comScore, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparison is Q1 2021. comScore is a global audience, content and advertising measurement and analytics company with one reportable segment. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $94.0 million | $90.3 million |
| Operating loss | $10.5 million | $11.5 million |
| Net loss | $9.3 million | $36.4 million |
| Net loss per common share | $0.14 | $0.49 |
| Operating cash flow | $12.4 million | $17.9 million |
| Capitalized software and other investing outflows | $3.8 million | $3.7 million |
- Revenue grew 4.0%. Digital Ad Solutions revenue was $53.1 million, essentially flat; Cross Platform Solutions rose 9.5% to $40.8 million.
- Operating margin improved to approximately negative 11.2% from negative 12.7%. Cost of revenue was 56.3% of revenue versus 58.3%; general and administrative expense increased 25.2% to $18.1 million.
- Net loss improved largely because Q1 2021 included a $9.6 million debt-extinguishment loss and substantially higher interest expense, as well as a large warrant remeasurement loss. Q1 2022 included a $2.4 million gain from remeasuring warrants.
- Cash, cash equivalents and restricted cash totaled $30.1 million at quarter-end. The company had $16.0 million drawn on its revolving facility and $20.7 million of remaining capacity, after $3.3 million of letters of credit. Total assets were $655.7 million and total liabilities were $254.6 million.
- Preferred stock is presented outside permanent equity: its carrying amount was $187.9 million, with a stated aggregate liquidation preference of $215.7 million. Accrued preferred dividends were $11.7 million; the 7.5% annual cumulative dividend was scheduled for cash payment on June 30, 2022.
Changes, outlook and key risks
- Revenue growth reflected higher Activation usage, Lift and custom digital solutions; new TV partnerships, renewals and agency adoption; and a $1.4 million increase in movies revenue as theater attendance recovered. Digital revenue faced a $2.4 million prior-year European license item. Q1 2022 Cross Platform revenue included $2.0 million of cloud and processing cost reimbursements.
- Management said it expected movies revenue to increase sequentially through 2022 as consumers returned to theaters. The filing provides no numerical full-year revenue or earnings guidance.
- Operating cash flow declined year over year, primarily because less cash was generated from operating assets and liabilities, including larger payments reducing accounts payable and accrued expenses.
- Liquidity depends on operating cash generation, customer collections and access to financing. Management noted that continued losses, delayed customer payments, trade-payable obligations and market conditions could constrain funding. The company was in compliance with revolving-credit covenants at March 31, 2022.
- The amended $40 million revolving facility carries a SOFR-based rate; its covenants include minimum EBITDA and asset-coverage tests through 2022 and a fixed-charge-coverage test beginning in 2023. A preferred-stock special dividend could require new debt financing and could affect liquidity or the revolver.
- Preferred stock, warrants, equity awards and Shareablee consideration create substantial potential dilution. The preferred stock was convertible into approximately 87.3 million common shares at quarter-end; the filing also describes warrant and equity-award share reserves.
- Shareablee contingent consideration was remeasured to $7.9 million at quarter-end after milestones were considered sufficiently achieved. In April 2022, the full amount was deemed payable, subject to agreement terms and indemnification claims; expected installments are $3.7 million in 2022, $3.7 million in 2023 and $1.2 million in 2024, payable in cash and/or stock at the company’s election.
- Fixed data-license payment obligations were $318.5 million, with estimated variable payments of $19.5 million over two years; lease obligations were $58.6 million and cloud-storage and bandwidth commitments were $17.2 million. These are contractual commitments, not all current-period expenses.
- COVID-19-related customer and movie-theater impacts may persist. The company also cited uncertainty from Russia’s invasion of Ukraine, including sanctions, cybersecurity and macroeconomic risks, while not expecting a direct material impact at the time of filing. Pending legal matters were not expected by management to materially affect results, though outcomes remain uncertain.
Important facts for investors to verify
- Whether revenue growth and the anticipated recovery in movies continue, and whether Cross Platform gains offset flat Digital Ad Solutions revenue.
- Cash conversion, customer collections, payables reduction and available revolver capacity relative to upcoming commitments and preferred-dividend obligations.
- Ongoing compliance with credit covenants, the cost and availability of additional financing, and any potential special dividend requirement.
- The timing and settlement form of Shareablee contingent consideration, plus dilution from preferred conversion, warrants and equity awards.
- The effect of related-party arrangements, including Charter data-license costs, and changes in data, cloud and infrastructure expenses.