Comscore Inc (SCOR) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the comScore second-quarter 2015 financial results.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would like to now introduce your host for today's conference, Mel Wesley, CFO. You may begin.

Thank you. Good morning, and welcome to comScore's earnings call for the second quarter of 2015. I am Mel Wesley, comScore's Chief Financial Officer; and with me today is Serge Matta, President and Chief Executive Officer.

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 periods 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, expectations as to opportunities for comScore, including customers, markets, and partnerships, expectations as to the strength of comScore's business, including the growth and composition of comScore's customer base and renewal rates, expectations regarding comScore's products, including regarding new releases and features, their quality relative to competitors, customer adoption, and the potential benefits of a particular products, expectations regarding the strategic and economic benefits of certain strategic relationships, such as those of Google, WPP/Kantar, and strategic acquisitions, expectations as to the financial expects of comScore's divestiture of certain business lines, assumptions regarding tax rates and net operating loss carry-forwards, and forecast of future financial performance for the third quarter and full year 2015, 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, and comScore's Form 10-K for the period ending December 31, 2014, along with subsequently filed form 10-Q reports. 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 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. Our results are posted under press releases. We have a presentation posted on our IR website under events and presentations that corresponds to our comments today, and will be helpful as you follow along.

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

Thank you, Mel. Good morning, everyone.

We closed out the first half of 2015 with better results than we expected. Our performance to date is a strong validation of the strategy we have been pursuing as we work to make audiences and advertising more valuable. We've built a differentiated position as a global media measurement and analytics company that is uniquely capable of solving some of the most important challenges facing companies at the intersection of media and advertising. We are seeing momentum across our businesses and are confident enough in these trends to raise both our year-end revenue and EBITDA guidance, as we noted in our earnings release earlier today. Let me begin with a brief overview of the quarter and then focus attention on some key milestones, including bringing our partnership with Google out of beta, significantly expanding our mobile and video advertising solutions, and launching the industry's first syndicated cross-media service. I will then turn it over to Mel to provide a detailed review of our financial performance before we take your questions.

Let's begin with slide 4. ComScore delivered another quarter of record revenues and strong profitability. This reflects continued positive momentum across our business and the strength of our partnerships, which continued to grow in number and impact. On a pro forma basis, second-quarter 2015 revenue was $91.3 million, up 16% over second quarter last year. We have strong revenue growth despite the negative affects of foreign currency adjustments. On a constant currency basis, our pro forma revenue grew 21% over last year, representing an additional $4.2 million, and as such, we achieved record pro forma constant currency revenue of $95.5 million. Adjusted EBITDA was $22.9 million, a 30% year-over-year increase, and a 25% adjusted EBITDA margin. Reflecting the significant operating leverage we have in the business and our focus on managing expenses. Adjusted EBITDA margins for the same quarter last year was 22%.

We had simply terrific customer momentum in Q2. During the second quarter, we added 98 net new customers for our overall business, for a total of 2,683 customers. These net-new adds include customers from our acquisition of the WPP Nordics business and our acquisition of Proximic, both of which closed in Q2, 2015. During the quarter, we added a record 92 new customers to our Media Metrix Multi-Platform service, also known as MMX MP, for a total of 652 MMX MP customers. By comparison, in previous quarters we've historically added approximately 50 net new customers to this service. We believe that this significant uptick in MMX MP customers is driven by strong adoption of our mobile products. Approximately two-thirds of these Multi-Platform customers also bought Mobile Metrix and/or Video Metrix during the same quarter, continuing a trend I've highlighted before.

We see this as a validation that customers place significant value on our entire suite of service offerings, and continue to embrace our market-leading products that measure the Multi-Platform world. In addition, we believe there is continued upside for MMX MP, as just over 50% of MMX customers -- Media Metrix customers, buy Media Metrics Multi-Platform in the markets where it is available today. We expect to see this penetration rise in existing Multi-Platform markets, even as we expand the markets we serve with this product suite. Our contract renewal rate for the entire business with existing customers again remains above 90% on a constant dollar basis.

