Comscore Reports Third Quarter 2019 Results and Announces Leadership Transition

COMSCORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

As of

As of

September 30, 2019

December 31, 2018

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

53,839

$

44,096

Restricted cash

4,651

6,102

Accounts receivable, net of allowances of $2,182 and $1,597, respectively

59,417

75,609

Prepaid expenses and other current assets

16,217

19,972

Total current assets

134,124

145,779

Property and equipment, net

32,609

27,339

Operating right-of-use assets

37,923

—

Other non-current assets

2,363

8,898

Deferred tax assets

2,521

3,991

Intangible assets, net

86,483

126,945

Goodwill

415,806

641,191

Total assets

$

711,829

$

954,143

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

44,921

$

29,836

Accrued expenses

48,108

58,140

Accrued litigation settlements

6,750

3,500

Contract liability

51,852

64,189

Customer advances

7,706

6,688

Warrants liability

5,905

—

Current operating lease liabilities

6,784

—

Other current liabilities

3,788

6,583

Total current liabilities

175,814

168,936

Financing derivatives

23,200

26,100

Senior secured convertible notes

182,744

177,342

Non-current operating lease liabilities

44,171

—

Deferred rent

—

10,304

Deferred tax liabilities

325

5,527

Other non-current liabilities

20,355

14,367

Total liabilities

446,609

402,576

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at September 30, 2019 and December 31, 2018; no shares issued or outstanding as of September 30, 2019 and December 31, 2018

—

—

Common stock, $0.001 par value per share; 150,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 70,955,367 shares issued and 64,190,571 shares outstanding as of September 30, 2019, and 66,154,626 shares issued and 59,389,830 shares outstanding as of December 31, 2018

64

59

Additional paid-in capital

1,595,402

1,561,208

Accumulated other comprehensive loss

(13,515)

(10,621)

Accumulated deficit

(1,086,747)

(769,095)

Treasury stock, at cost, 6,764,796 shares as of September 30, 2019 and December 31, 2018

(229,984)

(229,984)

Total stockholders' equity

265,220

551,567

Total liabilities and stockholders' equity

$

711,829

$

954,143

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenues

$

94,300

$

102,864

$

293,482

$

310,172

Cost of revenues^{(1) (2)}

47,390

49,446

152,791

148,226

Selling and marketing ^{(1) (2)}

20,421

24,866

68,590

80,418

Research and development^{(1) (2)}

14,064

18,742

49,163

58,347

General and administrative^{(1) (2)}

14,064

18,707

50,541

66,067

Investigation and audit related

980

696

4,176

37,446

Amortization of intangible assets

6,970

7,896

23,151

24,706

Impairment of goodwill

—

—

224,272

—

Impairment of intangible asset

—

—

17,308

—

Settlement of litigation, net

(2,100)

—

2,900

5,250

Restructuring ⁽¹⁾

2,270

51

5,149

5,141

Total expenses from operations

104,059

120,404

598,041

425,601

Loss from operations

(9,759)

(17,540)

(304,559)

(115,429)

Interest expense, net

(8,175)

(4,682)

(23,176)

(11,711)

Other income (expense), net

6,733

(1,711)

6,621

(827)

Gain (loss) from foreign currency transactions

1,194

(304)

768

(181)

Loss before income taxes

(10,007)

(24,237)

(320,346)

(128,148)

Income tax (provision) benefit

(552)

(400)

2,740

(3,916)

Net loss

$

(10,559)

$

(24,637)

$

(317,606)

$

Net loss per common share:

Basic and diluted

$

(0.16)

$

(0.42)

$

(5.16)

$

(2.32)

Weighted-average number of shares used in per share calculation - Common Stock:

Basic and diluted

64,157,167

58,212,306

61,603,357

56,877,186

Comprehensive loss:

Net loss

$

(10,559)

$

(24,637)

$

(317,606)

$

(132,064)

Other comprehensive loss:

Foreign currency cumulative translation adjustment

(2,950)

(429)

(2,894)

(2,789)

Total comprehensive loss

$

(13,509)

$

(25,066)

$

(320,500)

$

(134,853)

⁽¹⁾ Stock-based compensation expense is included in the line items above as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Cost of revenues

$

396

$

1,248

$

1,880

$

5,235

Selling and marketing

756

1,860

3,159

8,227

Research and development

469

1,137

1,863

5,453

General and administrative

1,392

2,066

7,368

12,276

Restructuring

129

—

(137)

—

Total stock-based compensation expense

$

3,142

$

6,311

$

14,133

$

31,191

⁽²⁾ Excludes amortization of intangible assets, which is presented separately in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended September 30,

2019

2018

Operating activities:

Net loss

$

(317,606)

