comScore, Inc. (SCOR) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Quarter Four 2013 comScore, Inc. Earnings Conference Call. My name is Cathy and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd now like to turn the call over to Mr. Ken Tarpey, Chief Financial Officer. Please proceed, sir.

Thank you. Good morning, and welcome to comScore's earnings call for the fourth quarter and full year of 2013. Again, I'm Ken Tarpey, CFO of comScore, with me today is, Dr. Magid Abraham, our CEO and Co-Founder; Serge Matta, our President; and Cameron Meierhoefer, our COO. 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 period that may follow, representatives of the company may make forward-looking statements within the meanings of the Securities 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 relative quality of comScore's products; expectations regarding changes and responsibilities in roles of our executive officers; assumptions regarding tax rates and net operating loss carry-forwards; and forecasts of future financial performance for the first quarter and full year 2014, 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 and comScore's Form 10-K for the period ending December 31, 2012, and our quarterly reports on Form 10-Q. 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 with the most directly comparable GAAP financial measure. The link to our Investor Relations website is ir.comscore.com, and our results are posted under Press Releases. Additionally, we have a presentation posted on our IR website under events and presentations that will accompany our comments today. It might be helpful to follow along with us. And with that, I will turn the call over to Magid.

Thank you, Ken, and thank you all for joining us today. I will start with a few comments on the announcement we today about the appointment of Serge Matta, as the CEO of comScore effective March 1. This well deserved promotion represents the combination of a thoughtful multiyear succession planning process, and the board and I are confident that this is the right time to elevate Serge to the CEO role. As you have seen in our earnings release and we will discuss in more detail on this call, comScore delivered strong results in 2013. We also continued to enter into powerful partnerships, like the Google partnership we just announced, which we expect to drive long-term growth and profitability. Several of these partnerships were conceived and driven by Serge. Many of you know him. For those who don’t, Serge has been with comScore almost since day 1. As a result, he has a deep understanding of comScore's product and technologies as well as the evolving industry landscape. He is a strong leader and someone who knows how to think strategically and execute well. So he has been close, very close to our clients and has strong relationships with them. He understands their needs and is effective at leading out team to develop solutions to best meet those needs. As far as my role as Executive Chairman after March 31 -- after March 1, sorry, I am excited to focus my energy and passion on driving innovation and product leadership and would continue to work closely with Serge and rest of the team. Beginning with Slide 5, let's review 2013. 2013 was a momentous year for comScore. We are thrilled about financial performance, our marketplace momentum, and the transformative industry partnerships we have established. But I am particularly excited about two really important deals. The first is an FTC mandated agreement with Nielsen providing a royalty free license for TV viewing data from 70,000 Arbitron panels. The second is a partnership agreement with Google to embed vCE into Google's DoubleClick ad management platform. The first enables significant expansion of our cross-media measurement capability with a very attractive cost structure. The second greatly expands vCE's reach by becoming seamlessly integrated into DoubleClick's massive digital advertising footprint. Let me review the summary of our 2013 business results. We generated 16% pro forma revenue growth over 2012, well above our expectation. Our digital measurement product expanded market share with our successful multiplatform capability. Our advertising measurement product, vCE, has been selected as a preferred solution by the world's leading ad platform, the world's largest advertises and many of the world's global advertising agencies. Our margin performance was strong with adjusted EBITDA margin at 22% for the quarter and 21% for the year, well above our expectations and the overall 2012 results. Finally, we are exiting the year with no gap between bookings growth and revenue growth rate. Bottom line, in 2013 we worked hard and our business performed really well. But our performance merely sets the stage for us to benefit from the transformational deals we have recently announced. First, I will talk about the TV license deal with Nielsen and then Serge will highlight the details of the Google partnership. So moving to Slide 6. In my opinion, it's hard to underestimate the value of our TV license deal. As you know, the media world is going through major upheaval. We are seeing explosive growth in digital advertising on mobile and tablet devices while mainstream TV advertising is undergoing a major transformation. TV content and advertising delivered through a set-top box or a DVR, constitutes only a piece of the pie. We are now moving to Slide 7 by the way. What is missing is the video being streamed to PCs, tablets, mobile devices and through over the top video clients such as Google Chromecast, Apple TV, game console and internet connected smart TV. The name of the game is no longer just about measuring TV in the sense of television, it is about measuring TV in the sense of total video, where all video usage is captured whatever the viewing platform. The IT based delivery of streaming content makes its measurement inherently similar to digital measurement where comScore has already built a strong leadership position. In fact, with Video Metrix, we are the leader in measuring streaming video and through the measurement enhancements we are rolling out this year, we will have