Moving to slide 5, in May our Board authorized a 12 month share buyback program of $150 million. This program began on May 6, and through June 30 we purchased just under a million shares -- 1 million shares, for a total of approximately $54 million. This program continues through today at a similar pace, and we will provide a further update in the Q3 earnings call. We will continue to monitor the progress of this program, taking the steps we believe are appropriate to reduce dilution. We remain committed to returning capital to our investor base. Now our mission at comScore is making audiences and advertising more valuable.

Our strategy aims to take advantage of what we see as three key trends shaping the media, television, and advertising ecosystems: The rapid emergence of the Multi-Platform consumer who connects with media across multiple devices and platforms. Second, the ubiquity of video and television that is reaching consumers through increasingly digital channels and challenging existing business models. And lastly, the rise of advertising automation, which is changing how advertising is bought and sold. At comScore, we remain focused on our four key priorities: expanding our cross media offerings globally; extending vCE market leadership, including display, video, and mobile on a worldwide basis; integrating comScore data into the places clients use them, with a focus on our data and to problematic platforms and client workflows, focusing on execution; and continue to return capital to our investor base.

On today's call I will offer some updates across these priorities. We are making strong progress across the board. Let's start with an update on vCE and DoubleClick. As we announced earlier this morning, comScore vCE and DoubleClick is now out of beta, and widely available to US Google DoubleClick customers across DoubleClick digital marketing, formally known as DFA or DoubleClick For Advertisers, DFP, which is DoubleClick For Publishers, and DoubleClick Bid Manager, also known as DBM. This solution provides media buyers and sellers with near real time access to audience delivery metrics, including reach, frequency, and GRPs for digital display and video campaigns that are directly comparable to TV and other traditional advertising. ComScore vCE in DoubleClick is first independent measurement solution to be directly integrated into Google's ad server.

Now, bringing vCE to DoubleClick is a huge milestone that, as you know, represents significant work from both comScore and Google across many months. We took our time, though, because we wanted to make sure we got this deep integration right and were able to unlock the potential of vCE for DoubleClick customers. Today, vCE metrics are being pushed to advertisers on the home page of the DoubleClick campaign manager, and appear in the workflow of Google's automated buying platform, DoubleClick bid manager. vCE metrics are displayed on data cards as part of this interface integration, and clients can quickly and easily [pivot] the data, making vCE integral to their business process.

I noted in our last call that adoption metrics have surpassed all of our internal expectations, and now that integration is complete, we have taken vCE and DoubleClick out of beta, we expect to see this momentum continue to build. We are thrilled by the overall vCE progress, and exiting out of beta is a significant development. As such, we are confident of achieving a run rate of $100 million in revenue during the full year 2017 for vCE. We believe that the ultimate payoff for this partnership with Google will be greatly expanding the vCE client base beyond what we would have been able to accomplish organically. We think our Google partnership is a testament to the value of industry leaders collaborating to jointly solve problems and create opportunities for clients. I am delighted to announce that Neal Mohan, who has been the key architect for this partnership for Google will be keynoting comScore's first industry summit next month in New York City. He will be on stage talking about the future of advertising with the President of the IAB, Randall Rothenberg.

As we work at comScore to help define that future, there are a series of important announcements about our advertising products that I want to review. First, we continue to drive innovation in advertising measurements and significantly expand our vCE product portfolio and geographic fingerprint. While vCE had its origins in digital display advertising on PCs, we have moved aggressively over the past year to broaden the reach of this product to both mobile devices and to video advertising. On our last call, we announced the availability of daily mobile reporting in vCE. We have seen strong client uptake of our mobile solution, and in June, mobile vCE reporting became a part of our syndicated offerings, which is unique in the industry, providing unduplicated GRP and viewability solution for mobile advertising.

For video advertising, we worked on two important fronts to insure that our vCE video viewability solutions are second to none. Three weeks ago we received accreditation from the media ratings council, also known as the MRC, for our video viewability measurement in the ad validation suite of vCE, including the removal of sophisticated invalid traffic, IVT, for video ad impressions. This expands vCE's existing accreditation from the MRC for display ad viewability, engagement, brand safety, and geography. Our continued work with the MRC underscores our commitment to transparency and alignment with industry standards, something that is critical to our clients as video advertising becomes a large portion of an advertiser's budget. We have also focused on making vCE video viewability widely available to the industry through partnerships. Just last week, we announced eight new partnerships with video advertising networks, including AOL, Brightcove, FreeWheel, Gannet, Innovid, Smartclip, Vindico, and Videology. As with our work with Google, we are making sure that comScore data is integrated into the places clients use them.

