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Revenue in the third quarter of 2009 was $31.9 million, an increase of 4% from the third quarter of 2008. GAAP income before taxes was $2.8 million in the third quarter of 2009, compared to $1.8 million in the third quarter of 2008, an increase of 56%. GAAP net income was $0.9 million, or $0.03 per diluted share, in the third quarter of 2009, compared to GAAP net income of $0.6 million, or $0.02 per diluted share, in the third quarter of 2008, an increase of 50%. Non-GAAP net income in the third quarter of 2009 was $5.7 million, or $0.18 per diluted share. Adjusted EBITDA was $7.4 million in the third quarter of 2009.
Magid Abraham, comScore's president and chief executive officer said, "While total revenue was slightly below prior guidance for the third quarter, with careful cost management we achieved pre-tax income and adjusted EBITDA closer to the higher end of our guidance range. During the third quarter, we continued to be impacted by softness in the advertising market, and foreign currency translation. However, project revenue grew sequentially, particularly in the case of services for measuring ad effectiveness. Our subscription renewal rates also remained strong, though we continued to see higher than normal attrition among smaller customers. We were pleased to see our net new customer count increase sequentially in Q3, and our introduction of Media Metrix 360 helped drive this growth. Late in the third quarter, and continuing through early fourth quarter, we started seeing a noticeable improvement in order patterns and our ability to up-sell existing customers.
Our launch of Media Metrix 360 has been very successful as evidenced by the fact that we tracked more than 900 million unique cookies in the U.S. and 1.8 billion worldwide during the month of September. We're delighted to have 74% of the top 50 U.S. media properties committed to the service. With the expected continued success of Media Metrix 360 and our opportunity to introduce new services, we plan to shift some resources to support its growth. This will involve the realignment of some personnel resources within the organization. This resource shift will result in an 8% reduction in the size of our workforce, although we will simultaneously be making selective new hires in areas that hold high potential for us. In the fourth quarter of 2009, we believe we will be able to achieve our prior adjusted EBITDA goals for the year.
Separately, we announced today the acquisition of Certifica, a leader in web measurement in Latin America, as we continue our global expansion. Certifica maintains offices and sales resources in 6 key Latin American countries, which will provide a platform to accelerate our penetration and revenue growth in the region. While the near-term revenue contribution from the acquisition is expected to be immaterial, we expect that the websites monitored by Certifica will participate in our Media Metrix 360 hybrid solution, creating the opportunity for clients to upgrade to higher service levels.
We continue to be very confident about comScore's longer-term prospects. The advertising market is now beginning to improve and we believe the increased robustness of our product line strengthens our position as the leading Internet audience measurement provider, helping drive our longer-term success. "
Third Quarter 2009 Financial and Business Summary
(Dollars in thousands, except per share data)
3Q09 3Q08 Change
Revenue $31,916 $30,661 4.1%
GAAP Pre-tax Income $2,773 $1,782 55.6%
GAAP Net Income $945 $575 64.3%
GAAP EPS $0.03 $0.02
Adjusted EBITDA* $7,417 $7,151 3.7%
Adjusted EBITDA Margin* 23.2% 23.3%
Non-GAAP Net Income* $5,721 $5,747 -0.5%
Non-GAAP EPS* $0.18 $0.19
Operating Cash Flow $6,537 $3,748 74.4%
Free Cash Flow* $5,854 $227 2478.9%
Deferred Revenue $41,364 $40,532 2.1%
Subscription Revenue $27,218 $25,737 5.8%
Project Revenue $4,698 $4,924 -4.6%
Existing Customer Revenue $28,569 $25,809 10.7%
New Customer Revenue $3,347 $4,888 -31.5%
International Revenue $4,934 $4,608 7.1%
Customer Count 1,216 1,136 7.0%
* A complete reconciliation of GAAP to non-GAAP historical results is set
forth in the attachment to this press release.
Reflected in GAAP net income for the third quarter of 2009 is an effective tax rate of 66% percent, including a cash tax rate of 4%. The effective tax rate was negatively impacted by a write-off of deferred tax assets associated with restricted stock awards prompted by the decline in our stock price from the date of grant to the vesting date during the third quarter. Because of this, the tax-basis compensation expense recorded for these awards upon vesting was substantially less than the GAAP-basis expense, which created taxable income that was greater than GAAP income before income taxes and a correspondingly higher effective tax rate. The company continued to utilize net operating loss carry-forwards to reduce cash taxes and expects to continue to do so as permitted in future periods.