$

(132,064)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

9,447

12,974

Non-cash operating lease expense

3,987

—

Amortization expense of finance leases

1,974

—

Amortization of intangible assets

23,151

24,706

Impairment of goodwill

224,272

—

Impairment of intangible asset

17,308

—

Stock-based compensation

14,133

31,191

Deferred tax (benefit) provision

(3,951)

2,828

Change in fair value of financing derivatives

(2,900)

10,141

Change in fair value of warrant liability

(4,893)

—

Change in fair value of investment in equity securities

2,324

(307)

Non-cash interest expense on senior secured convertible notes

17,374

—

Accretion of debt discount

4,607

3,327

Amortization of deferred financing costs

795

703

Other

657

560

Changes in operating assets and liabilities:

Accounts receivable

14,951

19,480

Prepaid expenses and other assets

2,115

3,502

Accounts payable, accrued expenses, accrued litigation settlements and other liabilities

6,913

(22,449)

Contract liability and customer advances

(11,748)

(28,531)

Operating lease liabilities

(6,034)

—

Net cash used in operating activities

(3,124)

(73,939)

Investing activities:

Proceeds from sale of investment in equity securities

3,776

—

Purchases of property and equipment

(2,810)

(2,183)

Capitalized internal-use software costs

(8,800)

(7,447)

Net cash used in investing activities

(7,834)

(9,630)

Financing activities:

Proceeds from borrowings on senior secured convertible notes

—

100,000

Debt issuance costs

—

(5,132)

Proceeds from private placement, net of issuance costs paid

19,769

—

Financing proceeds received on subscription receivable

—

7,998

Proceeds from sale-leaseback financing transaction

4,252

—

Proceeds from the exercise of stock options

1,191

2,855

Payments for taxes related to net share settlement of equity awards

(1,227)

(4,663)

Principal payments on finance leases

(2,080)

—

Principal payments on capital lease and software license arrangements

(1,997)

(7,260)

Net cash provided by financing activities

19,908

93,798

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(658)

(1,140)

Net increase in cash, cash equivalents and restricted cash

8,292

9,089

Cash, cash equivalents and restricted cash at beginning of period

50,198

45,125

Cash, cash equivalents and restricted cash at end of period

$

58,490

$

54,214

As of September 30,

2019

2018

Cash and cash equivalents

$

53,839

$

47,876

Restricted cash

4,651

6,338

Total cash, cash equivalents and restricted cash

$

58,490

$

54,214

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2019
(Unaudited)

2018
(Unaudited)

2019
(Unaudited)

2018
(Unaudited)

Net loss (GAAP)

$

(10,559)

$

(24,637)

$

(317,606)

$

(132,064)

Income tax provision (benefit)

552

400

(2,740)

3,916

Interest expense, net

8,175

4,682

23,176

11,711

Depreciation

3,336

4,135

9,447

12,974

Amortization expense of finance leases

613

—

1,974

—

Amortization of intangible assets

6,970

7,896

23,151

24,706

EBITDA

9,087

(7,524)

(262,598)

(78,757)

Adjustments:

Stock-based compensation

3,013

6,311

14,270

31,191

Investigation and audit related

980

696

4,176

37,446

Settlement of litigation, net

(2,100)

—

2,900

5,250

Restructuring

2,270

51

5,149

5,141

Impairment of goodwill

—

—

224,272

—

Impairment of intangible asset

—

—

17,308

—

Private placement issuance cost ⁽¹⁾

(416)

—

738

—

Other (income) expense, net ⁽²⁾

(6,385)

5,699

(5,469)

9,834

Adjusted EBITDA

$

6,449

$

5,233

$

746

$

10,105

⁽¹⁾ In the second quarter of 2019, we recorded $2.8 million in accrued transaction costs, of which $1.2 million was allocated to the warrants liability and recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs of $1.6 million were recorded in additional paid-in capital in the Condensed Consolidated Balance Sheet. In the third quarter of 2019, we recorded a $1.0 million adjustment due to a change in our estimate of transaction costs by decreasing general and administrative expenses by $0.4 million and additional paid-in capital by $0.6 million.

