SCOR

comScore, Inc. (SCOR)

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COMSCORE, Inc. (SCOR)

Q2 2013 Earnings Call

July 25, 2013 8:30 am ET

Executives

Kenneth J. Tarpey - Chief Financial Officer and Principal Accounting Officer

Magid M. Abraham - Co-Founder, Chief Executive Officer and Director

Serge Matta - President

Analysts

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Youssef H. Squali - Cantor Fitzgerald & Co., Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Ned Davis - Wm Smith & Co.

Matthew Chesler - Deutsche Bank AG, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2013 comScore, Inc. Earnings Conference Call. My name is Teresa, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Mr. Ken Tarpey, CFO. Please proceed, sir.

Kenneth J. Tarpey

Thank you very much. Good morning, everyone, and welcome to comScore's earnings call for the second quarter of 2013. Again, I'm Ken Tarpey, CFO of comScore. And with me today is Magid Abraham, our CEO and Co-Founder; Serge Matta, our President; 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 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; assumptions regarding tax rates and net operating loss carryforwards; and forecasts of future financial performance for the third quarter and the full year 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, 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 in our Investor Relations website, a reconciliation of non-GAAP financial measures discussed during today's call to 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.

With that, I will now turn the call over to Magid.

Magid M. Abraham

Thank you, Ken, and thank you for joining us today. Let me first cover an overview of the quarter. Serge will then discuss key operational highlights driving our business. After Serge, Ken will provide more details in our financial performance before we take your questions. We also have a presentation posted on the Investor Relations website under Events and Presentations that accompany our comments today and might be helpful for you to follow along with us.

On Slide 5, our strong second quarter results served as a confirmation of our strategy, market position and the value that we deliver for our customers. The results also represent continued progress on comScore's key priorities for 2013, which I will reiterate for you.

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; three, to capitalize on Digital Analytix momentum both in the U.S. and globally; four, continued focus on execution, particularly driving organic growth, improved margin and increase in free cash flow; and finally, a continued focus on returning capital for investors as appropriate.

On Slide #6. As you can see, our continued momentum was evident in the second quarter. We reported record quarterly revenues of $69.9 million, which is up 21% versus pro forma results in Q2 2012. Our record revenues were driven by growing momentum in validated campaign essentials or vCE and Digital Analytix and multi-platform products, along with continued strength in our Audience Analytics business. Our momentum in campaign measurement has never been stronger and we are also pleased with the marketplace momentum of our Digital Enterprise Analytics software.

We delivered adjusted EBITDA of $14 million, which represents 20% adjusted EBITDA margin and record quarterly free cash flow of $17.8 million.

In Slide 7, you see that we have continued the momentum in bookings of contract value for the trailing 12-month period ending in June 30. CV grew 15% over the prior 12-month period. This is consistent with our performance in the first quarter.

In Slide 8, I'm happy to say that we continue to see some momentum in our new products as we successfully address the growing market demand for reassigned value-added data analytics to meet our client needs. At our Q4 2012 earnings call, you may recall that we discussed the growing contribution of our new products to our contract value and ultimately, to revenue. We had set a target of a percentage contribution to CV of 28% to 30% from those new products.

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