In Q2, we continued to see strong momentum for vCE as measured both by client uptake and the increases in the volume of ad measurements. On the client front, comScore won a large commitment for vCE from the agency holding company, Dentsu Aegis. Dentsu joins Publicis Groupe, IPG, WPP, Omnicom in forging vCE deals with comScore at the holding company level. The scale of measurement through vCE continues to grow, and it is truly massive. Throughout June, we measured approximately 3 billion ad impressions every day. That is 3 billion daily impressions, which do not include any volume from our Google DoubleClick partnerships.

Expanding our vCE momentum globally is a key priority for comScore. In Q2, we launched vCE 2.0 in 9 additional international markets, for a total of 13 markets. Our total vCE global fingerprints of 44 markets matches that of comScore Media Metrics. vCE 2.0 dramatically expands the demographic data available to use, allowing us to conduct more granular studies and measure smaller campaigns, which also brings improved in-flight optimization and details on ad placement, enhancements which allow vCE to fold into client workflows, and be used as a basis for billing. We will continue to focus on expanding global vCE momentum, and will be rolling out several new countries in the coming quarters.

On our last call, I talked at length about how comScore's focused on solving today's core challenge for TV broadcasters: the rapid rise of the cross platform television and video audience. The traditional siloed views of the television and digital video audiences do a disservice to everyone in the ecosystem. Television broadcasters know that TV-only ratings undercount their audience reach, and digital video and over-the-top providers aren't getting credit for advertisers to the new reach they deliver, because they are not in TV-only ratings. At comScore, cross media is no longer an aspiration. It is now a reality.

Since our last earnings call, we launched our syndicated cross media product comScore Xmedia. ComScore Xmedia provides syndicated data, unduplicated audience measurement across TV, content, and digital media in a single tool. It allows our clients to analyze cross platform reach, engagement, and audience overlap. And in the near future, we will be providing syndicated data on cross media advertising. This represents an important milestone, as we move from industry-sponsored cross media projects to a syndicated product that is accepted by the industry. The reception that we received from clients has been uniformly positive, and we are now delivering monthly data that dates back to January 2015. Clients are paying for our syndicated cross media service today, and tell us it is helping them convert on cross media opportunities everyone understood were emerging, but until now could not be quantified or properly monetized.

Let me highlight a couple of bits of data to explain why we are very excited about the prospect for this product. One part of the puzzle we are solving for is measuring the incremental reach the digital platforms bring to the table. There is no one size fits all answer to this question. This slide shows data from comScore Xmedia service in May of this year for four national networks. As you can see, the impact of digital platforms on their total reach varies substantially. For example, network number three sees a 10% increase in reach from viewers who access content on their desktop but were not otherwise engaging with TV, and a greater than 9% increase from mobile-only consumers who they were not reaching with TV either. The data varies significantly across different media companies and media properties, and those differences represent opportunities for our clients to improve monetization and make sure they are getting full value for their audiences or for brands that they are optimizing their allocation of advertising dollars. A core value of comScore Xmedia is that ability, as we say, to solve for X.

While the notion that additional platforms create incremental reach may not be that surprising, we have discovered a new trend that isn't as intuitive. Cross platform consumers are more engaged with the network's content on TV than TV-only viewers. This slide benchmarks the TV-only audience versus the cross-platform audience for the big four broadcast networks. We find that the average TV-only viewer watched 100 minutes on TV, the average cross-platform viewer of that network watched 149 minutes, or approximately 50% more on TV.

Let me say this again, because it underscores why our Xmedia product is so important to the industry. We are discovering that cross platform consumers watch more television on TV. This is good news for everyone in the ecosystem, and we are uniquely positioned to help clients convert findings like this into business opportunities. I want to emphasize that our strategy here is to provide much more value beyond reporting on reach and frequency on TV. And one way we are doing this is through partnerships with other companies that have unique assets. You will hear more from us on this in the future, but we believe the partnerships with companies such as IRI, Oracle, RENTRAK, and others will help us continue to enhance our unique offerings in cross-media.