Financial Outlook
Magid Abraham, comScore's president and chief executive officer, said, "While we expect positive order momentum late in the third quarter to carry into the fourth quarter, there will be a latency in how this momentum translates into recognized revenue due to our subscription business model. As a result we now believe full-year 2009 revenue growth over 2008 levels will be slightly below our prior expectations. However, we expect to achieve adjusted EBITDA margin levels consistent with our prior expectations."
comScore's expectations for the fourth quarter 2009 are outlined in the table below:
Revenue $32.75 - $34.65 million
Income before income taxes $2.1 - $3.2 million
Adjusted EBITDA* $8.0 - $9.1 million
Estimated diluted shares 31.4 million
* Reconciliations of GAAP to non-GAAP measures are set forth in the
attachment to this press release.
Due to the high variability and difficulty in predicting certain items that affect net income, such as tax rates and stock price, comScore is unable to provide a complete reconciliation of Adjusted EBITDA to net income on a forward-looking basis without unreasonable efforts. However, a reconciliation of forward-looking Adjusted EBITDA to income before income taxes is set forth in the attachment to this press release.
Conference Call Information:
Management will provide commentary on the company's results in a conference call on Thursday, October 29, 2009 at 5:00 pm ET.
The conference call and replay can be accessed by telephone and webcast as follows:
Call-in Number: 888-680-0879, Pass code 77402338
(International) 617-213-4856, Pass code 77402338
Replay Number: 888-286-8010, Pass code 26085287
(International) 617-801-6888, Pass code 26085287
Webcast (live and replay):
http://ir.comscore.com/events.cfm
About comScore
comScore, Inc. (NASDAQ: SCOR | Quote | Chart | News | PowerRating) is a global leader in measuring the digital world and preferred source of digital marketing intelligence. For more information, please visit http://www.comscore.com/companyinfo.
Non-GAAP Financial Measures
comScore reports all financial information required in accordance with generally accepted accounting principles (GAAP). comScore believes, however, that evaluating its ongoing operating results will be enhanced if it also discloses certain non-GAAP information because it is useful to understand comScore's performance, as it excludes non-cash and other special charges that many investors believe may obscure comScore's on-going operating results.
For example, comScore uses non-GAAP net income, which excludes stock-based compensation, amortization of acquired intangible assets, impairment of marketable securities, non-recurring costs from acquisitions and restructurings, and the non-cash, deferred tax provision. comScore also reports non-GAAP EPS (diluted), which uses non-GAAP net income in lieu of GAAP net income in calculating earnings per share.
In addition, comScore believes that Adjusted EBITDA is a useful measure for investors to use to evaluate its operating performance. Adjusted EBITDA comprises non-GAAP net income further adjusted to exclude the cash tax provision, depreciation and interest income (expenses), net. A reconciliation of comScore's GAAP results to these non-GAAP measures is included in the financial tables accompanying this release.
The company believes that Adjusted EBITDA is an important indicator of the company's operational strength and the performance of its business because it provides a link between profitability and operating cash flow. Adjusted EBITDA is also widely used by investors and analysts as a supplemental measure to evaluate the overall operating performance of companies in comScore's industry. comScore's management also uses Adjusted EBITDA extensively as a measure of operating performance because it does not include the impact of items not directly resulting from our core operations. Moreover, the company's management uses the measure for planning purposes, to allocate resources and to evaluate the effectiveness of the company's business strategies and management's performance.
The company believes that excluding non-recurring costs from non-GAAP net income and EPS and from Adjusted EBITDA provides a meaningful indication to investors of the expected on-going operating performance of the company. Specifically as it relates to acquisitions and restructurings, the exclusion of the non-recurring costs reflects the expected benefits realized or to be realized upon the integration of acquired entities into comScore, and the realized benefits of the restructurings.
comScore's management also uses free cash flow as a non-GAAP measure of the company's operating cash flow less cash expenditures for capital spending as a key indicator of the company's operating cash flow performance net of capital outlays.
Whenever comScore uses such historical non-GAAP financial measures, it provides a reconciliation of historical non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measure included in the financial tables accompanying this release. Although the company provides a reconciliation of historical non-GAAP financial measures, due to the high variability and difficulty in predicting certain items that affect net income, such as tax rates and stock price, comScore is unable to provide a complete reconciliation of Adjusted EBITDA to net income on a forward-looking basis without unreasonable efforts. However, a reconciliation of forward-looking Adjusted EBITDA to income before income taxes is set forth in the attachment to this press release.
