comScore, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CommScore first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Mr. John Tinker. Sir, please begin.

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. These forward-looking statements include comments about our plans, expectations, and prospects, and are based on our view as of today, May 10, 2022. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. These risks and uncertainties include those outlined in our 10-K, 10-Q, and other filings with the SEC, which you can find on our website or at www.sec.gov. We disclaim any duty or obligation to update our forward-looking statements to reflect new information after today's call. We will 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 individual slides on this call, which are also available on our website. I'll now turn the call over to ComScore's Chief Executive Officer, Bill Libick. Bill.

Thank you, John, and thank you all for joining us today. I'm very proud that we delivered another solid quarter of results in our first quarter. As a reminder, this is our first quarter that we're operating under our new solutions group. Our focus is on measuring content and ads with the goal of enabling the planning and activation of media in a privacy-forward way across all screens, television, connected TV, or CTV, digital, mobile, and, of course, the movies. We are pleased to report that we grew revenue 4% year over year, to $94 million in adjusted EBITDA growth of 22% to $6.8 million versus $5.6 million a year ago. Some of the highlights in the quarter include NBCU certifying Comscore as a local TV currency provider across all of their owned and operated and affiliate group stations. Additionally, Effective announced Comscore will be using us for local TV measurement currency. We also inked an enterprise deal with Sinclair for the licensing of our CCI service, Comscore Consumer Intelligence for Local Markets, which provides an unrivaled cross-platform view of consumer retail visitations and online shopping tied to television viewing behavior at the local market level. And our momentum continued in this current quarter with the expansion of great television for 10 of the recently acquired markets. We also continued to make progress in accelerating our privacy forward offerings. Within predictive audiences, we are partnering with IRI to bring their CPG audience segments into our activation solution. This provides the best-in-class audience targeting within contextually relevant digital experiences in a cookie-free, privacy-forward manner. We are also happy with our progress to date on Comscore campaign ratings, or what we refer to as CCR. With CCR, advertisers can truly understand their audiences, and advertising campaigns across platforms with deduplicated reach and frequency metrics that allow them to align their spend and achieve more specific and accountable campaign-specific KPIs and a higher return on their overall investment. Our CCR partnership with YouTube continues to progress. One highlight this quarter was a program where we measured cross-platform advertising performance performance around the Super Bowl. This included PC, mobile, and connected TV. The program included 10 major brands across cars, travel, software, dining, and food service. Comscore CCR was the primary measurement used to specifically identify incremental advertising reach across YouTube before, during, and after the actual Super Bowl TV broadcast. On the digital side, with the integration of our social media service shareably into our digital offerings, we have named Tanya Yuki as our EBP of digital. to focus on expanding our product solutions and driving revenue growth in this key strategic area for us in 2022. As most of you know, Tanya rejoined Comscore when we acquired Cherubly in December of 2021. In the quarter Warner Brothers Discovery announced that they would be launching their now joint upfront with Comscore as an alternative currency provider with three very large national agencies. Also in the quarter, NBCU named Comscore as a certified provider for local currency measurement, the only provider they certified for local. In April, Comcast Cable's ad sales division, Effective, announced they'd use Comscore for local TV measurement as a currency, joining the growing ranks of TV players offering measurement alternatives to write deals on. In connection with our charter arrangement, Spectrum Reach has rolled out Comscore as their preferred television currency in all 89 markets, including New York and Los Angeles. With this, we believe more ad agencies and brands will switch to Comscore to buy TV advertising. Local stations continue to subscribe to Comscore for our stable and reliable currency. It's also worth pointing out that local TV stations should benefit this year from an estimated $3 billion-plus bump in political advertising, and many of them continue to be very vocal about actively looking for our new currency to base their advertising inventory transactions on. Also in the quarter... We expanded our relationship with Vizio TV, this with a multi-year agreement to continue our access to their unique CTV viewing at the glass level. Within digital, our partnership with IRI brings their CPG segments into our activation offerings. We believe this is a big win for both of our businesses. It provides IRI with a privacy-forward way to activate key segments in a cookie-free manner, and it provides Comscore with a key segment of CPG audiences that can be transacted on across the programmatic ecosystem at scale. Our ability to deliver a holistic view of both content and ad consumption throughout the home is a critical differentiator of what Comscore delivers for our clients every day. The combination of our census-based TV coverage, which includes more than 70 million TV sets, 35 million households, and nearly 13 million smart TVs, along with our census-based digital coverage and the industry's only total home panel is what sets Comscore's ability for our customers apart. Regarding our CTV capability specifically, there are two ways in which you can get connected TV information at scale. One is directly from publishers via tagging, or server-to-server integrations, or through ACR technologies from smart TVs. We do all of them. Unlike others who trot their CTV capability, Comscore measures both ad and content consumption. And because we have a combination of set-top box, panel, and CTV, we are able to deliver an unduplicated view of consumption This isn't a new offering for Comscore. We introduced our over-the-top measurement capabilities in 2015, and we have been collecting and reporting on holistic view of media behavior for years, continuing with our history of innovation and giving Comscore a leadership role to deliver on a holistic product suite across content and ads. This is Comscore's competitive advantage complete coverage and content and ads, and a very large installed base of both buyers and sellers of media that use our services every day to run their businesses. Despite all of the press in the marketplace trouncing new currency offerings, the reality is there's only two companies that deliver the full suite of capabilities across the media landscape, period. And Comscore is one of them. Our census-based TV and digital scale, coupled with our total home panel, means that Comscore can deliver what no one else can. the ability to get a cross-platform view of digital, CTV, and linear consumption, where our clients can precisely reach their desired audiences and contextually relevant experiences. This can be done in a privacy-forward way through our activation products, which allows our clients to optimize their spend, their ad delivery, and the measurement outcomes because of our ability to deliver deduplicated audience reach. It is clear that we have the most complete cross-platform offering, along with the highest coverage of CTV, video content, and video ad inventory available in the market. Taking this a step further, in today's privacy-forward market, The ad tech industry has struggled finding cookie-free tactics that will allow them to maintain campaign performance and KPIs that advertisers have become accustomed to. Building on the contextual targeting foundations of brand safety and IAB category in keyword targeting, Comscore is reinventing contextual targeting with the addition of predictive audiences. Predictive audiences is contextually delivering targeting, making privacy forward, and providing a crosswalk between audience behaviors and contextual signals. This is a massive step forward for the industry, enabling advertisers to maintain their KPIs without cookies. Comscore is leveraging this technology, not only for our own audience information, but complementary for our data partners, providing them with a cookie-free path to surface their segments in the marketplace. Before turning it over to John, I want to reiterate that we are laser-focused on executing against our key priorities aimed at delivering profitable growth. top score measures, content, and ads. It's what we do best, and the success that we're having across the markets we operate in with new clients' wins, new partnerships, and renewal with our longstanding media and agency clients gives us confidence that the opportunity is large for us. We are developing world-class products that are privacy-forward and cookie-free. We will be ready when the market shifts with our product offerings in the space. Returning to growth in digital is a key priority for us, and it's critical to our growth story going forward. Our product and our commercial focus here, aligned on new solutions group, is just the beginning. Our currency efforts and momentum we're seeing in the market under Carol Hinnant's leadership have led us to the NBC announcement on local and our double-digit growth to start the year in our cross-platform solutions group. Finally, as I transition from CEO, I am confident in our team's leadership efforts and them continuing to deliver against these priorities as we move throughout the year. And I could not be more excited about the opportunity that's in front of us. With that, I'd like to turn it over to John. John?

