Comscore Inc (SCOR) 2008 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the Third Quarter 2008 COMSCORE Inc.

Earnings Conference Call.

My name is [Shaquana] and I will be your coordinator for today.

At this time all participants are in a listen only mode.

We will facilitate a question and answer session towards the end of this conference.

(Operating Instructions)

I would now like to turn the call over to your host for today, Mr.

John Green, Chief Financial Officer.

Please proceed, sir.

Hello everyone, this is actually Magid Abraham.

I want to welcome everybody to this conference call.

We have two announcements that we have issued this afternoon.

One of them is related to a major new service or enhancements to our Media Metrix service.

It's called COMSCORE Extended Web.

And this has been published on PR Newswire, and it's also available on our website and we've sent it to our mailing list which I believe most of you are on.

The earnings release unfortunately PR Newswire has been having some trouble with it and I'm told it will be out in five minutes, but it has been on our website for the last 15 to 20 minutes or so and it has also been emailed.

So, for those that want to grab it from our website and read it, you're more than welcome to do so.

We expect that PR Newswire will carry it live in a couple of minutes now.

And while we're doing that, I'm going to ask John to read the introduction and the Safe Harbor statement.

Thanks, Magid and good afternoon everybody.

Welcome to the COMSCORE's Earnings Call for the Third Quarter 2008.

Before we begin please allow me to read the following statement to inform you of certain Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

During the course of today's presentation as well as any discussions and questions and answer periods that follow representatives of the company may make forward-looking statements within the meaning of Section 21A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding future events or financial performance of the company that involves risks and uncertainties including, without limitation, the expected strength of COMSCORE's business, customer growth and client's demands for COMSCORE's products, the future quality of client relationships and resulting renewal rates, expected results from profitability of COMSCORE's acquisition of their metrics, and forecast of future financial performance included belated growth rates and assumptions for the second half and the full year of 2008.

Such statements are only predictions based on management's current expectations.

Actual events or results could differ materially from those predictions due to a number of risks and uncertainties including those enumerated in the documents COMSCORE files from time to time with the SEC.

Those documents specifically include but are not limited to COMSCORE's Form 8K filed earlier today relating to the subject matter of this earnings call, COMSCORE's Form 10K for the year ended December 31, 2007 and COMSCORE's Form 10Q for the quarter ended June 30, 2008.

These filings may contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

We caution you not to place undue reliance on any forward-looking statements included in these presentations which speak only as of the date of these presentations.

COMSCORE does not undertake any obligation to publicly update any forward-looking statements to reflect new information after today's call or to reflect the occurrence of unanticipated events.

I'll now turn the call over to Magid.

Magid?

Thank you, John, and thanks to those of you who are joining us today on this call.

In the face of a challenging economic environment COMSCORE has had a very successful third quarter highlighted by strong revenue growth and better than expected profitability.

Our third quarter revenue of $30.7 million was up 37% year over year and 7% sequentially, which was at the top end of our guidance range.

Had the dollar remained at the same level as at the end of Q2, our revenue would have been $30.9 million which was up 38% from last year.

Our strong growth is being driven by the continued expansion of our existing customer relationships and a growing number of customers aligning with COMSCORE to maximize the impact of their websites and advertising dollars.

During the quarter we saw strong growth from both new and existing customers on a year over year and sequential basis.

Combined with a high level of execution and effective expense management we were able to deliver profitability that was at the top end or above our guided ranges for each profitability metric.

GAAP EPS for COMSCORE's third quarter was $0.2 per share at the high end of our guidance range of $0.1 to $0.2.

The $0.2 GAAP EPS includes a write down of $450,000 in the value of our auction rate securities which amounts of $0.015 per share.

EPS on a non-GAAP basis was $0.19 per share compared to our prior guidance of $0.13 to $0.14 and compared to -- and our adjusted EBITDA was $7.2 million also above the top end of our guidance range of $5.4 million to $5.7 million.

Needless to say we are very pleased with this profit performance.

We're also pleased with this performance particularly given the macroeconomic backdrop, considering the fact that the market environment deteriorated considerably during the last month of the third quarter due in large part to the turmoil in the financial markets.

Despite what's likely to be a tighter spending environment across the global economy we remain very confident in COMSCORE's long term growth prospects.

Our industry leading suite of products enables property owners and advertisers to measure and analyze behavior of internet audiences so that they can improve the effectiveness of their internet presence.