the capability of measuring every single platform on which video content is delivered, from Netflix to NBC, to the NFL network. In order to capture total video consumption, we need to measure two components. Number one, digital video where we know we already have a great head start. And number two, traditional TV programming. This is where and why our recent FTC mandated agreement with Nielsen is so important. In a world where audiences are fragmented across hundreds of channels, platforms and schedules, some companies have turned to set-top box data from granular TV measurement than traditional methods that rely only on panels. However, set-top boxes are limited. It does not provide the demographics of the individuals who are watching program content over advertising and it does not include activity of other devices such as tablets, PCs or smartphones. Since media is planned and bought by individual demographic segments not just households and advertisers want to buy against total audience regardless of device, set-top box data is necessary but not sufficient. Any researcher therefore would agree that getting more granular than the household requires a panel that measures TV viewing at the individual level. The challenge there is that these panels are very costly to build and maintain. In fact we estimate the cost of just maintaining a 70,000-person panel to be over $70 million per year at current technology, not to mention the actual startup cost required to get the panels to a maintenance stage. The FTC recognized these obstacles and as such noted in their consent order that the primary objective was to maintain competition in the area of cross-media measurement. Moving to Slide 8. As we embark on building a cross-platform total video measurement, we need to overcome three main challenges. First, the measurement must include both additional and digital activity across all devices and platforms. Second, it needs to reflect the demographics of individual users. And three, these different data sources need to be combined in a way that accurately reflects the overlap between the specific audiences and integrates the information into media planning and buying processes. The major accomplishment for us in 2013 is that we have demonstrated that we can do all three. In collaboration with ESPN, we successfully developed a methodology that combines television usage data, passively captured from persons carrying Arbitron's portable people meter or PPM, with set-top box data from millions of households in order to estimate the traditional TV usage at the household and individual level. We also develop technology that combines this data with mobile, tablets and PC video usage to create the first of its kind total video measurement. Turning to Slide 9. The main benefit of the FTC consent decree, once it gets final FTC approval, is that it will give us access to a TV panel which would enable us to solve the individual level demographic challenge but in a royalty free structure which eliminates a significant cost burden. With our heritage in digital video, our access to set-top box data and now with our agreement with Nielsen to access its PPM panel data, we have assembled all the pieces of the puzzle. And to these assets, add a bunch of big data geeks who can explode a traditional one-dimensional puzzle into three, four or five dimensions, and you get a very compelling and unique total measurement solution. This solution is far better than offerings based on set-top box data alone that lacks the individual level demographics and digital video consumption. It's also better than a panel-only solution. Because it transcends the limitation of panel centered approaches which have traditionally failed to measure the long tail adequately and which will have even more difficulty measuring fragmented audiences of users, each watching on his and/or her own time and not necessarily on a couch in front of the TV set. Looking at Slide 10. These developments are enough to make the scientist in me filled with excitement and that is in fact one of my personal priorities, to make it happen for comScore. But it is also an exciting business opportunity which opens up a cross-medium market potential that we believe to be $3 billion in size. Even if we capture just 10% of this market in the next four to five years, we would be doing very well. But we will aim higher. In fact, we will be investing an incremental $8 million to $10 million this year, approximately, to lay the foundation for our success in cross-media. Slide 11. The world is moving at such speed that advertisers, broadcasters and agencies want this cross-platform information with a high sense of urgency and a high degree of accuracy. In fact, a recent survey of marketers, agencies and sellers conducted by the Association of National Advertisers, found that spending on cross-platform media campaigns was expected to grow from 20% of budget today to 50% within three years. And 88% of respondents predicted that multi-stream campaigns will become very important in effectively delivering marketing messages. To do this, they need tools to holistically allocate advertising dollars and plan campaigns across an increasingly complex media landscape. This urgent need is reflected by ESPN's decision to invest in our early partnership, familiarly known as Project Blueprint, and to renew their subscription. Both NBC and ABC have recently followed suit. The need is also demonstrated by the support of a group of leading media industry players called CIMM, which stands for the Coalition for Innovative Media Measurement. It includes some of the leading agencies, advertisers, and the top broadcast and cable networks including CBS, Fox, Viacom and Univision. Nobody is better prepared than comScore to do this. With our technology, with our scale and analytical software sophistication, access to digital census data and access to millions of set-top boxes and individual TV panel data. We can put it all together and make sense of it. I believe this is an inflexion point for comScore which deserves highlighting. And with that, let me turn the call over to Serge to tell you about our other exciting news.

