comScore, Inc. (SCOR) This autumn 2023 Earnings Name Transcript

comScore, Inc. (NASDAQ:SCOR) This autumn 2023 Earnings Convention Name March 6, 2024 5:00 PM ET

Firm Contributors

John Tinker – Vice President of Investor Relations

Jonathan Carpenter – Chief Government Officer & Director

Mary Curry – Chief Monetary Officer & Treasurer

Steve Bagdasarian – Government Vice President of Development

Convention Name Contributors

Laura Martin – Needham

Jason Kreyer – Craig-Hallum

Surinder Thind – Jefferies

Operator

Good day and thanks for standing by. Welcome to the comScore Fourth Quarter 2023 Monetary Outcomes Convention Name. [Operator Instructions] Please be suggested that at present’s convention is being recorded.

I’d now like handy the convention over to your speaker at present, John Tinker, Vice President, Investor Relations.

John Tinker

Thanks, operator. Earlier than we start our ready remarks, I would wish to remind all of you that the next dialogue incorporates forward-looking statements. These forward-looking statements embrace feedback about our plans, expectations and prospects and are primarily based on our view as of at present, March 6, 2024. Our precise ends in future durations might differ materially from these at the moment anticipated due to numerous dangers and uncertainties. These dangers and uncertainties embrace these outlined in our 10-Okay, 10-Q and different filings with the SEC which you’ll find on our web site or at www.sec.gov. We disclaim any responsibility or obligation to replace our forward-looking statements to replicate new info after at present’s name.

We will probably be discussing non-GAAP measures throughout this name for which now we have offered reconciliations in at present’s press launch and on our web site. Please be aware that we are going to be referring to slides on this name that are additionally accessible on our web site www.comscore.com underneath Investor Relations, Occasions and Displays. Lastly, comScore intends to file a proxy assertion and associated supplies with the SEC in reference to the 2024 Annual Assembly of Stockholders. Our administrators and sure officers will be contributors within the solicitation of proxies in reference to the annual assembly. Stockholders are inspired to learn the proxy assertion and associated supplies once they change into accessible as they’ll include necessary info, together with the identification of the contributors and their direct or oblique curiosity by safety holdings or in any other case. As you could know, 180-degree capital submitted discover of its intent to appoint a candidate for election to the Board and submit a proposal for consideration on the annual assembly.

Right now, we’ll make no additional remark or take any questions on 180-degree capital nomination and proposal on any associated issues. I will now flip the decision over to comScore’s Chief Government Officer, Jon Carpenter. Jon?

Jonathan Carpenter

Thanks, John and thanks, everybody, for becoming a member of us this night. 2023 had each highs and lows for the enterprise. On the optimistic facet, we achieved numerous issues which our workforce ought to be very pleased with and I imagine set us up effectively for a return to sustainable progress. I am extra assured than ever that we’re headed in the fitting path. We delivered on our adjusted EBITDA margin objectives, made key cross-platform product improvements and revamped our go-to-market operations. We acquired conditional certification from the U.S. JIC and we’re the one measurement participant who acquired this certification and can be working towards MRC accreditation of a TV measurement product.

We additionally drove vital progress in each comScore Marketing campaign Scores, our product that measures cross-platform promoting campaigns and Proximic, our cross-platform viewers activation enterprise that gives each IV-based and ID free options. We imagine we’re simply beginning to see the type of progress that we are able to anticipate throughout these key areas of our enterprise. On the similar time, we did fall wanting our income goal for the yr. Macro challenges did have a fabric affect on our customized enterprise final yr, particularly within the again half, the place the customized enterprise was down double digits. Moreover, there are finish markets that we serve which have been and are more likely to stay challenged. Particularly, we noticed low single-digit declines within the a part of the enterprise that helps giant conventional community purchasers the place linear advert spend is predicted to stay underneath strain as {dollars} proceed to shift to digital platforms. And our enterprise final yr was actually not proof against a few of these pressures.

That being mentioned, our new go-to-market construction underneath the management of Chief Business Officer, Steve Bagdasarian, together with key improvements throughout our marketing campaign rankings and Proximic merchandise are already delivering outcomes for us, aligning our progress with the fastest-growing areas of want inside the market. And the bookings we printed within the second half of the yr are 2 of probably the most promising renewal durations we have had within the final 2 years. In reality, the progress we made in ’23 units us up properly to ship on our ’24 expectations. Our value management and expertise transformation work has continued to assist us ship stronger working margins in 2023. Our mixture of native TV velocity and precision helped us ship yet one more yr of double-digit progress in our native enterprise.