It's critical that advertisers maximize the return on their advertising dollars, particularly in a tough economic environment and COMSCORE becomes an even more integral component of how our customers maximize their efficiency and effectiveness.

This value is reflected by our subscription renewal rate remaining above the 90% level during the third quarter.

We are really excited about our extended web service reporting that we announced earlier today.

The extended web features allow publishers and advertisers to track distributed web content across third party websites such as video, music, gaming applications, widgets and social media.

It will allow publishers to report audience reach and characteristics of their various sales packages, enabling them to market those packages more effectively and help agencies plan their campaigns at the more granular level.

Some examples of the types of content that extended web can measure might include a New York Times news widget appearing on a personal blog, an NBC "The Office" widget appearing on the My Yahoo homepage, a National Geographic photo of the day appearing on a personal iGoogle page.

We also are adding a measure of GRP or Gross Rating Points to ease the comparison of online with other traditional media-like tv and provide the ability to measure ad impressions at the individual level.

Finally, this would allow the measurement of multiple ad networks that can sell inventory on any given page at the multitude of third party website.

We believe these capabilities will help us attract new customers and further expand our relationships within existing customers.

This offering has been endorsed by a number of industry leaders such as Ted Leonsis, Chairman of Clearspring and SnagFilm, John Battelle, Chairman of Federated Media; Bill Wilson, EVP programming at AOL, Samir Arora, Chairman and CEO of Glam Networks, Eric Porres, Partner and CEO of Underscore Marketing; Michael Matheiu, CEO of YuMe, [Gerard Busard], VP of Media at WPP's Group M, [Russ Graden], CEO of [Edify], Fred Wilson, Managing Partner of Union Square Ventures, and Jameson Hsu, CEO of Mochi Media.

We have quotes like, "Once again COMSCORE comes to the rescue," or "COMSCORE continues to innovate," or "unique solution," or "vital information," "COMSCORE's at the forefront," and "quality third party measurements from the market leaders." All these quotes reflect the value of this offering and the wide recognition of COMSCORE's innovation and market leadership.

On the Metrix side we have been actively building out our roadmap that incorporates base COMSCORE functionality in a mobile format thus broadening that product line as early adopters look to COMSCORE for leadership in this emerging space.

We have rapidly integrated the Metrix mobile data to the COMSCORE infrastructure product suite to leverage the scale and power of our platform and combined customer base.

In the coming months, you can expect to see further expansion of our mobile measurement products and services, including the measurement of additional platforms such as Android, Blackberry and other important platforms.

We will also be significantly increasing the number of mobile internet sites that we track as well as initiating the first panel of a combined behavioral tracking on both mobile phones and PCs.

This recent progress in the mobile space increases our confidence in the long term vision for the Metrix and our product line extension in the mobile space.

During the third quarter, we signed an agreement to measure the mobile internet behavior of millions of subscribers.

We will have more news for you as this relationship progresses but we believe it represents and important springboard for COMSCORE into the emerging mobile internet market.

Over time we expect the mobile market to become increasingly mainstream, particularly in international markets and our early leadership position in this strategic space combined with our clear market leadership position on the web will be clear differentiators for COMSCORE.

Turning to customer metrics, from an overall perspective we also saw continued momentum expanding our relationships with existing customers as well as signing up new customers during the third quarter.

During the quarter we added 107 new customers on a gross basis which is comparable with the level of our customer adds in recent quarters.

While our dollar renewal rates remained as strong or even stronger than our historical levels, we saw a greater number of customers with prolonged approval cycles -- approval processes for renewal agreements under a challenging economic environment.

We also saw a few smaller customers dropping out due to funding and economic difficulties.

This led to net new customer additions of 32 and a quarter ending customer count of 1,136.

This issue aside, we believe that COMSCORE is well positioned to continue growing the business at a solid pace during these more challenging times driven by continued high level of dollar renewal rates and expansion of our business with existing and new customers.

In fact, we expect to deliver fourth quarter revenues that's up 27% to 31% on a year over year basis and 4% to 8% on a sequential basis in spite of the fact that we expect next year end spending (inaudible) to our project revenue that's normally funded from leftover 2008 budgets and we are facing greater foreign exchange headwinds as a result of the strengthening U.S.

dollar.

We believe this is a strong performance considering the economic environment and I should point out that we will continue to focus on driving profitability and cash flow as well.

