comScore, Inc. (SCOR) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Q1 2013 comScore Incorporated Earnings Conference Call. My name is Clinton, and I'll be your operator for today. [Operator Instructions] As a reminder, the call is being recorded for replay purposes. I'd now like to turn the call over to Ken Tarpey, CFO. Please proceed, sir.

Thank you, Clinton. Good afternoon, everyone, and welcome to comScore's earning call for the first quarter of 2013. Again, I'm Ken Tarpey, the CFO of comScore. And with me today is Magid Abraham, our President, CEO and Co-Founder; Serge Matta, our President of Commercial Solutions; and Cameron Meierhoefer, our Chief Operating Officer. Before we begin, please allow me to read the following disclaimer regarding our use of forward-looking information and non-GAAP financial measures. During the course of today's call, as well as during any question-and-answer periods that may follow, representatives of the company may make forward-looking statements within the meaning of the Security Act of 1933 and the Securities Exchange Act of 1934 regarding future events or performance of the company that involve risks and uncertainties, including, without limitation, the strength of comScore's business; expectations as to opportunities, including new customers and markets for comScore; expectations as to the growth and composition of comScore's customer base and renewal rates; expectations regarding the impact and benefits of particular lines of business and products; expectations regarding the disposition of certain lines of business; expectations regarding the relative quality of comScore's products; assumptions regarding tax rates and net operating loss carryforwards; and forecasts of future financial performance for the second quarter and the full year of 2013, including related growth rates, exchange rates and assumptions. Such statements are only predictions based on management's current expectations. Actual events or results could differ materially from those predictions due to a number of risks and uncertainties, including those identified in the documents comScore files from time to time with the Securities and Exchange Commission. Those documents specifically include, but are not limited to, comScore's Form 8-K filed earlier today relating to this call; comScore's Form 10-K for the period ending December 31, 2012. We caution you not to place undue reliance on any forward-looking statements included in these presentations, which speak only as of today. We do not undertake any obligation to publicly update any forward-looking statements to reflect new information after today's call or to reflect the occurrence of unanticipated events. In addition, we may also reference certain non-GAAP financial measures in the course of our presentation. You will find in our press release and on our Investor Relations website, a reconciliation of non-GAAP financial measures discussed during today's call to the most directly comparable GAAP financial measure. For the link to our Investor Relations website is ir.comscore.com, and our results are posted under Press Releases. With that, I will now turn the call over to Magid.

