Comscore Inc (SCOR) 2011 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth-quarter 2011 comScore Inc.

earnings conference call.

My name is Lacey and I will be your coordinator for today.

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

We will facilitate a question-and-answer session towards the end of the presentation.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

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

Ken Tarpey, Chief Financial Officer.

Please proceed.

Thank you very much.

Good morning and welcome to comScore's earnings call for the fourth quarter and full year 2011.

Again, I am Ken Tarpey, CFO of comScore.

On the phone with me today is a Magid Abraham, our President, CEO, and Co-Founder.

Before we begin please allow me to read the following disclaimer regarding our use of forward-looking information and non-GAAP financial measures.

During the course of today's call as well as during any question-and-answer period that may follow, representatives of the Company may make forward-looking statements within the meaning of Securities Act of 1933 and the Securities Exchange Act of 1934 regarding future events or performance of the Company that involve risks and uncertainties including without limitation the strength of comScore's business, expectations as to opportunities including new customers and markets for comScore.

Expectations as to the growth and composition of comScore's customer base and renewal rates, expectations regarding the impact and benefits of particular lines of business and products, expectations regarding the relative quality of comScore's products, expectations regarding comScore's acquisitions, expectations regarding comScore's intellectual property rights, expectations regarding the results of comScore's settlement with Nielsen.

Assumptions regarding tax rates and net operating loss carry forwards, and forecasts of future financial performance for the first quarter and the full year of 2012, including related growth rates, exchange rates and assumptions.

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 identified in the documents comScore files from time to time with the Securities and Exchange Commission.

Those documents specifically include, but are not limited to, comScore's form 8-K filed earlier today relating to this call, comScore's form 10K for the period ending December 31, 2010, and comScore's form 10-Q for the period ending September 30, 2011.

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

We do 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.

In addition, we may also reference certain non-GAAP financial measures in the course of our presentation.

You will find in our press release and on our Investor Relations website a reconciliation of non-GAAP financial measures discussed during today's call to the most directly comparable GAAP financial measure.

The link to our Investor Relations website is ir.comscore.com and our results are posted under Press Releases.

With that, I will now turn the call over to Magid.

Thank you Ken and thank you all for joining our earnings conference for the fourth quarter of 2011.

We are pleased to report good revenue performance and very good EBITDA performance, both sequentially and year-over-year despite the negative impact of foreign exchange headwinds in Q4.

We entered 2012 well-positioned to drive top line growth by offering innovative best-in-class solutions that enable publishers, advertisers and agencies to optimize their digital strategies while continuing to focus on our execution to drive further margin expansion.

Revenue in the fourth quarter was $22.6 million, a 22% increase from the fourth quarter of 2010, and 7% up sequentially.

Our fourth-quarter revenue was negatively affected by foreign exchange fluctuations which reduced the revenue growth by $600,000, or 1 percentage point in growth.

Still, we executed strongly and produced adjusted EBITDA of $15.4 million, a 34% increase from a year ago and representing adjusted EBITDA margin of 24.6%, the highest level in two years.

Activity at both new customers and existing customers remained healthy in the quarter.

We added 54 net new customers in the quarter, consistent with our recent quarter's performance.

And our subscription renewal rate was well into the 90%-plus range on a constant dollar basis in our seasonally strongest quarter for renewals.

Our international business continues to expand with revenue from outside the United States up 56% from a year ago.

On a full-year basis we delivered a strong performance as well.

Full-year 2011 revenue was $232.4 million, up 33% from 2010, and adjusted EBITDA was $47.1 million representing EBITDA margin of 20.3%.

Beyond the financial statistics, 2011 was a year of substantial investment and accomplishment for comScore.

We believe we have laid the foundation for compelling offerings in three analytic segments that complement our traditional audience analytics business which continues its robust growth in its own right.

In the area of advertising analytics, the year culminated with the implementation of validated Campaign Essentials, or in short, vCE, which we officially introduced to great industry reception on January 18, 2012.

vCE enables the validation of advertising exposures which are served by an ad server and counted but may never actually reach a real user.

vCE also delivers essential campaign metrics such as validated reach and frequency, validated GRP, audience demographic composition, and in an industry first, behavioral segmentation.

During the fourth quarter we executed an oversubscribed charter program with campaigns from a dozen blue chip advertisers and their agencies in the CPG, auto, financial services, and telecom markets.

Participating clients included industry leaders such as Kraft, General Mills and Kimberly Clark in CPG, Ford and Chrysler in auto, Allstate, Discover and eTrade in financial services, HTC and Sprint in telecom.

The results of the program we shared with the industry at the vCE launch event last month.

They showed that an average of 35% of the campaign impressions were not valid.

