Comscore Reports Fourth Quarter and Full Year 2019 Results

COMSCORE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

As of

As of

December 31,
2019

December 31,
2018

Assets

Current assets:

Cash and cash equivalents

$

46,590

$

44,096

Restricted cash

20,183

6,102

Accounts receivable, net of allowances of $1,919 and $1,597, respectively

71,853

75,609

Prepaid expenses and other current assets

15,357

19,972

Total current assets

153,983

145,779

Property and equipment, net

31,693

27,339

Operating right-of-use assets

36,689

—

Other non-current assets

2,979

8,898

Deferred tax assets

2,374

3,991

Intangible assets, net

79,559

126,945

Goodwill

416,418

641,191

Total assets

$

723,695

$

954,143

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

44,804

$

29,836

Accrued expenses

55,507

58,140

Accrued litigation settlements

3,575

3,500

Contract liability

58,158

64,189

Customer advances

9,886

6,688

Warrant liability

7,725

—

Current operating lease liabilities

6,764

—

Deferred rent

—

1,884

Other current liabilities

3,818

4,699

Total current liabilities

190,237

168,936

Secured term note

12,463

—

Financing derivatives

21,587

26,100

Senior secured convertible notes

184,075

177,342

Non-current operating lease liabilities

42,497

—

Deferred rent

—

10,304

Deferred tax liabilities

287

5,527

Other non-current liabilities

13,575

14,367

Total liabilities

464,721

402,576

Commitments and contingencies

Stockholders' equity:

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

—

—

Common stock, $0.001 par value per share; 150,000,000 shares authorized as of December 31, 2019 and 2018; 76,829,926 shares issued and 70,065,130 shares outstanding as of December 31, 2019, and 66,154,626 shares issued and 59,389,830 shares outstanding as of December 31, 2018

70

59

Additional paid-in capital

1,609,358

1,561,208

Accumulated other comprehensive loss

(12,333)

(10,621)

Accumulated deficit

(1,108,137)

(769,095)

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

(229,984)

(229,984)

Total stockholders' equity

258,974

551,567

Total liabilities and stockholders' equity

$

723,695

$

954,143

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Years Ended December 31,

2019

2018

2017

Revenues ⁽¹⁾

$

388,645

$

419,482

$

403,549

Cost of revenues ^{(1) (2) (3)}

199,622

200,220

193,605

Selling and marketing ^{(1) (2) (3)}

89,145

108,395

130,509

Research and development ^{(1) (2) (3)}

61,802

76,979

89,023

General and administrative ^{(1) (2) (3)}

66,419

84,535

74,651

Investigation and audit related ⁽¹⁾

4,305

38,338

83,398

Amortization of intangible assets

30,076

32,864

34,823

Impairment of goodwill

224,272

—

—

Impairment of intangible asset ⁽¹⁾

17,308

—

—

Settlement of litigation, net

2,900

5,250

82,533

Restructuring ⁽³⁾

3,263

11,837

10,510

Total expenses from operations

699,112

558,418

699,052

Loss from operations

(310,467)

(138,936)

(295,503)

Interest expense, net ⁽¹⁾

(31,526)

(16,465)

(661)

Other income (expense), net

1,654

(1,464)

15,205

Gain (loss) from foreign currency transactions

336

1,303

(3,151)

Loss before income taxes

(340,003)

(155,562)

(284,110)

Income tax benefit (provision)

1,007

(3,706)

2,717

Net loss

$

(338,996)

$

(159,268)

$

(281,393)

Net loss per common share:

Basic and diluted

$

(5.33)

$

(2.76)

$

(4.90)

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

Basic and diluted

63,590,882

57,700,603

57,485,755

Comprehensive loss:

Net loss

$

(338,996)

$

(159,268)

$

(281,393)

Other comprehensive (loss) income:

Foreign currency cumulative translation adjustment

(1,712)

(4,397)

6,168

Other

—

—

28

Total comprehensive loss

$

(340,708)

$

(163,665)

$

(275,197)

⁽¹⁾ Transactions with related parties are included in the line items above.

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

⁽³⁾ Stock-based compensation expense is included in the line items above as follows:

Years Ended December 31,

2019

2018 ⁽¹⁾

2017

Cost of revenues

$

1,852

$

6,349

$

1,766

Selling and marketing

3,615

9,452

5,247

Research and development

1,981

6,580

2,270

General and administrative

9,247

14,770

8,031

Restructuring

(137)

468

—

Total stock-based compensation expense

$

16,558

$

37,619

$

17,314

⁽¹⁾ Stock-based compensation expense in 2018 includes $28.5 million for awards granted under our 2018 Equity and Incentive Compensation Plan, which was approved by our stockholders in May 2018. We did not grant any stock-based awards in 2017, as we were not current in our SEC reporting obligations.

