comScore Returns to Revenue Growth for the First Quarter 2018

COMSCORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

March 31, 2018

December 31, 2017

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$

67,266

$

37,859

Restricted cash

7,564

7,266

Accounts receivable, net of allowances of $1,779 and $1,991, respectively ($1,487 and $2,899 of accounts receivable attributable to related parties)

70,902

82,029

Prepaid expenses and other current assets

15,581

15,168

Insurance recoverable on litigation settlements

37,232

37,232

Total current assets

198,545

179,554

Property and equipment, net

26,894

28,893

Other non-current assets

8,106

7,259

Deferred tax assets

4,252

4,532

Intangible assets, net

151,275

159,777

Goodwill

643,006

642,424

Total assets

$

1,032,078

$

1,022,439

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable ($227 and $2,715 attributable to related parties)

$

26,223

$

27,889

Accrued expenses ($1,442 and $5,857 attributable to related parties)

68,966

86,031

Accrued litigation settlements

27,447

27,718

Other current liabilities

9,428

10,485

Deferred revenue ($2,386 and $2,755 attributable to related parties)

96,388

98,367

Financing derivatives, current

4,100

—

Total current liabilities

232,552

250,490

Financing derivatives

11,020

—

Senior secured convertible notes

126,246

—

Deferred tax liabilities

4,259

3,641

Accrued litigation settlements

90,800

90,800

Other non-current liabilities

18,458

21,016

Total liabilities

483,335

365,947

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at March 31, 2018 and December 31, 2017; no shares issued or outstanding as of March 31, 2018 and December 31, 2017

—

—

Common stock, $0.001 par value per share; 100,000,000 shares authorized as of March 31, 2018 and December 31, 2017; 60,382,466 shares issued and 55,017,670 shares outstanding as of March 31, 2018 and 60,053,843 shares issued and 57,289,047 shares outstanding as of December 31, 2017, respectively

60

60

Additional paid-in capital

1,414,109

1,407,717

Accumulated other comprehensive loss

(4,609)

(6,224)

Accumulated deficit

(661,277)

(609,091)

Treasury stock, at cost, 5,364,796 and 2,764,796 shares as of March 31, 2018 and December 31, 2017, respectively

(199,540)

(135,970)

Total stockholders' equity

548,743

656,492

Total liabilities and stockholders' equity

$

1,032,078

$

1,022,439

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three Months Ended March 31,

2018

2017

Revenues ⁽¹⁾

$

105,919

$

100,861

Cost of revenues^{(1) (2) (3)}

47,254

47,313

Selling and marketing ^{(1) (2) (3)}

25,905

29,733

Research and development^{(1) (2) (3)}

18,716

21,020

General and administrative^{(1) (2) (3)}

18,661

17,785

Investigation and audit related ⁽¹⁾

31,867

17,678

Amortization of intangible assets

8,544

8,735

Settlement of litigation, net

—

1,533

Restructuring

1,257

—

Total expenses from operations

152,204

143,797

Loss from operations

(46,285)

(42,936)

Interest expense, net⁽¹⁾

(2,905)

(154)

Other income, net

77

3,184

Loss from foreign currency transactions

(922)

(20)

Loss before income taxes

(50,035)

(39,926)

Income tax provision

(1,415)

(866)

Net loss

$

(51,450)

$

(40,792)

Net loss per common share:

Basic

$

(0.93)

$

(0.71)

Diluted

(0.93)

(0.71)

Weighted-average number of shares used in per share calculation - Common Stock:

Basic

55,227,046

57,274,851

55,227,046

57,274,851

Comprehensive loss:

Net loss

$

(51,450)

$

(40,792)

Other comprehensive income:

Foreign currency cumulative translation adjustment

1,615

603

Total comprehensive loss

$

(49,835)

$

(40,189)

⁽¹⁾ Transactions with related parties are included in the line items above (refer to Footnote 8, Related Party Transactions, of the Notes to Condensed Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2018 for additional information).

⁽²⁾ Amortization of stock-based compensation expense is included in the line items above as follows:

Three Months Ended March 31,

2018

2017

Cost of revenues

$

213

$

629

Selling and marketing

575

1,446

Research and development

344

821

General and administrative

749

924

$

1,881

$

3,820

⁽³⁾ Excludes amortization of intangible assets, which is presented separately in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

COMSCORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended March 31,

2018

2017

Operating activities

Net loss

$

(51,450)

$

(40,792)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

4,563

6,129

Amortization of intangible assets

8,544

8,735

Stock-based compensation

1,881

3,820

Deferred tax benefit

906

879

Change in fair value of financing derivatives

2,180

—

Change in fair value of equity securities

449

—

Accretion of debt discount

752

—

Amortization of deferred financing costs

207

—

Other

(69)

806

Changes in operating assets and liabilities:

Accounts receivable

11,095

8,271

Prepaid expenses and other assets

(597)

(14,932)

Accounts payable, accrued expenses, and other liabilities

(19,761)