To summarize, COMSCORE has had a tremendously successful third quarter from an overall perspective.

There are fundamental market drivers for our solution as what property owners and online advertisers need to measure and analyze behavior of their audience, particularly given the dynamic and increasing trends of customers utilizing new media channels for information and entertainment.

The ability to measure, analyze and determine (inaudible) in these areas are as important or more so in a softening economy as it is in a robust economy.

As John will cover in a moment, we have revised our top line outlook for the year primarily due to three factors.

Less positive year end seasonality in Q4 project revenue and the negative impact of the stronger dollar which depresses our local currency denominated revenue.

To a lesser degree we adjusted our view as to the face with which we will ramp our efforts in the banking and institution of investor sectors given the weaknesses and volatility in the financial markets which you may be well able to appreciate.

We continue to expect strong revenue growth both quarter over quarter and year over year during the fourth quarter driven by strong growth of our subscription revenue.

We will continue to invest in our strategic growth initiatives and at the same time manage expenses closely to ensure that COMSCORE is positioned to deliver strong profitability and cash flow without sacrificing our long term revenue growth potential.

While no company is entirely immune to the pressures of the current economic environment, we continue to believe that COMSCORE is better positioned than most as a result of our large market opportunity, our proven value proposition, our Blue Chip customer base and a clear market leadership position and significant barriers to entry.

In addition, we share the sudden news in our major new product launch that we believe will increase our value and our ability to maintain and expand our customer relationships.

Now let me turn the call over to John for more specific comments on our financial results and our outlook for the fourth quarter and the full year.

Thanks, Magid.

COMSCORE's third quarter revenue was $30.7 million which is up 37% year over year and 7% sequentially.

Within total revenue, revenue from subscription customers was $25.7 million up 44% year over year and representing 84% of our total revenue.

This large and growing base of revenue provides COMSCORE with visibility into future revenue and the ability to manage our expense and investment profile to deliver targeted levels of profitability.

Revenue from project customers was $5 million up 10% year over year and representing the remaining 16% of our total revenue.

From a detail perspective, revenue contribution from both existing new customers was strong in the quarter with revenue from existing customers at $25.8 million up 35% year over year and revenue from new customers was $4.9 million up 49%.

We believe this reflects an appreciation of the value proposition and return on investment that we bring to our customers.

International trends continue to be strong as well and improved 86% year over year to $4.6 million with 15% of revenue in the third quarter generated from outside the U.S.

compared with 11% a year ago.

Turning to our profitability, third quarter 2008 GAAP income before taxes was $1.8 million compared to $3.9 million in the third quarter of 2007.

GAAP net income was approximately $600,000 compared to $3.8 million in the third quarter 2007.

Reflected in GAAP net income for the third quarter of 2008 is the normalized effective rate of 68% including a cash tax rate of 18%.

The normalized effective tax rate was negatively impacted by current year net losses incurred by certain Metrix International subsidiaries for which the full benefits not realized by other COMSCORE subsidiaries plus a moratorium that the State of California has placed through 2009 on new laws in NOLs.

GAAP EPS was $0.2 in the third quarter based on $30.4 million fully diluted shares outstanding.

Looking at the results in a non-GAAP basis, adjusted EBITDA was $7.2 million, an increase of 59% year over year.

COMSCORE's adjusted EBITDA margin the third quarter was approximately 23% compared to the 20% level from a year ago.

We were able to beat our adjusted EBITDA expectations as a result of strong revenue and effective cost controls while continuing to invest in growth initiatives.

Non-GAAP adjusted net income for the third quarter of 2008 was $5.7 million, an increase of 24% compared to $4.6 million in the third quarter of 2007.

Operating cash flow for the third quarter 2008 was $3.8 million with CapEx of $2 million leaving the pre-cash flow total of $200,000 for the quarter.

Excluding the impact of the MMetrix acquisition transition related costs, pre-cash flow for basic COMSCORE was approximately $4 million in the third quarter of 2008.

As of September 30, 2008, our company held approximately $67.6 million in cash, cash equivalents and short term investments and $6.4 million in long term investments.

This figure is up from about $400,000 from the end of the second quarter.

The company continues to hold auction rate securities which are a long term investment balance and during the third quarter we recognized as Magid said an unrealized loss of $455,000 associated with these investments.

Most significantly we continue to have a sizeable cash balance invested very conservatively which provides COMSCORE with ample liquidity to invest in our growth initiatives particularly when combined with our positive cash flow.