Thank you, Magid and good morning everyone. Moving to Slide 12. We all share Magid's excitement and passion on our introduction of total video and its future impact on our business and the advertising industry. Clearly, the comScore brain trust has a big, exciting task in front of them. At the risk of sounding cliché, I will say the following, that wait, there is more. I spent the evening last night standing next to Neal Mohan, the VP of Display Advertising from Google, and partners at Starcom MediaVest, Kellogg’s and others at the IAB Leadership Summit, to announce a strategic partnership with Google which has the power to transform the entire media industry. Our goal is a simple one. To combine our company's respective strengths to help simplify and accelerate the growth of the digital advertising market. Online buyers and sellers of advertising have been asking for audience reach and frequency metrics for their online campaigns similar to TV. The want these metrics to be open, transparent, and actionable. Additionally, they need these metrics in minutes, not overnight, or net next week or next month, so that they can optimize their advertising spend across display, video and mobile platforms in close to real time. Our partnership does this and more. So turning to Slide 13. The first step of this collaboration will be the deep integration of comScore vCE into the DoubleClick ad management platform. This integration goes far beyond the placing of vCE tags on YouTube content, something comScore has already been doing with Google for the past year. This agreement makes vCE part of the daily workflow for display, mobile and video advertising in DoubleClick. So when someone is going to buy ads off of the DoubleClick platform, they will simply need a single click to chose to get vCE. I don’t need to tell you the magnitude and reach Google DoubleClick has within the advertising ecosystem. So what does this partnership mean? Google and comScore will leverage the best of our technologies. Our sales forces will work closely together and we will jointly market this product. But let me be very very clear, comScore will maintain its role as a neutral third party and its independent measurement offerings will continue to be available to the broader advertising market. Now that’s just the start. This will be long-term, multiyear partnership with the vCE integration to go live in the second half of 2014. In addition, we plan on working closely with Google to provide additional metrics to properly support this ever changing ecosystem. These initiatives lay the ground work for data science collaboration aimed at improving the quality of data used in advertising reporting. I hope by now that you are seeing the possibilities as detailed on Slide 14. In case you haven't had time to digest the buzz from yesterday's announcement, I will outline a few benefits for you. Number one, accessing vCE data will be easier than ever, just one click. Number two, DoubleClick clients will have immediate access to industry trusted, mutual data that is directly comparable to TV and other traditional media. And number three, by putting our metrics into DoubleClick's ad management platform, marketers and publishers will have the ability to immediately act on the results that they see, and course correct or fine tune their campaign performance in real time. What I just described and that alone will radically simplify the process of buying and executing advertising across display, mobile and video. As well as improve the quality and effectiveness of campaigns. Needless to say, we have already received support from some of the industry's biggest players. You can read them for yourself on Slide 15. Now, we did not get to this place easily. ComScore was part of an extensive whetting process that required over a year of discussion and work with Google. What made us stand out was our digital expertise, market penetration, and the value and credibility of the comScore brand. Our success with vCE was a prerequisite for this partnership. During 2013 we secured large relationships will all of the major agencies and large advertisers, such as Proctor and Gamble, Kellogg's and L'Oreal. Equally is important, Google wanted a company that value neutrality, quality and accountability. ComScore delivers on all of three of those needs. With the increased usage of vCE in the market, we expect even more media buyers and sellers to be interested in our entire ad effectiveness product suite. And we plan on making the integration of our products seamless while always ensuring our neutral third party objectiveness. We are extremely excited about this partnership and we are not the only ones. Truly, the response to our announcements yesterday was electric. As you can see on Slide 17, 2013 was -- so moving on, as you can see on Slide 17, 2013 was a busy year. We exceeded expectations on all counts, while at the same time establishing a truly exciting foundation for our forward-looking strategy. Mobile bookings were a record high. Sales of Media Metrix Multi-Platform in the U.S. and U.K. resulted in 85 new customers during the fourth quarter alone. We also have great up-sell activity, with two-thirds of clients who purchased Media Metrix Multi-Platform also purchased Mobile Metrix and Video Metrix during the same quarter. Moving on to Slide 18, highlight some big client wins in cross-media and this even without access to Nielson's PPM panel data. Needles to say, vCE is on fire, with adoption by all of the top agency holding companies in addition to the top ten CPG advertisers. For the full year, comScore vCE outpaced its nearest competitor by measuring 2.5x more digital impressions than its nearest competitor globally. Clearly, this type of performance along with the integration we will see in DoubleClick, will make room for significant growth opportunities. Finally, we were able to expand our DAx client base in the U.S. and internationally. As DAx has become the platform for clients to gain business intelligence by incorporating not only their own data but also third party data sets. Turning to Slide 20. I want to highlight for you where we will be focusing our energy in 2014. We will of course continue to grow our industry-leading products such Media Metrix, but clearly cross-media measurement is a big, big opportunity, as is continuing to extend our vCE market leadership. Our partnership with Google will help us do that but it also supports a third focus for 2014, which is to integrate comScore data into the places where clients use them. As you can see, integrating vCE into the DoubleClick ad management platform is a first example of this approach. Additionally, we will continue aggressively rolling out Media Metrix MP in the U.S. and internationally as meaningful upside remains to growing this offering. We can also leverage business intelligence technologies, tools and approaches. We are using in DAx to support clients that need a platform for analysis of multiple data inputs, whether proprietary or licensed, comScore generated or produced by other third parties. Finally, we will maintain a sharp focus on execution and continue to return capital to investors. With a great team, powerful technology, some exciting partnerships and the wind at our backs, we are positioned better than ever to capitalize on these clear opportunities and deliver superior value to our shareholder and customers. Now I will turn the call over to our CFO, Ken Tarpey, for a review of our financial results.