Lastly, we have made substantial progress in our key cross-platform merchandise, Proximic and CCR. The market has responded extremely effectively to the worth we’re delivering with these 2 product areas to the tune of effectively over 30% year-over-year progress. Provided that these companies symbolize roughly 10% of our complete enterprise final yr, we’re assured we’re simply scratching the floor on what our alternative for 2024 appears like. However earlier than we go any additional on ’24, I will let Mary Margaret take you thru our ’23 numbers in a bit extra element.

Mary Curry

Thanks, Jon. Complete income for the total yr was $371.3 million, down 1.3% from $376.4 million in 2022. The Cross Platform Options income of $162.5 million was down 0.9% from 2022. As Jon talked about, we’re impacted by the linear advert spend strain the foremost networks are experiencing which resulted in a decline in our nationwide TV income in 2023 from decrease renewals. This decline was offset by double-digit progress in native TV and 4% progress in our motion pictures enterprise in comparison with the prior yr. Income from Digital Advert Options of $208.8 million was down 1.7% in comparison with $212.5 million a yr in the past. The decline was primarily pushed by decrease deliveries of sure customized digital merchandise which have been impacted by the macroeconomic setting, together with the decline in syndicated digital income. These declines have been partially offset by the expansion we’re seeing in our Proximic and CCR merchandise which, on a mixed foundation, grew 34% over 2022.

Adjusted EBITDA for the yr was $44 million, up 17.5% from 2022, leading to an adjusted EBITDA margin of 11.9%. In the event you exclude the overseas change affect from adjusted EBITDA, this yr’s results of $46.9 million is up 29% over the prior yr. Despite the fact that our prime line was challenged in 2023, we have been profitable in reaching our adjusted EBITDA margin objective which is a testomony to the exhausting work our groups have achieved to make disciplined and intentional selections round spend. Our core working bills for 2023 have been down almost 5% over the prior yr, primarily as a result of decrease worker compensation because of our restructuring efforts. As a part of the restructuring plan, we additionally diminished our bodily workplace footprint and we’re persevering with to rework our enterprise operations and simplify our tech stack to drive extra efficiencies as we transfer into 2024.

Our fourth quarter outcomes inform a really comparable story. Complete income for the fourth quarter was $95.1 million, down 3.2% from $98.2 million in the identical quarter a yr in the past. Cross Platform Options income of $39.9 million was down 7% from 2022, once more, primarily pushed by the decline in nationwide TV, partially offset by progress in our motion pictures enterprise. Digital Advert Options income of $55.2 million was roughly flat with the prior yr. Just like the total yr outcomes, the decline in income was primarily pushed by the decrease deliveries of sure customized digital merchandise and decrease syndicated digital income which have been offset by the expansion of our Proximic and CCR merchandise which when mixed, grew greater than 50% over the prior yr quarter.

Adjusted EBITDA for the quarter was $16.4 million, up 36.8% from the prior quarter, leading to an adjusted EBITDA margin of 17.3%. In the event you exclude the overseas change affect from adjusted EBITDA, the fourth quarter results of $18.7 million is up 12.9% over the prior yr. Our core working bills have been down 4.5% in comparison with the fourth quarter of 2022, once more, primarily as a result of decrease worker compensation from our restructuring efforts.

With that, I will flip it again to Jon to speak about the place we’re headed.

Jonathan Carpenter

Thanks, Mary Margaret. The ANA estimates as a lot as $22 billion of the $88 billion in open internet programmatic advert spend is wasted and that is a staggering quantity. That waste and the quickly rising complexity throughout the media panorama that is fueling it’s what we’re targeted on serving to our purchasers handle and navigate efficiently. We’re doing that by specializing in connecting audiences throughout all screens and markets, leveraging our currency-grade native and nationwide linear TV, digital streaming and social information belongings to assist advertisers attain their meant audiences effectively and publishers to extra successfully talk the worth of their audiences to these advertisers.