Thank you, Ken, and thank you for joining us today. Let me first cover some highlights of the quarter, and then Ken will provide some more detail on our financial performance. We also have some slides posted on our IR website that accompany our comments today and it might be useful for you to follow along with us. During our fourth quarter 2002 earnings call back in February, we outlined 4 key priorities for comScore in 2013. Number one is to maintain our measurement leadership, especially in mobile and multi platform; number two is to continue our campaign measurement progress and rollout globally; number three, capitalize on the Digital Analytix momentum; and number four, focus on executions, particularly driving to improve margins and to increase free cash flow. I'm happy to say that we are making progress on all 4 priorities. This progress helped us deliver strong results for the first quarter of 2013. We reported record quarterly revenues of $68.8 million, which is up 11% over the first quarter of last year. On a non-GAAP pro forma basis, excluding the financial performance of our non-health copy testing and configuration manager products, which we divested during the quarter, revenue grew 12% to $67.5 million. Our record revenues were driven by the continued strength in our Audience Analytics business with notable contribution from our mobile and multi-platform products. Our momentum in campaign measurement has never been stronger. We're also pleased with the marketplace momentum of our enterprise Digital Analytix software and the status of early implementations of deals sold last year. Finally, our execution was laser-sharp and delivered better than expected margins and record free cash flow. Despite our seasonally lower margins in the first quarter, our focus on execution and operating leverage resulted in 19% adjusted EBITDA margin, representing an adjusted EBITDA level of $12.6 million on a pro forma basis. In addition, we generated record quarterly free cash flow of $16.9 million. All in all, it was a strong quarter and a strong start for the year. Moving forward, I have on Slide 7, a definition for a metric that we're going to use in lieu of booking, and that's called CV or contract value. It is basically the same metric as what we have used before but we wanted to be very specific about what it means because some people have different definitions of bookings, sometimes including multiyear -- the value of multiyear contracts, sometimes not. So to be very precise, contract value is the value of contract commitment in the first 12 months of the contract. So any contract that's 12 months and shorter, it includes the full value of that contract. A contract that's longer than 12 months will include only the first year. And then pro forma trailing -- sorry, and then trailing 12 months CV is the sum of all the CDs or all the contracts that have been signed in the last 12 months and then the pro forma for a 12-month CV is the trailing 12-month CV for contracts excluding the business that we divested in the quarter. So with that terminology specified, we were happy to have seen CV trends remain strong and continue to outpace revenue. So on a pro forma basis, the trailing 12 months performance CV grew by 16%, which compares to 12% for pro forma revenue. The 4 percentage point difference between CV growth and revenue growth reflects the previously discussed lag in CV to revenue conversion for many of our new products. However, the gap is smaller than the 6 percentage point gap that we saw in the fourth quarter of 2012. As this lag or gap begins to narrow, we believe it will result in higher revenue growth and improved margin as the higher CV growth flows through into revenues and margin. I would like to note that while the growth rate in trailing 12 months CV has decreased from its level of 19% that we saw in Q4 of 2012, our operating plan anticipated this decrease, which is due to the continuing shift in our contract anniversary renewals to the second half of each calendar year, primarily due to many of our customers aligning their contracts with their December fiscal years. And in order to illustrate that, we added, in Slide 9, an illustrative spreadsheet that basically shows you the dynamic of CV growth over a 3-year period and then what happens to the metric of trailing 12 months CV when you have a dynamic where in the first year, let's say, in the fourth quarter, the fourth quarter accounts for 32.6% of contract value then it grows to 34.6% and it grows to 38.4%. This is illustrative, it's not exactly what our numbers are but it is indicative of the dynamics that we're observing in our business. And what you see in that case is that the CV will go from 19% in the fourth quarter of the second year to 16%, 15.5%, 15.6%, and then finally, 18%. So it shows you that despite the fact that we are looking at a 12-month trailing average and despite the fact that, that's supposed to account for seasonality, this gradual shift that's happening in the business where more and more of the contracts get renewed in the fourth quarter is responsible for the metric of the trailing 12-month CV being lower early in the year and then normalizing at the end of the year. Moving on to Slide 10. I want to talk a little bit about the vCE momentum. So during the last earnings call, we talked about our new products, certainly including vCE, but also DAx, subscriber analytics, Media Metrix Multi-Platform or Mobile Matrix 2.0, that they will contribute between 28% to 30% of our annual CV in 2013. We are well on track towards that objective, reflecting the success of our analytics strategy. One great example of this is the strategic partnership we announced last week with Procter & Gamble, the largest advertiser in the world. P&G has agreed to partner with comScore on our validated Campaign Essential or vCE capability, which they view as a holistic ad delivery validation solutions that provides deep campaign insights, in-flight reporting and daily alerting for convenient and effective campaign management. Needless to say, we are extremely pleased with the confidence that P&G has placed in our capabilities. The agreement covers both display campaigns and online video advertising campaigns. And P&G is not alone, if we actually look at the top 25 advertisers in the world, 22 of those top 25 advertisers are using vCE on at least 1 of their brands. And those top 25 -- 22 advertisers represents 89% of the global ad dollars. So clearly, we have made a lot of headway among the major advertisers and in particular, in the critical CPG category, we do business with all top 10 CPG advertisers. I want to repeat, all top 10 CPG advertisers. So when you hear that we're not doing business with so and so, that is not correct based on what the facts are. I'm also happy to report on our progress in terms of vCE momentum with agencies. On the slide entitled vCE Momentum and Agency Adoption, what we show you here is a list of the agencies among the major advertising agency holding companies. And so what you can see is lots of publicists, agencies that are using vCE, lots of IPG agencies that are using -- all the major main agencies are using vCE. A lot of the WPP agencies, including GroupM, are using vCE, Omnicom Media Group and OMD part of Omnicom, are using vCE. And then finally, Havas and Aegis are also using vCE. So bottom line is that we're doing business with the vast majority of the advertising agencies and we are very pleased with that progress. And everybody should remember that the advertising agency will follow the choice of the clients. And since we have so many advertisers that have lined up with us, one way or the other, we will do business with almost any agency. In the most recent data available, in March of 2013, we actually went to measure a metric of how much vCE has delivered in terms of impression compared to its closest competitor. And in the United States, during March, vCE had going through it 1.9x as many impressions as its closest competitor. And when you look outside the U.S., the gap is even bigger. We process 4.3x as many impressions as the closest competitor. I'm also pleased to announce our partnership on video measurement with Brightroll. Brightroll is a top 3 video entity in comScore's online video ranking. This partnership adds to a number of existing relationships on video measurement with many of the top 10 video publishers. We are pleased that the momentum of vCE extends to both online display and video measurement. Looking ahead for the remainder of the year, our priorities remain the same. We will maintain and expand our leadership in Audience Analytics with a particular focus on enhancing our mobile and multi-platform measurement products, including ubiquitous measurement of video; number two, we will continue our momentum in advertising measurement by expanding the successful rollout of vCE and enhancing our advertising effectiveness measurement products; number three, we will expand our Digital Analytix business both in the U.S. and internationally, building on the momentum that we achieved last year. We intend, in particular, to leverage DAx's innovative big data architecture and on-demand, unrestricted query capabilities to broaden its market potential and we're seeing that in the pipeline today. Finally, we will maintain our focus on financial execution, on improving margins and growing free cash flow, all of which will further strengthen our balance sheet. And our goal remains to deliver profitable growth in the quarter, strong cash flow and superior shareholder value. We're off to a good start in 2013, and our first quarter results are really a good indication of that. With that, I would like to turn it back over to Ken to talk a little bit more detail about our financial results.

