Ladies and gentlemen, thank you for standing by, and welcome to the comScore Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to hand the conference over to one of your speakers today, Mr. Christopher Ferris, Director of Investor Relations. Sir, please go ahead.

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, November 9, 2020. 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. Our actual results in future periods may differ materially from those currently expected because of the number of risks and uncertainties included those related to the COVID-19 pandemic and its economic impact. 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. I'll now turn the call over to comScore's Chief Executive Officer, Bill Livek. Bill?

Thank you, Chris, and thank you, everyone, for joining us today. Let me begin by addressing our strategic review. On our last earnings call, we committed to an announcement by today, our third quarter earnings call. While we cannot report a definitive agreement, I'm pleased to say that we are in advanced discussions with respect to a recapitalization transaction with an anchor investor. If consummated, the transaction would result in a significant reduction in our outstanding debt, enhance our balance sheet, and liquidity profile. In addition, the transaction will provide for an enhanced commercial relationship to support our growth initiatives. Our management team, Board and financial advisers continue to work diligently toward a conclusion. However, we cannot provide assurances regarding the timing or the outcome of this process and do not intend to provide additional updates until we determine further disclosure is necessary. We also will not be able to answer questions about this beyond what is in our press release from this afternoon. We appreciate the patience and the trust of all of our stakeholders who have all exhibited a great strength through this process. Now let's turn to the quarter. Again, I want to applaud our outstanding employees for their continued dedication despite the strain from the pandemic. I thank them for their efforts, and I'm proud to represent them on the call today. Our business, particularly movies, continued to be impacted by the pandemic in the third quarter as revenue generation fell short of our expectations. However, we saw positive signs across our business lines. Our television business performed well in the quarter, with National TV and addressable growing by double-digit percentages year-over-year. We gained momentum with advertising agency clients who are increasingly embracing our advanced audience metrics and rallying around our local market currency. Our local…

Thank you, Bill. Today, we reported third quarter revenue of $88 million compared to $94.3 million in the third quarter of last year. Revenue from ratings and planning in the third quarter was $62.7 million compared to $65.3 million reported in the third quarter of last year. The decrease continues to be primarily from our syndicated digital products. While enterprise customer renewals continue to be strong, syndicated digital revenue declined year-over-year, representing 48% of our ratings and planning revenue in the quarter compared to 51% in the third quarter of 2019. However, sequentially, syndicated digital was down approximately 1%, as we continue to sign new contracts from the exit of some competitors. National TV revenue was higher compared to the prior year as we realized revenue from LiveRamp. Revenue from analytics and optimization in the third quarter was $17.4 million compared to $18.3 million in the third quarter of last year. The decrease was due to lower custom digital marketing Solutions revenue compared to the third quarter of last year and was in part offset by higher activation revenue. Movies reporting and analytics revenue in the third quarter was $7.8 million compared to $10.7 million in the prior year quarter. Revenue continues to be impacted by ongoing theater closures as a result of the pandemic. While the timing of theaters reopening at scale is uncertain, we do expect theater closures to continue to have an impact on movies revenue. Turning to operating costs. Our core operating expenses, which includes cost of revenues, sales and marketing, R&D and G&A declined over $10 million year-over-year for the quarter. The significant reduction in operating costs relates to the actions we implemented throughout last year and further reductions we took in 2020. Cost of revenues decreased by $900,000 in the third quarter compared to…

[Operator Instructions] Our first question comes from the line of Laura Martin with Needham. Your line is open. Please go ahead.

So maybe a couple. I remember Rentrak used to have big political quarter, so I'm wondering what you think the political advertising is in 3Q and maybe 4Q to date for comScore? And then secondly, one of the things -- I'm also wondering, Greg, for you, how much of Comcast costs will end up being in this year because I know that revenue delays? So how much cost are we eating to integrate Comcast in this fiscal year whereas we won't see the revenue probably until next year?