Once we take into consideration what meaning for comScore in 2024, there are 3 key areas that we’re targeted on: first, cross-platform product adoption and particularly our CCR and Proximic choices. Second, digital resilience as we lastly begin to see indicators that our syndicated digital enterprise is popping the nook and three, in continued native progress and growth, leveraging our cross-platform capabilities alongside our main native linear information to ship worth for our native purchasers. We’re already seeing encouraging indicators in every of those areas early in 2024 as evidenced by acceleration of the adoption of our cross-platform merchandise, key metrics for our digital enterprise bettering and a couple of main bulletins with main native station group purchasers.

A giant motive we’re in a position to put up wins like that is that we’re simply constructed otherwise from different measurement corporations. That is giving us a critical benefit because the world turns into extra cross-platform and extra programmatic. By measuring from the underside up beginning on the family stage and constructing as much as a nationwide view, comScore is ready to present cross-platform information with the velocity and precision wanted to let advertisers optimize in-flight campaigns. Our bulletins with each Nexstar a couple of weeks in the past and final week with TEGNA are a validation of the strategy that we’re taking and we’re excited to have such necessary companions leaning in and increasing their relationships with comScore.

Our complete view of audiences throughout nationwide, native, digital, streaming linear or walled gardens is why we imagine comScore is constructed for the way forward for programmatic cross-platform media. Provided that, after we have a look at the market, we’re not merely simply targeted on the linear TV advert market. We’re targeted on influencing the entire market of greater than $400 billion in advert spend because the world turns into more and more programmatic and audiences change into more and more fragmented. Constructing on that, with comScore Marketing campaign Scores, we introduced a key enhancement just some weeks in the past, including native market information to CCR, this enhancement permits advertisers to promote nationally after which optimize domestically, one thing that wasn’t beforehand potential.

Past enabling an advertiser to grasp how their marketing campaign is performing throughout completely different markets, the velocity and accuracy with which we’re in a position to ship this information makes it potential for advertisers to optimize their advert campaigns in flight, shifting {dollars} to probably the most performing channels and driving the outcomes they want extra effectively. Together with that announcement a couple of weeks in the past, you will have seen our take care of the Commerce Desk to combine CCR with native reporting into their platform. This partnership will assist the Commerce Desk purchasers optimize their campaigns, eliminating waste and delivering the outcomes they want as effectively as potential. Previous to releasing this function, we noticed a rise of greater than 80% in impressions measured by comScore Marketing campaign Scores in January of this yr versus January of final yr. And as we transfer into the second quarter of this yr and our integration with the Commerce Desk begins to ramp, we anticipate to see that progress speed up.

Cross-platform adoption, digital resilience and native growth are the issues we’re targeted on in ’24. These pillars, coupled with a relentless effort to scale our capabilities profitably level to a strong ’24 forward. I look ahead to updating you on our progress as we go all year long.

And with that, I will flip it over to Mary Margaret to speak about our steering.

Mary Curry

Thanks, Jon. Primarily based on present developments and expectations, we imagine our complete income for 2024 will probably be between $375 million and $390 million. As Jon simply laid out, there are a variety of things driving progress in 2024, together with our continued progress in native TV, the stabilization of our syndicated digital enterprise and the accelerated progress of our cross-platform merchandise, Proximic and CCR. When eager about our income steering for 2024, I believe it is necessary to speak about among the elements that may affect the timing of income progress as we transfer by way of the yr.

First, we anticipate our progress in Proximic and CCR to ramp over the approaching 3 or 4 months as new integrations roll out and purchasers are onboarded, delivering a extra pronounced income affect within the again half of the yr. Second, we anticipate that our nationwide TV income will proceed to be impacted by the linear advert spend strain that main networks are experiencing and the demand for customized digital merchandise will proceed to be unpredictable as we transfer into 2024. And at last, we anticipate the development we’re seeing in syndicated digital to take a few quarters to translate into a greater year-over-year income outcomes.

Because of this, we anticipate income within the first quarter of 2024 to be decrease than the primary quarter of 2023, with nearly all of our anticipated income progress occurring within the again half of the yr. For adjusted EBITDA, we anticipate continued enchancment of our adjusted EBITDA margin in 2024 and anticipate the total yr margin will probably be between 12% and 15%. Along with prime line progress, the important thing elements driving the elevated margins embrace the continued impacts of the restructuring initiatives we executed in 2023 and the disciplined product innovation we’re enterprise as we proceed to rework how we function.