Thanks, Bill, and it's good to be with everyone this evening. As Bill mentioned, we turned in a solid print for the quarter. Revenues of $94 million were up 4% versus the same quarter a year ago. Adjusted EBITDA of $6.8 million was up 22% versus a year ago. Diving into the solution groups a bit further, cross-platform solutions grew by 10%. from 37.3 million in the first quarter last year to 40.8 million this year. Growth here was driven in large part by double-digit growth in our TB measurement efforts. Within that group, we also accelerated growth in our movies business, which grew by 20% year-over-year from 6.8 million in the first quarter last year to 8.2 million this year as the business continued to see strong recovery following the pandemic. Digital ad solution revenues of 53.1 million are essentially flat versus the same quarter a year ago, which included a one-time upfront revenue item. Growth in our activation offering, which was up 20%, our custom digital offerings, as well as execution and shareably, were key highlights in the quarter. All in all, we're pleased with the way we started the year from a revenue and EBITDA perspective, as well as from a cash perspective, and we're reaffirming our 2022 guidance for both revenue growth and the adjusted EBITDA margin rate. With that, I'll turn it back over to Bill.

Thank you, John, and I thank all of you for your support, and I thank you for trusting us with some of your investment. Operator, with that, let's open up the line for questions.

Operator? Ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star then 1 on your telephone keypad. Our first question or comment comes from the line of Jason Crayer from Craig Hallam. Your line is open.

Hi, guys. Cal in here for Jason. I just had a couple questions. So starting off, as you head here into upfronts, what are your thoughts on Comscore's ability to be more visible in transactions this year?

Well, that's a great question. The upfronts, there's been a lot more press releases, I think, than often activity. I think coming through the upfront, you're going to see comp score coming out of it, playing a far more important role in the transacting of advertising. We're pretty excited what we're hearing from our clients on that. I don't know if there's anything else I can add to that. I answered that question.

Oh, no, perfect. And then just my second question here. So given the back-end weighting of the year, what's your confidence in that ramp-up here in 2022?

John? Yeah, I think, like I said in my comments, we feel good about the way the year has started, delivering against what we said we would, which puts us in good position to continue executing as we go throughout the year. So I'd say we've got some real encouraging momentum here as we head into the last three quarters of 2022.