With validation failures, varying from 7% to over 90% across sites.

They also demonstrated that the true reach of a campaign is substantially lower than what is traditionally reported based on gross impressions and traditional GRP metrics that include nonvalid impressions.

We are extremely gratified by early customer and industry interest in vCE, not only from advertisers and agencies but from publishers as well.

Many clients and industry observers have characterized the product as industry-changing.

Within the last two weeks we have signed up several new and charter vCE customers and we are developing a very healthy pipeline consisting of both pilots and extended commitments.

We will use pilots aggressively to achieve ubiquity among marketers and agencies.

Eventually we expect these pilots to translate into broader and longer-term commitments with a progressively growing contribution to our top and bottom line.

On the web analytics front, we started seeing payoff from our integration and product development efforts throughout 2011.

Revenue from our digital analytics suite grew strongly in the fourth quarter and the business was accretive to EBITDA for the first time.

We are encouraged by the early customer activity so far in 2012, which we expect to translate into accelerated bookings that will gradually accrue into revenue on expanded margins later in the year.

As we mentioned on previous calls, our Xplore suite of carrier analytics is breaking new ground in integrating carrier network, data and subscriber usage data to help wireless operators effectively leverage the opportunities and challenges of skyrocketing mobile data usage across the globe.

Despite initial startup delays in our cross-media partnership with AT&T, we have successfully delivered our first suite of four-screen measurement reports including TV, mobile, tablet and PC usage to CIMM, which is the Coalition of Innovative Media Measurement, made up of leading TV broadcasters, marketers and advertising agencies.

We are also pleased for being selected to measure NBC Universal's four-screen audience for this year's Summer Olympics.

On the international front, our global expansion has hit it's strides with international business contributing 27% of our total revenue in the second half of 2011.

We expect our strong growth to continue, fueled by our expanding geographical footprint, the anticipated endorsement of several important local industry bodies for comScore as a preferred audience measurement source.

In addition the rollout of vCE and AdEffx product suites outside the US and the continued international expansion of Xplore and Digital Analytix products.

Finally, we are pleased that the IP litigation with Nielsen was put behind us through a settlement agreement that includes the acquisition of four families of Nielsen domestic and international patents and patent applications.

In combination with other IP acquired by us and patents that we have cultivated organically, our current expanded IP portfolio provides a strategic foothold over existing and new technologies within our broader addressable markets.

As a technology Company, developing and protecting our intellectual property is an important aspect of building our business, and we view our agreement with Nielsen as a strong positive for our business and future innovation.

For 2012, we will be highly focused on strong execution, capitalizing on our substantial investments in 2011 in order to maximize the medium- and long-term contribution of new products to our top line growth while prudently managing our expenses to improve margins.

While we are mindful of the longer sales cycle of some of our new SaaS products and of the revenue accrual lags from the growing adoption of vCE, we expect strong and broad-based booking activity which will turn into higher growth in the second half of the year and beyond.

Nevertheless, we are expecting healthy revenue growth in 2012 of approximately 19% to 21% based on current foreign exchange rates while driving margins improvement and earnings growth.

In summary, we are pleased with the momentum we are enjoying as we enter 2012, benefiting from the strong strategic foundation we built during 2011.

We are excited by the multiple growth opportunities within our larger addressable market, made possible by our expanded innovative product portfolio and timely industry solutions.

Now I will turn the call over to Ken for comments on our financial performance in the fourth quarter and our outlook for 2012.

Ken?

Thank you Magid.

GAAP revenue in the fourth quarter was $62.6 million up 22% year-over-year.

Subscription revenue in the fourth quarter of 2011 was a record of $52.2 million, up 22% also year-over-year.

Subscription revenue represented 83% of total revenue.

Project revenue was $10.4 million, up 25% from the fourth quarter of 2010, and up from the third quarter of 2011.

Total revenue was negatively impacted by approximately $600,000 due to foreign exchange fluctuations in the fourth quarter.

GAAP revenue from existing customers was up 28% year-over-year in the fourth quarter to $55.9 million and represented 89% of total revenues.

We added 54 net new customers in the fourth quarter with our customer count now standing at 1,978.

Our focus on international expansion continues to drive an increase in international revenue.

In the fourth quarter revenue from outside the United States was $17.1 million or 27% percent of revenue and up 56% year-over-year.

Our top 10 customers represented 24% of revenue in the fourth quarter, reflecting increased diversification in our overall customer base.

Consistent with this trend, we had no 10% customer in the fourth quarter.

Turning now to expenses, gross margins were 70%, up from 67% level the last few quarters and in line with the 70% gross margin from the same quarter a year ago.

Gross margins, which were impacted by the effects of our 2010 acquisitions, have now bounced back to more normalized levels.

