Good day, and thank you for standing by. Welcome to the comScore Second Quarter 2021 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] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, John Tinker. You may begin.

Thank you, operator. Before we begin our prepared remarks, I'd like to remind all of you that 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, August 9, 2021. 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. Actual results in future periods may differ materially from those currently expected because of the number of risks and uncertainties, including 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 our comScore's Chief Executive Officer, Bill Livek. Bill?

Thank you, John, and thank you, everyone for joining us today. With me are Greg Fink, our CFO and other members of management. For the first half of 2021, it represented a turning point for comScore as the completion of the recapitalization transaction was a critical milestone for us. With this transaction behind us, we are now able to focus on growing our business and investing in new products in ways that we have been constrained over the past few years. That said, I am proud of the contract signing accomplishments in the quarter. Some of the contract signings have taken longer than anticipated, but we expect that they will produce revenue later this year and into 2022. Before I discuss the quarter, I would like to share with you the landscape that comScore's measuring and why we believe we have a world-class platform that measures the way media and the way our clients are demanding them today. We recently ran an op-ed piece in MediaPost that discussed this topic in quite a bit of detail. In that op-ed piece, we have discussed how comScore is leading a fundamental change in how media is measured and transacted it in 21st century. We are helping the market move forward with measurement that includes six critical considerations. First, measurement needs to be passive and impression-based. Impressions are the common language across media and inventory. Second, media impressions needed to be properly deduplicated so advertisers can measure their true and applying frequency management to their messaging. Third, modern measurement must be built by a company grounded in technology, research and big data management. Fourth, we believe modern measurement is about audiences, not age and gender demos. This modern measurement requires a high focus on privacy. Lastly, and most importantly, we believe that the…

Thank you, Bill. Today, we reported second quarter revenue of $87.7 million, down from $88.6 million in the second quarter of last year. Revenue from Ratings and Planning in the second quarter was $62.4 million, down from $63.8 million reported in the second quarter of last year. The decrease compared to the same period in the prior year was the result of lower syndicated digital revenue offset by increases in TV. TV continued to experience higher revenue compared to the prior year from new and expanded partnerships. Syndicated digital revenue was lower compared to the prior year quarter, primarily from lower international business. For the second quarter, TV revenue comprised 43% of our Ratings and Planning revenue compared to 40% last year, while syndicated digital revenue comprised 46% of our Ratings and Planning revenues compared to 48% in the second quarter of 2020. Revenue from Analytics and Optimization in the second quarter was $17.8 million, up from $16.9 million in the second quarter of last year. The increase was due to higher Lift and Survey revenue compared to the second quarter of last year and increased Activation revenue, which was up 65% year-over-year and 27% sequentially. Movies Reporting and Analytics revenue in the second quarter was $7.5 million compared to $7.9 million in the prior year quarter, but up 10% sequentially. As theater reopenings began in earnest in major U.S. cities in the first quarter and in Europe in the second, we believe revenue from our movie business has bottomed and we should see revenue increase from this level continuing throughout 2021. Turning to operating costs. Our core operating expenses, which includes cost of revenues, sales and marketing, R&D and G&A increased $7.8 million year-over-year in the second quarter. Cost of revenues increased by $6.4 million in the second quarter…

[Operator Instructions] And your next question – I mean, your first question will come from Laura Martin with Needham. Your line is open.

Hi there. Can you hear me okay, Bill and Greg?

We can Laura. Thank you.

Okay. Great. A couple for me. You had a couple of announcements today on the YouTube. Can you talk about how that drives long-term revenue growth, please, the announcements you made today?