Thank you, Magid. Good afternoon, everyone. Let's take a look at our performance for the first quarter in more detail starting with revenues. As Magid mentioned, reported revenue for the first quarter was a quarterly record of $68.8 million, up 11% year-over-year. On a non-GAAP pro forma basis, excluding the financial performance of our non-health copy testing and configuration manager products, which we divested in the quarter, revenue grew 12%. Subscription revenue in the first quarter was $59.4 million, up 14% year-over-year, 15% on a pro forma basis. Subscription revenue represented 86% of total revenue or 87% on a pro forma basis while project revenue was $9.4 million. Project revenue as a percentage of revenue was somewhat lower, primarily due to the seasonal nature of project work with our customer base. GAAP revenue from existing customers was up 8% year-over-year in the first quarter to $60.8 million and represented 88% of total revenues. On a pro forma basis, existing customer revenue in the first quarter of 2013 was up 9% year-over-year. Our renewal rate with existing customers remained above the 90% on a constant dollar basis and we added 62 net new customers in the first quarter. Our customer count now totals 2,206 customers. And we continue to increase our international revenues. In the first quarter, revenue from outside the United States was up 27% on a pro forma basis and represented 30% of revenue, driven by the strength of our audience products particularly in Europe and Latin America. On a constant currency basis, our pro forma revenue would have been $200,000 higher with the British pound and euro fluctuations being the primary reasons. Our top 10 customers represented 23% of pro forma revenue in the first quarter, reflecting the continued diversification of our overall customer base. Now, let me turn a little bit to expenses and margins. Our gross margin was 67.2%, up from the fourth quarter due to cost optimization efforts. The stronger Q1 adjusted EBITDA performance benefited also from the timing of certain cost of good sold expenditures, which will now will occur substantially during Q2 of 2013. Notwithstanding this timing benefit, Q1 was a strong quarter both in terms of revenues and adjusted EBITDA. We are also beginning to realize the benefits of prior strategic investments to support our expanding multi-platform and cross media sales initiatives. GAAP pretax income was $156,000 in the first quarter as compared to $606,000 in the same quarter last year. Our stock compensation expense in Q1 was $5.0 million or $1.3 million lower than anticipated. This delta occurred primarily due to the timing of certain stock award plan approvals, which occurred later than previously anticipated. The 2013 stock compensation expense of $26.2 million should still approximate the previously anticipated total after factoring for the award timing change and reductions in grant estimates. On the quarter, our effective tax rate in the first quarter was 1,397%, while our cash tax rate was 251%. We've recorded a larger year-to-date income tax expense for several reasons. First, we have several loss-generating entities in foreign countries where we are unable to recognize a current income tax benefit due to the uncertainty of future profits in those countries. The second reason is the treatment of stock compensation charges under GAAP, FAS 123R. For GAAP accounting, we used the fair value at the time of stock grant to determine stock compensation deductions, whereas for cash tax, we use the fair value at that time of investing. This caused the GAAP effective rate to be well above our cash rate and normal experience. This booked tax stock compensation difference will continue to occur throughout 2013 based on our current stock price. We can't predict the tax impact of stock compensation effect because of the dependency on future stock price performance. This makes our quarterly effective tax rates during 2013 difficult to predict but we would expect our cash tax rate to be similarly smaller because of our currently available net operating losses. GAAP net loss was $2 million or $0.06 per basic and diluted share in the first quarter of 2013 based on a basic and diluted share count of approximately 34.1 million shares. Due to the GAAP net loss position, the basic share count, which is the weighted average share count in Q1, is used for both basic and fully diluted EPS calculations. Non-GAAP pro forma net income for the first quarter was $8 million or $0.22 per diluted share excluding stock-based compensation, amortization of intangibles, acquisition-related expenses, restructuring and other non-recurring items. Since this metric results in net income, the accompanying EPS calculation is based on a calculated Q1 fully diluted share count of 35.9 million shares. This amount compares to a non-GAAP net income of $7.5 million or $0.22 per diluted share in the first quarter of 2012. We believe that adjusted EBITDA is a useful measure for investors to use to evaluate our operating performance. Adjusted EBITDA takes non-GAAP net income and adjust it to include the cash tax provision depreciation and net interest expense income. On this basis, adjusted pro forma EBITDA was $12.6 million in the first quarter, up from $11.3 million in the first quarter of 2012 and represents an adjusted EBITDA margin of 19%. Switching over to the balance sheet. We ended the quarter with cash and cash equivalents of $73.7 million, an increase of $12 million from December 31, and an increase of $31.3 million from a year ago. Our receivables of $65.8 million are essentially flat from the $66.1 million a year ago due to our collection efforts while our business has continued to grow over the