Ladies and gentlemen, thank you for standing by and welcome to the Comscore Fourth Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] It is now pleasure to hand the conference over to Director of Investor Relations, Mr. Christopher Ferris.

Thank you, operator. Before we begin our prepared remarks, I'd like to remind all of you that the following discussion contains forward-looking statements. These forward-looking statements include comments about our plans, expectations and prospects and are based on our view as of today, February 27, 2020. We disclaim any duty or obligation to update our forward-looking statements to reflect new information after today's call. We will be discussing non-GAAP measures during this call, for which we have provided reconciliation in today's press release and on our website. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. These risks and uncertainties include those outlined in our 10-K, 10-Q and other filings with the SEC, which you can find on our website or at www.sec.gov. I'll now turn the call over to Comscore's Chief Executive Officer, Bill Livek.

Thank you, Chris. And I’d like to start our call today by discussing our measurement deal with Comcast. Today we're announcing an agreement to begin integrating Comcast TV arms into our local and national TV footprint. This move vastly improves our direct measurement of television households across the US markets and greatly enhance our national and local rating services. The entire television ecosystem is poised to benefit from this landmark announcement and Comscore stable and predictive audience ratings, impressions and scale. The integration of Comcast viewing information will strengthen our already stable and predictive audience ratings and add impressions and will increase accountability and insights for advertisers, agency stations and networks. Advertisers and agencies for the first time with this ability for viewing information from all the major MVPDs that provides additional confidence, so buyers and sellers of advertising will be able to maximize the value of their inventory. We look forward to discussions with our customers and prospects who stand to benefit from this advancement in our service. We believe this enhanced capability will present an opportunity to sell Comscore products to more media companies, brands, advertisers, agencies and driving our revenue growth. Looking to future products, our integrated dataset will be invaluable for addressable advertising and measure many of the emerging and major streaming services. Targeted ads on streaming services with limited ad inventory require more precise measurement and Comscore has that ability. The expansion of our streaming measurement addressable services and the Comcast partnership are all major milestones in our long-term growth plan. We are thrilled to have expanded our partnership with Comcast and are excited about the transformative possibilities. Since becoming Comscore’s CEO four months ago, my energy has been placed on positioning the company to capitalize on the significant growth opportunities in front of us.…

Thanks, Bill. Today we reported fourth quarter revenue of $95.2 million, which compares to revenue of $109.3 million reported in the fourth quarter of last year. The decrease was primarily the result of lower syndicated digital and custom solutions. These decreases were offset by higher local TV activation and small but growing addressable and OTT products. Revenue from Ratings and Planning in the fourth quarter was $66.8 eight million, a decrease of $8 million from the prior year quarter. The decrease compared to the same period last year was a result of a decline in our syndicated digital products, national TV and cross platform products. These declines were offset by higher local TV and addressable and OTT revenue. While syndicated digital revenue declined year-over-year, we experienced some stabilization in the fourth quarter as revenue was comparable to the third quarter. While the fourth quarter included approximately a $0.5 million of non-recurring revenue, syndicated digital remained flat on a sequential basis and represented 51% of Ratings and Planning, in line with the same period a year ago. As Bill noted, we have seen several customers return and believe that the digital privacy laws, the changing landscape and need for our products will benefit the digital business over the long term. Additionally, a portion of the decline relates to some international markets which we exited over the last few years and the majority of those declines are now behind us. We are optimistic that the sequential quarterly declines will slow and flatten throughout 2020. Revenue from analytics and optimization in the fourth quarter was $17.7 million, down $6.2 million from the fourth quarter of last year. The decrease was from lower digital custom marketing solutions and lift products in the fourth quarter of 2019, as compared to the prior year. The decrease…

Thank you. [Operator Instructions] Our first question comes from the line of Laura Martin with Needham.

Hi, guys.

Hey, Laura.

Great job here. Hi. So a couple things on my recollection from the Rentrak days is that when you sign up somebody like Comcast there's a bunch of costs that hit your P&L right away and then as you renew your deals you increase the revenue. So what's the negative margin drag, because of the Comcast deal in the near term 2020? That's my first question.

Well. Greg is the margin guy. So I'll turn it over to him.

Okay.

Well, we don't think there's going to be any significant impact. I mean, obviously we will need to integrate that data, but we see it as something that we can do at a relatively low cost. Some of those costs you know, we have already embedded in our plan and we feel very confident that it won't have a negative impact in 2020 to the numbers I shared earlier.

Okay, great. Okay, that’s…

Yeah. And we did it as you know, because we believe that it will be a revenue enhancer force.

Okay. Super helpful. And then the digital, one of the things you're showing in your guidance is growth, which would be a first for a long number of years here at the revenue line. And I was just wondering though if you could give us any additional comfort that digital is actually stabilized. I know you said it was flat quarter-over-quarter, but is there any other insights or data points you can give us that the data downdraft has stabilized so that we can have more confidence that you actually can achieve revenue growth in 2020? Please.