Turning to our updated guidance for 2008 and for the fourth quarter, for the full year 2008 COMSCORE now anticipates revenue to be in the range of $117.8 million to $119 million, a growth of 35% to 37%.

As Magid pointed out, the adjustment to our overall top line outlook for 2008 is based on three factors: revised seasonal spending expectations relative to project revenue as a result of a challenging global economic environment; foreign exchange impact from the strengthening of the U.S.

dollar; and to a lesser degree the softness in the banking and institutional investment management sectors.

We believe our customers continue to find tremendous value in measuring and analyzing online audience behavior that we can continue to demonstrate a strong value proposition to them regardless of the macro environment.

With our strong third quarter results and an increased focus on cost controls, we expect strong profitability for the balance of this year.

For the full year 2008, we're anticipating GAAP net income of $5.9 million to $6.4 million.

This includes the effect of certain nonrecurring acquisition related expenses, Starface compensation, an amortization of certain potential assets.

An estimated normalized effective tax rate of approximately 48%, including an estimated cash tax rate of approximately 6% is assumed to be applied against our full year earnings before taxes.

Given these assumptions we're projecting a GAAP EPS for the full year 2008 of $0.19 to $0.21 per share.

We expect adjusted EBITDA for the full year 2008 in the range of $25.4 million to $26.8 million, $1 million, which is essentially in line with our full year guidance provided on our last call.

We expect non-GAAP adjusted net income of approximately $21.5 million to $22.1 million and non-GAAP EPS of $0.71 to $0.73 per share for the full year 2008 also unchanged from prior year guidance.

This full year guidance translates into fourth quarter expectations for revenue in the range of $32 million to $33.2 million, an increase of 27% to 31% compared to the fourth quarter of 2007.

For the fourth quarter of 2008, we expect GAAP net income of $1.1 million to $1.6 million.

An estimated normalized effective tax rate of approximately 48% including estimated cash tax rate of approximately 6% is assumed to be applied against fourth quarter earnings before taxes.

For the fourth quarter we are forecasting GAAP EPS of $0.4 to $0.5 per share.

Adjusted EBITDA for the fourth quarter of 2008 is expected to be $6.2 million to $6.9 million representing adjusted EBITDA margin of 19% to 21% at the midpoint of our revenue guides.

We anticipate non-GAAP adjusted net income for the fourth quarter of 2008 of $4.9 million to $5.5 million or $0.16 to $0.18 per share.

As always a reconciliation of the guidance for the fourth quarter and full year 2008 GAAP net income EPS to the adjusted EBITDA non-GAAP adjusted net income and non-GAAP EPS is included in the table accompanying our press release.

I would like to finish with two items that may potentially impact our GAAP results in the fourth quarter that are not currently factored in our current guidance.

First, as of September 30, 2008, the company had a valuation allowance of $26.4 million against certain deferred tax assets which consist principally of net operating loss carried forward.

The company has continued to evaluate this valuation allowance position on a regular basis.

Depending on the actual results for the fourth quarter 2008 and projected operating results for 2009 and beyond, there may be sufficient evidence to support the conclusion that all or a portion of the remaining valuation allowance on our deferred tax assets to be reduced in the fourth quarter of this year.

It is expected that any such reduction of the company's valuation allowance will have a material positive impact on its results from operations in the quarter when the reversal is recorded.

The company's forecasted GAAP net income and non-GAAP net income figures we presented do not reflect any adjustments related to a reversal of the company's valuation allowance.

A potential reversal of the valuation allowance affects booking income only.

There would be no impact on operating or pre-cash flow until the net operating losses were actually utilized against the taxable income.

This is a reference point and as a reminder in the fourth quarter 2007 the company realized a tax benefit of $8.1 million related to an adjustment of the valuation allowance.

The second item I'd like to cover which could impact our reported fourth quarter results is a potential special charge related to the integration MMetrix associated with leads terminations and modifications that could total up to $1.5 million.

If both events occurred during the fourth quarter, the tax benefit resulting from any adjustment to the company's valuation allowance would more than offset the one time charges to MMetrix.

Importantly, while these events have the potential to impact our GAAP net income results even if they were to occur they would not impact our adjusted EBITA or non-GAAP guidance.

In summary, we are pleased to have net or exceeded our third quarter expectations.