GAAP pretax loss was $4.4 million in the fourth quarter as compared to a GAAP pretax loss of $1.5 million in the fourth quarter of 2010.

Note that our GAAP pretax loss was impacted by $7.8 million of Nielsen litigation and related settlement costs.

Absent these expenses we would have been pretax profitable of $3.4 million on a GAAP basis in the fourth quarter of 2011.

The Nielsen settlement payment of comScore stock in exchange for certain Nielsen patents was fair valued at $16 million due to the stock voting and holding terms.

The acquired patents were then determined to have a current value of $11 million which was recorded as intangible assets which will be amortized over the remaining patent years of approximately 8 years.

The $5 million difference amount was recorded as a one-time settlement charge in the fourth quarter of 2011.

Turning now to taxes, our effective GAAP income tax rate in the fourth quarter was a 26% benefit rate due to the current book pretax loss position.

GAAP net loss was $3.3 million or $0.10 per basic and diluted share in the fourth quarter of 2011 based on a basic and diluted share count of 33.2 million shares.

Non-GAAP net income for the fourth quarter of 2011 was a record $11.8 million or $0.35 per diluted share excluding litigation costs, settlement costs, stock-based compensation, amortization of intangibles, acquisitions-related expenses.

This amount compares to a non-GAAP net income of $7.8 million or $0.24 per share in the fourth quarter of 2010.

With our varying tax rates and noncash expenses, we believe that adjusted EBITDA is a useful measure for investors to use to evaluate our operating performance.

Adjusted EBITDA takes non-GAAP net income and adjusts it to exclude the cash tax provision, depreciation, intangible amortization costs, stock-based compensation expense, acquisition-related expenses, litigation costs, net interest income and the impact of purchase accounting on acquired deferred revenue.

On this basis, adjusted EBITDA was a record $15.4 million in the fourth quarter compared to $11.5 million in the fourth quarter of 2010, an increase of 34% and representing an adjusted EBITDA margin of 24.6%.

Our adjusted EBITDA came in higher than anticipated as we continue to be focused on improved execution to drive margin leverage.

For the full year now of 2011, revenue was $232.4 million, up 33% from 2010.

GAAP net loss was $15.8 million or $0.49 per share.

Note that our GAAP net loss was impacted by 2011 costs of $16.5 million of litigation costs and related settlement costs.

Adjusted EBITDA was a record $47.1 million, up 23% compared to 2010.

Though adjusted EBITDA margin of 20.3% for 2011 was down from 21.9% in 2010, we believe improving margin trends that we started to see in the second half of 2011 will carry into 2012.

Non-GAAP net income in 2011 was also a record of $31.8 million or $0.97 per share.

Turning now to cash flow.

Cash flow from operations for the fourth quarter of 2011 was $7.9 million.

Our capital expenditures were $1.3 million in the quarter.

This resulted in a fourth-quarter free cash flow of $6.7 million which included a $1 million cost outflow of legal cash payments related to the Nielsen litigation.

Looking at 2011 for the year, cash flow from operations was $26.8 million, our capital expenditures were $7.2 million, which resulted in a 2011 free cash flow of $19.5 million which also incorporated the negative impact of cash payments of $11 million related to the suit and settlement of the Nielsen litigation.

Adjusting for these nonrecurrant payments, free cash flow would have been $30.5 million in 2011.

Total deferred revenue which includes current deferred revenue of $68.7 million and long-term deferred revenue of $1.7 million was at $70.4 million.

This total deferred revenue is comprised of cash paid upfront for subscription licenses or subscriptions that will be recognized over future periods.

As expected, we had strong renewal activity in the quarter so we saw a healthy improvement in deferred revenue in Q4 over Q3.

We have seen more customers shifting to quarterly or monthly payment terms rather than more accelerated payment terms because of the growing scale of our contract sizes with large customers as well as current general economic conditions.

These shifts in billing terms reduced deferred revenues by lowering advance billings as a percentage of overall bookings.

Our full-year GAAP tax rate was a benefit rate of 16%, and the tax benefit of current losses was somewhat minimized by valuation allowances mainly related to Netherlands.

On a full-year basis, our cash tax rate was 7% and as a result of our profitability in certain international jurisdictions, such as Canada, some South American countries, and certain states where we do not have net operating loss carry-forwards available.

For 2012, we project an annual GAAP tax rate of approximately 52%.

The GAAP tax rate is somewhat higher due to the inability to deduct current losses, again principally in Netherlands, due to valuation allowances.

For 2012 we anticipate an annual cash tax rate of 8%.

We continue to hold significant net operating loss carry-forwards in the United States, certain states in the US, certain international subsidiaries principally Netherlands and UK.