Great question. Thank you for that. What we've seen actually just in the last month outside the quarter is the focus on the privacy laws, particularly the California one. Two companies have gone out of business and we see companies’ clients who are doing business with those are starting to migrate back to us. And that is a very important I believe green shoot there. And we also see that because of the abundance of companies that went with programmatic and there's so much inventory that many of the clients tell us who are returning is that programmatic when they have premium offerings are not getting what they used to when they had their direct sales staff. So some companies are starting to put together sales numbers and they need sales tools like what we provide. So I'm optimistic on digital for the first time in a long time, I think we've got the right focus internally on it and the market is turning our way, Laura.

Okay. And then my last question is your predecessor talked about two products that were going to be on the market in the first half of 2020. One was extended TV, which is like linear TV, plus VOD and the duplicated extended TV. I was just wondering are we still - is that still on our product roadmap. Are we sort of pushing those aside and going to do addressable and cross platform which were the two strategies you sort of highlighted?

Well, addressable is a very important piece of the puzzle and extended TV, you can't have one without the other, right. So someone who is watching 60 minutes on all different platforms, you have to have that extended TV for cross platform to work and campaign ratings to work. So they're all sort of embedded in one in the same. And we're seeing strong demand on those products and there were a lot of additional offshoot products on our roadmap there.

Thanks very much. Those are my questions. I appreciate it. Great numbers, guys. Congratulations.

Thank you.

Thank you. And our next question comes from the line of Surinder Thind with Jefferies.

Good afternoon, gentlemen. Just starting with a question on guidance. Can you talk a little bit about maybe what the outlook is for the TV business and then relative to that kind of the ET Analytics and Optimization business in terms of the growth prospects for next year? What's built into guidance?

Yeah. Look at TV we think it's going to have a strong year this year. I mean, if you look at the macro environment, we have a political race going on and smiling because we all know that very well. And typically in a presidential cycle there's a lot of television activity and as many of you long time investors and analysts know that we actually invented the ability during the first Obama campaign to target in a privacy compliant way with television, the persuadable voter. And every candidate has their definition of a persuadable voter that's different. We merge those segments in a privacy compliant way with our television information and we think this year is going to be a super good year for us in television. The other questions Greg, I'm not sure if I got or remember them.

Yeah, I would just say that you know, as Bill highlighted in his call some of the things that we've done around our sales organization and some of the changes that are happening in the ecosystem, we feel very confident, right, that many of the areas that you might not have had growth here recently will turn in 2020, right. And so when you look at our Custom Solutions business, when you talk about national TV, we feel confident that we're on the cusp of the turn there. Obviously local was exceptional, right. As you saw and the slowing decline in digital which has been a headwind you know, will be more than offset with these other areas. And so I think we're very focused on the areas that may have underperformed a little bit this year and we're very bullish on their opportunities for 2020.

That's helpful. And then turning to the expense side of the story, it sounds like you're able to maybe squeeze out a little bit more in terms of the expenses for the year, and about how – or how should we think about that versus where the current run rate is as the year progresses?

Yeah, I think the current run rate is a good proxy. I think that there will be opportunities for us over the course of the year. You know, we've talked a lot about leases, we have more of those that will expire or go to sublease in 2020. And there's other areas that the company around professional fees and other cost compliance that we believe will also come down. I think the heavy lifting is now behind us, but I think there are opportunities for us to continue to drive those costs lower around the margins over the course of 2020 which will be obviously helpful. But I think the third quarter and the fourth quarter were good proxies, as I had said in the third quarter call, right, fourth quarter would be a little higher due to year end sales commissions and the like. And so while they turn out to be flat, if you think about that, I think it's a good proxy for where we're headed in 2020.

That's helpful. And then if we were to turn to incremental margins, I assume you guys are at a fairly comfortable stage where you should be able to grow healthy, I'll say without too much additional expenses at this point?

I would say that that's spot on. I think there's an opportunity for us to grow the revenue line. Well you know, total costs continue to go down. That's why we provided an adjusted EBITDA margin range that would be significantly above where we were in 2019.

That's helpful. And then maybe a bit of a big picture question here. Obviously, you guys are enjoying great success within the local TV market. What do you think it will take to translate maybe some of that success more towards the national market at this point…

Yeah, I think that's driven by the advanced audiences, right. If you think about us think about measuring TV with the products, we as consumers buy, own our lifestyles that we have versus just age and gender demographics. And as you have more accountability being demanded in the market, we see a significant upside with our national business and particularly with the new streaming services, in the quarter, you know, we didn't talk about it, but with some of the major streaming services we integrate it server to server integrations with our video metrics product and you have to utilize our television product to utilize the video metrics. So the more streaming that is going on we think that will translate to more revenue in our national business. But remember our national business too, there's just not TV networks, right. It is brands that come and they buy that - our national service for a particular length of time because they have certain strategic initiatives that are going on. But we feel really good about where national television has headed.

Thank you. That's it for me. Thanks.

Thank you.

Thank you. Our next question comes from the line of Matthew Thornton with SunTrust.