We remain very confident in our market opportunity and leadership position which we believe will enable COMSCORE to continue to deliver solid financial results in the face of significant global economic pressures.

In addition to driving growth with existing and new customers, we will continue to focus on managing our expenses closely to deliver strong profitability in the margins while selectively investing in key initiatives to ensure that we are able to maximize our long term growth potential.

With that, Operator, we are now ready to take questions from the audience.

(Operating Instructions)

Your first question comes from the line of Youssef Squali with Jefferies & Co.

Please proceed.

Yes, hi.

This is [Novert Cahn] for Youssef.

So, my first question is about the deferred revenues.

These were down slightly quarter on quarter.

Is this simply because the pace of the (inaudible) slowed down or because you lost some smaller customers?

It's primarily the reflection of Citadel not being renewed on a exclusive basis.

One can also anticipate that deferred revenue gradually will move in line with what our revenue growth is.

I see.

And of the 32 new customers are just signed in the third quarter, can you say how many of these were subscribers and break out how many were for the core [Black -- Palm] versus the MMetrix?

Again it was primarily on the subscription side as well as a number of new customers in MMetrix and we're also very encouraged that the average selling price for those new customer ads was well above whatever attrition we experienced from smaller companies.

Okay.

And then lastly can you update us on the percentage of your subscriber list which is under multi-year contract?

It's now 32%.

And that's again a reflection of the Citadel agreement which was a five year agreement now that that dollar amount is lower.

So, excluding Citadel that percentage actually has gone up.

So, is this -- is 32% of percentage of revenue or is it a percentage of the subscriber base?

That's 32% of our overall subscription revenue base, dollar revenue base.

Got it.

Okay, that's all I have.

Thanks.

Thanks.

Your next question comes from the line of Troy Mastin with William Blair & Co.

Please proceed.

Good afternoon.

Thank you.

First I wanted to ask about the fourth quarter guidance and what sort of bookings activity is anticipated in that guidance versus where you stood in the third quarter or where things were last year?

We don't provide bookings activity and I think that we've kind of shed light in terms of where we see kind of the market conditions that we've modified our full year revenue guidance accordingly.

Is it fair to assume your anticipating a slow down in new customer additions on a revenue basis versus where you've been recently?

Again, we've identified that it's on the project side and related to the banking consolidation and the [five site sell] side that network in refining our revenue guidance for the fourth quarter.

So, if it is bookings related or new acquisition related it would be solely from the financial vertical?

Again, that's where it's primarily from.

It would be for the projects that we typically get at the end of the year due to leftover budget that will be across the board because we think that most companies are going to take everything off the table that is leftover fourth quarter money.

Okay.

And on those three items you identified projects, currency and the financial vertical it sounds like that's in the order of magnitude of impact, is that correct?

Roughly.

Yes.

Okay.

And if those are the only three things affecting the fourth quarter guidance projection, then it sounds like the 90% of your business I believe is the right number is not related to the financial services vertical.

Excluding projects has it so far been relatively unaffected by the environment?

Is that a fair statement.

Well it's a difficult environment as we have you know said before.

We have not really noticed a strong impact on it.

I'll say the first this notion of a couple of dozen clients that we did not have in a customer account but we would categorize as pending renewals that sort of a more recent phenomenon that is really driven by company's scrutinizing more what contracts they sign, having more approval processes and all of that.

And there are always put and takes in our business, but you know the fundamentals are that those are the areas that we think the majority of the economic impact will be localized.

Okay.

And then how should we think about a moderation in your growth rate in the context of what's primarily a subscription model so I think you sort of lose momentum and it takes time for these factors to work their way completely into your growth rate.

So, if you think through the three forces affecting the fourth quarter if they carry into next year, how long does it take until we kind of normalize to a new growth level if my question makes sense?

Yes, I mean on the project side you typically have on the project side that has a shelf life of about four months.

On the subscription side clearly it has a shelf life of about a year.

So, those would be the factors.

You know compensating for that is that we this extended web offering that we are making clearly it's a new offering that will tap into additional budgets.

And so it you know I'll say under normal circumstances it would have been -- I would be very excited about the potential that that brings because if you think about it companies may have dozens of advertising packages and those advertising packages for every one of them they would pay a fee for reporting on them.

There are dozens and dozens of companies that we cannot measure right now given sort of this distributed nature of the web that we will be able to measure with the extended web service.