Moving on, less than six months ago, we announced our long term strategic partnership with Kantar. We continue to make rapid progress in laying a strong foundation for our multi-year collaboration. On our last call, we announced that we had jointly developed a cross-media measurement framework, and agreed to integrate media tagging to reduce client costs and complexity. We also announced that Spain would be the first pilot country for our joint cross-media measurement solution. Today, we are taking another step forward and announcing that comScore and Kantar will jointly build mobile panels for behavioral measurements. We are starting with two countries, Spain and Indonesia. Mobile panels are our cornerstone of cross media measurement, and our partnership makes it possible for both companies to move more quickly to expand our global mobile reach than either of us could do independently. We will continue to update you on our progress with Kantar in future quarters. But suffice to say, we are pleased with the progress thus far.

Now, I will turn it over to Mel for a review of our financial results.

Thank you, Serge.

I will now provide more detail regarding our second quarter results. Revenue in the quarter was $91.3 million on a pro forma basis, up 16% versus the same quarter last year. We are pleased with our revenue growth despite continued foreign currency exchange rate headwinds. If exchange rates against the US dollar remain constant from the same quarter last year, our Q2 pro forma revenue would have been $95.5 million, or a growth of 21%. Subscription revenue in the quarter was $83.5 million on a pro forma basis, up 17% versus the same quarter last year. Subscription and project revenue represented 92% and 8% of total revenue, respectively. Revenue from existing customers was $79.8 million on a pro forma basis, up 11% year-over-year, and representing 87% of total revenue. During the quarter, we also added 98 net new customers, bringing our total customer count to 2,683 on a pro forma basis. Our international revenue on a pro forma basis also continued to grow, despite continued foreign currency pressure, up 8% year-over-year and representing 28% of total revenue.

Moving to margin and expenses. On a GAAP basis, our gross margin was 69%, down from 71% for the same quarter last year. The lower gross margin is primarily attributable to higher data acquisition costs associated with new product offerings, including mobile and cross-media. We expect costs associated with new offerings to put near term pressure on gross margins, while margins will expand as new product sales ramp. Selling and marketing expense decreased to $24.9 million, down $1.7 million from the same quarter last year. Selling and marketing expense for Q2 represented 27% of revenue, compared to 33% for the same quarter last year. The decrease in expense was driven by a decrease in stock-based compensation. The decrease in selling and marketing expense as a percentage of revenue was primarily due to operating amount of leverage from revenue growth.

R&D expense increased to $16.9 million for the second quarter, up $4 million from the same quarter last year. R&D expense for Q2 represented 19% of revenue, compared to 16% for the same quarter last year. The increase is largely the result of increased compensation related to headcount and data acquisition costs associated with the development of new products. We expect R&D costs to decline in absolute dollars and as a percent of revenue during the remainder of 2015, as the cost of newly released products shift to cost of sales. G&A expenses increased to $15 million for the second quarter, up $350,000 from the same quarter last year. G&A expense for Q2 represented 16% of revenue, compared to 18% for the same quarter last year. We expect G&A costs to decline in both absolute dollars and as a percentage of revenue during the remainder of 2015.

GAAP pre-tax loss for the quarter was $2.7 million, which includes a $5.2 million loss on disposition of the mobile operator division. The Q2 loss of $2.7 million was equivalent to the GAAP pre-tax loss for the same quarter last year. Our tax expense for the quarter was $2 million, compared to $500,000 for the same quarter last year. We expect our cash taxes to remain low in the near term, as we hold net operating loss carry-forwards in the US and certain foreign jurisdictions. During the quarter, GAAP net loss was $4.8 million, or $0.12 per basic and diluted share, based on the basic and diluted share count of 40.1 million shares.

Non-GAAP net income for the quarter was $15 million, or $0.37 per diluted share, excluding stock based compensation, amortization of intangibles, acquisition related expenses, and other nonrecurring items. Our non-GAAP EPS calculation is based on a fully diluted share count of 40.9 million shares. Second quarter adjusted EBITDA was $22.9 million, a 30% increase over the prior year, representing an adjusted EBITDA margin of 25%. We are pleased by the continued margin expansion, and we expect these gains to provide us with incremental investment dollars to accelerate key projects we believe will contribute significant ROI.