19,807

Deferred revenue

(3,498)

5,325

Net cash used in operating activities

(44,798)

(1,952)

Investing activities

Purchase of property and equipment

(2,657)

(2,999)

Net cash used in investing activities

(2,657)

(2,999)

Financing activities

Proceeds from borrowings on senior secured convertible notes

85,000

—

Debt issuance costs

(4,315)

—

Financing proceeds received on subscription receivable (related party)

3,065

1,259

Repurchase of Common Stock (withholding taxes)

(4,099)

(1,262)

Principal payments on capital lease and software license arrangements

(2,859)

(4,499)

Net cash provided by (used in) financing activities

76,792

(4,502)

Effect of exchange rate changes on cash

368

(1,721)

Net increase (decrease) in cash, cash equivalents and restricted cash

29,705

(11,174)

Cash, cash equivalents and restricted cash at beginning of period

45,125

88,341

Cash, cash equivalents and restricted cash at end of period

$

74,830

$

77,167

Three Months Ended March 31,

2018

2017

Cash and cash equivalents

$

67,266

$

72,635

Restricted cash

7,564

4,532

Total cash, cash equivalents and restricted cash

$

74,830

$

77,167

Reconciliation of Non-GAAP Financial Measures

The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods identified:

Three Months Ended March 31,

(In thousands)

2018

2017

Net loss (GAAP)

$

(51,450)

$

(40,792)

Income tax provision

1,415

866

Interest expense, net

2,905

154

Depreciation

4,563

6,129

Amortization of intangible assets

8,544

8,735

EBITDA

(34,023)

(24,908)

Adjustments:

Stock-based compensation

1,881

3,820

Investigation and audit related ⁽¹⁾

31,867

17,678

Settlement of litigation, net

—

1,533

Restructuring costs

1,257

—

Other income, net ⁽²⁾⁾

2,629

13

Adjusted EBITDA

$

3,611

$

(1,864)

⁽¹⁾ Amounts represent charges for matters relating to the Audit Committee investigation described in our Annual Report on Form 10-K for the year ended December 31, 2017, including litigation and investigation-related costs, costs associated with tax projects, audits and other professional, consulting or other fees.

⁽²⁾ In 2018, adjustments to other income, net, reflect non-cash changes in the fair value of financing derivatives and equity securities investments included in other income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.  These financial instruments were not held in the prior period.  The prior period adjustment to other income, net reflects items classified as non-operating other income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss, excluding the other income associated with the transition services agreement for the DAx disposition. Our change to exclude non-operating other income, net from our calculation of Adjusted EBITDA for 2018 is intended to conform Adjusted EBITDA to the Consolidated EBITDA definition within our senior secured convertible notes.

The following table presents a reconciliation of non-GAAP net loss to net loss (GAAP) for each of the periods identified:

Three Months Ended March 31,

(In thousands)

2018

2017

Net loss (GAAP)

$

(51,450)

$

(40,792)

Adjustments:

Stock-based compensation

1,881

3,820

Investigation and audit related ⁽¹⁾

31,867

17,678

Settlement of litigation, net

—

1,533

Restructuring costs

1,257

—

Other income, net ⁽²⁾

2,629

13

Non-GAAP net loss

$

(13,816)

$

(17,748)

⁽¹⁾ Amounts represent charges for matters relating to the Audit Committee investigation described in our Annual Report on Form 10-K for the year ended December 31, 2017, including litigation and investigation-related costs, costs associated with tax projects, audits and other professional, consulting or other fees.

⁽²⁾ In 2018, adjustments to other income, net, reflect non-cash changes in the fair value of financing derivatives and equity securities investments included in other income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss.  These financial instruments were not held in the prior period.  The prior period adjustment to other income, net reflects items classified as non-operating other income, net on our Condensed Consolidated Statements of Operations and Comprehensive Loss, excluding the other income associated with the transition services agreement for the DAx disposition. We have excluded non-operating other income, net from our calculation of non-GAAP net loss for 2018.

Supplemental Non-GAAP Disclosures

The following table presents a reconciliation of certain non-GAAP expense line items (to be discussed on today's conference call) to the most directly comparable GAAP expense line items.

Three Months Ended March 31,

2018

2017

(In thousands)

As reported (GAAP)

Less: Stock-based Compensation

As adjusted (non-GAAP)

% of GAAP Revenue

As reported (GAAP)

Less: Stock-based Compensation

As adjusted (non-GAAP)

% of GAAP Revenue

Revenues

$105,919

100.00%

$100,861

100.00%

Cost of revenues

47,254

(213)

47,041

44.41%

47,313

(629)

46,684

46.29%

Selling and marketing

25,905

(575)

25,330

23.91%

29,733

(1,446)

28,287

28.05%

Research and development

18,716

(344)

18,372

17.35%

21,020

(821)

20,199

20.03%

General and administrative

18,661

(749)

17,912

16.91%

17,785

(924)

16,861

16.72%