And so it will open a door for a number of either new customers or existing customers that have these sign up capabilities that will subscribe to this new service.

Now we just launched it as you can see, I don't know if you had a chance to read the press release, but as you can see there is some very enthusiastic response to it and how quickly that's going to translate into revenue is something I'm not going to hazard a guess on.

But fundamentally I think it is a -- it is something that strengthens our competitive position.

We are the only ones that are offering it in the marketplace.

It brings more value to customers.

It makes the planning of media more concrete.

And it is something that is very important for us.

I would say almost as close to a game changer as we can get with a new product in production.

And then one more final question.

You announced a new mobile panel that you secured through partnership I think you said millions of panelists.

Can you give us an ideal of what type of partner this is, if there's a cost associated with getting access to these panelists?

We're actually getting paid for capturing this data.

But unfortunately I cannot -- there are some confidentiality issues related to this agreement that we expect to be lifted sometime hopefully in November in which case we'll be able to talk more about it.

Can you tell us if that data is yours to resell or if that would remain with the party?

The partner?

That is a -- there is an agreement that's being negotiated about our ability to resell this data with obviously a revenue share.

But fundamentally we are being paid for the building and the gathering of the system and the reporting infrastructure and then incremental revenue beyond that will be generated and we're still in the negotiation process as far as what revenue is shared.

Okay, great.

Sounds like a good deal.

Thanks.

Thanks.

Your next question comes from the line of Jason Helfstein with Oppenheimer.

Please proceed.

Thanks.

It's a good thing you guys don't limit it to one question.

Two easy ones.

One, on the margin guidance.

It's 24 for this quarter for the fourth quarter versus 24 last year.

Can you talk about what costs are weighing on margins and are these temporary or permanent costs and does this have to do with a new product launch?

And then secondly, can you get any of that lost project revenue for the fourth quarter to become part of subscription revenues next year when you renew agreements?

Thanks.

I guess first we're continue to invest in the business and those initiative that we've outlined earlier this year in terms of expanding overseas and into new products and into M:Metrics so that's all reflected in our fourth quarter guidance and we anticipate that that's going to yield a very attractive revenue in '09 and beyond.

So, that's the one point.

And then in terms of -- you know it's really the project revenue that has been a big source of subscription revenue growth and so what we're anticipating is that if metrics are constrained at year end we certainly anticipate that we'll realize some of that project revenue go into '09 and then similar to what we've been able to realize in the past convert a lot of that to subscription revenue agreements.

Thank you.

Your next question comes from the line of Mark May with Needham & Company.

Please proceed.

Hi, this is Clark Long calling in for Mark May.

I was wondering I could get two housekeeping questions in first and then have a follow up after that.

First, what number of subscribers did you end with in the quarter?

And what was the organic growth rate at MMetrix?

Again, we're just giving total customer count and so the total customer count was 1,136.

And the organic growth rate at MMetrix?

That's something that we are not breaking out separately.

We're just reporting consolidated COMSCORE results.

Okay and just a broader question I guess.

You mentioned some of the -- you guys lost some of the smaller customers.

I was wondering in addition to the macro economic environment whether this had something to do with competitive landscape where lower cost providers are starting to take a share?

No, no, no we have not lost any competitive face off situations.

Okay, and also given that you now are expecting a slower ramp in the institutional investors and financial sector selling to those verticals, when do you expect to be able to make up for the loss of the Citadel contract?

You tell us when the stock market will improve and we'll tell you when that's going to happen.

I mean it's really hard to make a forecast on that before getting some visibility on the equity markets.

You guys had mentioned that you had generated some interest before from potential clients.

Have you guys lost any of those?

Is that why you guys are slowing down your ramp or is there something else?

Well we have a couple of large contracts that are still in discussions.

I think some of the more what I would call retail contracts some of them have slowed down or are being deferred and frankly I'm not optimistic that we're going to be in a position of getting into that again before our investing in anything.

And also how dramatic do you think the drop off in project revenues will be in the fourth quarter?

Well (inaudible) we were expecting we think it's about $800,000.

That is the drop off being $800,000?

Yes.

All right.

Thank you.

Your next question comes from the line of William Morrison with Thinkpanmure.

Please proceed.

Hi, thanks.

I was wondering if you could talk a little bit more about your expectations for customers going -- customer ads going forward.

Historically you've guided to I believe somewhere around 40 to 50 net customer ads a quarter.