Thank you, Serge. Let's take a deeper look at our results for Q4 and for fiscal '13. Revenue in the fourth quarter was $76.5 million, up 15% versus pro forma results in the same quarter last year. Subscription revenue in the fourth quarter was $68.4 million, up 21% versus pro forma results in Q4 '12. Subscription revenue and project revenue represented 89% and 11% of total revenue respectively. As compared to prior quarter's more customers are contracting vCE on a subscription basis, driving the subscription revenue mix slightly higher. Revenue from existing customers was up 19% year-over-year in the fourth quarter to $69.5 million and represented 91% of total revenues. Our renewal rate with existing customers remained above 90% on a constant dollar basis, and we added a record 72 net new customers in the fourth quarter, bringing our total customer count to 2368, a 10% increase over the last year. Our international revenues remain strong as international revenue represents 29% of our total revenue and increased 12% over the same period in 2012 on a pro forma basis. But for the year of 2013, pro forma international revenues grew 21% over 2012. Turning to Slide 22. You can see in 2013 we closed the gap between bookings and revenue growth. We began disclosing bookings to contract value in 2012 as the number of new products were gaining traction and generating CV growth substantially greater than revenue growth. We expect these two metrics to ride similar growth rates going forward with some minor quarter-to-quarter fluctuation and, thus, expect bookings and revenue growth rates to align making it unnecessary to separately disclose CV. Slide 23. At the end of 2012, new products including vCE, DAx, and multi-platform audience solutions accounted for about 24% of our bookings. At the beginning of 2013, we set a target range between 28% and 30% of bookings for these new products. In 2013, we exceeded our expectations with 31% of total bookings for the year coming from these new products. The products we have characterized as new products, as vCE, digital business analytics and mobile audience products, are now well established, folded into our mainstream businesses and we no longer see them as new products. We expect to continue to introduce new products and we will of course bring those to your attention. Now let me turn to expenses and margins. Our gross margin in the fourth quarter was 68.4%, up from the Q4 '12 levels due to the higher revenue and therefore greater operating leverage. GAAP pretax income in this quarter was $312,000, compared to a loss of $1.9 million in the same period last year. Our stock compensation in Q4 was $7.6 million. The 2013 GAAP tax provision continues to be higher than usual due to the continuing non-deductibility of certain international losses for GAAP purposes. Our cash tax rates though remain low and our cash taxes for 2013 were only $2 million or 6% of 2013 non-GAAP net income, since we hold significant net operating loss carry-forwards in the U.S. and certain foreign jurisdictions. In the fourth quarter, GAAP net income was $170,000 excluding the impact of a Non-Health Copy Testing and Configuration Manager products. This equates to zero per basic and diluted per share based on a basic and diluted share count of approximately 35.5 million shares and 35.8 million shares respectively. Non-GAAP net income for the fourth quarter of 2013 was $11.4 million or $0.32 per diluted share excluding stock-based compensation, amortization of intangibles, acquisition related expenses, and other non-recurring items. That EPS calculation is based on a Q4 fully-diluted share count of $35.8 million shares. In the fourth quarter, adjusted EBITDA was $17.1 million representing an EBITDA margin of 22%. Now looking for the full year, our reported revenue was $286.9 million, up 12.4% from 2012. But please keep in mind this reflects some businesses discontinued or disposed of in early 2013. On a pro forma basis, revenue was $285.5 million or about 16% over 2012, GAAP pretax income of $2.1 million and GAAP net loss of $2.3 million or $0.07 per basic and diluted share loss. Non-GAAP net income was $40.3 million or $1.12 per diluted share. Adjusted EBITDA was $60.1 million or 21% EBITDA margin as we produced solid adjusted EBITDA margins throughout 2013. Turning to our balance sheet. We entered the year with cash and cash equivalents of $67.8 million. Total deferred revenue for the year was $89.5 million, the result of the seasonally high customer renewal activity. 