As of December 31, 2011, cash, cash equivalents and short-term investments totaled $38.1 million.

Our receivables of $64.4 million increased from the $54.3 million of a year ago and up $13 million sequentially due to the growth of our business and the timing of our fourth-quarter bookings.

Our DSOs of 88 days are consistent with the fourth quarter last year.

Now let me turn to our guidance for the first quarter of 2012 and the full year of 2012.

We anticipate full-year revenue growth of 19% to 21% based on current foreign exchange rates.

As I mentioned, foreign exchange had approximately a 1% negative impact on our fourth-quarter revenue growth rate and at current exchange rates the we anticipate a 1% impact on 2012 growth rate, which we factored for.

Therefore we are anticipating full-year revenue to be between $277 million and $281.7 million in 2012.

With respect to revenue patterns through the year, with momentum from newer products such as the Dax and Validated Campaign Essentials, growing throughout the year, we expect quarterly year-over-year revenue growth to expand as we progress through the year.

From a profitability perspective we are maintaining our sharp focus on executing to drive profitability ahead of revenue and anticipate that adjusted EBITDA margins will grow by approximately 50 basis points to 150 basis points from the 2011 adjusted EBITDA margin of 20.3%.

We anticipate GAAP income before income taxes to be in the range of $7.4 million to $10.7 million.

We anticipate adjusted EBITDA to be in the range of $56.9 million to $60.2 million.

For the full year of 2012, we anticipate average fully diluted share count of 34.8 million shares.

Now for the first quarter of 2012, we anticipate revenues in the range of $61.8 million to $62.8 million, which represents an expected increase of 17% to 19% over the first quarter of 2011.

We anticipate first quarter GAAP loss income before taxes in a range of a $600,000 pretax loss to a $200,000 pretax income.

As in the fourth quarter, first-quarter GAAP income before taxes will be impacted by a number of noncash items.

We currently expect approximately $2.3 million in amortization of intangibles and patents and $5.4 million in stock-based compensation.

Therefore we anticipate adjusted EBITDA for the first quarter of 2012 to be in the range of $10.9 million to $11.7 million, which represents an adjusted EBITDA margin of 18% at the midpoint of our revenue and adjusted EBITDA guidance.

Our estimated fully diluted share count for the first quarter is 34.5 million shares.

A reconciliation of GAAP net income before income taxes to adjusted EBITDA guidance for the first quarter and the full year of 2012 is included in the tables to our earnings press release.

With that, operator, we can now open the lines to take questions.

Thank you.

(Operator Instructions)

Jeetil Patel, Deutsche Bank Securities.

Couple questions here.

If you look at the business it looks like it's more like the mid to upper teens, slower on the base, and then as we look at Digital Analytics and vCE, is it safe to assume that's going to be 2 to 4 percentage points of growth for 2012 and obviously growing as we progress through the year?

Is that how we should think about the adoption rate or the revenue contribution from the newer services that have been rolled out?

Second, deferred revenue was flat year on year.

I am curious as you look at 2012, do you envision this theme to continue to play out in terms of shorter duration, less deferred and a lot of folks paying as you go throughout the year?

And then I have a quick follow-up.

Okay.

Jeetil, this is Ken.

I will take those questions if you don't mind.

Let me deal with the second one first.

As it relates to deferred revenue in the second half of 2011 we did see somewhat trending as we have mentioned on the payment side with customers.

I think the other point in terms of year-over-year is we still have some residual impacts of acquisitions.

A year ago in the fourth quarter of our deferred revenue, we had several million that was in there relating to the purchase accounting impacts of some of the acquisitions.

And I think on a more normalized basis as we look at the end of 2012 we would see a reasonable growth in deferred revenue, pretty much in line with the growth of our business during the course of 2012.

Generally speaking, customers who are used to paying upfront are continuing to do that way.

We have some other customers who are again, to our comments, given the size of the contract terms, and some of their conditions need to do a little bit more spreading of payments.

But it has been fairly consistent with what we have seen and we would expect it to go that way so we would see deferred revenue to grow in line with our revenue growth of 2012.

On the first point, again we saw very good organic growth across the board in 2011.

We will have some impact of currency on organic growth of our products in 2012.

Clearly, as Magid mentioned, the expansion of the vCE and then the take-up rate of DAx from a revenue standpoint as that grows in the second half of the year will help to contribute a little bit more proportionately as we go through the year from a growth standpoint.

But we feel good about our organic growth rate of all of our products.

Maybe qualitatively, but where are you seeing greater demand for vCE?

Has it been largely US or are you seeing it out of the European markets as well, around that particular product?

Jeetil, this is Magid.