Do you expect the levels to maintain around where they were at this quarter or bounce back to that level over the next few quarters?

Just what are your expectations on customer ads?

And then secondly, can you talk a little bit more about the types of customers that weren't renewing, the smaller customers.

Were they publishers, advertisers or agencies?

Thanks.

As far as -- we're highly confident that the number of new customer ads is -- will continue to be strong and as we said early 107 new customers that we added here.

I think the -- as far as the net customer ad I think this is going to be affected by how many customers don't get funding or go out of business and you know that's really hard to forecast.

And then the second thing if the delayed approval cycles extend beyond the end of the year then we may see some of the same phenomenon that we saw here.

In other words, some of the customers that we have been delayed from Q3 we'll sign up in Q4 but some of the customers that would be expected to sign up in Q4 will sign up in Q1.

Now I want to say that some of these delays by the way don't really have a revenue impact or that much of a revenue impact, And the reason is that when a client customer expires, let's say it expires in September they have the right to September data which would be issued in October and the next data level that they would be getting would be in October which would be issued in November.

So, customers have the ability of continuing to get the data even though there is technically a gap of one month of when they sign.

Our ability to take revenue on that is still preserved because we're delivering the same number of monthly data.

Now you mentioned -- you asked is there a pattern to the -- some of these customer drop offs.

It tends to be fairly even.

I would say the one area that it seems to be sort of proportionally slightly higher than the rest is in some of the sort of stock up mobile companies that are dependent on mobile modernization which is slower in coming so some of these companies are retrenching.

But again in terms of absolute numbers it's a pretty small number.

If you don't mind I'll ask one more question.

What percent of revenue in the quarter was from the big four: Yahoo, Google, Microsoft and AOL?

Can you remind us when those -- I believe you're one multi-year contracts with most or all of them?

Can you mind us when those renewals are up?

Microsoft is approximately 12% of total revenue and we don't give out statistics for the others because of the fact that Microsoft is about 10%, it's the only one.

So, what's the top, what do we have the top 20 --?

So, in terms of the top 20 it was about 38% of total revenue on a year to date basis.

So, that's a decrease in concentration from 42% from the quarter.

And when is Microsoft's renewal up?

It was renewed.

It was renewed this past year?

It was renewed in July or August.

On multi-year?

Usually Microsoft has a one year cycle.

We don't let them sign multi-year agreements.

Okay.

Thank you very much.

Your next question comes from the line of Jeetil Patel with Deutsche Bank.

Please proceed.

Hey, thanks, this is actually Herman calling in for Jeetil.

Hey, Herman.

Hey.

Quick question I guess on the contract pricing.

I think you guys talked about a little bit of prolonged renewal process on the contract.

I was wondering if you could talk about you know what type of push back are you seeing and how October trends are tracking right now.

It's -- we don't see anything significant in the trends in October than we have seen.

In our core business I think we're -- we really don't have any anxiety in terms of renewals and we're constantly adding value to our clients so we are always striving to increase our revenue from existing clients.

By the way the increase in revenue from existing clients this quarter was 34%, 35% ...?

It was 35%.

35%.

So, that's again a reflection of you know our ability to increase (inaudible) of relationships and to be able to raise prices and up sell.

So, that's something that you know we're very pleased with and it's not a dynamic that we at this point, of course no one can forecast where things will exactly end up at this point, it's not something that we are worried about.

But is there any push back on you know I think a bigger chunk of your contract renewals is in the back half of this year, is there any push back on pricing, any term dynamics that you've seen a higher level of other than just the timing of the closing of the contracts?

Nothing unusual.

Nothing.

And last question I guess, have you assessed the profile of -- in the nature of, I guess, you're 1,136 customers that you have -- have you done any work assessing the profile and the risk profile of any more of these customers sort of going out of business or shutting down or things of that nature?

We have one specific which is that the customers that have contracts with us have less than $25,000.

They represent 4% of our revenue.

Okay.

Thanks.

Your next question comes from the line of Heath Terry with FBR Capital Markets.

Please proceed.

Great, thank you.

I was wondering if you could give us an update on your certification efforts around data quality and just what kind of initiatives are in place as you continue to work on the data quality front as far as securing that kind of certification and then also just continuing to kind of reassure customers?

Well as far as the MRC certification is concerned we have a five days process, we have completed two of them and we're starting the third phase.

