comScore(US:SCOR)2021-05-06 21:05PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, show a net loss of $36.4 million, compared to a net loss of $13.2 million in the prior-year period, with total assets decreasing to $643.6 million from $678.0 million at year-end 2020 Condensed Consolidated Balance Sheet Highlights (As of March 31, 2021) | Account | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $29,075 | $31,126 | | Total current assets | $107,460 | $137,030 | | Total assets | $643,636 | $677,970 | | Liabilities & Equity | | | | Total current liabilities | $181,187 | $184,275 | | Total liabilities | $237,045 | $448,980 | | Convertible redeemable preferred stock | $188,183 | $— | | Total stockholders' equity | $218,408 | $228,990 | Condensed Consolidated Statement of Operations Highlights (Three Months Ended March 31) | Account | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Revenues | $90,330 | $89,528 | | Loss from operations | ($11,459) | ($12,751) | | Loss on extinguishment of debt | ($9,629) | $— | | Net loss | ($36,355) | ($13,184) | | Net loss per common share (Basic and diluted) | ($0.49) | ($0.19) | Condensed Consolidated Statement of Cash Flows Highlights (Three Months Ended March 31) | Activity | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $17,888 | ($4,781) | | Net cash used in investing activities | ($3,692) | ($3,917) | | Net cash used in financing activities | ($30,477) | ($549) | | Net decrease in cash, cash equivalents and restricted cash | ($16,869) | ($10,174) | Notes to Condensed Consolidated Financial Statements The notes detail significant financial events in Q1 2021, including a major financing transaction, revenue disaggregation, related party transactions, a privacy class-action lawsuit settlement, and a new revolving credit agreement - On March 10, 2021, the company issued 82,527,609 shares of Series B Convertible Preferred Stock for gross proceeds of $204.0 million to Charter, Qurate, and Pine, with proceeds used to repay senior secured convertible notes3239 - A loss on debt extinguishment of $9.6 million was recorded in Q1 2021 related to the payoff of the senior secured convertible notes and the secured term note37 Revenue by Solution Group (Three Months Ended March 31) | Solution Group | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Ratings and Planning | $65,806 | $63,521 | | Analytics and Optimization | $17,701 | $15,501 | | Movies Reporting and Analytics | $6,823 | $10,506 | | Total | $90,330 | $89,528 | - Concurrent with the financing transaction, the company entered into a ten-year Data License Agreement with Charter, with license fees increasing from $10.0 million in year one to $32.3 million in year ten109 - Subsequent to quarter end, on May 5, 2021, the company entered into a new three-year, $25.0 million senior secured revolving credit agreement with Bank of America122 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a slight 0.9% increase in total revenue to $90.3 million for Q1 2021, driven by growth in Ratings and Planning and Analytics and Optimization, offset by a sharp decline in Movies Reporting and Analytics due to the COVID-19 pandemic's impact on theaters Results of Operations For Q1 2021, total revenue increased by 0.9% to $90.3 million, driven by growth in Ratings and Planning and Analytics and Optimization, while Movies Reporting and Analytics revenue fell due to theater closures Revenue Variance by Solution Group (Q1 2021 vs Q1 2020) | Solution Group | Q1 2021 Revenue (in thousands) | Q1 2020 Revenue (in thousands) | % Variance | | :--- | :--- | :--- | :--- | | Ratings and Planning | $65,806 | $63,521 | +3.6% | | Analytics and Optimization | $17,701 | $15,501 | +14.2% | | Movies Reporting and Analytics | $6,823 | $10,506 | -35.1% | | Total revenues | $90,330 | $89,528 | +0.9% | - Cost of revenues increased by $6.9 million (15.1%) YoY, primarily due to a $3.0 million increase in data costs for an expanded data footprint and a $2.4 million increase in other license costs for European cross-platform products138 - General and administrative expenses decreased by $1.1 million (6.9%) YoY, driven by a $1.6 million reduction in professional fees and a $1.1 million decrease in other expenses, partially offset by a $1.7 million increase in employee costs144 - A $9.6 million loss on debt extinguishment was recorded in Q1 2021 from the payoff of senior secured convertible notes and a secured promissory note147 Liquidity and Capital Resources As of March 31, 2021, the company held $33.9 million in cash, cash equivalents, and restricted cash, following a significant recapitalization in March 2021 that raised $204.0 million to extinguish existing debt and improve financial position - In March 2021, the company issued and sold shares of Series B Convertible Preferred Stock to Charter, Qurate, and Pine for gross proceeds of $204.0 million160 - The proceeds from the preferred stock issuance were used to repay the $204.0 million in senior secured convertible notes and the $13.0 million secured term note161172174 Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $17,888 | ($4,781) | | Net cash used in investing activities | ($3,692) | ($3,917) | | Net cash used in financing activities | ($30,477) | ($549) | - On May 5, 2021, the company entered into a new $25.0 million senior secured revolving credit agreement, which was undrawn as of the filing date167169 Critical Accounting Policies The company highlights new critical accounting policies related to the March 2021 financial restructuring, including the classification of newly issued Series B Convertible Preferred Stock as mezzanine equity and the early adoption of ASU 2020-06 - The newly issued Preferred Stock is classified as mezzanine equity on the balance sheet because it is contingently redeemable upon events like a change of control, which are outside the company's control190 - The company early-adopted ASU 2020-06, simplifying the accounting for convertible instruments, with no embedded features requiring bifurcation except for the change of control redemption feature192193 - The company applied ASC 470, Debt, to account for the repayment of its debt, recognizing a $9.6 million loss on extinguishment in Q1 2021194195 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company identifies two primary market risks: warrants liability, sensitive to common stock price changes, and foreign currency risk from global operations - The company is subject to market risk from its outstanding warrants liability, which was valued at $12.8 million as of March 31, 2021197 - A 10% increase or decrease in the company's common stock price would result in a corresponding $1.7 million increase or decrease in the fair value of the Series A Warrants198 Item 4. Controls and Procedures As of March 31, 2021, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective201 - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2021202 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports on a privacy class action lawsuit (Rushing, et al v. The Walt Disney Company, et al.) where a settlement was reached and received final court approval on April 12, 2021 - The company reached a settlement in the Rushing, et al v. The Walt Disney Company, et al. privacy class action lawsuit, which received final court approval on April 12, 2021118206 Item 1A. Risk Factors The company highlights a new risk factor concerning the planned implementation of a new enterprise resource planning (ERP) system in the second half of 2021, which could adversely affect financial reporting and business operations - A new risk factor has been identified related to the implementation of a new enterprise resource planning (ERP) system planned for the second half of 2021208 - Potential issues with the ERP implementation include delays, errors, and disruptions that could impair financial reporting, distract management, and negatively impact the business208 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On January 25, 2021, the company issued 2,802,454 shares of its common stock as a payment-in-kind for $6.1 million in interest due on its senior secured convertible notes, an unregistered sale under Section 4(a)(2) of the Securities Act - On January 25, 2021, the company issued 2,802,454 shares of common stock in lieu of a $6.1 million cash interest payment on its notes209 Item 5. Other Information On May 5, 2021, the company entered into a new three-year senior secured revolving credit agreement with Bank of America, providing a borrowing capacity of $25.0 million and including financial covenants effective at future dates - On May 5, 2021, the company entered into a new three-year, $25.0 million senior secured revolving credit agreement214215 - The credit agreement includes financial covenants for minimum Consolidated EBITDA (starting before June 30, 2022) and a minimum Fixed Charge Coverage Ratio (starting on or after June 30, 2022)218219 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, agreements related to the recent preferred stock issuance and data license agreement, and officer certifications