Thank you, Laura. I'll start out with political, and then I'll hand it over to Greg on the cost question. Political was clearly an unusual year. The Democratic primary started out what I would call "normal" where the candidates we're looking for our segments for highly targeted TV. Then the throws of the pandemic happened, political advertising pretty much stopped. And then toward the end, you basically had both candidates not doing targeted media. They were just doing carpet bombing, what I would call, and there wasn't a lot of targeting going on. But I think what we saw was this seat change setting us up for future cycles in the off presidential cycle and the presidential cycle. As voters got used to an extended voting period of time, there is not enough money to be -- in my opinion, to cover that long period of time. So candidates will revert back to highly targeted in the future, I believe. But this year, political for us was softer than we had anticipated, even though it was important. Greg, on the Comcast question, please?

Yes, Laura. Thanks. Appreciate it. And I know that -- I think we've shared before that we don't speak specifically about contracts. But what I will say, I think we've shared this before, we are expensing Comcast in 2020. So we've done that since Q2 when we began the integration. So when you think about it on a comparable basis moving forward, 2021 would have similar, obviously, it will be a full year, cost of those that are already embedded in the 2020 run rate. So I think the long and short answer is, we don't provide specifics. I think you have some estimates but 2021 would have a similar run rate to the run rate we're seeing today.

Thank you. And our next question comes from the line of Matthew Thornton with Truist Securities. Your line is open. Please go ahead.

I came on a little bit late, so I apologize if I missed any of this. Maybe first question, just around digital housekeeping, digit mix, as a percentage of ratings and planning, any update there? And just, I don't know, maybe it's for Bill, but digital comp, we've talked about that stabilized around the hope that that would kind of stabilize as we look forward, just kind of any latest thinking there? Secondly, in the strategic update that you guys put out this afternoon, you talked a little bit about enhanced commercial relationships with this particular potential anchor investor. I'm kind of curious if you could put any more meat on that or any more color around what that might mean without getting into specifics about the partner, obviously? And then maybe third, just any color on -- you talked about revenue growth, remaining a bit cautious. I'm just curious 4Q is typically a good sequential quarter. I'm just wondering if you'd be willing to give us any thoughts about how we can think about modeling revenue in the 4Q here.

Well, there's a lot there. On the strategic review, that one's easy. We can't say anything more than is in the press release, but thank you for the question. On digital, we're seeing what we have predicted, the bottoming out. We had 100% renewal with our enterprise-wide clients that we believe will continue into 2021. Our digital service, we believe, has a lot of potential out there because of the increased focus on privacy. So we are excited about that, the sequential process that we are seeing. Greg, do you want to take the other questions that Matt had?

Sure. Let me just say Matt, if you missed it, 48% for ratings and planning this Q3 versus 51% last Q3. I think the thing to point out is from Q2 to Q3, syndicated digital was down about 1%. So we're starting to see the flattening out that we expected. As you know, as we sign clients, it takes time for that revenue to come into the stream for a full quarter. So we are starting to see that stabilization, as Bill pointed out, but Q4 is a large quarter for us as far as contract renewals. And we're looking for that follow through that we saw in Q3. As to your last question around Q4 revenue, you're correct. Q4 tends to be one of the best quarters of the year for us, tends to be typically higher due to the analytics and optimization projects that happened there. And while we're not giving any guidance because of a fair amount of uncertainty in ad spending in areas like activation and whether or not we'll have all of those projects, certain things earlier in the year were held back. I do expect that things are returning. You'll see that some of those projects that are recurring, we expect to occur in the fourth quarter.

Thank you. And our next question comes from the line of Alan Gould with Loop Capital. Your line is open. Please go ahead.

Hi, Bill. Hi, Greg. Two questions. First, what impact do you think IDFA is going to have on your business? And the second one is with respect to this new pivot on cross-platform measurement, when do you think we'll start seeing revenue coming out of cross platform?

Well, the IDFA first, it's going to have an impact on the industry. We think that we're positioned well because of the data assets that we have, including our panel in digital. So we're optimistic there that our solutions that we're working on and we'll talk about them more in the future, are the right solutions. In terms of cross platform, in 2020, we've been laying the groundwork here to have a -- to capitalize on the impression-based, audience-based piece of the puzzle. We think that this is going to shipped away from C3 to C7, C28 days, that, that is no longer -- will be less relevant in the future. I won't say not relevant, but a lot less relevant. And we believe that we're set up perfectly because of our census approach to capitalize on revenue in 2021 there.