Thank you, Laura. Well, look, for YouTube and YouTube TV reporting, as many of you know, who follow the industry, more people watch the nightly newscast from network on YouTube than they do on linear TV, therefore, a lot of advertisers use Google as an advertising mechanism. But until now with what comScore is actually providing with our comScore Campaign Ratings is being able to validate the true reach that those campaigns on YouTube and YouTube TV report versus linear TV and look at the unduplicated reach. So if an advertiser for a certain brand is running an ad campaign through their ad agency and the ad agency has held accountable for a total reach goals, they can validate this now through comScore, so our customers here are going to be the ad agencies in the brands who want to validate what their campaigns are actually reaching in addition to linear TV. So we talked about for a long time how CTV and linear TV works together, I think this is a major example of how we're going to earn revenue out of the combination of the two.

Okay. And then I wanted to stay, my follow-up would be still on costs and content costs. You're paying Comcast a ton of money and now YouTube to basically make your measurement product better, but we still don't see growth in the topline. So my worry or my question to you is how would you respond to investor pushback that we get? Whether you're paying a fortune for linear ratings, which are becoming less valuable every day, because consumers are moving from linear to streaming?

Well, we are not paying Google for this service that we integrated into our…

No, I am taking about Comcast.

Yes. On our investment that we've made with the operators, people will think we’ll continue to watch linear TV for a long time. But the true value is how linear TV and over-the-top and connected TVs work in harmony, they are now working alone. So as we all know that magic here that comScore brings to this dynamic is what is the total audience, how do you verify that across all these different platforms. Now, as we stated in our earnings script or prepared remarks, we had a great contract signing in the second quarter. But they did not result in revenue in the second quarter that will be later this year and then into 2022, and we believe the investments that we've made with the operators will bear fruit for the shareholders.

Okay. Thank you very much.

Thank you, Laura.

Your next question will come from Jason Kreyer with Craig-Hallum. Your line is open.

All right. Thanks guys. Bill, just wanted to see if you could spend a little bit of time talking in some more detail about the Spectrum Reach agreement, kind of some details on what doors that opens up for you and potentially how that changes your competitive position in the market?

I think that's a great question. One of the reasons that Charter came in as an investor was their goal to move the whole industry to an impression-based measurement, so the inventory that is out there on linear and connected TV can finally be used with the standard of impressions and comScore is doing just that. And again, the YouTube announcement, YouTube TV is another validation of those impressions. So as Spectrum Reach starts rolling out their markets where they're using us as their principal service, given that they're one of the largest ad providers within local markets, we believe that will encourage the local ad agencies to switch to us and switch to us as their primary source or their exclusive source and it will encourage television stations to do the same. We think that is the start of an industry trend and Spectrum Reach being one of the largest providers in the markets are rolling it out, starting from the Southeast region throughout the United States and we'll be announcing more the effects of that in coming quarters.

Perfect. Thank you. Understood that obviously some of the new deal flow doesn't give you full-year contribution, I get all that stuff. Curious, is there any way to quantify any potential revenue benefit? I know you mentioned TCV, just wondering if there's another way to look at what the opportunity is of the deals that you've landed. And then in conjunction with that, if there's any sense of the cadence on how the back half of the year looks? Just curious if Q3 looks a little more like Q2 and we get a big year-end ramp, or if it's a little bit more linear than that? Thank you.

Greg, would you like to take that?

Sure. Thanks, Jason. Appreciate that. Look, as I say, timing matters, right, so some of these contracts, right, that we signed obviously will have an impact in the back half. We had thought and believe that if they had happened sooner, they would obviously had impact to the second quarter, which would have improved the 2021 total revenue. We did keep the low end of our guidance. We didn't move the guidance. So we still expect the back half to be as we always have higher than the first half and we expect the teams to begin to see that benefiting starting in Q3 as you move forward. So I think when we try to highlight, I'm going to have four things here. One is, we highlighted in our prepared remarks that we're seeing higher renewal rates. We closed higher contract value year-over-year. We continue to see the transaction businesses such as Activation significantly above year-over-year levels, and now we're seeing that improvement in movies. And so all four of those in combination should begin to increase the bottom line and the topline, of course, first, in the coming quarters at a cadence that will get us to where we laid out for guidance today.

All right. Thank you guys.

Thank you.

