comScore(SCOR) - 2021 Q4 - Annual Report

PART I Business Comscore is a global information and analytics company measuring advertising, content, and consumer audiences across various media platforms Overview Comscore measures audiences and advertising across multiple media platforms using proprietary data science to provide a common standard for transactions - Comscore measures advertising, content, and consumer audiences across platforms like connected TVs, mobile devices, computers, TV, OTT, and movie screens[19] - The company's proprietary data science enables person-level and household-level audience measurement, removing duplicated viewing across devices[19] - Customers include a wide range of media ecosystem players such as digital publishers, television networks, movie studios, brand advertisers, and agencies[19] Recent Key Developments In 2021, Comscore experienced leadership changes, acquired Shareablee for social media insights, and raised $204.0 million through strategic investments - Jonathan Carpenter was appointed as CFO and Treasurer, effective November 29, 2021, while CEO William Livek announced his planned retirement in February 2022[21][22] - Acquired Shareablee, Inc. on December 16, 2021, for up to $45.0 million, integrating social media engagement insights into its Media Metrix® and Video Metrix® products[23][25] - Completed strategic investment transactions with Charter, Qurate, and Pine on March 10, 2021, issuing Series B Convertible Preferred Stock for $204.0 million to repay outstanding senior secured convertible notes[26] Our Approach to Media Measurement Comscore's measurement approach combines extensive data collection from panels and third-party sources with advanced data science for cross-platform audience insights - Data collection methods include proprietary consumer panels, website/app tagging, licensed third-party data, and TV viewership information from millions of screens[30] - Key data science innovations include the UDM methodology for combining panel and server data, cross-platform audience de-duplication, and accredited Invalid Traffic filtration methods[33] Our Products and Services Comscore's products are organized into Ratings and Planning, Analytics and Optimization, and Movies Reporting and Analytics, covering audience measurement, campaign evaluation, and box office results - Products and services are categorized into Ratings and Planning, Analytics and Optimization, and Movies Reporting and Analytics solution groups[35] - Ratings and Planning products (e.g., Media Metrix, TV Essentials) measure audience size, reach, and demographics across TV and digital platforms[36] - Analytics and Optimization products (e.g., vCE, Lift Models, Activation Solutions) offer solutions for ad campaign planning, validation, and evaluation[36][37] - Movies Reporting and Analytics products (e.g., Box Office Essentials, PostTrak) provide real-time measurement of movie ticket sales and audience demographics worldwide[38] New Product Investments and Releases Comscore is developing privacy-centric, cookieless solutions, launching Predictive Audiences, enhancing Branded Content reporting with AI, and introducing Consumer Intelligence for local markets - The company is adapting to a privacy-centric, cookieless environment by leveraging panel data and participating in industry initiatives like the ANA's Cross-Media Measurement pilot[40][41] - Launched 'Predictive Audiences' in Q1 2021, a cookie-free targeting solution for digital, mobile, and CTV campaigns[43] - Partnered with Hive to use AI-powered computer vision for logo detection, enhancing Branded Content reporting to measure audience size and demographics[44] - Introduced 'Comscore Consumer Intelligence,' a local market tool providing granular insights into consumer purchasing behavior and media interaction[45][46] Competition Comscore operates in a highly competitive market, competing with full-service research firms, TV measurement startups, and online advertising companies based on accuracy and product breadth - Key competitors include Nielsen, Ipsos, GfK, VideoAmp, iSpot, Google, Facebook, DoubleVerify, Integral Ad Science, SimilarWeb, and Adobe Analytics[50] - Competition is based on providing accurate, deduplicated audience measurement across digital and TV platforms, data reliability, technological adaptation, and product breadth[50] Government Regulation and Privacy Comscore's business is subject to complex and evolving U.S. and international data privacy laws, including GDPR, CCPA/CPRA, and LGPD, with non-compliance risking substantial penalties - The company is subject to numerous data security and privacy laws, including GDPR in Europe, CCPA/CPRA in California, and LGPD in Brazil[53][54] - Failure to comply with these evolving regulations could result in substantial penalties and affect the company's ability to conduct business effectively[54] Human Capital Management As of January 31, 2022, Comscore had 1,355 employees, with a focus on Product and Technology, emphasizing employee engagement, diversity, and inclusion Employee Distribution by Function (as of Dec 31, 2021) | Functional Area | Percent of Employees | | :--- | :--- | | Product and Technology | 53% | | Sales and Service | 22% | | Movies | 14% | | General and Administrative | 11% | - As of January 31, 2022, the company had 1,355 employees and 145 contingent providers/contractors[56] - The company promotes diversity and inclusion, with 40% of its global workforce being female and 40% of its U.S. employees identifying as a person of color as of year-end 2021[65] Risk Factors The company faces substantial risks from the