We have not rolled out vCE yet internationally.

We expect to do that in the next couple of months in high-priority jurisdictions.

So the big activity has been in the US.

One noteworthy exception has been actually in Japan, of all places, where we have actually our biggest contract in Japan and vCE in the fourth quarter.

But the reaction in the US has been extremely positive from advertisers who are obviously the most impacted and see a big opportunity with vCE with their agencies who are obviously very incented to be aligned with customers.

But we also see a lot of publishers really excited about this as really changing the game and dynamics in the display market.

Youssef Squali, Jefferies.

Good morning guys.

Couple questions please.

If I look at revenues from new customers, I think you reported a $6.7 million number that was down year-on-year even with the broader product portfolio that you have rolled out throughout the year.

So I was just wondering if you can speak to that and what to expect going forward, and then I have a follow-up.

Sure.

Revenue from new customers is coming -- a lot of it is coming from international, which where the initial contract value tends to be smaller internationally than it is in the US.

So on a dollar basis, the revenue from new customers is going to be lower, impacted by unit price.

I also think that in the fourth quarter, as well as in the next couple of quarters, we are going to be focusing on leveraging the opportunity with our new products among existing customers.

Obviously that is the area where we are a known quantity and we're proven in terms of our quality and client service, and we think that that's where we are going to get the biggest uptick.

So while we expect that these new products will broaden our customer base overall, we have an intentional focus on existing customers in the short-term.

Okay, that explains it.

If I look at your guidance, your Q1 guidance at the midpoint of revenues, basically implies a flat to down quarter-on-quarter which would be a first for you guys considering the nature of the subscription model.

I was just wondering what is driving it.

Is it project revenues that fluctuate?

Is it may be lower ARPU or how do you explain that?

It's really, in the fourth quarter we had a healthy fourth quarter in terms of project revenue, which was at $10.4 million, I believe.

And seasonally we expect that because usually people spend their leftover budget at the end of the year.

Now, as you saw throughout the year, our project revenue in the first quarter was kind of flat, but then it bounced up in Q4 and it was significantly up relative to a year ago.

We don't expect the same strength in project revenue to continue in Q1.

It will probably be lower by a couple of million dollars which is basically what is driving the lower total revenue.

On the other hand, subscription revenue will continue to grow.

Okay.

That explains it Thank you very much.

Heath Terry, Goldman Sachs

Great, thank you.

I was wondering if you could touch on if you are seeing any change in the average term length of contracts and if that is having any impact on the year-over-year decline in deferred revenue?

Sure, this is Ken.

I can take that one.

We actually are seeing an increase over time of the multiple-year component of our business.

It has gone from a year ago at about 30% of our book of business; we exit the year now, it's at about 38%.

Typically, the payment terms on those deals again, are usually, you have your advance payments at the beginning of each contract year.

Specifically, Heath, I think that has given us more retention and the ability to upsell with our customers.

I don't recall that being a specific reason on the payment terms side.

Actually on the payment terms side, our multiyear contracts, at best we will get up-front payment for a year.

So even though the length of the contract is longer, it does not really begin to affect deferred revenue unless we are able to bill, and since we are not able to bill for the full multi-year but only for the first year, the two are really independent.

Great.

And could you give us an update on the MRC certification process, with their move to decertify a few of the previously certified options that they have had out there with Arbitron?

Does that suggest that maybe they are getting a little bit more active in terms of moving through the backlog that they have?

We are working very diligently with the MRC.

We did certify comScore Direct last year.

We are aggressively pursuing of the certification of AdXpose and vCE, and hopefully in the next few months, two to four months, depending on how fast we can move.

We are also continuing to work with the MRC for certification of other services as we introduce them.

Our first priority is to certify vCE because we want to be certified as being able to count impressions according to the standards that the MRC sets, with the same level of accuracy as ad servers which can help us allow advertisers to pay on the basis of vCE results.

Great.

Thank you.

And I guess just one last question on mobile.

Are you seeing any improvement in your discussions either with Apple or with the Android holders in terms of being able to get some kind of direct device measurement into mobile traffic, or is there any progress at all on that front?

We have implemented a measurement solution for IOS which actually is working pretty well and is increasing our panel counts in IOS.

Our panel overall is growing, and we never really had a problem with including Android customers.

The challenge is, particularly with Android, is that the versions keep on changing and in a lot of cases you have to develop special versions of them either for different generations of the operating systems.

We are making progress on getting other potential sources of mobile data and we are also leveraging the mobile data that we get from people who are tagging in our UDM program.

So we have several assets and approaches that we are using in mobile measurement.

Okay, great.

Thanks, Magid.

Shyam Patil, Raymond James and Associates.

Hi, good morning.

First question.

