comScore Reports Second Quarter 2018 Results

COMSCORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

June 30, 2018

December 31,
2017

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

46,589

$

37,859

Restricted cash

6,599

7,266

Accounts receivable, net of allowances of $1,510 and $1,991, respectively ($1,409 and $2,899 of accounts receivable attributable to related parties, respectively)

70,182

82,029

Prepaid expenses and other current assets

19,523

15,168

Insurance recoverable on litigation settlements

10,000

37,232

Total current assets

152,893

179,554

Property and equipment, net

27,669

28,893

Other non-current assets

9,143

7,259

Deferred tax assets

3,619

4,532

Intangible assets, net

143,004

159,777

Goodwill

641,702

642,424

Total assets

$

978,030

$

1,022,439

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable ($977 and $2,715 attributable to related parties, respectively)

$

18,352

$

27,889

Accrued expenses ($5,745 and $5,857 attributable to related parties, respectively)

52,485

86,031

Accrued litigation settlements

3,800

27,718

Other current liabilities

10,335

10,485

Customer advances ($988 and $2,755 attributable to related parties, respectively)

86,310

98,367

Total current liabilities

171,282

250,490

Financing derivatives (related party)

15,900

—

Senior secured convertible notes (related party)

174,404

—

Deferred tax liabilities

5,590

3,641

Accrued litigation settlements

1,750

90,800

Other non-current liabilities

36,149

21,016

Total liabilities

405,075

365,947

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at June 30, 2018 and December 31, 2017; no shares issued or outstanding as of June 30, 2018 and December 31, 2017

—

—

Common stock, $0.001 par value per share; 150,000,000 shares authorized as of June 30, 2018 and 100,000,000 shares authorized as of December 31, 2017; 64,651,714 shares issued and 57,886,918 shares outstanding as of June 30, 2018, and 60,053,843 shares issued and 57,289,047 shares outstanding as of December 31, 2017

58

60

Additional paid-in capital

1,528,719

1,407,717

Accumulated other comprehensive loss

(8,584)

(6,224)

Accumulated deficit

(717,254)

(609,091)

Treasury stock, at cost, 6,764,796 and 2,764,796 shares as of June 30, 2018 and December 31, 2017, respectively

(229,984)

(135,970)

Total stockholders' equity

572,955

656,492

Total liabilities and stockholders' equity

$

978,030

$

1,022,439

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Revenues ⁽¹⁾

$

101,389

$

99,439

$

207,308

$

200,300

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

51,526

47,301

98,780

94,614

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

29,647

31,190

55,552

60,923

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

20,889

21,502

39,605

42,522

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

28,699

13,310

47,360

31,095

Investigation and audit related ⁽¹⁾

4,883

17,399

36,750

35,077

Amortization of intangible assets

8,266

8,443

16,810

17,178

Settlement of litigation, net

5,250

(915)

5,250

618

Restructuring

3,833

—

5,090

—

Total expenses from operations

152,993

138,230

305,197

282,027

Loss from operations

(51,604)

(38,791)

(97,889)

(81,727)

Interest expense, net ⁽¹⁾

(4,124)

(252)

(7,029)

(406)

Other income, net

807

2,683

884

5,867

Gain (loss) from foreign currency transactions

1,045

(1,205)

123

(1,225)

Loss before income taxes

(53,876)

(37,565)

(103,911)

(77,491)

Income tax provision

(2,101)

(1,061)

(3,516)

(1,927)

Net loss

$

(55,977)

$

(38,626)

$

(107,427)

$

(79,418)

Net loss per common share:

Basic

$

(1.02)

$

(0.67)

$

(1.90)

$

(1.38)

Diluted

$

(1.02)

$

(0.67)

$

(1.90)

$

(1.38)

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

Basic

55,192,741

57,498,228

56,703,795

57,386,516

55,192,741

57,498,228

56,703,795

57,386,516

Comprehensive loss:

Net loss

$

(55,977)

$

(38,626)

$

(107,427)

$

(79,418)

Other comprehensive income:

Foreign currency cumulative translation adjustment

(3,975)

2,352

(2,360)

2,955

Unrealized gain on marketable securities, net

—

34

—

34

Total comprehensive loss

$

(59,952)

$

(36,240)

$

(109,787)

$

(76,429)

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

⁽²⁾ Stock-based compensation expense is included in the line items above as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Cost of revenues

$

3,774

$

433

$

3,987

$

1,062

Selling and marketing

5,792

1,532

6,367

2,978

Research and development

3,972

450

4,316

1,271

General and administrative

9,461

409

10,210

1,333

$

22,999

$

2,824

$

24,880

$

6,644

⁽³⁾ 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)

Six Months Ended June 30,

2018

2017

Operating activities:

Net loss

$

(107,427)

$

(79,418)