COVID-19 pandemic, intense competition, reliance on third-party data, evolving privacy regulations, operational failures, and financial challenges including net losses and debt obligations - Business & Technology Risks: The COVID-19 pandemic could continue to have adverse effects, intense market competition, failure to provide complete analytics or respond to technological developments, and critical dependence on third-party data pose significant threats[85][89][93][96][97] - Operational & Financial Risks: Failure to meet analyst expectations, a history of net losses, potential inability to service debt and dividend obligations, and further impairment of goodwill are key financial concerns[86][124][128][131][137] - Legal & Regulatory Risks: Concerns over privacy violations and data breaches, domestic and foreign laws (like GDPR, CCPA) limiting data collection, and intellectual property infringement claims present ongoing legal challenges[87][142][146][150] - Capital Structure Risks: Holders of Series B Preferred Stock have significant influence and consent rights, potentially conflicting with common stockholders' interests, and the credit facility contains restrictive covenants limiting operational flexibility[88][162][169] Properties Comscore's corporate headquarters are in Reston, Virginia, occupying 84,000 square feet, with additional leased offices globally, though most employees currently work remotely - The corporate headquarters in Reston, Virginia, consists of approximately 84,000 square feet of leased office space[184] - Other material leased locations include offices in Portland, New York, and Chicago[189] - As of December 31, 2021, the company leased facilities in 25 locations globally, with about 45,000 square feet being subleased[184] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Comscore's common stock trades on Nasdaq under 'SCOR', with 104 stockholders of record as of February 24, 2022, and its performance lagged major indices from 2016 to 2021 - The company's common stock is traded on The Nasdaq Global Select Market under the symbol "SCOR"[191] - As of February 24, 2022, there were 104 stockholders of record[192] - The stock performance from 2016 to 2021 lagged behind major indices including the Nasdaq Composite, S&P MidCap 400, and Nasdaq Computer Index[193] Management's Discussion and Analysis of Financial Condition and Results of Operations Comscore's 2021 total revenue increased by 3.1% to $367.0 million, driven by Analytics and Optimization growth, while reporting a net loss of $50.0 million and improving cash from operations to $9.9 million Results of Operations In 2021, total revenues grew 3.1% to $367.0 million, primarily from Analytics and Optimization, resulting in a net loss of $50.0 million and increased cost of revenues due to higher data costs Consolidated Statement of Operations Summary (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenues | $367,013 | $356,036 | $388,645 | | Total expenses from operations | $395,878 | $377,311 | $699,112 | | Loss from operations | $(28,865) | $(21,275) | $(310,467) | | Net loss | $(50,037) | $(47,918) | $(338,996) | Revenues by Solution Group (2021 vs 2020, in thousands) | Solution Group | 2021 | 2020 | $ Variance | % Variance | | :--- | :--- | :--- | :--- | :--- | | Ratings and Planning | $255,073 | $253,652 | $1,421 | 0.6% | | Analytics and Optimization | $81,306 | $69,080 | $12,226 | 17.7% | | Movies Reporting and Analytics | $30,634 | $33,304 | $(2,670) | (8.0)% | | Total revenues | $367,013 | $356,036 | $10,977 | 3.1% | - Cost of revenues increased by $22.3 million (12.4%) in 2021, primarily due to a $10.6 million increase in data costs, including an expanded license with Charter[222] - Selling and marketing expenses decreased by $3.3 million (4.7%) in 2021, driven by lower commission expense and reduced office footprint[225] - General and administrative expenses increased by $6.0 million (10.7%) in 2021, mainly due to higher stock-based compensation and professional fees related to a new ERP system implementation[231] Liquidity and Capital Resources Comscore's liquidity was significantly impacted by raising $204.0 million from preferred stock issuance in March 2021 to repay senior notes, resulting in $9.9 million net cash from operations Cash Flow Summary (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $9,856 | $717 | $(4,636) | | Net cash used in investing activities | $(14,648) | $(15,555) | $(10,460) | | Net cash (used in) provided by financing activities | $(22,452) | $(2,096) | $31,973 | - On March 10, 2021, the company raised $204.0 million in gross proceeds by issuing Series B Convertible Preferred Stock, using the funds to repay its senior secured convertible notes[260][261] - Entered into a new revolving credit agreement on May 5, 2021, with $16.0 million in borrowings and $3.3 million in letters of credit outstanding as of December 31, 2021[262][263] - As of December 31, 2021, the company has a total fixed payment obligation of $325.8 million for data licensing agreements with MVPDs, with terms ranging from one to nine years[290] Critical Accounting Estimates Comscore's critical accounting estimates involve significant judgment in revenue recognition, particularly for bundled contracts, and annual goodwill impairment analysis using discounted cash flow and market approaches - Revenue Recognition: Significant judgments are required to identify distinct performance obligations and estimate the standalone selling price (SSP) for bundled products, impacting the timing and amount of revenue recognized[296][298] - Goodwill Impairment: Goodwill is tested annually by