Could you talk about the traction you are seeing with your web analytics product in the US market.

And for the growth you're expecting in 2012, how much of that is in the US and which competitors are you taking share from?

On a bookings basis, the growth in the US is pretty significant.

It will expand our entire bookings for digital analytics by at least 40%.

And we are really having quite a bit of success and excitement about some of the capabilities that we have introduced and the new releases of the product that happened late last year.

We are excited about the progress that we are making in the US, and there's a lot of momentum behind it.

On a revenue basis, there are two hurdles to start accruing revenue on digital analytics.

The first is implementation and customer acceptance.

To some extent, it takes some time for customers to finalize their tags above and beyond what we already have in UDM, and we cannot start accruing revenue until the measurement starts and until it starts showing up in the system.

That's the first thing.

And then, second as you know, that whole thing accrues on a pro rata basis.

So a million dollar contract that we sell in April may not start accruing revenue until May or June and then we can only accrue half of it for the rest of the year.

And contracts that come in later in the year will contribute less to revenue.

So we are very excited about digital analytics, both in the US and in Europe.

And we were actually seeing it also in Latin America.

But from a revenue standpoint, we are expecting the meaningful revenue contribution to start happening in the second half rather than the first half.

Great.

Thank you.

And then a follow-up.

Regarding the settlement with Nielsen, how do you think about, or should we think about potential joint management of an online panel, similar to how Nielsen and SymphonyIRI run the national consumer panel?

Do you think that is something that could happen given the settlement?

I think that our settlement with Nielsen is a signal of two things.

First of all, just making sure that we are going to get into the litigation game.

As you know there was a standstill of about three years in terms of suing each other.

So we look at that very positively.

We both realize that in the Internet space, there is -- the mode of action is coopetition rather than head-to-head strident competition.

So I think that this was a signal that we are going, just like everybody else, into coopetition, where in some cases where we are going to compete less harshly, and in other cases we will continue competing.

As far as running a joint panel, I think that is not something that is on the table right now.

But I think with a spirit of coopetition, if there are things that make sense and don't really affect the competitive dynamics of the marketplace like the deal that IRI and Nielsen put together, those are the types of things that we could look at that make sense from a cost standpoint.

But at this point there has been no discussion about that and no expectations of that happening in the short-term.

Okay, great.

And then a couple quick ones for Ken.

Ken, what were the gross adds in the quarter?

And what was the FX impact relative to the guidance range you had provided for the fourth quarter?

I'm sorry, the gross adds were 185.

And what was your question about FX?

You mentioned a $600,000-- (multiple speakers)

Because of the deterioration of currency in the fourth quarter versus where the rates had been in the third quarter, or earlier in the year, we had been fairly neutral because currency for us and many other companies so it had a dampening impact on revenue in the fourth quarter.

And we entered the quarter looking at more stability in terms of exchange rates versus where they ended up.

Okay, thank you.

Jason Helfstein, Oppenheimer.

Thanks.

Just three questions, all business-related.

One, can you talk about what is going on with the mobile relaunch that was imbedded in the fourth quarter; it was supposed to launch I believe in the first quarter, has not launched yet, commercially.

Just comment if it's on track for a second quarter launch and maybe any other color there?

Second, if you could just give us an update on your uptake of YouTube video tracking?

Are you successfully upselling that to the clients who you are tracking usage for?

And then third, can you just talk about, in the context of now Facebook becoming public, your social media offering and the penetration among the top 200 advertising clients or something like that to give a sense of how broadly comScore's services are being used to track social media.

And if they are asking for new types of products as Facebook continues to evolve, what they are trying to sell to advertisers?

Thanks.

Sure.

The mobile relaunch, I think what you are talking about is that what we call Mobile Metrics 2.0.

It is out in beta and we expect it to be launched in the first half, whether it makes it towards the later end of the quarter or in the second quarter, I can't be sure right now.

It depends on the beta results.

On the YouTube video tracking, I think things are going well, but I really don't have a number for you in terms of where that is coming at.

On the Facebook going public, number one we are really pleased about our substantially growing relationship with Facebook and its contribution to revenue.

It is one of our largest customers now.

As far as our social services, they are getting -- they are actually unique.

Social Essentials is a very unique product.

One of the things that we have realized, though, is that our sales force is primarily focused on selling to publishers and not to brands, per se.

And so, one of the things that we are doing this year to expand the reach within brands is we are partnering -- we are putting a special effort on reaching brands and we are partnering with companies like Buddy Media, which has over 100 branded customers.

And we are looking at different marketing venues to be able to reach brands that we currently don't do business with.

Just a follow-up.

Is anybody else offering analytics on Facebook that somebody could say would be superior to yours?