As we take into consideration core working bills, we might ideally wish to hold prices as flat as potential year-over-year. However we additionally know we have to make investments in sure areas of the enterprise, equivalent to information and cloud computing prices to ensure that our cross-platform merchandise to scale in a means that may drive significant income progress. These extra prices anticipated to be between $5 million and $8 million have been constructed into our plan for 2024 and are included within the steering I am giving at present. Just like final yr, we anticipate our margin fee to scale as we transfer by way of the yr.

With that, I will flip it again over to Jon for closing remarks.

Jonathan Carpenter

Thanks, Mary Margaret. Thanks, everyone. Right now, operator, we’ll open it up for any questions.

Query-and-Reply Session

Operator

[Operator Instructions] Our first query comes from Laura Martin with Needham.

Laura Martin

So I am questioning — so I see you may have nationwide down regardless that cross-platform is rising so rapidly. Are you discovering that there is not as a lot benefit of linking your native to nationwide as we hoped falling with the fast progress throughout platform. After which my solely different query is on steadiness sheet objectives for 2024. Might you give us an replace on that, please?

Jonathan Carpenter

Laura, thanks. Sure, on the Nationwide one, no, I believe what you are seeing with the foremost networks is clearly simply strain on the linear advert mannequin which did create some headwinds for us final yr and I anticipate and we factored into the steering a little bit of that in 2024 as effectively. It is also true that the shift from how promoting is purchased and offered is shifting very a lot to a cross-platform view. And I believe that is why you see an acceleration of our cross-platform merchandise which I believe goes to be the way forward for actually the place everybody is targeted and positively the main target of our funding {dollars}.

I’d level to the wins that we had with, let’s take Nexstar, for instance, Nexstar has received main nationwide networks. They have, clearly, largest native broadcaster within the nation, vital digital properties. Once we have a look at our expanded relationship with Nexstar and the way they need to go to market, it is leveraging the totality of {our capability} that differentiates us from everyone else within the market, that capacity to step up from a neighborhood market all the best way as much as a nationwide perspective which permits that workforce to go to market with each a nationwide image of the total 200-plus million those who attain their platforms in addition to individually throughout native stations. And that was undoubtedly a serious differentiator for us in these wins.

And your second query was on the steadiness sheet. I haven’t got an replace for you on the steadiness sheet particularly, it is one thing we proceed to work on and be targeted on, our most well-liked shareholders have been very supportive of giving us the funding that we have wanted with a few the bulletins we had late final yr by way of strikes we made with the dividends. And people conversations proceed to be ongoing. And — so at this level, I haven’t got an replace for you past that.

Operator

Subsequent query comes from Jason Kreyer with Craig-Hallum.

Jason Kreyer

So Jon, I believe you talked about one thing in your ready remarks concerning the bookings that you just guys have logged within the again half of the yr offers you confidence into 2024. Simply questioning in case you can unpack the bookings remark and particularly what you are referring to in there.

Jonathan Carpenter

Sure. After I have a look at the contract worth that we underwrote within the third and fourth quarters of final yr, each quarters have been up on a comparable — after we have a look at the 12-month worth of these offers that we’re reserving each the third and fourth quarter have been up considerably from the place we have been within the prior durations or the expiring contract values which is what I used to be pointing to in my remarks which was encouraging and plenty of nice work by the groups on many vital [indiscernible]. The third and fourth quarter, the opposite half to level out, the third and fourth quarter represents a few of our largest renewal durations for the enterprise, so it was encouraging.

Jason Kreyer

Okay. After which within the slides, you type of talked about how sign loss and cookie deprecation create new alternatives. Are you able to simply discuss extra about how that is monetizable or the way you anticipate that to affect fundamentals this yr?

Jonathan Carpenter

You need to discuss that, Steve, by way of Proximic enterprise particularly?

Steve Bagdasarian

Sure, it is a mixture of a few issues. One is, clearly, the significance of having the ability to purchase audiences on a verified and validated foundation goes on the coronary heart of what the digital syndicated product line immediately presents. Moreover, the viewers segmentation enterprise that basically is constructed for Proximic, is closely predicated on having the ability to present privacy-centric, non-ID primarily based contextual enrichment segments for publishers in addition to the purchase facet that we’re each seeing adopted at an incredible fee. So the brief story with each of those eventualities is as we see deterministic ID-based information that has been prevalent for an extended time period, start to be deprecated exterior of the market, it raises the visibility and the profile of having the ability to belief impartial measurement to confirm and validate the consistency of viewers that we’re shopping for throughout all channels. And that is immediately on the coronary heart of our asset class and the best way that the merchandise are finally constructed.

