Business context and reporting period
Comscore, Inc. (NASDAQ: SCOR) is a media measurement and analytics company serving advertisers, publishers, broadcasters, studios and technology providers. This Form 10-K covers the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter report. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $367.0 million | $356.0 million |
| Gross profit / gross margin | $164.0 million / 44.7% | $175.3 million / 49.2% |
| Operating loss / margin | $28.9 million / 7.9% | $21.3 million / 6.0% |
| Net loss | $50.0 million | $47.9 million |
| Net loss per common share | $0.78 | $0.67 |
| Operating cash flow | $9.9 million | $0.7 million |
| Cash, cash equivalents and restricted cash, year-end | $22.3 million | $50.7 million |
Revenue rose 3.1%, but cost of revenue increased 12.4%, compressing gross margin by approximately 4.5 percentage points. Higher data licensing, systems and employee costs contributed. Analytics and Optimization revenue grew 17.7% to $81.3 million; Ratings and Planning increased 0.6% to $255.1 million; Movies Reporting and Analytics declined 8.0% to $30.6 million. Management attributed the movies decline largely to pandemic-related theater closures and delayed releases earlier in the year.
Investing cash outflow was $14.6 million, including $14.7 million of capitalized internal-use software costs. Operating cash flow less capitalized software and property/equipment purchases was approximately negative $5.7 million (a simple cash-flow proxy, not a company-reported free-cash-flow measure). Current assets were $109.1 million versus current liabilities of $165.4 million at year-end.
At December 31, 2021, Comscore had $16.0 million drawn on its revolving credit facility and $3.3 million of letters of credit outstanding; the facility had $5.7 million of remaining capacity at that date. A February 2022 amendment increased facility capacity to $40.0 million and remaining capacity to $20.7 million. The facility is secured, has financial and operating covenants, and matures in May 2024. The company reported covenant compliance at year-end.
Material changes versus the prior comparable period
- Revenue recovered modestly from 2020, although it remained below 2019’s $388.6 million.
- Operating loss widened by $7.6 million, and net loss widened by $2.1 million. The 2021 results included a $9.6 million debt-extinguishment loss; interest expense fell to $7.8 million from $35.8 million after repayment of prior debt.
- Cash and restricted cash fell $28.5 million year over year. Operating cash generation improved, but cash was used for debt repayment, preferred dividends and other financing needs.
- In March 2021, Comscore issued $204.0 million of convertible preferred stock to Charter, Qurate and Pine, receiving $187.9 million net of issuance costs. Proceeds principally repaid $204.0 million of senior secured convertible notes; the company also repaid a $13.0 million secured term note.
- In December 2021, Comscore acquired Shareablee for consideration valued at $31.4 million, principally stock, with up to $8.6 million of contingent consideration. The acquisition added social-media measurement capabilities; its 2021 contribution was not material to consolidated revenue.
Outlook, risks and unusual items
The filing gives no formal revenue or earnings guidance. Management expected sequential quarterly improvement in Movies Reporting and Analytics as audiences returned to theaters. Beginning in 2022, the company planned to report revenue in two revised solution groups, Digital Ad Solutions and Cross Platform Solutions; on a 2021 basis, management estimated these would represent approximately 60% and 40% of revenue, respectively.
Management highlighted continuing COVID-19 effects on customer contracting, collections and the movies business; intense competition; dependence on third-party data suppliers and access to representative panels; subscription renewals and customer concentration (top ten customers accounted for 35% of 2021 revenue); and evolving privacy laws, consent requirements and technology changes. Other material considerations include preferred-stock dividends and potential special-dividend obligations, covenant and refinancing risk, substantial potential dilution from preferred-stock conversion and other securities, and fair-value volatility in warrants and contingent consideration.
Preferred stock carries a cumulative 7.5% annual dividend, with a higher accrual rate if a scheduled payment is missed. Preferred holders may request a one-time special dividend subject to contractual conditions; financing it could affect liquidity and borrowing flexibility. The 2021 net loss available to common stockholders was $62.7 million after $12.6 million of preferred dividends, including accrued amounts.
Management and the auditor reported effective internal control over financial reporting, and the auditor issued an unqualified opinion on the financial statements. Goodwill was $435.7 million at year-end; the October 2021 impairment test estimated reporting-unit fair value approximately 40% above carrying value, but management cautioned that changes in forecasts, discount rates or market conditions could lead to future impairment.
Important facts for investors to verify
- Whether revenue growth can continue while data costs and other delivery costs remain elevated, and whether gross margin stabilizes.
- Whether operating cash flow can fund capital investment, preferred dividends, lease and data commitments, and trade-payable reductions; review the $325.8 million of fixed MVPD data-license commitments and the company’s payment schedule.
- The implications of preferred-stock dividends, any special-dividend request, conversion rights, investor governance rights and potential share dilution.
- Post-amendment revolver capacity, interest expense, covenant headroom and compliance in subsequent reporting periods.
- Progress integrating Shareablee and realizing expected cross-platform and commercial benefits, including contingent payments.
- Customer retention and concentration, privacy-law compliance, data access and panel adequacy, and the effect of theater recovery on the movies business.