year. Borrowings under our revolving credit facility were $3.8 million. We borrowed these funds to pay down certain short-term intercompany loans in order to minimize the potential impact of foreign exchange rate fluctuations. We anticipate paying this borrowing off during 2013 with operating cash flows. I would also note that on Tuesday, we filed an S-3 with the SEC related to a $100 million shelf facility. This was simply a renewal of an existing shelf facility and the filing does not signal any imminent actions. Total deferred revenue was $86.8 million, up 12% from a year ago with current deferred revenue of $85.5 million, again reflecting our strong CV growth performance. The majority of our subscription-based deferred revenue is composed of contracts with a ratable revenue recognition which provides us with high, near-term visibility. There is a smaller component of deferred revenue for vCE, for example, whose revenue recognition can be dependent on the timing of customer campaigns. Also, keep in mind that deferred revenue represents only the invoice portion of billings value of current contracts over the next 12 months. The percentage of billing value that is invoiced upfront has been trending down in some cases, as some customers have moved from annual billing to multiple billing cycles in a year. Turning to cash flow. Our cash flow from operations for the first quarter of 2013 was $18.4 million. Our capital expenditures are $1.5 million. This resulted in a free cash flow for the first quarter of $16.9 million. We typically generate higher free cash flow in the first quarter due to the normal receivables collection in Q1 after our seasonally high Q4 2012 renewals. While we do not expect to sustain this high a run rate for the rest of the year, even after adjusting for the normal seasonal uptick, this was a very strong quarter in terms of cash flow. For the rest of the year, we expect our capital expenditures will approximate $9 million to fund expanded data center capacity, supporting our expanding DAx customer base in the United States. Now, if you address -- if you'll look at Slides 14 and 15, I will address our guidance. As Magid has highlighted, we continue to make progress in transforming comScore from a data focused company to a realtime Digital Analytix company. We're gradually benefiting from new high growth offerings, as well as continued strong contribution from our core products suites. We are focused on execution, reducing our cost structure and generating operating leverage in line with our commitment to deliver top line growth with margin improvements. We believe our solid CV growth will continue throughout 2013 and position us well to deliver faster revenue growth going forward. The following guidance for 2013 and Q2 2013 are provided on a non-GAAP pro forma basis, excluding the financial performance of our non-health copy testing and configuration manager products, which we divested in the first quarter of 2013. We're now anticipating a higher 2013 non-GAAP pro forma revenue range, the range being $275.5 million to $283.5 million. Using this non-GAAP pro forma basis, the 2013 revenue growth range year-over-year is 12% to 15%. From a profitability perspective, we anticipate non-GAAP pro forma income or loss before income taxes to be in the range of a $7 million loss to a pretax income of $1 million. We anticipate pro forma adjusted EBITDA to be between $48.3 million and $54.8 million in 2013, representing an adjusted EBITDA margin range of approximately 18% to 19%. We project the 2013 normalized annual GAAP tax rate of approximately 55% and an annual cash tax rate of 17%. And we continue to hold significant net operating loss carryforwards in the United States, certain states in the U.S. and in certain foreign jurisdictions predominantly and particularly, the Netherlands. For 2013, we expect approximately $8.1 million in amortization of intangibles and patents and $26.2 million in stock-based compensation, consistent with our prior expectation. For the full year, we anticipate average basic share count of 34.6 million and fully diluted share count of 36.1 million. Turning to our expected performance for the second quarter of 2013, we anticipate revenues in the range of $65.5 million to $68.0 million, representing an increase of 14% to 18% or 16% at the midpoint over the second quarter of 2012 on a non-GAAP pro forma basis. Our Q2 2013 revenue guidance does not have any pro forma impact as we've completed those divestitures in the first quarter. We anticipate second quarter GAAP income or a loss before income taxes in the range of a $4.9 million loss to a $2.6 million loss. Our estimated basic share count for the second quarter is 34.4 million shares and estimated fully diluted share count for the second quarter is 36.0 million shares. We anticipate adjusted EBITDA for the second quarter of 2013 to be in the range of $10.5 million to $12.0 million, which represents an adjusted EBITDA margin of 17% at the midpoint of our revenue and adjusted EBITDA guidance. The sequential drop from Q1 reflects the impact of the cost of sales expense timing swing which I mentioned before. A reconciliation of GAAP net income and net loss before income taxes to adjusted EBITDA guidance for the second quarter and the full year of 2013 is included in the tables to our earnings press release, as well as the slides accompanying today's presentation. Additionally, on Slide 18, for your reference, we're provided comparative 2012 and 2011 information for the pro forma products, which we divested so that you have a better sense of the financial contribution of those products during the quarters of 2012 and 2011. Now with that, operator, we can open the lines to take questions.