2013 net cash from operations was $44.6 million, capital expenditures for the year were $4.6 million, in part affected by the outfitting of a new center during the second half of 2013. This resulted in a free cash flow for Q4 of $4.7 million and a free cash flow of $40 million for the full year of '13, representing a record free cash flow year for us. Lastly, we also repurchased $13.1 million value of shares during 2013 and we remain committed to returning cash to shareholders. Let's turn now to Slide 24 and talk about guidance. This guidance for the first quarter and full year of 2014 is provided on a GAAP basis as there is no impact in 2014 financial performance of our Non-Health Copy Testing and Configuration Manager products which we divested in Q1 2013. The Q1 2014 and fiscal year 2014 guidance include anticipated investments for key products initiatives previously outlined on this call, regarding the rollout of vCE and the launch of Total Video Measurement. We anticipate this investment to range between $8 million to $10 million throughout 2014 with a greater impact in the first half of 2014 than the second half. The expanded product portfolio investment has commenced and the net impact on our margins will decrease at the accompanying revenues expand. The cost investments will appear as increases in R&D, some marketing and sales activities in the first half of 2014 and a bit more so or shifting to cost to sales as the products are deployed to market. For the first quarter of 2014 we anticipate revenues in the range of $74.8 million to $76.7 million. This revenue range reflects the anticipated impact of recent foreign currency fluctuations. We anticipate first quarter GAAP loss from income taxes in the range of $4.8 million loss to a pretax loss of $3.1 million. Our estimated basic share count for the first quarter of 2014 is 36.1 million shares. We anticipate adjusted EBITDA for the first quarter of 2014 to be in the range of $12 million to $13.7 million which represents an adjusted EBITDA margin of approximately 16% to 18% or 17% at the midpoint of our revenue and adjusted EBITDA guidance ranges. Besides the aforementioned product investments, first half margins also are somewhat impacted by the seasonal impact of our vacation, programs and employer social taxes. We expect the full year 2014 GAAP revenue range of $316.5 million to $327.5 million. On this basis, the 2014 pro forma revenue growth rate is 11% to 15%, or 13% at the midpoint. We anticipate full year GAAP income or loss before income taxes to be in the range of a $2.8 million loss to pretax income of $6.7 million. And our estimated fully diluted share count for 2013 is 36.3 million shares. We anticipate adjusted EBITDA to be between $58.8 million and $67.5 million in 2014, representing an adjusted EBITDA margin range of 19% to 21% or 20% at the midpoint of our revenue and adjusted EBITDA guidance ranges. This includes our $8 million to $10 million cross-media measurement investment which reduces our EBITDA margin by almost 3 percentage points. We are pleased that the margin progress we have made in our core business during 2013 and which we expect to continue in 2014, has limited the net margin impact to 1 percentage point as compared to our guidance midpoint. Currently, for 2014 we project an annual GAAP tax rate of approximately 50% and an annual cash tax rate of 15%. We are currently implementing a revised international tax program. On slides 25, 29, 30, we have a reconciliation of GAAP net income and net loss before income taxes to adjusted EBITDA guidance for the first quarter and full year of 2014. These are also included in the tables to our press release. For your reference, on Slide 30 we have provided comparable 2012 and 2011 information for the pro forma products which we had divested or eliminated in the first quarter of 2013, so you get a sense of the historical financial contribution of those products in 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 of Oppenheimer. Please proceed, sir.