Part of this has to do whether it is an internal versus an external solution, but can you give us a sense of what you are offering for in the Social Essentials versus what you are seeing other offerings are out there in the market?

We are not aware of anybody that offers capabilities that are competitive or match the capabilities of Social Essentials.

The reason for that is that Social Essentials focuses on not just how many people like something, or the fan base, which other people can offer, but then the magnification of that fan base in terms of the exposure of their friends.

And we get that by mining our panel, and, as you know, that is something that is unique.

And as far as we know nobody is doing that.

Thank you.

John Blackledge, Credit Suisse.

Great, thanks.

Just a couple questions.

Based on the 1Q '12 and 2012 guide you expect topline growth to accelerate 2Q through 4Q?

If you can give us the drivers of the acceleration there?

And also some margin expansion expected in 2012, where you are getting the leverage?

Is it at the gross margin line, or just explain were the up leverage comes from?

Thank you.

Sure, this is Ken.

I will take both of those, John.

Good morning.

Let me deal with the leverage point first.

Again, as you saw in the fourth quarter with the recovery on our gross margin line, that will be one area I think we'd look at from an expansion standpoint in terms of year-over-year to expand the EBITDA percent.

As we go through the year and as we execute a second area might be in the G&A line.

But as we have discussed before, sales and marketing, continual area to invest in as well as R&D.

On the other one, in terms of a growth during the year, a couple of factors that we have mentioned.

One of course is project revenue, as we talked about.

That tends to grow during the year particularly in the fourth quarter, so that would be one impact.

Second one is the take-up rate to revenue for vCE as well as the take-up rate to revenue for DAx in the US, but also outside the US as Magid mentioned in a previous question, as well.

Great.

And just one other question, one follow-up, thank you.

The subscription revenue line item is a bit of a black box.

I'm just wondering, would you guys ever consider breaking that out a little bit further for investors?

Thanks.

We don't think of it as a black box, John.

But if you are talking about the various pieces of our element, what goes in their obviously are our subscription services that everybody is used to, our DAx business, the business that we have from our Telephony customers through the Xplore business.

Those are the main elements that are in there.

I think one of the biggest, in our core business, the expansion of AdEffx from project-based over the last several years to being much more driven by contract-base or subscription, I think has been an element that the Company looks to do more and more so over time.

There was a probably a time years ago where social activity was looked at on a project basis and now we have subscription-based activity.

So I think in terms of the way we look at it, it comes down to the nature of the contractual relationship with the customer.

A one-off project-base versus something that is repetitive in nature based on either time or activity over time.

Great, thank you.

You are welcome.

Robert Coolbrith, ThinkEquity.

Thank you, good morning.

I'm just wondering, in the past few quarters you have given us a snapshot update on ad effectiveness in terms of growth and percentage of revenue.

I think most recently it was above 10% of revenue and was growing still quite strongly, maybe 2%-plus year-over-year.

Just wondering if you could give us another update on that in Q4.

And then also, just to understand the take up to revenue on vCE.

You talked about some aggressive piloting of that product.

Are you initially foregoing some revenue opportunities over the next couple quarters to drive adoption of that solution, presumably where that revenue take up would begin maybe in the back half of the year?

And what kind of growth in AdEffx should we expect in Q1 as a consequence?

Thank you very much.

I will let Ken dig up the growth rates.

I remember it was in a 40% to 50% range on AdEffx, but I am not sure which it was closer to.

As far as vCE, you are absolutely right that there are going to be customers where we do have the opportunity of generating some decent vCE revenue on the first project, but we want to shorten the implementation cycle because we are strong believers that once a customer sees the impact of validated impressions on their own campaigns, on their own products, they get a much higher sense of urgency in basically signing up on a broader basis.

So if we wanted to really maximize short-term revenue, we can actually generate revenue from vCE earlier.

But we really want to have a critical mass of advertisers getting to use vCE on a very broad scale and having their agencies start using that for those clients and potentially for other clients.

So we think that the right strategy longer-term is to actually encourage the adoption of vCE and sacrifice some early revenue in Q1 and Q2.

And in terms of the drivers, in terms of the higher growth rates, very consistent with last quarter in terms of on the ad effectiveness side, mobile product side, and also the expansion year-over-year on our DAx business.

As we mentioned last call or implementation with BBC is online so that's a nice add to our DAx business worldwide.

So those are three of the factors that are doing a growth rate significantly higher, to Magid's point, 40%-plus compared to the overall growth of the business year-over-year.

And if I could ask one question on the industry, you mentioned some pretty wide variances in terms of what you are seeing with the validated Campaign Essentials in terms of the performance across different sites.

Just for those of us following the industry, who's doing a better job delivering validated impressions, who's doing a worse job?