Jason Kreyer

Only one final one for me for Mary Margaret. Simply attempting to dissect the money move in This autumn, you had a robust EBITDA quantity and good progress there, greatest EBITDA for the yr. But it surely appears like free money move had a drag. Are you able to simply stroll by way of if there’s something distinctive in there?

Mary Curry

Within the fourth quarter particularly, there wasn’t something distinctive there aside from we did make amends for some accounts payable in This autumn. We additionally have been anticipating some receipts to come back in proper on the finish of the yr that did not are available till the primary week of January. So these can be the two issues that I’d level to.

Operator

Our subsequent query comes from Surinder Thind with Jefferies.

Surinder Thind

Jon, are you able to perhaps discuss a bit of bit about the place you see threat within the information by way of interim that you’ll obtain it this yr? Is all of it macro associated? Or have you ever derisked for macro? How ought to we take into consideration the vary that you just offered and examine and distinction that to how 2023 ended up versus what your expectations have been?

Jonathan Carpenter

Positive. I believe the low finish of the vary appropriately accounts for type of the danger that we see at this level within the macroeconomic stuff simply by way of the place linear advert spend is within the market. And so I believe we have that contemplated within the low finish of the vary. I believe what we’re most bullish about is how rapidly our Proximic and cross-platform functionality scale. For instance, the deal that was introduced a bit of over per week in the past with the Commerce Desk, that may go reside right here this week or within the subsequent couple of weeks. And we — offers like that, they take a bit of little bit of time to scale however there’s — fairly frankly, we see upside towards what we have contemplated. So we really feel just like the $375 million to $390 million income information has received it appropriately booked in primarily based on what we are able to see right here on the sixth of March.

Surinder Thind

Acquired it. After which I assume when you concentrate on simply longer-term assumptions and the mannequin for the enterprise, like how do you account for issues like linear advert spend? I imply is that going to be an accelerating drag? Or how can we take into consideration a few of these — the dynamics of the adjustments within the trade?

Jonathan Carpenter

I believe for probably the most half, I imply, we — the place we really feel that’s within the customized e book of enterprise which we handled a few of that. And I really feel like we have, once more, within the low finish of the steering, the lumpiness there accounted for, so we really feel type of the strain that the foremost conventional media networks really feel. We see that in our customized enterprise. We see that in among the renewals that, fairly frankly, within the first half of final yr have been robust. However I really feel like we have most of that accounted for. We took most of what we, I believe, noticed there and have gotten that factored into the information. So the excellent news is that the print — if I have a look at our native enterprise, Clearly, there’s — these groups are uncovered to a linear advert mannequin. And we’re rising double digits in that area. And clearly, our digital enterprise, in case you have a look at Proximic and cross-platform, we’re exceeding progress that {the marketplace} is seeing in case you have a look at among the advert tech comparables there.

Surinder Thind

Acquired it. After which perhaps only a ultimate query on syndicated digital. It sounds such as you’re extra comfy that issues have bottomed at this level. Is that honest? Or I simply really feel like we have heard this story earlier than the place we begin the yr with a bit extra optimism that we’re type of seeing the sunshine on the finish of the tunnel however we do not fairly get to the tip of the tunnel.

Jonathan Carpenter

Sure. I imply we like — as cookie deprecation additional permeates all through the market, we just like the energy of our digital enterprise towards that backdrop. The metrics that we monitor by way of total shopper churn fee, ARR, these issues have been extraordinarily encouraging by way of what we’re seeing on our finish by way of the best way that we handle the enterprise which gave us plenty of actually good perception by way of how we thought of steering for the yr associated to the syndicated digital enterprise.

Operator

Thanks. I’d now like to show the decision again over to John Carpenter for any closing remarks.

Jonathan Carpenter

Thanks, everyone, for becoming a member of the decision and we look ahead to chatting with a lot of you quickly.

Operator

Thanks. Because of points with the webcast, the presentation will probably be accessible on demand one hour after the convention name. Thanks to your participation. You could now disconnect.