So first, Serge, I want to congratulate you on getting the CEO title. Two questions and then just one housekeeping. So the first question, obviously you are very excited about this cross-media, cross-device measurement. Just talk to us about, if this is in such high demand, is there anything that Nielson could ultimately do there that thwarts your effort? And I know that there is a lot of complicated rules around what they can and can't do but let's just say they underfund their own internal initiative, does that potentially ultimately drive up the cost to you overtime to make sure this is the quality product that comScore clients expect. So that’s one question and then I will hit the next one.

Sure. Let me answer that, Jason. The consent decree clearly prohibits that and in fact has appointed a mediator or a monitor to review the implementation of the deal. It's also important to realize that this infrastructure is really necessary to deliver the radio business, and clearly Nielson has a vested interest in making sure that their radio customers are well served.

Okay. And then second question....

The only other thing I would, Jason, thanks -- the only thing I would add is, everyone knows also where we stand in terms of digital and the ability, the data that we have in terms of all the census data that we have. So it would be -- it's just really hard to replicate the massive data that we have from all of the clients that we target.

And then onto the Google announcement. Can you help us understand how big this could be? So if you take the DoubleClick clients that you think would be technically eligible for this product, and let's ballpark, let's say half the clients adopted vCE with their version of DoubleClick, what type of revenue could that be to your guys? And then lastly, Ken, I don’t know, did you give us a 2014 CapEx forecast?

No, but I can give you that in a minute. What don’t we -- do you want to go to the first one, the Google?

