added reach and increased return on ad spend that advertisers are looking for in a privacy forward way is a key part of our continued cross-platform growth story.
Jon Carpenter: Second, having Proxemic and CCR embedded in the programmatic platforms where the majority of ad dollars are spent is critical. We'll continue to focus on key platform integrations, ensuring that we're making it easy for advertisers to choose Comscore for every campaign.
Jon Carpenter: Finally, our cross-platform growth is directly aligned with the changes within the market. So as more spend transacts programmatically, we expect to see our cross-platform offerings naturally accelerate.
Jon Carpenter: Between the massive market opportunity and the differentiated offerings that address some of the most costly challenges that advertisers face, we anticipate revenue from our cross-platform products growing at least 30% well into the future.
Speaker Change: With that, why don't I turn it over to Mary Margaret to walk you through the results of the third quarter, as well as our guidance.
Thank you, John.
Mary Margaret: Total revenue for the third quarter was $88.5 million, down 2.8% from $91 million the same quarter a year ago.
Mary Margaret: Content and ad measurement revenue of $75.3 million was flat compared to the prior year quarter, with lower revenue from our syndicated audience offerings offset by an increase in cross-platform revenue.
Mary Margaret: In the third quarter, we continued to feel the impacts of the pricing pressures that our legacy media clients have been facing, most notably international TV and syndicated digital products.
Mary Margaret: Our movies business remains strong, generating $9.3 million of revenue in the third quarter, up 7% from the prior year.
Thank you.
Mary Margaret: Cross-platform revenue of $10.2 million was up nearly 34% compared to the prior year. As John mentioned, our Proxemic business was impacted in the second quarter by the Oracle announcement that it was shutting down its ad business. And at the time, we anticipated it could be a revenue catalyst for us in the longer term.
Mary Margaret: We saw some of that happen very quickly in Q3, which is contributing to the revenue growth for the quarter, and we expect the trend to continue as we close out the year.
Mary Margaret: Research and Insight Solutions revenue of $13.2 million was down 14% from 2023, primarily due to lower deliveries of custom digital solutions and lift products as a result of the pullback of discretionary ad spend we're continuing to see from certain clients.
Mary Margaret: Adjusted EBITDA for the third quarter was $10.1 million, down 24% from the prior year quarter, resulting in an adjusted EBITDA margin of 11.5%.
Mary Margaret: When you exclude the foreign exchange impacts from adjusted EBITDA, this quarter's result of $12.4 million is up 1% over the prior year.
Mary Margaret: In addition to the restructuring efforts we've made over the past couple of years, we remain disciplined in our spending and continue to take additional cost savings action to operate more efficiently.
Mary Margaret: This has allowed us to maintain a double-digit adjusted EBITDA margin for the quarter, even with lower revenue.
Mary Margaret: Our core operating expenses in the third quarter were down 3.9% over the prior year quarter and down almost 5% year-to-date.
Mary Margaret: As we continue to focus on operational efficiencies, we're also investing in new products and capabilities, including enhancements to existing products, upgrading our tech stack, providing faster data delivery, and increasing interoperability as we continue to roll out key integrations.
Mary Margaret: Last quarter we also discussed the progress we've made to strengthen our balance sheet.
Mary Margaret: Earlier this month, we paid off the outstanding balance of our credit facility and extended the maturity date of the facility to January 31, 2025, to cover the outstanding letters of credit currently held by Bank of America.
Mary Margaret: We continue to evaluate alternative financing options, including a replacement for this facility, and have been working with outside advisors to assist in our efforts.
Mary Margaret: We'll provide an update on that front when the process concludes.
Thank you.
Mary Margaret: As we work to close out the year as strongly as possible, we are tightening the revenue range we provided last quarter.
Mary Margaret: Based on our current expectations, we believe full-year revenue for 2024 will be between $351 and $355 million.
Mary Margaret: We made progress in the third quarter, with our year-over-year revenue declines improving over previous quarters.
Mary Margaret: We expect to see a similar trend in Q4, with revenue from our cross-platform solutions continuing to grow and offset the declines in other parts of our business.
Mary Margaret: We're also seeing momentum from WINS and local TV, strengthened relationships with agency hold codes, and the rollout of major platform integrations.
Mary Margaret: As we head into 2025, we expect this momentum to continue to build and put us back on a path to revenue growth.
Speaker Change: I'll now turn the call back over to Jon for closing remarks.
Jon Carpenter: Thanks Mary Margaret. I'm confident that we'll continue to make progress in our transformation, positioning us to become the industry's leading source for cross-platform audience planning and measurement.
Jon Carpenter: Transformations are hard and take patience and discipline to execute successfully. I'd like to thank our employees who have worked tirelessly every day to help position us to achieve our goals and to our clients and stakeholders for their continued trust and partnership. With that, why don't we open it up, operator, for any questions that we may have. Thank you.
Speaker Change: As there are no further questions, I would like to turn the call over back to Jon Carpenter for closing remarks.
Jon Carpenter: Okay, Operator, thank you very much. Thanks everybody for joining us this evening.
Speaker Change: That concludes today's conference. Thank you for your participation. You may now disconnect.