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended December 31,

2019

2018

2017

Operating activities:

Net loss

$

(338,996)

$

(159,268)

$

(281,393)

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

Depreciation

12,778

17,259

23,339

Non-cash operating lease expense

5,369

—

—

Amortization expense of finance leases

2,413

—

—

Amortization of intangible assets

30,076

32,864

34,823

Impairment of goodwill

224,272

—

—

Impairment of intangible asset

17,308

—

—

Provision for bad debts

727

966

983

Stock-based compensation

16,558

37,619

17,314

Deferred tax (benefit) provision

(3,727)

2,019

(3,203)

Change in fair value of financing derivatives

(5,100)

14,226

—

Change in fair value of warrant liability

2,411

—

—

Change in fair value of investment in equity securities

2,324

(1,443)

—

Non-cash interest expense on senior secured convertible notes (related party)

17,374

—

—

Accretion of debt discount

6,242

4,812

—

Amortization of deferred financing costs

1,078

955

—

Gain on forgiveness of obligation

—

—

(4,000)

Accrued litigation settlements to be settled in Common Stock

—

—

90,800

Other

(2)

568

192

Changes in operating assets and liabilities:

Accounts receivable

2,738

4,707

14,529

Prepaid expenses and other assets

2,198

(4,456)

4,067

Insurance recoverable on litigation settlements

—

10,000

(37,232)

Accounts payable, accrued expenses, and other liabilities

10,438

(4,955)

85,001

Contract liability and customer advances

(3,477)

(30,013)

(2,638)

Deferred rent

—

1,565

1,013

Current operating lease liability

(7,638)

—

—

Net cash used in operating activities

(4,636)

(72,575)

(56,405)

Investing activities:

Sales of marketable securities

3,776

—

28,436

Purchases of property and equipment

(2,736)

(4,206)

(10,182)

Capitalized internal-use software costs

(11,500)

(9,608)

—

Net cash (used in) provided by investing activities

(10,460)

(13,814)

18,254

Financing activities:

Proceeds from borrowings on senior secured convertible notes (related party)

—

100,000

—

Debt issuance costs

—

(5,146)

—

Proceeds from secured term note

13,000

—

—

Secured term note issuance costs

(350)

—

—

Proceeds from private placement, net of issuance costs paid

19,752

—

—

Financing proceeds received on subscription receivable (related party)

—

9,679

11,012

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

(1,267)

(5,263)

(1,514)

Principal payments on finance leases

(2,535)

—

—

Principal payments on capital lease and software license arrangements

(2,070)

(9,006)

(17,016)

Net cash provided by (used in) financing activities

31,973

93,119

(7,518)

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

(302)

(1,657)

2,453

Net increase (decrease) in cash, cash equivalents and restricted cash

16,575

5,073

(43,216)

Cash, cash equivalents and restricted cash at beginning of period

50,198

45,125

88,341

Cash, cash equivalents and restricted cash at end of period

$

66,773

$

50,198

$

45,125

As of December 31,

2019

2018

2017

Cash and cash equivalents

$

46,590

$

44,096

$

37,859

Restricted cash

20,183

6,102

7,266

Total cash, cash equivalents and restricted cash

$

66,773

$

50,198

$

45,125

Years Ended December 31,

2019

2018

2017

(In thousands)

(Unaudited)

(Unaudited)

(Unaudited)

Net loss (GAAP)

$

(338,996)

$

(159,268)

$

(281,393)

Income tax (benefit) provision

(1,007)

3,706

(2,717)

Interest expense, net

31,526

16,465

661

Depreciation

12,778

17,259

23,339

Amortization expense of finance leases

2,413

—

—

Amortization of intangible assets⁽³⁾

30,076

32,864

34,823

EBITDA

(263,210)

(88,974)

(225,287)

Adjustments:

Stock-based and expected awards compensation expense⁽³⁾

16,695

37,151

34,261

Investigation and audit related

4,305

38,338

83,398

Settlement of certain litigation, net⁽²⁾

2,900

5,250

82,533

Restructuring

3,263

11,837

10,510

Impairment of goodwill

224,272

—

—

Impairment of intangible asset

17,308

—

—

Other expense (income), net ⁽¹⁾

682

12,783

(4,125)

Adjusted EBITDA

$

6,215

$

16,385

$

(18,710)

⁽¹⁾ In 2019 and 2018, 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 and certain legal expenses defined by our senior secured convertible notes (the "Notes") and classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. Additionally, we recorded transaction costs related to the issuance of warrants, which costs were allocated to the warrants liability and recorded in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs were recorded in additional paid-in capital in the Consolidated Balance Sheets.