[Operator Instructions] Your first question comes from the line of Jason Helfstein from Oppenheimer and Company. Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division: Why aren't you treating the copy testing as discontinued operations? Just because I think it kind of makes the ratio analysis confusing through the whole income statement since we're obviously -- it's excluded from the guidance and excluded in all the analysis. The second question, we're clearly seeing a take-up in vCE. Can you just talk about how that's impacting kind of all the other businesses? Are you seeing a greater take-up in any products around mobile or social or any of your custom products because of the momentum you're seeing in vCE?

This is Ken, let me just take the first one to clarify that and that I'll open it up to the rest of the colleagues to take the second one. As it relates to the divestiture, we did hold on to or keep the health focus portion of those products. So since we did not divest of the entire business, under the accounting rules, you're not allowed to do divestiture accounting. And that's why be provided that supplemental information for everybody's benefit so we have comparability as best as we can on a go-forward basis.

With regards to vCE momentum, I think we're very, very happy with the way it's going and we see actually, momentum even within the quarter accelerating. And you're right, it is really opening doors for us as far as people interested in multi platform, in terms of mobile. Just basically when you are talking to advertisers, it open up the door for addressing a whole bunch of marketing questions and gives us the opportunity to cross-sell other products. So like anything, anything that gets you a foot in the door and get you engaged in a serious conversation with the client, is actually going to turn out to be very beneficial and synergistic. Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division: So is it fair to say, just a follow-up, just given how the businesses has gotten more and more weighted toward the fourth quarter with renewals, we would see more of that benefit next year or when you post the fourth quarter, is that a fair way to think about it?