⁽²⁾ Adjustments to other (income) expense, net, reflect non-cash changes in the fair value of financing derivatives, warrants liability and equity securities investment included in other income (expense), net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2019
(Unaudited)

2018
(Unaudited)

2019
(Unaudited)

2018
(Unaudited)

Net loss (GAAP)

$

(10,559)

$

(24,637)

$

(317,606)

$

(132,064)

Adjustments:

Stock-based compensation

3,013

6,311

14,270

31,191

Investigation and audit related

980

696

4,176

37,446

Amortization of intangible assets ⁽¹⁾

6,970

7,896

23,151

24,706

Settlement of litigation, net

(2,100)

—

2,900

5,250

Restructuring

2,270

51

5,149

5,141

Impairment of goodwill

—

—

224,272

—

Impairment of intangible asset

—

—

17,308

—

Private placement issuance cost ⁽²⁾

(416)

—

738

—

Other (income) expense, net ⁽³⁾

(6,385)

5,699

(5,469)

9,834

Non-GAAP net loss

$

(6,227)

$

(3,984)

$

(31,111)

$

(18,496)

⁽¹⁾ In the fourth quarter of 2018, amortization of intangible assets was added as an adjustment in our calculation of non-GAAP net loss. Prior year non-GAAP net loss has been recast to include this adjustment, which is intended to better reflect our core operating performance.

⁽²⁾ In the second quarter of 2019, we recorded $2.8 million in accrued transaction costs, of which $1.2 million was allocated to the warrants liability and recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs of $1.6 million were recorded in additional paid-in capital in the Condensed Consolidated Balance Sheet. In the third quarter of 2019, we recorded a $1.0 million adjustment due to a change in our estimate of transaction costs by decreasing general and administrative expenses by $0.4 million and additional paid-in capital by $0.6 million.

⁽³⁾ Adjustments to other (income) expense, net, reflect non-cash changes in the fair value of financing derivatives, warrants liability and equity securities investment included in other income (expense), net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended September 30,

2019

(Unaudited)

2018

(Unaudited)

(In thousands)

As
reported
(GAAP)

Less: stock
-based
compensation

As
adjusted
(non-
GAAP)

% of
GAAP
Revenue

As
reported
(GAAP)

Less: stock
-based
compensation

As
adjusted
(non-
GAAP)

% of
GAAP
Revenue

Revenues

$

94,300

100.0

%

$

102,864

100.0

%

Cost of revenues

47,390

$

396

$

46,994

49.8

%

49,446

$

1,248

$

48,198

46.9

%

Gross profit

46,910

(396)

47,306

50.2

%

53,418

(1,248)

54,666

53.1

%

Selling and marketing

20,421

756

19,665

20.9

%

24,866

1,860

23,006

22.4

%

Research and development

14,064

469

13,595

14.4

%

18,742

1,137

17,605

17.1

%

General and administrative

14,064

1,392

12,672

13.4

%

18,707

2,066

16,641

16.2

%

Restructuring

2,270

129

2,141

2.3

%

51

—

51

—

%

Nine Months Ended September 30,

2019

(Unaudited)

2018

(Unaudited)

(In thousands)

As
reported
(GAAP)

Less: stock
-based
compensation

As
adjusted
(non-
GAAP)

% of
GAAP
Revenue

As
reported
(GAAP)

Less: stock
-based
compensation

As
adjusted
(non-
GAAP)

% of
GAAP
Revenue

Revenues

$

293,482

100.0

%

$

310,172

100.0

%

Cost of revenues

152,791

$

1,880

$

150,911

51.4

%

148,226

$

5,235

$

142,991

46.1

%

Gross profit

140,691

(1,880)

142,571

48.6

%

161,946

(5,235)

167,181

53.9

%

Selling and marketing

68,590

3,159

65,431

22.3

%

80,418

8,227

72,191

23.3

%

Research and development

49,163

1,863

47,300

16.1

%

58,347

5,453

52,894

17.1

%

General and administrative

50,541

7,368

43,173

14.7

%

66,067

12,276

53,791

17.3

%

Restructuring

5,149

(137)

5,286

1.8

%

5,141

—

5,141

1.7

%

Three Months Ended September 30,

(In thousands)

2019
(Unaudited)

% of
Revenue

2018
(Unaudited)

% of
Revenue

$ Variance

% Variance

Ratings and Planning

$

65,334

69.3

%

$

70,499

68.4

%

$

(5,165)

(7.3)

%

Analytics and Optimization

18,252

19.3

%

22,215

21.6

%

(3,963)

(17.8)

%

Movies Reporting and Analytics

10,714

11.4

%

10,150

10.0

%

564

5.6

%

Total revenues

$

94,300

100

%

$

102,864

100

%

$

(8,564)

(8.3)

%

Nine Months Ended September 30,

(In thousands)

2019
(Unaudited)

% of
Revenue

2018
(Unaudited)

% of
Revenue

$ Variance

% Variance

Ratings and Planning

$

204,833

69.8

%

$

210,569

67.9

%

$

(5,736)

(2.7)

%

Analytics and Optimization

57,003

19.4

%

68,479

22.1

%

(11,476)

(16.8)

%

Movies Reporting and Analytics

31,646

10.8

%

31,124

10.0

%

522

1.7

%

Total revenues

$

293,482

100

%

$

310,172

100

%

$

(16,690)

(5.4)

%