Business context and reporting period
Comscore, Inc. is a global audience, consumer behavior and advertising measurement company with one operating segment. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2022; amounts below are in U.S. dollars. The company appointed Jonathan Carpenter CEO and Mary Margaret Curry CFO, effective July 6, 2022.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $91.4 million | $87.7 million | $185.4 million | $178.0 million |
| Gross margin | 43.7% | 41.4% | 43.7% | 41.5% |
| Operating loss | $11.3 million | $10.9 million | $21.9 million | $22.3 million |
| Net loss | $5.1 million | $18.5 million | $14.3 million | $54.9 million |
| Net loss per common share, basic and diluted | $0.10 | $0.28 | $0.24 | $0.76 |
Second-quarter revenue grew 4.3%; first-half revenue grew 4.2%. Cross Platform Solutions revenue rose 13.2% in Q2 and 11.3% in the first half, while Digital Ad Solutions declined 1.7% and 0.7%, respectively. Operating losses remained broadly similar year over year. Lower net losses chiefly reflect favorable year-over-year movements in the fair value of warrants and, for the first half, the absence of the prior-year debt extinguishment loss and substantial interest expense.
For the six months ended June 30, operating cash flow was $24.2 million, versus $10.9 million a year earlier; investing cash outflow was $8.3 million, and financing cash outflow was $17.0 million. Cash, cash equivalents and restricted cash declined $2.2 million to $20.1 million. Management attributed improved operating cash flow primarily to working-capital movements, including higher revenue, shorter billing cycles and improved collections, partly offset by payments to reduce payables.
At June 30, cash and cash equivalents were $19.6 million and restricted cash was $0.4 million. The company had $16.0 million drawn on its $40.0 million revolving facility, $3.3 million of letters of credit, and $20.7 million of remaining borrowing capacity. It reported compliance with the amended facility’s covenants. Current assets of $91.2 million were below current liabilities of $153.1 million. The company also had $187.9 million of convertible redeemable preferred stock recorded outside permanent equity, with a $204.0 million liquidation preference.
Material changes versus prior comparable periods
- Cross Platform growth was attributed to new TV partnerships, higher renewal contract values, increased agency adoption and recovery in movie attendance. First-half Cross Platform revenue also included $3.0 million of cloud-computing and processing cost reimbursements.
- Digital Ad revenue was pressured by lower Activation usage in Q2 and, in the first half, the absence of $2.4 million of European license revenue recognized in Q1 2021; custom digital solutions partly offset the declines.
- First-half general and administrative expense increased 22.7% to $35.2 million, including CEO-retirement severance and a $2.4 million loss from remeasurement of Shareablee contingent consideration.
- The warrant liability remeasurement generated $7.0 million of income in the first half of 2022, compared with $16.5 million of expense in the first half of 2021. These fair-value changes affect reported earnings but are non-cash.
Outlook, risks and unusual items
The filing provides no specific full-year revenue, earnings or cash-flow guidance. Management cautions that interim results are not necessarily indicative of full-year results. Remaining performance obligations on qualifying non-cancelable contracts were approximately $215 million at June 30; the company expects to recognize about 29% during the remainder of 2022, 38% in 2023 and 16% in 2024, with the balance thereafter.
Liquidity depends on operating cash generation, customer collections and available revolver capacity. Risks include ongoing net losses, the ability to reduce trade payables and meet obligations, customer payment delays, COVID-19 effects on media and entertainment demand, and broader economic uncertainty. The company also identified potential indirect risks from the Russia-Ukraine conflict, including sanctions, cybersecurity and operational disruption, but did not then expect a direct material business impact.
Preferred stock carries a cumulative 7.5% annual dividend, and $15.5 million was paid on June 30, 2022; the next scheduled payment date is June 30, 2023. Holders may also request a one-time special dividend, subject to contractual conditions; financing it could require additional debt and affect liquidity or the revolving facility. The company disclosed significant potential dilution from preferred-stock conversion, warrants, equity awards and possible stock settlement of Shareablee consideration. Shareablee contingent consideration was valued at $8.0 million, with expected installments of $3.7 million, $3.7 million and $1.2 million in 2022, 2023 and 2024, respectively. Management said current pending legal matters were not expected to materially affect financial position, results or cash flows, while noting litigation outcomes are uncertain. The company reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether Cross Platform growth can continue and Digital Ad Solutions can stabilize, especially given lower Activation usage and regional product trends.
- Whether operating cash flow remains positive after working-capital benefits, and whether the company can manage payables and other contractual commitments.
- Compliance with revolving-credit covenants, the availability and cost of borrowing, and the impact of the SOFR-based rate and future fixed-charge coverage test.
- The cash and potential financing implications of preferred dividends, any special dividend request, and the extent of dilution from preferred stock, warrants and other share-settled obligations.
- Progress against the $215 million of remaining performance obligations and the assumptions underlying Shareablee contingent consideration.