Yes. Jason, in terms of the Google and revenue projections, clearly we are very very bullish about it. Having comScore vCE product integrated into DoubleClick will just make it so much easier for any advertiser to simply -- it's a click. It's a clickable and in real time or near-real time they will be able to get the campaign performance and they will be able to course correct. It is hard and somewhat premature to estimate any revenues at this point coming from this deal. It will be going live, like we said, in the second half of 2014, but it is premature at this point to speculate on the revenue associated with that deal. But you know as well as I do, how big Google DoubleClick's reach is in this ecosystem.

So basically what you are implying is that your guidance for the year does not assume any additional revenue from the Google deal?

No, our guidance includes some Google revenue coming from it but, again, we will be closing watching this. We have some three to six months of development that we need to get done. And then once we have a better read on it, we will obviously we talking.

And from a CapEx standpoint, Jason, I would say probably $8 million to $9 million.

Thank you for question. The next question comes from the line of Youssef Squali, Cantor Fitzgerald.

Hi, this is Kip Paulson for Youssef. So just a couple of quick ones on my end. First, did the fourth quarter results include as much investment in mobile data as you expected? Curious, if the EBITDA beat was due more to lower than expected mobile investment or if it was simply driven better than expected operating leverage?

Yes, hi, Kip, this is Ken. I will take that one. Yes, it was the operating leverage from that standpoint. As I mentioned in my comments, the team has started to keep expanding those investments and so Q4 was kind of in line with our expectation but it was really more about the operating leverage.

Okay. Great. And then second one. Pro forma subscription revenue growth continues to build nicely, 21% this quarter versus 19% to 20% in the last couple of quarters. Did any particular new product drive this more than the other components? And roughly how fast are Media Metrix, vCE and DAx growing? Thanks.

Sure. The other products are growing well but I think as Serge coined it, vCE is on fire and in terms of the fastest growth far and away was the vCE product.

Okay. Great. And then just one...

And then also Media Metrix MP, Media Metrix Mobile Platform, we continue to see a significant growth there. We have still significant upside in 2014 and beyond in the product not only in the U.S. but as we roll it out globally.

Great. And then just one more quick one if I could. How should we think about monetization for the just announced Google partnership? Is this going to have more of a cost per action transactional arrangement? And lastly, do you seen any potential cannibalization of the traditional vCE subscription plan?

It is definitely CPM based. So that is something that we have already stated in some of the press that we did yesterday. And just to be clear, Google pays us for this relationship. As far as the size and the financial implications, like I said earlier, again, a bit premature to state but we feel bullish about the deal.

Thank you for your question. The next question comes from Mark Zgutowicz of Northland Capital Markets.

Congrats on the Google announcement. Certainly impressive. And Serge, congrats as well. It's certainly not a bad time to be accepting the charge from Magid. Why don’t you just talk a little bit more about Google in terms of how that partnership works from an economic standpoint? And I understand, obviously, that economics are sensitive but maybe just, from a broader standpoint, for instance the things, Serge, you talked about, sort of just the single-click to get vCE. Would that require in itself a 12-month subscription to vCE or is this arrangement sort of an all transactional based, revenue share with Google.

Hi, Mark. Thanks for the comments. You know it's -- we believe it's going to be a subscription based. I don’t see -- again, it's hard to tell at this point. We still have three to six months to work out all these details. But if I were to guess at this point, I would think it would end up being, a lot of the clients that we have, the big advertisers, the agencies, would end up doing subscription deals with Google whenever there is a campaign that goes through DoubleClick. Now clearly, anything that goes outside of DoubleClick, we will still have our regular vCE product and we will be marketing it as is. And we will be getting into deals with our clients on a subscription basis like we have been in 2013.

Okay. And then you talked about going live in the second half, obviously that's a pretty wide window. I'm just hoping to maybe tighten that a bit. So is there an equal probability of this going live in Q3 versus Q4 or is the expectation on your part that this would be live in Q3?