Is there any way that you could categorize that or give us a little more color on that?

Thank you.

It is too early to tell because our results came from 18 campaigns that were, generally speaking, coming in premium placements and executed really well.

We actually expect the validation rates to drop to about 50% or even less for the broader Internet as a whole.

We do think that there is an opportunity for publishers, though, which is that there was a tendency before to sell the majority of the inventory as remnant inventory because it falls below the fold.

If the publishers guarantee or price on the basis of visible impressions, then we believe they are able to charge higher CPNs for visible impressions and therefore actually significantly change their revenue mix and in a lot of cases, we believe some publishers are very well-positioned to benefit from that in expanded revenue.

As a consequence to that last comment, is there a significant opportunity to sell some of these products to publishers to help them create new products, new monetization opportunities?

Yes, absolutely.

As we speak, there is kind of a mirror image of vCE, or something that is very related that we are planning on -- we are working feverishly on, we're planning on producing to publishers to help them forecast their validated inventory and to be able to package it and price it better.

That's great color.

Thank you very much.

Mark Zgutowicz, Piper Jaffray.

Yes, this is John Crowther on for Mark.

First question here is just on the FX impact.

I wonder if you could walk through how that FX impact flows through the business model and what impact it might have on EBITDA and EPS both in this quarter and as we look forward?

Sure, this is Ken.

I can take that one.

Our international business on the revenue line is strong majority local currency-based.

There is some dollar-based business that we have, so that's the impact of the $600,000.

On the expense side, most of our expenses are local currency-based.

So overall, the impact on the EBITDA line in the quarter was about $100,000.

So as we look forward, we will look at the continued expansion of our revenue on local currency basis because that's what our customers will be looking for, which is what we baked into our guidance range, as I mentioned, having about a 1% impact.

Overall, again on the EBITDA side, it is much more muted it with the local currency expenses and not hugely meaningful at this point but we have factored it in as well.

Great, thank you.

And then, as you mentioned, talked earlier about where operating leverage comes from, you obviously showed great leverage on the sales and marketing and R&D line in the current quarter with percent of sales going back to levels well below the last, let's call it, eight quarters.

It sounds like that may have been more of a one-time item and we should see that number tick up to more of what we have seen over the last seven quarters or so as we move into '12?

Yes, I think again, as you look at it on a quarterly basis, we have that circumstance in the first half of each year due to vacation accruals and social tax impact that tends to depress the profitability somewhat, which we then get an opposite recovery impact with vacation accruals that can be reversed in the fourth quarter.

So it's a little bit of an anomaly.

That's part of why the EBITDA always tends to be several points higher in the fourth quarter versus third, as an example, and then drops down in the first quarter of the next year.

But on a year-to-year basis, yes, we agree that in terms of leverage it is the gross margins and then G&A and then R&D, from that perspective.

I think our message to investors has been lots of business opportunities worldwide and so continual investment on sales and marketing for proportional growth, but we do see leverage in those other line items over the coming years.

Okay, and then if you could just speak to maybe the pipeline in carrier analytics.

Obviously those are pretty sizable contracts there and just wondering how that has evolved here over the last couple of months and what your expectations are for that going into '12?

The pipeline has grown very nicely, you are right that those are chunky deals.

And therefore the approval processes and then implementation with the carriers takes more time.

And we have tried to factor that in in terms of how we look at our go-forward business, but we feel very positive and we are getting some very good -- we have had good established customers in the US and now we are getting some very nice traction with some exciting international accounts as well.

Okay, and then just a last question.

You mentioned on the call about submitting some results from a three-screen panel to CIMM and I'm just wondering is that something that we could expect to see results on here?

And how do you see the potential for the work you have done there as may be manifesting in some potential new contracts given those are some big-name media advertisers as well as agency clients that you are doing this work for?

I think it is too early for us to forecast that, and so as a result we have been very conservative in building in the contribution for the four-screen revenue during the year.

I think there is an upside if we see some pick-up as we progress through the year, but we wanted to be conservative at this point in terms of what we include in our guidance.

And is that data is something that we may potentially see here in terms of the study or a paper?

Or is that not something we can expect in the near term?

First of all, I talked about the Olympics.

You're going to see obviously a lot of results published by us and NBC about the Olympics, in the June/July timeframe.

We will show some of that data at some point, we just don't have a timeline for it as of now.

Okay, great.

Thank you very much.

Ladies and gentlemen this concludes our question-and-answer portion for today's call.

I would like to turn the call back over to Dr.

Magid Abraham for closing remarks.

Thank you very much for your interest and support.

We look forward to speaking to you again in the near future.

Good bye.

See you again.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day everyone.