Your next question will come from Surinder Thind with Jefferies. Your line is open.

Thank you for taking my questions. Bill just following-up on an earlier question, any color on maybe why it took a little bit longer to sign some of the contracts that you did? And then I'm assuming that now that most of those have been signed at this point. Your outlook for 2022 should theoretically be unchanged. Is that right?

Well, we're not giving guidance. But let me address why this takes longer. All of you has listened to our media customer’s earnings calls and they're having a great topline. The ad markets recovered, but everyone is very cautious about spending. So I mean, we are not immune to that dynamic and it take longer. But as we said in our prepared remarks, we had very good contract signings in the quarter, but they did not result in revenue.

Understood. I guess maybe any additional color that you can provide in terms of just the conversations you're having about visibility with your clients and how that maybe impacts your guidance visibility? Is there just a lot of consideration around how dynamic? I guess the question is more around your comfort level with additional kind of macro charter around COVID and the Delta variant and so forth?

Well, everyone is concerned, but I also believe that customers that gotten back to business, let's remember that most companies do budgets in September of every year. So let's go back to September of last year, we had political disruption, an election that had not yet happened, and we didn't have a vaccine, okay. So companies put in the cost structure that was assuming a very different environment that actually happened, the ad market has recovered, but the recovery on spending is not completely happened. So decisions are in fact taking longer, but we are encouraged by what we see in our market segment. Look at the announcement that we made on Fox TV for our service. I think that is significant that our customers want a stable, predictable and a modern measurement service.

That's helpful. And then maybe turning to the movie business. If I heard the commentary, right, is the anticipation that we will return to kind of full revenues at some point in time or pre-pandemic revenue levels at some point in time. I think the commentary was also theaters are generally about 90% open, but any kind of color on that dynamic or if there's other structural changes in the marketplace that maybe we're not going to quite get back to the full run rate revenues pre-pandemic?

Yes. We have said that we'll return to pre-pandemic levels with our revenues. But please don't confuse the windows that have permanently changed with the need for our service. Our service is not tied to the box office receipts. Our services tied to theaters being open. Now, the theatrical experience provides a great deal of profit for the movie companies, all of them, okay. And they rely on our service now that that environment is open, they're deciding on different windows, depending on COVID and depending on their streaming service. So for our movie business, as our movie business is today, we believe that we will return to pre-pandemic levels and the work that we're doing on measuring movies everywhere, we think we'll add additional revenue into the future, but we're not predicting that at this point. We're working on those products. We're working on those services, but that business is in a recovery mode.

Got it. Thank you.

Thank you.

Your next question will come from Matthew Thornton with Truist Securities. Your line is open.

Hey. Good afternoon, Bill and Greg. And Greg, absolute best of luck in future ventures. Couple, if I could, I guess, maybe just starting on the Activation – the Analytics and Optimization segments. You talked about Activation being up, I think Lift and Survey were up. If we take a step back and look at that segment, I'm wondering if you'd be willing to size Activation at this point. And then maybe just talk a little bit about what the puts are? What's kind of in decline in that segment just so we can kind of see the puts and takes there. And then secondly, I guess, over at digital, I'm wondering if you could talk a little bit about what percentage international is at that point, and then maybe compare and contrast a growth trend you're seeing international versus domestic in that segment? Thanks guys.

Greg?