Looking at our balance sheet, we ended the quarter with cash and cash equivalents of $188 million, an increase of $147 million sequentially, and an increase of $149 million from the same quarter last year. The increases were primarily driven by proceeds of $205 million received in connection with the issuance of shares to WPP on April 1, partially offset by stock repurchase activity. Cash flow from operations for the second quarter was $11.1 million, and capital expenditures for the quarter were $1.1 million, resulting in free cash flow of $10 million. Free cash flow for the same quarter last year was $6.1 million.

Our next slide, 16, details our guidance. It is important to note that the following guidance ranges for the full year continue to exclude the financial impact of the Mobile Operator Division, as the division was divested during the second quarter. For the third quarter of 2015, we anticipate revenue on a pro forma basis in the range of $90.8 million to $95.4 million. We anticipate GAAP income before income taxes on a pro forma basis in the range of a $1.4 million loss to income of $4.1 million. We anticipate adjusted EBITDA to be in the range of $19.5 million to $23.6 million, which represents an adjusted EBITDA margin range of approximately 21% to 25%, or 23% at the midpoint of our revenue and adjusted EBITDA guidance ranges. Our estimated fully diluted share count for Q3 is 40.2 million and does not include any projected buyback activity.

We are raising our full year revenue and profitability guidance. For the full year of 2015, we anticipate revenue on a pro forma basis in the range of $369.5 million to $382.5 million. We anticipate GAAP income before income taxes on a pro forma basis in the range of a $5.9 million loss to income of $10.1 million. We anticipate adjusted EBITDA to be in the range of $86.5 million to $97.5 million, which represents an adjusted EBITDA margin range of approximately 23% to 25%, or 24% at the midpoint of our revenue and adjusted EBITDA guidance ranges. Our estimated fully diluted share count for the full year is 39.1 million, and does not include any projected buyback activity.

We will now open the line for questions.

(Operator Instructions)

Our first question comes from Youssef Squali, Cantor Fitzgerald. Your line is now open.

Thank you. Good morning, guys, and congratulations on a very nice quarter.

We can't hear you.

How about now? Is this better?

Yes.

All right. Sorry about that. So, congrats on a nice quarter. Two quick questions. Can you maybe help us with the economics of the Google deal, please? Maybe whether it is opt-in, opt-out? Who pays? Does Google pay, or do the advertisers? And, did I hear you correctly in you stating that vCE in aggregate should still, at least in your opinion, contribute about $100 million in 2017?

And second on, Mel, maybe you can address the net new customer issue. Well, it is not an issue. It is great -- you guys added 98 million, historically you've added 40 to 50 [million]. Did you do anything different this quarter that drove the net customer count to MMX MP so much higher, and is that the new normal? Thanks.

Yes, Youssef. Thanks. On Google, I figured everybody wants to know this. As I have mentioned before, the way we are -- the way it is going to work is, right after -- now that this thing has exited out of beta, it is going to be opt-in, and Google is going to charge their clients. Now, that being said, I want to emphasize here that Google and comScore are partners here, and we are going to monitor the adoption. If for some reason adoption starts declining, we will adjust. This is exactly what we said now all along, and it has come to fruition. We believe that if adoption is hampered, it will -- we will go back and adjust it with Google. We are definitely here on the same boat, here with them.

Are there any thresholds of adoption that you can share with us that you -- that will trigger that move?

No. There aren't any, actually. It is really more -- we are literally going to monitor it on a monthly basis and make the call. I don't anticipate adoption going down at all. Actually, if anything, I see now that we are out of beta, I actually think that adoption is going to increase because, let's face it, now it is out of beta. It is a full-fledged product. We have QA'ed the data. All the infrastructure issues that we talked about in the previous quarters, all that is behind us. The alignment of the data is there. And both the marketing muscle of both comScore and Google are going to be behind it. Both the sales force of Google and comScore will be behind it. Not only did we put a press release out there today, Google put out a blog post already on this launch. We will be jointly doing marketing events and webinars together on this in the next couple of weeks.

So, if anything, I see the adoption going up. That being said, we are going to monitor it. But like I said, right now, I feel confident that adoption will be very good. As a result of our bullishness, we are -- you are right, we are anticipating that vCE in total will achieve a run rate of $100 million by 2017. This is for a product that two years ago had $0 to $100 million with very high EBITDA margins. We feel very good. Lastly, the volume is just incredible. The volume, excluding DoubleClick is, as I mentioned in the script earlier, 3 billion daily impressions. Is just something that no one internally had ever expected that we would be able to see. So, we are very, very pleased about where vCE is and where it is going.