I think it will skew more towards the fourth quarter but I think we'll see the benefit gradually as we go through the year. In some cases, people are not going to wait until the fourth quarter to upgrade and buy the mobile product or the multi-platform product, et cetera.

Our next question comes from the line of Youssef Squali of Cantor Fitzgerald. Kip N. Paulson - Jefferies & Company, Inc., Research Division: This is Kip Paulson for Youssef. Just a couple of quick questions. First, could you talk a bit about bookings or contract value growth for Audience Analytics versus advertising analytics, web analytics and the mobile and network analytics? And which of these categories has the widest spread between pro forma bookings growth and pro forma reported revenue growth? And I have one follow-up.

This is Ken, I'll start it off. In terms of the spread overall, as we mentioned in the past, we've shown in the chart in prior calls, the subscriber analytics has the longest lead time with the longest gap. Then the second one, as I mentioned in the call at this point, would be the vCE because it is dependent on timing of campaigns. But we are seeing, to the prior comments by Magid that, that gap is closed -- closing during this past quarter. The audience products, fairly consistent, as always, as ratable products in terms of the recognition and really, no gap from that perspective. On the DAx side, we had seen a bit more of a gap that is starting to close as our base increases and we really will be on the vCE side and the DAx side is where we'll see that gap continue to close over the course of the year as we look at things. Kip N. Paulson - Jefferies & Company, Inc., Research Division: Got it, great. And then it looks like you guys added a better-than-expected 62 customers in the quarter. Were there any onetime additions in here, if you will, or should we consider adding more of the typical 45 to 50 customers per quarter?

No. This is Serge. No, there were no onetime customers or anything like that. These were for the most part, I don't think we saw any of that, so you should expect that, so definitely not anything in regard to onetime customers.

The next question comes from the line of Heath Terry of Goldman.

I was wondering if you could give us an update on the ESPN cross-platform measurement program, what kind of traction you're seeing with that so far to the extent that there are any partners outside of ESPN that have started to join into the program? And how, if at all, the Arbitron acquisition impacts that program.

Let me try to answer that, Heath. The ESPN project is going well. It has -- it involves cooperation between us and Arbitron. And despite the fact that Arbitron is going through this acquisition process, we're both meeting our obligations and things are on schedule. The timeframe for the project was to get done towards the end of the second quarter beginning -- or the summer time.

The summer time.

And then it would be from the summer time until the end of the year where ESPN will take a close look at the recurring numbers that are coming out of it. We have seen interest from other customers in it but I think that there is some uncertainty about what will happen depending on how the FCC rules on the pending deal between Nielsen and Arbitron. So it's too early to predict how that's going to go. Other than that, we are happy with the progress and with the method that we are using and we're looking forward to getting out some way of continuing the cooperation with Arbitron after the deal is adjudicated one way or the other.

That's great. I guess just one sort of follow-up question. When you look at the rollout of new mobile products that you've seen over the course of the last year or so and the expansion that you guys have done to the mobile panel, when you think about sort of the -- where you are in terms of measuring mobile, how would you compare it or how would you compare it to where you are in desktop now and maybe where you were in desktop a few years ago? I mean, I guess, what I'm thinking is are we, in 2013, with mobile, where we were with desktop in 2002 or 2005? How do you see it that way? And then would you say mobile now is kind of 50% of where desktop is now or what's the best way to sort of think about that, I guess, both from a business and maybe from a products standpoint?

Well, I think, from a sample size standpoint in the U.S., we have actually gotten to the point where our sample is at least as good as what desktop was in the early 2000s. And so we believe we have a pretty strong basis for that measurement. The complexity of measuring mobile revolves around apps. And the app ecosystem is very diverse. And so with the apps, we have lost some of the open nature of the Internet measurement where you have a standardized URL that you can track and report. But this is something that we're working through and we are working -- we're leveraging some of the progress that we're making for subscriber analytics to get our hands on international data for mobile.

The only other thing I just want to add, Heath, is in terms of numbers, we have significantly enhanced our mobile offerings. So just -- we announced this a few weeks -- a few months a go but in terms of data collection in the U.S., we now collect data on over 1 million smartphones, 400,000 tablets and 150,000 connected devices. And also, in Q1 in March, we launched a tablet measurement service for -- called TabLens that we are now providing to our customers. So we definitely expanded and invested a lot in our mobile offering.