Thanks Matt, and thanks for those kind words. Let me talk a little bit about the M&A area. So we did talk about Activation. We did talk about Lift and Survey. I think the other big thing that's in there is customs. Over the years we've talked about customs is one of those areas that can be a little bit lumpy. We had a really good first quarter in custom. As we talked about it year-end some of those projects got pushed out and then got delivered in Q1. So sometimes that custom can move up or down something I've given as example. It gets delivered on July 1, as opposed to June 30, right and this is the quarter. So from that standpoint, that one's a little harder to predict from a custom perspective because different quarters have different lumpiness, although the fourth quarter, generally is the highest quarter where we have a lot of custom projects. And as we've talked about over the last few years, we dialed back some of those custom projects that were profitable, but now that we've got our cost structure in place, we’re going after more of those custom projects because they are profitable, at least putting more dollars to the bottom line and our adjusted EBITDA. So we're very focused on that. We haven't given an exact number for Activation as it grows, that is something that we're thinking about as we move through the third quarter, and it was moved to year-end as far as being able to break that out from a product level revenue item within the [M&O] space, and you should hear more on that in the coming quarters. You had a question about digital, again, it's not something we break out. We haven't provided that historically. Digital is a pretty much a U.S. centric story. I don't want to say that international is a big, but over the last few years, again, similar to custom where we've had international locations that were profitable and we exited those markets. We do think that there's still opportunity there and we're going after that. And some of our winbacks this quarter we're in the international market. So we're actually positive on that, and I think, Bill highlighted one in his prepared remarks in the UK. So I think that's an area where it has shrunk over time some of it by our own choosing, but we're very focused on winning back those customers and we saw some good wins in the quarter.

Great. Maybe if I could just sneak one more in there. Maybe this is for you, Greg. Just that the cash balance and just how you're feeling about the balance sheet right now. I think you guys have got a small credit facility outstanding. I'm just kind of curious how you're feeling about cash levels, again, just to operate the business kind of looking forward. Any color there would be great. Thanks guys.

Yes. Thanks Matt. I mean, I highlighted the fact that we had to get through the first half and get three large means of cash. Those are now behind us. From our standpoint, we do expect revenue to increase. We talk about that. That should help our cash balances as we move forward in our cash flow. So I think we obviously ended the quarter substantially down where we ended year-end, but we did pay the dividend. We did cover the transaction costs, right, and we did pay off the term loan. So we feel good about where we're headed in the back half of the year.

That's it for me. Thanks guys.

Thank you.

[Operator Instructions] And your next question will come from Alan Gould with Loop Capital.

Thank you, and good afternoon, Bill and Greg. I'd like to also extend my best wishes to you, Greg. I've got three questions. First, on streaming. The press release talks about two studios signing for both theatrical and streaming. In addition to YouTube and these two studios, can you give us some idea where you are on measuring TV streaming more streaming overall?

Right. Well, streaming that is ad supported, it’s extremely important to us. And with every company we have a slightly different strategy, but the objective is to measure ad campaigns on all the streaming services. So like what we announced with Google that we can do everywhere to have a holistic platform. And in future calls and on our Investor Day, we'll be drilling into that a lot more.

Okay. And then Greg, can you give us some sense of backlog type of number?

We do disclose a backlog number in our filings. I don't have it in front of me right here Al, but we do publish that. I think sometimes that can be a little bit tricky given that the accounting for that required set of backlog for contracts that are in excess of a year. And so depending on where certain contracts are, that number can move around and tends to be the highest as of fourth quarter of every year and then kind of whittle this way down. But it can be found in our filings and that we follow-up with you after the call, if you'd like more information around that.

Okay. That's fine. And the last question, I know you used to have a deal – you had a deal with Arbitron, Nielsen Audio, which I think goes through September of an eight-year deal. Is that still necessary, helpful, required, or have you replaced that for your measurement services?

Great question. We obviously knew that that was happening and we have a plan in place. We'll be announcing shortly what it is. It'll be seamless for our customers that utilize it, and we have an improved process that is based on our strengths and not about a small panel. So we're pretty excited about what we've developed and we look forward to sharing it very shortly.

Okay. That's it for me. Thanks for taking the questions.

Thank you, Alan.

[Operator Instructions] Excuse me, speakers, I'm showing no further questions at this time. You may continue.

Thank you, operator and thank you all for attending today. We remain excited about the future and I'm very pleased with the project and the progress that we made with contract signings in the second quarter as we returned to growth in the second half of this year. Thank you for joining us today, and we look forward to talking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please standby for a post conference.