Thank you. Our next question or comment comes from the line of Matthew Thornton from Truist Securities. Your line is open.

Hey, guys. It's Anthony DuPlessis on for Matt. Thanks for taking the question. How should we think about the impact of the Comcast NBC Universal deal on the full year guide, just in terms of nominal impact as well as cadence? And then apologies if I missed this already, but can you give us an update on the MRC accreditation process and kind of where that stands?

Yeah, I'll start with the MRC first. The MRC is progressing well. As you know, we're in the process for the accreditation for our local and national TV services. How are the announcements, I think is the question, and local affecting our guidance? Clearly it's positive. We see a lot of momentum in the local market. We're not just excited about it. I just came back from the National Association of Broadcasters Conference, and it was nice to meet station groups that we hadn't seen since the lockdown in person, even though we're on Zooms with them. all the time, and to feel the momentum of the shifting of not just with subscriptions, but to do deals. We see more local agencies signing on with us. We see the usage in national agencies. So we feel really good. When it comes to guidance, I always turn that over to John to answer.

Yeah, look, I think the momentum we're seeing there with new business wins across both the local and national landscape have been encouraging. As you saw in the first quarter, we started the year strong with a nice double-digit print there, and I expect the momentum to carry forward as we go throughout the year.

Thanks, guys.

Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. Our next question or comment comes from the line of Sarinda Finn from Jefferies. Your line is open.

Good afternoon. A question about the resegmentation of the business into the digital ad solutions and cross-platform solutions. Can you talk about the decision to change the presentation format and then maybe what your expectations are for the outlook for each of the segments for the remainder of the year?

Yeah, I think we provided kind of a range in the operating materials in terms of what our expectation is on the guide surrender. In terms of the rationale, look, this is the way that we're operating our business day-to-day. It aligns more with competitive landscape that's out there on the digital front with our syndicated digital business really competing against a different set than, say, our cross-platform set of solutions. And so the way we think about aligning that – is along those lines. Like I said, I think the guide for cross-platform solution is high single-digit to low double-digit range. And then on the digital ad solution side, it's really about a guide towards what I would call low single-digit to mid-single-digit, if you will.

Fair enough. And then in terms of just as we think about changing economic conditions. Can you maybe talk about the sensitivity to ad spend and how, with, you know, revenue being back half-weighted, how your outlook, the sensitivity of your outlook, I guess, if there's a slowdown in ad spend, or how we should think about that?

Great question. You know, the only good thing about being in retirement age is I saw this similar thing unfold in the 70s, late 70s, when we had super high inflation, we had an economy that was strong, but it set us off into an awful recession, and it did affect ad spending. I hope we don't go into a recession, but if we do, one thing I did learn, the information services business become far more valuable in that environment, and let me explain why. The sellers of media who pay us a great deal of money they need us actually more because they're fighting for every dollar, not just the incremental dollar, every dollar the transact on. And we, I believe, where the status of Comscore is a must-have in this current environment, going in that environment, I think we're double down on a must-have for clients who don't currently subscribe. So And ad recession is awful. Make no mistake about it for our customers. But it's something that I think we're well positioned to thrive in that environment. The buyers of media have a very similar dynamic where they have more pressure on accountability. And our suite, like our CCR suite of accountability, plays right into that theme. I hope we don't get there, but I think we're going to be in a good position with or without it. We set our guidance with the expectation before the current economic data has been coming out. But I'll tell you, if history is any guide, I feel good about our guidance.

Yeah, the only thing I would add, Bill, I mean, we feel good given the largely syndicated nature of the contracts that we have. Beyond that, just to add what Bill said, look, our offerings in many ways are helping buyers and sellers of advertising get the best ROI and outcomes. And if you think about what our product offerings are, they do exactly that. They provide a return on ad spend clarity and outcomes that our clients are looking for. And so I think in a scenario where there could be or maybe a little bit of pressure on the ad spend, we feel good about our product offering coupled with the syndicated nature of the contracts.

Got it, that's helpful. And then maybe one kind of final question here. Just on the cost of revenues, I think we've talked about it a number of times in the past, over the past year plus. Obviously it starts off high in the year. Can you talk about how the trajectory of how we should think about that line item should go over the course of the year and how much is kind of embedded It's just seasonally higher this quarter.

Yeah, I think, look, if you're talking about the cost of goods line, that was essentially in line with our expectation. I don't expect a lot of variability here as we move throughout the year surrender. So, you know, I think we feel good about, you know, where we're at, again, in line with what we had expected for the first quarter.

Okay. That's it for me, guys. Thank you. Thank you.

Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Thank you very much, Operator. We appreciate it. And thank you all for joining us today. We look forward to our next earnings call. And like always, I want to thank you for your investment in Comscore. And have a great evening. Take care.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.