comparing the fair value of the single reporting unit to its carrying value, determined using discounted cash flow and market approaches reliant on key assumptions[299][301] - Key assumptions for the 2021 goodwill impairment analysis included a long-term growth rate of 3.0% and a discount rate of 19.0%[303][304] - As of the October 1, 2021 annual assessment, the estimated fair value of the reporting unit exceeded its carrying value by approximately 40%, indicating no impairment[307] Quantitative and Qualitative Disclosures About Market Risk Comscore is exposed to interest rate risk from variable-rate borrowings, financial instrument risk from warrants sensitive to stock price, and foreign currency risk from global operations - The company is subject to interest rate risk on its Revolving Credit Agreement, which has a variable rate based on the Daily SOFR[311] - The warrants liability, valued at $10.5 million at year-end 2021, is subject to market risk, where a 10% increase in stock price would increase Series A Warrants' fair value by $1.5 million[313][314] - The company has foreign currency risk from its global operations, with a 10% adverse change in foreign currency values potentially increasing the net loss by approximately $5.7 million for 2021[315][317] Financial Statements and Supplementary Data This section presents Comscore's audited consolidated financial statements for the three years ended December 31, 2021, including balance sheets, statements of operations, cash flows, and detailed notes Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on Comscore's 2021 financial statements and internal controls, highlighting critical audit matters in revenue recognition, goodwill impairment, and preferred stock accounting - Deloitte & Touche LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[322][323] - Critical Audit Matter 1: Revenue recognition, focusing on judgments in identifying performance obligations, determining transaction prices, and allocating them[327][328] - Critical Audit Matter 2: Goodwill impairment analysis, specifically the significant judgments in forecasting future revenue and selecting the discount rate[331][333] - Critical Audit Matter 3: Accounting for the preferred stock transaction, highlighting the complexity of analyzing embedded derivative features and classification[337][339] Consolidated Financial Statements The consolidated financial statements show Comscore's total assets at $663.5 million and total liabilities at $252.4 million as of December 31, 2021, with a net loss of $50.0 million for the year Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total current assets | $109,107 | $137,030 | | Total assets | $663,474 | $677,970 | | Total current liabilities | $165,371 | $184,275 | | Total liabilities | $252,413 | $448,980 | | Convertible redeemable preferred stock | $187,885 | $— | | Total stockholders' equity | $223,176 | $228,990 | Consolidated Statement of Operations Data (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenues | $367,013 | $356,036 | $388,645 | | Loss from operations | $(28,865) | $(21,275) | $(310,467) | | Net loss | $(50,037) | $(47,918) | $(338,996) | | Net loss per share (Basic & Diluted) | $(0.78) | $(0.67) | $(5.33) | Notes to Consolidated Financial Statements The notes detail the Shareablee acquisition for $31.4 million, the $204 million Series B Preferred Stock issuance and senior notes extinguishment, lease obligations, and related party transactions - Acquired Shareablee on December 16, 2021, for total purchase consideration of $31.4 million, resulting in $19.2 million of goodwill and $12.6 million of definite-lived intangible assets[442][444] - As of December 31, 2021, the company has approximately $210 million of revenue expected to be recognized from remaining performance obligations under long-term contracts[454] - Issued 82,527,609 shares of Series B Convertible Preferred Stock for net proceeds of $187.9 million, with a 7.5% cumulative annual dividend, classified as mezzanine equity[455][462][361] - Used proceeds from the preferred stock issuance to extinguish $204.0 million of senior secured convertible notes, resulting in a loss on extinguishment of $9.3 million[495][498] - As of December 31, 2021, the company had federal and state net operating loss carryforwards of $620.0 million and $1,403.0 million, respectively, subject to limitation[542] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, an assessment also affirmed by Deloitte & Touche LLP - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of December 31, 2021[565] - Management concluded that internal control over financial reporting was effective as of December 31, 2021, an assessment audited by Deloitte & Touche LLP, which also issued an unqualified opinion[566][567] - A new enterprise resource planning (ERP) system was implemented in Q3 2021, leading to changes in reporting processes and internal controls[569] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the company's 2022 Proxy Statement[584] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the company's 2022 Proxy Statement[586] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the company's 2022 Proxy Statement[587] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the company's 2022 Proxy Statement[588] Principal Accounting Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the company's 2022 Proxy Statement[589] PART IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the Annual Report on Form 10-K, with other schedules omitted as inapplicable - This section contains the list of financial statements and exhibits filed as part of the 10-K report[592]