⁽²⁾ Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

⁽³⁾ 2017 includes $16.9 million related to a stock-based retention program that was settled in cash for employees who departed prior to issuance of equity.

Years Ended December 31,

2019

2018

2017

(In thousands)

(Unaudited)

(Unaudited)

(Unaudited)

Net loss (GAAP)

$

(338,996)

$

(159,268)

$

(281,393)

Adjustments:

Stock-based and expected awards compensation expense⁽⁴⁾

16,695

37,151

34,261

Investigation and audit related

4,305

38,338

83,398

Amortization of intangible assets⁽³⁾

30,076

32,864

34,823

Settlement of certain litigation, net⁽²⁾

2,900

5,250

82,533

Restructuring

3,263

11,837

10,510

Impairment of goodwill

224,272

—

—

Impairment of intangible asset

17,308

—

—

Other expense (income), net ⁽¹⁾

682

12,783

(4,125)

Non-GAAP net loss

$

(39,495)

$

(21,045)

$

(39,993)

⁽¹⁾ In 2019 and 2018, 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 and certain legal expenses defined by the Notes and classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. Additionally, we recorded transaction costs related to the issuance of warrants, which costs were allocated to the warrants liability and recorded in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs were recorded in additional paid-in capital in the Consolidated Balance Sheets.

⁽²⁾ Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

⁽³⁾ In 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.

⁽⁴⁾ 2017 includes $16.9 million related to a stock-based retention program that was settled in cash for employees who departed prior to issuance of equity.

Years Ended December 31,

(In thousands)

2019

(Unaudited)

2018

(Unaudited)

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

$

388,645

100.0

%

$

419,482

100.0

%

Cost of revenues

199,622

$

1,852

$

197,770

50.9

%

200,220

$

6,349

$

193,871

46.2

%

Gross profit

189,023

(1,852)

190,875

49.1

%

219,262

(6,349)

225,611

53.8

%

Selling and marketing

89,145

3,615

85,530

22.0

%

108,395

9,452

98,943

23.6

%

Research and development

61,802

1,981

59,821

15.4

%

76,979

6,580

70,399

16.8

%

General and administrative

66,419

9,247

57,172

14.7

%

84,535

14,770

69,765

16.6

%

Restructuring

3,263

(137)

3,400

0.9

%

11,837

468

11,369

2.7

%

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended December 31,

2019

2018

Revenues ⁽¹⁾

$

95,163

$

109,310

Cost of revenues ^{(1) (2) (3)}

46,831

51,994

Selling and marketing ^{(1) (2) (3)}

20,555

27,977

Research and development ^{(1) (2) (3)}

12,639

18,632

General and administrative ^{(1) (2) (3)}

15,878

18,468

Investigation and audit related ⁽¹⁾

129

892

Amortization of intangible assets

6,925

8,158

Restructuring ⁽³⁾

(1,886)

6,696

Total expenses from operations

101,071

132,817

Loss from operations

(5,908)

(23,507)

Interest expense, net ⁽¹⁾

(8,350)

(4,754)

Other expense, net

(4,967)

(637)

Gain (loss) from foreign currency transactions

(432)

1,484

Loss before income taxes

(19,657)

(27,414)

Income tax (provision) benefit

(1,733)

210

Net loss

$

(21,390)

$

(27,204)

Net loss per common share:

Basic and diluted

$

(0.31)

$

(0.46)

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

Basic and diluted

69,644,437

59,116,831

Comprehensive loss:

Net loss

$

(21,390)

$

(27,204)

Other comprehensive income (loss):

Foreign currency cumulative translation adjustment

1,182

(1,608)

Total comprehensive loss

$

(20,208)

$

(28,812)

⁽¹⁾ Transactions with related parties are included in the line items above.

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

⁽³⁾ Stock-based compensation expense is included in the line items above as follows:

Three Months Ended December 31,

2019

2018

Cost of revenues

$

(28)

$

1,114

Selling and marketing

456

1,225

Research and development

118

1,127

General and administrative

1,879

2,494

Restructuring

—

468

Total stock-based compensation expense

$

2,425

$

6,428

Three Months Ended December 31,

2019

2018

(In thousands)

(Unaudited)

(Unaudited)

Net loss (GAAP)

$

(21,390)

$

(27,204)

Income tax expense (benefit)

1,733

(210)

Interest expense, net

8,350

4,754

Depreciation

3,331

4,285

Finance lease amortization expense

439

—

Amortization of intangible assets

6,925

8,158

EBITDA

(612)

(10,217)

Adjustments:

Stock-based and expected awards compensation expense

2,425

5,960

Investigation and audit related

129

892

Restructuring

(1,886)