In terms of your second question related to net adds, especially on MMX MP, I don't know if it is the new norm, if we can expect that. I have to tell you, we were very pleasantly surprised, and we started digging in, saying -- what is going on? Why is it? Why it's happening? Frankly, the reason why this is all happening is because of mobile. It is 95% of the increase is because clients now are finally buying our mobile products on a worldwide basis. They see the value of it and as a result you can buy the Media Metrix Multi-Platform product, which gives you a de-duplicated of across your digital and mobile numbers, but the next question obviously is -- what is PC? What is video? What is mobile? That is when they have to then go and buy the individual products.

So, again, too early to tell. It is one data point, Youssef, in terms of the new norm. But, we are really pleased about the uptick in MMX MP, and as we noted, there is still a tremendous amount of upside here with just over 50% of Media Metrix clients purchasing it. There is definitely a lot more upside here to go in the future quarters.

Great. Thank you very much.

Sure.

Thank you. Our next comes from Robert Peck, SunTrust Robinson Humphrey. Your line is now open.

Hey, Serge, congratulations on a great quarter and raising the guidance. I wanted to dig into two more questions on vCE. I think the answer to Youssef's question there was for current DoubleClick customers. Can you talk about the economics flow if you are a current vCE customer or [Reston] vCE, how do those economics flow?

Part two of the question is are you comfortable with the trajectory or cadence of the $50 million in 2015, $75 million in 2016, and then getting to that $100 million that you already talked about in 2017? Thanks.

Yes. Hey, Bob. Thanks. You clearly have been doing your industry checks, and been doing your homework. All I can say is a client is not going to pay for the same product twice. We have tried that in the past, and believe me, as good of sales people as we are, it is very hard for a client to pay for the same product twice. So, that being said, we will still get paid from Google. So, no matter what happens, if Google gives it to Reston vCE clients, the service, or we up-sell it to the vCE Reston service customers, the DoubleClick service, we will still get paid no matter what. That is written in stone, no changes there.

As far as the trajectory, really, we have done our analysis. We feel very confident of the trajectory. We would not be committing to it for the first time publicly at $100 million. I have to tell you, the first two quarters have been incredible. So we feel very, very good about where we are, and we feel very good about the trajectory to get to the $100 million. I know especially in your analysis, you had the bear and the bullish analysis and, frankly, we feel very good. We are committing to $100 million by 2017, and we will obviously be updating the Street if anything changes.

Thanks so much. Congratulations again.

Thanks.

Thank you. Our next question comes from Jason Helfstein, Oppenheimer & Company. Your line is open.

Thanks. So, what sounds like is -- or confirm -- you are not really changing your outlook for vCE for this year, because it is too early. Is that fair? I think previously, you talked about $50 million, and you were comfortable with that number even if Google stayed in beta. Clearly we are moving out of beta, but effectively you are not really moving that number.

Second, Serge, can you talk about, now that you have gotten to this point, how this positions you to ultimately win effectively vCE for YouTube and kind of what is going on there? Obviously there is another company that would really like to win that, as well. Lastly, just housekeeping modeling, can we get the ending basic share count at the end of the quarter, and then what the current basic share count is today? Thanks.

Hey, Jason. Yes, it is too early. Listen, we got out of beta today, so I am not going to talk about our forecast for the remainder of the year and all that. We feel very good about it. I think you can tell from our tone, from our numbers, from our performance, we feel we are very bullish about vCE and its trajectory over the next couple of years.

As far as YouTube is concerned, listen, we have a deep integration with Google. We mentioned we are the first to be deeply integrated into Google's ad server. We work with YouTube a lot, and stay tuned there. We will be trying to -- We are working with clients on vCE for YouTube guarantees. So a lot of positive momentum there as well. I know who you are referencing, Jason, but suffice to say, our deep integration within the Google ad server gives us quite a bit of an edge.

And then in terms of the share count, I will hand it off to Mel.

Yes. So, ending basic, Jason, was 40.1 million for the quarter. Then I think you are looking for the outstanding. This will be filed here shortly. Let me get back to you on that. That will be filed obviously with the Q, but let me get back to you on that. That will be as of August 3.