You know as we said from the very beginning the MRC accreditation process is a process that actually now concluded by COMSCORE and we expect that two years -- so another year is a realistic timeframe for it but it could take longer.

There have been cases that have taken -- the worst case I think has been 12 years.

But that said we also have undergone a review by the Advertising Research Foundation and we have seen a draft of the final review which we expect to be published in the next 30 days or so, so we think that that's one element of external validation that would be good.

That doesn't diminish in any way our commitment to work with the MRC.

I think we're proceeding and are on track and committed to transparency.

We have also come up with a number of ways to tighten up the accuracy of our projections.

We have come up with some methodology that would leverage the availability of census data on certain websites that would allow us to improve the projections of our website.

So, needless to say this is really an area that is very important to us and we will continue making progress on it.

In our extended web measurement service, one of the options that will be available to people is to be able to beacon every page.

We are doing for instance that now already on videos and we are reporting the actual number of streams that we are seeing every time that user anywhere is running that video.

Great.

Thank you very much.

(Operating Instructions)

Your next question comes from the line of Sandeep Aggarwal with Collins Stewart.

Please proceed.

Thank you.

Two questions.

One is that given that venue acquired on MMetrix on market was very different, I wanted to ask how MMetrix is meeting your internal goals in terms of gross sell as well as the margin ramp up?

And secondly, as we run into global weakness how does it impact your international ramp up especially many of the geographies where you have already penetrated?

Well as we said today we are not second guessing our MMetrix acquisition.

In fact I'm very glad we made it.

I think we need to keep in mind that you know I'm not sure exactly where the stats are -- three billion cell phones or so compared to less than a billion PCs.

In many countries like in India that's going to be the main source of access to the web.

Certainly access outside the U.S.

is very important.

I think Android in addition to the iPhone has been game changers in terms of access.

So, we really wanted to be on the high ground and we achieved that on the high ground so you know from that standpoint I think this was a very, very important acquisition for us and we're glad we made it.

I also think that some of you know the contracts that we talked about in terms of tracking the behavior of millions of subscribers that is something that we -- that has a good potential expanding into many more countries.

And in a way it will accelerate our international expansion.

It is you know it's somewhat early to tell whether the economy is going to have an impact on that, but as far as we see there is just an acceleration of demand for that.

As far as how MMetrix has lived to our expectations, I think that we had two elements to the MMetrix plan.

One element was that you know we inherited a cost structure that was in the $18 million to $20 million range.

We had to work the heck out of it and we did and we had said that we expect that MMetrix would be break even to EBITDA positive at the end of the year and we expect that to be the case in December.

So, I think that we are meeting those targets now.

You know the only thing that I would say is a little bit of a disappointment is the sort of the attrition phenomenon that we're seeing with a number of these sort of wireless players that you know we're banking on a high increase in spending on mobile advertising and there is clearly some retrenchment in that.

The counterbalancing effect of that is that we think that there is a lot of potential in cross selling MMetrix with -- within the rest of our customer base.

So, while you know pure breed mobile advertising is something that's going to be slower to materialize, I think a lot of publishers are highly interested in making sure that their content can be used on the appropriate mobile devices.

And, you know, by the way, they generate revenue from that because the same way as someone sees a webpage on PCs they see it on a mobile phone, they're going to get credit for that ad.

So, there is revenue that will be generated from increasing the audience on those devices.

I think we still have a significantly untapped opportunity in terms of doing that and that is something that we're looking forward to next year.

The one thing that we have done is a couple of weeks ago we have actually fully integrated our sales forces to be able to encourage this cross selling activity now that we have the operational integration completed.

Thanks very much.

You have a follow up question from the line of Mark May with Needham & Company.

Please proceed.

Hi, it's [Carl] again.

I was just wondering so excluding Citadel would deferred revenue had been up about $1.5 million given that the Citadel contract was about $3 million a year?

Between $1 million and $1.5 million.

Okay.

And also in terms of I guess you guys divide your sales force into kind of hunters and farmers, I was wondering what the kind of current numbers are and what projections for the end of the year are?

We have 118 quota carrying sales people in total and so we're basically on track in terms of our goal that we set at the beginning of the year of adding an additional 30 to base COMSCORE.

And then on top of that we also had about 14 MMetrix salespeople that came on board.

Thanks.

At this time there are no further questions.

Okay.

Well thank you very much.

We look forward to the next call.

Thank you very much.

Thank you for your participation in today's conference.

This concludes the presentation.

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