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

Depreciation

8,839

11,996

Amortization of intangible assets

16,810

17,178

Stock-based compensation

24,880

6,644

Deferred tax provision

2,477

1,808

Change in fair value of financing derivatives

4,460

—

Change in fair value of investment in equity securities

(265)

—

Accretion of debt discount

1,978

—

Amortization of deferred financing costs

445

—

Other

510

189

Changes in operating assets and liabilities:

Accounts receivable

10,638

11,724

Prepaid expenses and other assets

(5,255)

(15,693)

Accounts payable, accrued expenses, and other liabilities

(18,138)

20,402

Customer advances

(14,321)

2,912

Net cash used in operating activities

(74,369)

(22,258)

Investing activities:

Purchases of property and equipment

(1,287)

(4,021)

Capitalized internal-use software costs

(5,228)

—

Net cash used in investing activities

(6,515)

(4,021)

Financing activities:

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

100,000

—

Debt issuance costs

(5,123)

—

Financing proceeds received on subscription receivable (related party)

4,676

5,822

Proceeds from the exercise of stock options

164

—

Repurchase of Common Stock (withholding taxes)

(4,275)

(1,262)

Principal payments on capital lease and software license arrangements

(5,359)

(8,608)

Net cash provided by (used in) financing activities

90,083

(4,048)

Effect of exchange rate changes on cash and cash equivalents

(1,136)

21

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

8,063

(30,306)

Cash, cash equivalents and restricted cash at beginning of period

45,125

88,341

Cash, cash equivalents and restricted cash at end of period

$

53,188

$

58,035

As of June 30,

2018

2017

Cash and cash equivalents

$

46,589

$

47,638

Restricted cash

6,599

10,397

Total cash, cash equivalents and restricted cash

$

53,188

$

58,035

Reconciliation of Non-GAAP Financial Measures

The following table presents a reconciliation of net loss (GAAP) to adjusted EBITDA for each of the periods identified:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2018

2017

2018

2017

Net loss (GAAP)

$

(55,977)

$

(38,626)

$

(107,427)

$

(79,418)

Income tax provision

2,101

1,061

3,516

1,927

Interest expense, net

4,124

252

7,029

406

Depreciation

4,276

5,867

8,839

11,996

Amortization of intangible assets

8,266

8,443

16,810

17,178

EBITDA

(37,210)

(23,003)

(71,233)

(47,911)

Adjustments:

Stock-based compensation

22,999

2,824

24,880

6,644

Investigation and audit related

4,883

17,399

36,750

35,077

Settlement of litigation, net

5,250

(915)

5,250

618

Restructuring costs

3,833

—

5,090

—

Other loss (income), net ⁽¹⁾

1,506

(53)

4,135

(40)

Adjusted EBITDA

$

1,261

$

(3,748)

$

4,872

$

(5,612)

The following table presents a reconciliation of net loss (GAAP) to non-GAAP net loss and non-GAAP net loss per share for each of the periods identified:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2018

2017

2018

2017

Net loss (GAAP)

$

(55,977)

$

(38,626)

$

(107,427)

$

(79,418)

Adjustments:

Stock-based compensation

22,999

2,824

24,880

6,644

Investigation and audit related

4,883

17,399

36,750

35,077

Settlement of litigation, net

5,250

(915)

5,250

618

Restructuring costs

3,833

—

5,090

—

Other loss (income), net ⁽¹⁾

1,506

(53)

4,135

(40)

Non-GAAP net loss

$

(17,506)

$

(19,371)

$

(31,322)

$

(37,119)

Supplemental Non-GAAP Disclosure

The following tables present a reconciliation of certain non-GAAP expense line items (to be discussed on today's conference call) to the most directly comparable GAAP expense line items:

Three Months Ended June 30,

(In thousands)

2018

2017

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

$

101,389

100.0

%

$

99,439

100.0

%

Cost of revenues

51,526

(3,774)

47,752

47.1

%

47,301

(433)

46,868

47.1

%

Selling and marketing

29,647

(5,792)

23,855

23.5

%

31,190

(1,532)

29,658

29.8

%

Research and development

20,889

(3,972)

16,917

16.7

%

21,502

(450)

21,052

21.2

%

General and administrative

28,699

(9,461)

19,238

19.0

%

13,310

(409)

12,901

13.0

%

Six Months Ended June 30,

(In thousands)

2018

2017

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

$

207,308

100.0

%

$

200,300

100.0

%

Cost of revenues

98,780

(3,987)

94,793

45.7

%

94,614

(1,062)

93,552

46.7

%

Selling and marketing

55,552

(6,367)

49,185

23.7

%

60,923

(2,978)

57,945

28.9

%

Research and development

39,605

(4,316)

35,289

17.0

%

42,522

(1,271)

41,251

20.6

%

General and administrative

47,360

(10,210)

37,150

17.9

%

31,095

(1,333)

29,762

14.9

%