Let me ask you then, how many shares did you buy back in the quarter?

Approximately 1 million.

1 million for approximately $54 million. That was through June. We kept the same levels in Q3, so in July it was the same levels. The program did not change at all, and we don't expect to do anything to it, barring any unforeseen changes.

Got it. Thank you.

Thank you. Our next question comes from Todd Mitchell, Brean Capital, LLC. Your line is open.

Can you talk about how Google's decision to disband Google-plus is going to impact your data acquisitions, and how you feel about that? As well, can we get an update on your efforts to get data from sources other than cookie panels?

Hey, Todd, can you repeat the first question? Maybe I didn't understand.

We were wondering how Google is basically disbanding Google-plus.

Oh, Google-plus.

Does that have any impact on your ability to get data from them?

No, we don't -- we have a lot of different data sources, and it does not really have any impact from us one bit. We know what is going on with Google-plus, and we saw the same news that you saw. But frankly, it has zero impact at all. As far as other data sources, we have a ton of data sources today. We are working on other things, especially for mobile outside of the US. And stay tuned for more news there. But it is something that is a big focus of ours, and we will update you when the time is right.

One more question, here. Also moving to the Multi-Platform products for television, basically. Your competitor Nielson talks a lot about efforts to get to a industry standard on that. It seems likes they are pitching an idea, you are pitching an idea, some others are pitching an idea, but the industry is really going to decide what they want. Can you give us a view on how that process is going to happen, and how long it is going to take?

Yes. Obviously this is not going to be an overnight solution. We are working on a census-based solution, leveraging all of our digital data, leveraging massive amounts of set-top box data with partners. I've mentioned companies like RENTRAK and others. We are partnering with them and others in this space. We are coming up with a unique solution here. It is not going to be based on a panel-based only solution. We do believe in panels, so that is why our solution has the best of both worlds. It includes a panel which is from the Arbitron PPM data, now called Nielson Audio, and it includes the set-top box data that we have procured internally and partnered with companies like RENTRAK.

So for us, it is a unique differentiator. It is the best of both worlds. In terms of adoption, it's still early innings, here. We will see the way this all goes, getting adoption by not only the big broadcasters, but also the agencies. Fortunately for us, we have existing relationships with all those constituencies, so we feel good about our prospects there. Time will tell. We feel we have an excellent solution. It is a unique, differentiated solution, but it is going to take time. I am not going to say that all of a sudden Xmedia is going to be a $100 million business. Over time it will be, but not in the next couple of years.

Thank you.

Thank you. Our next question comes from Andre Benjamin, Goldman Sachs. Your line is open.

Thank you and good morning, guys.

Hey, Andre.

First question, I was wondering as you continue to progress with your partnership with DoubleClick, is there any discussion of expanding into the international market? Or has that formally been decided yet?

It has been decided. We have -- we are expanding to international. We are expanding to mobile, but realistically, we needed to get out of beta for vCE in the US, and get that out the door. Now that, that is out the door, we can focus on the international markets and mobile, but rest assured, all the paperwork is there. The contracts have been signed, everything -- the business arrangements are already there with us and them in terms of both for mobile and international expansion. It is just, we needed to get out of beta for the US. Once we got out of that, now we can focus on the other stuff.

And I would say you have been very successful coming out with products that kind of go after either new markets or markets that your largest competitors have been the leader in for a while. Do you have any thoughts on the potential competitive implications from Nielson launching its own new syndicated audience measurement product with Adobe? I know you haven't seen it yet so it is hard to give a robust response, but any early thoughts there?

We continue to monitor DAR and what Nielson is up to. Nielson is a fantastic competitor and has done a good job, and we will continue to monitor. As you said, it is still early. That being said, we talked to our clients. We have mutual clients, both overlapping clients between us and Nielson. We know what they are up to; we know what to expect. And frankly, we feel very, very confident about our solutions and how differentiated they are. Their relationship with Adobe is still in the early stages. But rest assured, we are not ignoring them. We know what they are up to, and we feel confident of where we are.

Thank you.

Thank you. Our next question comes from Allen Klee, Sidoti & Company. Your line is open.