[Operator Instructions] Our next question comes from the line of Matt Chesler of Deutsche Bank.

Can you address the broader economic client tone across your client base including the trends in the near-term prospects for your project revenue? It was helpful to see the pro forma breakout, to see that the decline in product revenue pro forma was smaller than the reported revenue. I just want to get a sense for where you see that headed over the coming quarters and contributing to your full year plan?

Well, we always see a sequential drop in project revenue from Q4 to Q1, just due to end of year effects, people that have money left over in their budgets. But so far so good. We see good customer activity and good discretionary spending. Obviously, the areas in the world where there is tightness in spending, which tends to be around Europe, that's not the business where we have a lot of project work. Our project work tends to be in the U.S. And so from that standpoint, we think the climate is pretty good. It's not exuberant but at the same time, it's pretty healthy. So barring any unforeseen circumstances, we are bullish on the level of project revenue this year.

So year-over-year it declined 4%, you see that snapping back to growth in the next quarter?

I don't know about the next quarter but definitely within -- like I said, we see an uptick, Matt, in the fourth quarter. We'll see an uptick in the fourth quarter, but it's hard to tell in terms of exact uptick in Q2. But like Magid said, we're not seeing anything concerning -- to concern us in Q1 and at least in the U.S. And most of the projects anyway, like he said, is in the U.S. So it doesn't really affect us. If there's going to be things that happen in Europe and elsewhere, it doesn't really impact project revenue.

Okay. And if you look at those 62 net adds for customers, can you give us -- can you breakdown the parts of your business you're seeing those increases in?

In terms of the -- as always, the initial entry point most usually for our customers is on the audience side. We are seeing more of it internationally.

Yes, we're seeing audience, we're seeing international, we're also seeing some DAx clients that come in that are not audience clients, which is an interesting trend that we started seeing. We started seeing that in late Q3 and then saw in Q4, and it's also continued. So clients that are not Media Metrix clients or have any relationship with comScore end up becoming into the -- signing up for DAx as well.

Okay. And then just lastly, you're having -- you're showing good traction in vCE. Just back in your audience business, one of your competitors talked about deemphasizing the planning aspect of the business. Have you seen -- do you have the information to know if you've picked up any business directly as a result of that? Are you gaining market share in that area?

Well, we know we're gaining some market share in some of the countries that they have decided to abandon, that's one thing for sure. The second thing that we've gained is Media Metrix Multi-Platform is a competitive -- is a very compelling offering that there's no competitive offering out there. And in that Media Metrix MP, just to give everybody on the call some stats, we signed our 100th Media Metrix Multi-Platform subscription in Q1. We now total around 123 customers through Q1. Our ASP for multi-platform is up 15% versus the fourth quarter. We have major new subscribers in Q1 including Facebook, Viacom, Time Warner, NBC, Twitter, Guardian, IAC. And this is the most -- the last point I want to make is the most really compelling point about Media Metrix Multi-Platform is it is generating new cross-sell opportunities. So when we sell Media Metrix Multi-Platform, 43% of all of the sales in Q1 2012, Q1 -- sorry, 2013, also bought Mobile Metrix or Video Metrix. So this extra revenue creates a positive multiplier effect to the MP upsell. So it's really helping us not only to upsell clients but it's also helping us upsell additional products.

We have no questions left at this time. I'd now like to turn the call back over to Dr. Abraham for closing remarks.

Thanks. Well, thank you, all, for your participation today. We believe we're off to a strong start for the year and we're well positioned to deliver improved top line growth in 2013, drive operational efficiencies and simultaneously deliver increased profit margin and strong free cash flow. Additionally, I wanted to make you aware that we're very excited about hosting an Investor Day on Monday, June 3, in New York. We have a slide here that includes the invitation. And our plans are to discuss the company's business and its prospects in more depth and give you an update since the last investor meeting about 3 years ago. So please be certain to mark your calendars and I hope we will be able to see many of you there. Otherwise, we look forward to speaking with you again on the next conference call. Thank you very much.

Okay. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining. Have a very good day.