Cautionary Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, comScore's expectations regarding the continued growth of its customer base; expectations regarding customer renewal rates; expectations regarding the impact and financial benefits of new products, including the recent Media Metrix 360 release; expectations as to comScore's ability to up-sell additional products and services to existing customers; expectations regarding the timing of purchases by customers and the resulting impact on comScore's revenue recognition; expectations regarding comScore's plans to reallocate resources, reduce its net workforce and hire additional resources in support of Media Metrix 360; expectations regarding the acquisition of Certifica and the resulting impact and benefits to comScore; assumptions and expectations regarding effective tax rates and the use and availability of net operating loss carry-forwards; expectations regarding the outcome of cost containment measures and the resulting effect on comScore's financial performance; expectations and forecasts of future financial performance, including related growth rates and components thereof; assumptions related to the market and economic environment and assumptions related to costs and revenue growth for the fourth quarter and the full year 2009. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: comScore's reliance on subscription-based revenues; comScore's ability to retain existing large customers and obtain new large customers; risks related to the domestic and global economies and the effects they may have on comScore, its industry or its customers; the early stage of the market for digital marketing intelligence and the rate of development of such market; comScore's ability to manage its growth; comScore's ability to maintain panels of sufficient size and scope; the impact of a change in methodology stemming from acquisitions or the development of new products; the impact of increasing international operations; the rate of development of the Internet advertising and eCommerce markets; comScore's ability to effectively expand sales and marketing; continued growth of the Internet as a medium for commerce, content, advertising and communications; comScore's ability to sell new or additional products and attract new customers; limitations over comScore's control of certain variables in financial forecasts such as its stock price and the resulting effect on its tax rates; and the volatility of quarterly results and expectations.
For a detailed discussion of these and other risk factors, please refer to comScore's Quarterly Report on Form 10-Q for the period ended June 30, 2009, comScore's Annual Report on Form 10-K for the period ended December 31, 2008 and from time to time other filings with the Securities and Exchange Commission (the "SEC"), which are available on the SEC's Web site (http://www.sec.gov).
Stockholders of comScore are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. comScore does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after the date of this press release, or to reflect the occurrence of unanticipated events.
comScore, Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Revenues $31,916 $30,661 $93,915 $85,781
------- ------- ------- -------
Cost of revenues
(excludes amortization
of intangible assets
resulting from
acquisitions shown
below) (1) 9,455 9,412 29,186 24,286
Selling and marketing
(1) 10,241 10,659 31,057 29,120
Research and
development (1) 4,677 4,131 13,210 10,838
General and
administrative (1) 4,353 4,266 12,874 12,596
Amortization of
intangible assets
resulting from
acquisitions 385 346 1,032 475
--- --- ----- ---
Total expenses from
operations 29,111 28,814 87,359 77,315
------ ------ ------ ------
Income from operations 2,805 1,847 6,556 8,466
Interest and other
income, net 39 267 348 1,578
(Loss) gain from
foreign currency (71) 123 (53) (18)
Impairment of
marketable securities - (455) - (841)
--- ---- --- ----
Income before income
taxes 2,773 1,782 6,851 9,185
Income tax provision (1,828) (1,207) (4,445) (4,368)
------ ------ ------ ------
Net income $945 $575 $2,406 $4,817
==== ==== ====== ======
Net income available to
common stockholders per
common share:
Basic $0.03 $0.02 $0.08 $0.17
Diluted $0.03 $0.02 $0.08 $0.16
Weighted -average number
of shares used in per
share calculation -
common stock
Basic 30,204,147 28,878,494 29,914,460 28,576,651
Diluted 31,157,222 30,389,519 30,879,072 30,215,920
(1) Amortization of stock-based
compensation is included
in the line
items above as follows:
Cost of revenues $277 $265 $925 $610
Selling and
marketing 1,234 797 3,573 1,823
Research and
development 285 225 829 507
General and
administrative 755 617 2,056 1,697
comScore, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
September 30, December 31,
2009 2008
---- ----
(unaudited) *
Assets
Current assets:
Cash and cash equivalents $44,976 $34,297
Short-term investments 38,979 37,164
Accounts receivable, net of allowances
of $572 and $479, respectively 26,799 29,947
Prepaid expenses and other current
assets 2,420 1,871
Deferred tax asset 12,957 13,304
------ ------
Total current assets 126,131 116,583
Long-term investments 2,861 3,497
Property and equipment, net 17,457 17,697
Other non-current assets 191 131
Long-term deferred tax asset 9,034 13,736