Hey, guys. Thanks for taking the questions. Maybe a couple of I could. Starting with Comcast. What's that the timeline to getting that - that data integrated into the syndicated products and is this a function of going from zero households with Comcast to all of them or from some to all of them or from zero to some, so just any color there would be helpful as well. And then just second question, maybe for Greg, the – what were the terms on the loan, now that the small term note intra-quarter, any color there would be helpful. Thanks, guys.

So let me start with our building block and that's local markets, so all 210 markets add up to our national numbers and in local markets where we have all operators, we have to do very little mathematical modeling to make sure that we're representing an operator that we don't have, like we had not had Comcast before. Now that model comes out and actual viewing data goes in which we see as a material improvement in our service and takes away one of the last objections that is there, why agencies you know are not advancing faster. We're excited by this. We know station groups are excited by this and we're also doing a lot of great work in local press across the platform and in local cross platform the more complete measurement you have, we think the happier customers that we will have there. Now we're targeted to complete this by year end. That's our focus. We've got a super capable team that has done this before and this is something that's strategically important for the industry and us. So we're making a top priority.

Thanks, Matt. Let me just address your question on the financing. As I mentioned on the call $13 million, two year term note, it's 9.75% interest, all of the information around that now will be filed in our 10-K here today.

Perfect. And then just maybe one quick follow up. Obviously, you guys alluded a little bit to maybe some opportunities for further expense reductions, R&D was down again sequentially. I think it's a multiyear low, if not all time low. How do you think about again the ability to continue to maybe turn growth around – and flex growth while cutting costs and maybe not hitting into your muscle. I guess how - any thoughts there, I guess, would be help as well.

Look, we are relentlessly focused on customer satisfaction. That's super important. We think we've got the right cost base now to build new products. And the reason I mentioned Amir Yazdani. Amir helped us, it builds many of the products that we have today and advanced those. He along with David Algranati and a great team that we have here at Comscore, I believe are going to continue to build great products. And we don't have to add a lot of cost. You know, one of the best kept secrets is that it's easy to spend so far in advance of revenue and we've taken a different perspective. Greg and the team that I inherited many of the folks, I've worked with for a long time, we know how to spend just a little bit in advance of revenue. You don't have to do it years in advance. I think that's in this number.

Yeah and I'll just follow on Matt, as I said right, I think the heavy lifting is done. There's other areas that are not people related that we think we can continue to drive lower. We contract services professional fees, facilities, other areas that are still sizable that we think we have opportunity to drive lower. So I think we are very conscious around, your points around you know, getting things done and getting things built. And so, as I said, these are more around the fringe to drive those costs lower, but the heavy lifting is behind this.

Great. Appreciate the color, guys.

Thank you. Our next question comes from the line of Victor Anthony with Aegis Capital.

Hey, guys. Congrats on the execution in the Comcast deal, which looks like a game changer for you guys. A couple questions, maybe I'll just rattle them off right now. One, I guess, on the topic now, which is coronavirus, maybe if you could just talk about what sort of exposure you guys have, if any? That's one. And second on that Comcast deal, why don’t you kind of look beyond just television and see whether or not there's an opportunity for you guys to expand it, the measurement into more digital platforms that they have. And on third, I wonder if you guys could kind of walk us through and refresh us on your strategic options that you have on the table right now. You said you close to an end. What could that end be, is potential sale of the company, all pieces of it, is that part of it. So if you could just kind of refresh us. Thanks.

Thanks, Victor. Let me take the first one on the coronavirus. You know, we don't see really any impact to us as it relates to that. You know, as I mentioned earlier, we did exit international - some international markets some time ago, including for the most part China and some other countries in that area. As we look at our global footprint, we feel pretty comfortable in the revenue guidance that we gave and that would have minimal to no impact for us. I'll turn over the Comcast questions to Bill.

Comcast has always been a great client. We've done work over the years and they were actually the first company that gave us the honor of having their video on demand information. And we're in constant conversations with what they're doing. And remember, our video platform, video metrics platform is what I believe the industry standard and everyone who goes direct to consumer want to make sure that there's a server to server integration. So we're committed to work with all of our customers, as they expand into these new frontiers. Lastly, your question was on strategic options. There's really nothing I can say, other than what was said in my prepared remarks and in previous earnings call, there will be an update, when there's an update on it.

Got it. Just a follow up on your guidance for EBITDA in 2020. How should we think about the free cash flow conversion in 2020?

Yeah, I mean I think - look as we think about adjusted EBITDA as we move forward, many of the reconciliation items there between EBITDA and adjusted EBITDA that we had in 2019 we won't have in 2020 you know, such as the investigation and audit costs for example. So when you think about it, I think adjusted EBITDA absent the impact of stock based comp is a good proxy for free cash flow, absent capital expenditures. So I think you can take a look at the trend around stock based comp, think about where that would be, back that out and you can get a pretty good flavor for where we think cash flow will be in 2020.

Thank you.

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I will now turn the call back over to CEO Mr. Bill Livek for closing remarks.

Thank you so much, operator. We look forward to sharing all of our progress and our results with you in the coming quarters. Thank you for joining us today. And those of you our shareholders I thank you for trusting us. Talk to you soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. And you may now disconnect.