6,696

Other expense, net ⁽¹⁾

5,413

2,949

Adjusted EBITDA

$

5,469

$

6,280

⁽¹⁾ In 2019, 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 Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended December 31,

2019

2018

(In thousands)

(Unaudited)

(Unaudited)

Net loss (GAAP)

$

(21,390)

$

(27,204)

Adjustments:

Stock-based and expected awards compensation expense

2,425

5,960

Investigation and audit related

129

892

Amortization of intangible assets

6,925

8,158

Restructuring

(1,886)

6,696

Other expense, net ⁽¹⁾

5,413

2,949

Non-GAAP net loss

$

(8,384)

$

(2,549)

⁽¹⁾ In 2019, 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 Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended

(In thousands)

March 31,
2019
(Unaudited)

June 30, 2019
(Unaudited)

September 30,
2019
(Unaudited)

December 31,
2019
(Unaudited)

Net loss (GAAP)

$

(27,514)

$

(279,533)

$

(10,559)

$

(21,390)

Adjustments:

Stock-based and expected awards compensation expense

6,953

4,304

3,013

2,425

Investigation and audit related

842

2,354

980

129

Amortization of intangible assets

8,105

8,076

6,970

6,925

Settlement of certain litigation, net⁽¹⁾

—

5,000

(2,100)

—

Restructuring

(70)

2,949

2,270

(1,886)

Impairment of goodwill

—

224,272

—

—

Impairment of intangible assets

—

17,308

—

—

Private placement issuance cost

—

1,154

(416)

—

Other (income) expense, net ⁽²⁾

(2,388)

3,304

(6,385)

5,413

Non-GAAP net loss

$

(14,072)

$

(10,812)

$

(6,227)

$

(8,384)

⁽¹⁾ Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

⁽²⁾ In 2019, 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 Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended

(In thousands)

March 31,
2018
(Unaudited)

June 30, 2018
(Unaudited)

September 30,
2018
(Unaudited)

December 31,
2018
(Unaudited)

Net loss (GAAP)

$

(51,450)

$

(55,977)

$

(24,637)

$

(27,204)

Adjustments:

Stock-based and expected awards compensation expense

1,881

22,999

6,311

5,960

Investigation and audit related

31,867

4,883

696

892

Amortization of intangible assets

8,544

8,266

7,896

8,158

Settlement of certain litigation, net⁽¹⁾

—

5,250

—

—

Restructuring

1,257

3,833

51

6,696

Other expense, net ⁽²⁾

2,629

1,506

5,699

2,949

Non-GAAP net loss

$

(5,272)

$

(9,240)

$

(3,984)

$

⁽¹⁾ Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

⁽²⁾ In 2019, 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 Consolidated Statements of Operations and Comprehensive Loss.

Three Months Ended December 31,

(In thousands)

2019

(Unaudited)

2018

(Unaudited)

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

$

95,163

100.0

%

$

109,310

100.0

%

Cost of revenues

46,831

$

(28)

$

46,859

49.2

%

51,994

$

1,114

$

50,880

46.5

%

Gross profit

48,332

28

48,304

50.8

%

57,316

(1,114)

58,430

53.5

%

Selling and marketing

20,555

456

20,099

21.1

%

27,977

1,225

26,752

24.5

%

Research and development

12,639

118

12,521

13.2

%

18,632

1,127

17,505

16.0

%

General and administrative

15,878

1,879

13,999

14.7

%

18,468

2,494

15,974

14.6

%

Restructuring

(1,886)

—

(1,886)

(2.0)

%

6,696

468

6,228

5.7

%

Three Months Ended December 31,

(In thousands)

2019

(Unaudited)

% of
Revenue

2018

(Unaudited)

% of
Revenue

$ Variance

% Variance

Ratings and Planning

$

66,790

70.2

%

$

74,786

68.4

%

$

(7,996)

(10.7)

%

Analytics and Optimization

17,722

18.6

%

23,901

21.9

%

(6,179)

(25.9)

%

Movies Reporting and Analytics

10,651

11.2

%

10,623

9.7

%

28

0.3

%

Total revenues

$

95,163

100.0

%

$

109,310

100.0

%

$

(14,147)

(12.9)

%

Year Ended December 31,

(In thousands)

2019

% of
Revenue

2018

% of
Revenue

$ Variance

% Variance

Ratings and Planning

$

271,623

69.9

%

$

285,355

68.0

%

$

(13,732)

(4.8)

%

Analytics and Optimization

74,725

19.2

%

92,380

22.0

%

(17,655)

(19.1)

%

Movies Reporting and Analytics

42,297

10.9

%

41,747

10.0

%

550

1.3

%

Total revenues

$

388,645

100.0

%

$

419,482

100.0

%

$

(30,837)

(7.4)

%