Intangible assets, net 7,981 8,805
Goodwill 40,146 39,114
------ ------
Total assets $203,801 $199,563
======== ========
Liabilities and stockholders' equity
Current Liabilities:
Accounts payable $1,725 $1,755
Accrued expenses 6,439 9,432
Deferred revenues 41,122 42,779
Deferred rent 1,221 1,049
Capital lease obligations 607 977
--- ---
Total current liabilities 51,114 55,992
Deferred rent, long-term 8,420 8,691
Deferred revenue, long-term 242 -
Capital lease obligations, long-term 766 -
--- ---
Total liabilities 60,542 64,683
Stockholders' equity:
Common stock 30 29
Treasury stock (2,735) (1,265)
Additional paid-in capital 199,443 192,612
Accumulated other comprehensive loss (231) (842)
Accumulated deficit (53,248) (55,654)
------- -------
Total stockholders' equity 143,259 134,880
------- -------
Total liabilities and stockholders' equity $203,801 $199,563
======== ========
* Information derived from the audited Consolidated Financial Statements
comScore, Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
Nine Months Ended
September 30,
--------------
2009 2008
---- ----
(unaudited)
Operating Activities:
Net income $2,406 $4,817
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 4,924 3,596
Amortization of intangible assets resulting
from acquisitions 1,032 472
Provisions for bad debts 271 379
Stock-based compensation 7,377 4,642
Amortization of deferred rent (432) (70)
Deferred tax provision 4,188 3,845
Impairment of marketable securities - 841
Loss on asset disposal 108 -
Changes in operating assets and liabilities:
Accounts receivable 3,177 (518)
Prepaid expenses and other current assets 21 (298)
Other non-current assets (55) 105
Accounts payable, accrued expenses, and
other liabilities (3,482) (1,558)
Deferred revenues (1,868) 2,618
Deferred rent 331 9,366
--- -----
Net cash provided by operating activities 17,998 28,237
Investing activities
Acquisition, net of cash acquired - (44,543)
Recovery of restricted cash - 1,385
Purchase of investments (41,503) (71,844)
Sales and maturities of investments 40,197 73,522
Purchase of property and equipment (4,826) (13,587)
------ -------
Net cash used in investing activities (6,132) (55,067)
Financing activities
Proceeds from the exercise of common stock
options and warrants 412 879
Repurchase of common stock (1,470) (1,238)
Principal payments on capital lease
obligations (725) (669)
---- ----
Net cash used in financing activities (1,783) (1,028)
Effect of exchange rate changes on cash 596 (619)
--- ----
Net increase (decrease) in cash and cash
equivalents 10,679 (28,477)
Cash and cash equivalents at beginning of
period 34,297 68,368
------ ------
Cash and cash equivalents at end of period $44,976 $39,891
======= =======
Reconciliation from Income before income taxes to Non-GAAP
Net Income and Adjusted EBITDA (dollars in thousands, except
per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Income before income taxes $2,773 $1,782 $6,851 $9,185
Deferred tax provision (1,728) (889) (4,188) (3,846)
Current cash tax provision (100) (318) (257) (522)
---- ---- ---- ----
Net income 945 575 2,406 4,817
Amortization of acquired
intangibles 385 346 1,032 475
Stock-based compensation 2,551 1,904 7,383 4,637
Impairment of marketable
securities - 455 - 841
Non-recurring costs from
acquisition 112 1,578 112 2,036
Deferred tax provision 1,728 889 4,188 3,846
----- --- ----- -----
Non-GAAP net income 5,721 5,747 15,121 16,652
Current cash tax provision 100 318 257 522
Depreciation 1,727 1,353 4,924 3,596
Interest (income) expense,
net (131) (267) (438) (1,578)
---- ---- ---- ------
Adjusted EBITDA 7,417 7,151 19,864 19,192
Adjusted EBITDA margin (%) 23% 23% 21% 22%
EPS (diluted) $0.03 $0.02 $0.08 $0.16
Non-GAAP EPS (diluted) $0.18 $0.19 $0.49 $0.55
Reconciliation from GAAP Operating Cash Flow to Free Cash Flow
(dollars in thousands)
Three Months
Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Net cash provided by
operating activities $6,537 $3,748 ** $17,998* $28,237 **
Purchase of property and
equipment (683) (3,521) ** (4,826)* (13,587) **
---- ------ ------ -------
Free cash flow $5,854 $227 $13,172 $14,650
====== ==== ======= =======
* Includes approximately $333,000 in leasehold improvements due to tenant
allowances.
** Includes approximately $1.5 and $9.4 million in leasehold improvements
due to tenant allowances for the three and nine months ended September
30, 2008, respectively.
Reconciliation from Income before income taxes to Adjusted EBITDA
(Guidance) (dollars in thousands)
Forecasted amounts for the three months ended December 31, 2009 are
based on the mid-points of the range of guidance provided herein.
The three months ended December 31, 2008 reflect reported results.
Three Months
Ended
December 31,
------------
2009 2008
---- ----
(unaudited)
Revenues $33,700 $31,590
======= =======
Income before income taxes $2,650 $1,106
Amortization of acquired intangibles 385 329
Stock-based compensation 2,825 1,837
Impairment of marketable securities - 1,398
Non-recurring costs from acquisitions and
restructuring 1,175 752
Depreciation 1,600 1,382
Interest (income) expense, net (85) (322)
--- ----
Adjusted EBITDA $8,550 $6,482
====== ======
Adjusted EBITDA margin (%) 25% 21%
SOURCE comScore, Inc.
http://www.comscore.com
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