We have every expectation that this thing goes live in Q3. We are -- now, granted we are 50% of the puzzle, but integration, technical integration has already started with Google. It started just last week. So these things are, it's ongoing. There is quite a bit of effort that needs to be done. But we fully anticipate that it will get done in Q3.

Okay. And just following on an earlier question, in terms of your contemplation of your FY '14 guidance. Is that the assumption that it goes live in Q3 or is that....

It goes live in Q3...

Been contemplated in your guidance?

Absolutely. It goes live in Q3 and we will kind of see how it goes and we will obviously be updating you guys throughout the year.

Okay, great. And then just one last one on the Google. So you talked about on the press release the purpose or the MRC accreditation, I'm just curious what the purposes or the need to seek accreditation of this product with Google?

No, I think it's important, right. For advertisers, publishers, all of them want a separate accredited body to go in and say what we have done even though we go through our MRC accreditation for our own products. So as massive as this integration is going to be, it's really important to the industry. And it also says quite a bit about both of our intentions to remain open, clear methodologies, completely transparent. And for us to remain a neutral third party, we believe it's important that the MRC comes and accredits it. Now we all know that an MRC accreditation takes a few months but we will start the process as we quickly as we can once the product has been developed.

Okay. Are there certain clients that would require MRC accreditation, or is that start of the....?

No. It's really more of us bringing it up more than anything.

Right. Okay, that's what I assumed. And then just switching gears on the cross-media measurement opportunity. The $8 million to $10 million investment, I'm just curious if there's a pipeline that those investments are being directed to? And then, Ken, maybe if you can speak to the mix of R&D versus sales and marketing in the first half?

Sure. I think clearly in the first half -- first of all, is it directed to certain specific initiatives, absolutely, detailed plans behind it. The increase will be substantially seen in our R&D line in the first half of the year, to a lesser extent on the sales line. And then you are going to see a shifting or some additional cost into COGS during the second half as Serge just chatted about how some of these products will start to roll into the market and some of the cost will shift. So overall, that should give you some sense of how that rolls through and meanwhile the core business will continue to get some leverage on, so as I mentioned in my comments, it's only about 1% impact on margin from this past year.

Okay. And the fact that the majority is going into R&D, can I assume that you have more clients coming to you as opposed to you having to sell this product? I guess what I'm trying to get at is, is there a specific sales team that is being built to sell this product? Is it in place or not, this team?

We definitely have a sales team already but we will be expanding on that. We need additional sales people for the cross-media effort. And then on the Google thing, clearly both, like we said, both us and Google will be co-selling this and co-marketing it. So it helps to have them behind us as well but for the cross-media we definitely will be investing in additional sales people.

Thank you. (Operator Instructions) The next question comes from Ned Davis of William Smith

Thank you. The last guy did 12 questions, I will just ask you one. What is the target in terms of incremental customers that you might derive from this new relationship or expanded relationship with Google? You got about 2300 odd customers today, is it a big jump in customer potential?

Ned, good morning. It's hard to speculate at this point. Clearly we will see clients that have never done anything with us because they already have an integration going on with DoubleClick. The thing that I am also super excited about is, this deal will also help us up sell our existing ad effectiveness products once we bundle it with, and integrate it within DoubleClick. So that is something that, it's not only are we going to get absolutely, we will get new additional client, hard to tell at this point. But we will be, we are hoping that we can also integrate our existing ad effectiveness products.

Thank you for your question. I would now like to turn the call over to Dr. Abraham for closing remarks.

Thank you, very much, and thank you all for your participation today. As you see in our fourth quarter and full year 2013 results reflect continued strong execution and momentum across our business. 2014 is set to be another exciting year for comScore, one in which multiplatform, cross-media opportunities and the Google partnership are set to transform not only comScore but the industry as large. We have our key priorities identified and we remain focused on the sharp execution of our strategy and delivering value to shareholders. We look forward to speaking with you again on our next conference call. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may disconnect. Good day.