Yes, hi. I have a few questions just on the guidance on margins and expenses. What are the factors behind -- I think I heard that gross margins might -- I am not sure how long they'd, perhaps, be a little constrained? Then, what is driving SG&A and R&D to be down in the second half? Thank you.

Got you. So, hey, Allen, it is Mel. On margins, basically what is happening is we are seeing a shift of costs from R&D to cost of sales. It is going to be somewhere around for the next couple of quarters, probably about 4% of revenue. That is primarily because, as we are developing new products, the data costs associated with that are recorded in research and development, but then once those products become available, then they get recorded in cost of sales. And then generally the decline in SG&A, broadly, is related to the November 14 market-based grant. It had $26.1 million of stock-base comp associated with it. Through the end of June, as of 6/30, the expense associated with that was 92% expensed. So the remaining expense for that of $1.4 million will be expensed over the next two quarters, and then that will be fully expensed.

Okay. Thank you very much.

Thank you. Our next question comes from Tom Eagan, from Telsey Advisory Group. Your line is open.

Follow up on the cross media measurement stuff. With such differences in the incremental reach from the digital platforms for the various TV networks from your slides, how do you position the metrics -- or the currency I guess, for the widest appeal to the networks? Then I have a follow-up. Thanks.

First, for the networks, we need to show them the incremental reach. That is one thing that they have been complaining about, that they are losing audiences or they are not being able to measure the audiences based on digital, over the top, mobile, all of that. So, this allows us to measure this -- to measure and give them that analytics. Again, based on a census-based solution versus a panel. So that is the first thing that we want to at least highlight. The other thing that, as we mentioned in the script, this is really good news for the broadcasters, because as we have shown, as the data has shown so far, that on average the cross media TV consumer spends as lot more time, close to 50%, on TV itself. So the cross media consumer that is on tablets, on mobile devices, on PC and OTT devices, are spending more time watching TV on their regular TV than on the -- so, it's good news for both parties, not just for the OTT players, but also for the broadcasters.

I was thinking the incremental reach for, say, a Viacom would be very different from the incremental reach for a CBS. How do you position -- what metrics do you use to appeal to the widest group of networks?

We will -- obviously, we're going to have uniform metrics. There is an interface already out there. We are happy to share with you the exact metrics that we have, but suffice to say, it's reach, frequency, GRPs. But they are pretty standard metrics out there that the industry is used to seeing, and we want to make sure that they are consistent across all of the different broadcasters.

You mentioned a partnership with other companies, such as IRI and RENTRAK. Regarding RENTRAK, how much do you think the cross media service could be enhanced if you use Rent's linear measurement on VOD? Thanks.

RENTRAK has a bunch of unique assets. We are very close, and we partner with RENTRAK quite a bit, and they obviously are the leader in VOD measurements, and they have millions and millions of set-top box data available basically on a nationally representative basis. We are very close with them. We partner with them, and obviously a solution like ours with our digital data, our set-top box data, our mobile data, coupled with all of their data, is, from a partnership perspective, is quite powerful.

How would you estimate -- what is the size of the cross media market, today, do you think?

Hard to tell. Like I said, it is early innings. We believe -- we are not talking here tens of millions of dollars. We are talking significantly more. But I can't give you a specific number at this point. We just launched this product. The sales cycles are much longer than our typical digital products. These are usually six to nine month sales cycles, but, no, we put a lot of effort here, and so we are not chasing something that is in the tens of millions of dollars. We are chasing something in the hundreds of millions of dollars.

Right. Great. Thank you.

Sure.

Thank you. I am showing no further questions from our phone lines. I would now like to turn the conference back over to Serge Matta for any closing remarks.

Thank you for your participation today. Our record second quarter results reflect the momentum we have been building across our business, and continues to validate both our strategy and our execution against our strategic priorities. It is a great time to be at comScore, and I am hoping many of you can join us next month for comScore's first industry summit. We are bringing together senior leaders from top agencies, brands, publishers, and broadcasters to engage with industry experts on the latest disruptions, opportunities, and learnings that are shaping the future of media and advertising.

In addition to Neal Mohan and Randall Rothenberg, who I mentioned earlier, we will be hearing from Ted Leonsis, Eric Salama, and many others over the course of an intense and productive day of conversation in New York City on September 15. We look forward to seeing you there and speaking with you again on the next conference call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.