Thank you. [Operator Instructions] And our next question comes from the line of Richard Kramer with Arete Research. Your line is open. Please go ahead.

A very quick one on the strategic partner and maybe this is something you can answer. Is this going to be the same investor you had before or change given that you had so many issues with the previous or the existing investor? And then my two sort of fundamental questions, the first one is. You talked about growth in local, national and addressable TV. Given the pressures that TV has faced this year, and your main rival claiming to have revenue secured on multiyear agreements, do you expect there could be a round of retendering of measurement deals and that there's going to be more up for grabs? Or do you think this is a year where I think as you're implying in your Q4, that there may be some restrictions on variable spend going into next year? And then alongside that, you talked about the new product pipeline for next year. And usually, when companies come out with a new product pipeline, they have to go into a long sales cycle for it. How do you think about your sales and marketing expense next year? Is that one of the reasons behind the finally resetting the investment profile for the Company so that you can go out and sell those products in the market? How do you think about margins next year?

I'll let Greg take the financial ones, but the top one that you had on the strategic review, as I appreciate the question, we cannot comment further than what is in the press release. If you -- your second question was about contracts being opened up with pressure in advertising. As I've said before on previous quarterly calls, there's a number of great attributes about our business on the syndicated business. One is, oftentimes, we have long-term contracts. And also in a downturn, the sellers have to sell harder. And being in the information business is a good place during a difficult economic period. So, we're optimistic as we look forward to it. The investment that we made in our local and national product, with the addition of Comcast that will be done by the end of the year, is going to give us unprecedented coverage with the advanced audiences along with those impressions that ad agencies want. Ad agencies using us as a precursor to more stations and more media companies utilizing us, I cannot overemphasize the importance of Pinnacle. You would know them better as the WeatherTech ads that you see on television, switching to us exclusively. Why are they doing it because we have a service that fits where they're going, Canvas that has Honda and Kia, they look at our information being helpful on the national side of understanding outcome-based through a variety of products there. So on the cycle that we're looking at for sales and marketing that process has already started. But any more specifics, I'll turn it over to Greg on expense.

Yes, I think you talked a little bit about the sales cycle. What I would say is, these solutions have been being developed over the course of the entire year. And our sales staff is pretty adept of what they're going to be in having those conversations already. So those things are already in the works as we look to integrate the Comcast data, we've been talking about that now for some time now. So, I think people are all getting up and geared up for that as we're working towards the end of the year and into 2021. So we feel good about that. On the cost side, the sales and marketing cost side, I think we are focused on cost, as we always have, but I do think we understand that there will be incremental costs associated with doing this. But I think that the incremental revenue that we think that we will generate and that we expect to generate. And while we've given no guidance, we obviously believe that these enhancements will provide significant benefit to the bottom line as we move through 2021.

Okay. And maybe just one last sort of housekeeping one. Can you give us a sense of the contribution from Data Plus Math this quarter? Just how much was that? And is that expected to ramp considerably? Is that one off? Or is that ongoing?

Greg?

Yes. I mean, we don't provide specifics around any one specific product or solution. What I would say is that, as Bill mentioned, we're excited about that relationship. It's generating revenue. We think there's opportunities for us as we move forward to continue to enhance that.

And I'm showing no further questions at this time. And I would like to turn the conference back over to your CEO, Bill Livek, for any further remarks.

Thank you, operator. We remain excited about the future as we manage through this unprecedented period. I'm pleased with the progress that we made as a company in 2020 despite all the challenges that we've talked about. On behalf of myself and our entire comScore team, I'd like to send a heartfelt best wishes and thank you to our front-line workers in this pandemic, including first responders, health care workers and essential employees. Thank you, operator, and thank you, guests and investors for joining us today, and we look forward to sharing our progress and results in the coming quarters. Thank you for joining today.

Ladies and gentlemen, this concludes today's program. Thank you for participating. You may now disconnect.