Melvin F. Wesley - Chief Financial Officer Serge Matta - President, Chief Executive Officer & Director.

Youssef H. Squali - Cantor Fitzgerald Securities Robert S. Peck - SunTrust Robinson Humphrey, Inc. Jason S. Helfstein - Oppenheimer & Co., Inc. (Broker) Todd T. Mitchell - Brean Capital LLC Andre Benjamin - Goldman Sachs & Co. Allen Klee - Sidoti & Co. LLC Thomas William Eagan - Telsey Advisory Group LLC.

Good day, ladies and gentlemen, and welcome to the comScore Second Quarter 2015 Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. . As a reminder, this conference call is being recorded.

I would now like to 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'm 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 particular products; expectations regarding the strategic and economic benefits of certain strategic relationships, such as those with Google, WPP/Kantar and strategic acquisitions; expectations as to the financial effects of comScore's divestiture of certain business lines; assumptions regarding tax rates and net operating loss carry-forwards; and forecasts 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 and our results are posted under Press Releases. We have a presentation posted on our IR website under Events & 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, and 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've been pursuing as we worked to make audiences and advertising more valuable.

We've built the differentiated position as the global media measurement and analytics company that's uniquely capable of solving some of the most important challenges facing companies at the intersection of media and advertising.

We're 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'll 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 has 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 effects 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 margin 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 includes 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's continued upside for MMX MP, as just over 50% of MMX customers, Media Metrix customers, buy Media Metrix Multi-Platforms in the markets where it's 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 remained above 90% on a constant dollar basis. Moving to Slide 5. In May, our board also authorized a 12-month share buyback program of $150 million.

This program began on May 6 and through June 30 we purchased just under 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 of 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 ecosystem.

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's 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 into programmatic platforms and client workflows; focusing on execution, and continue to return capital to our investor base.

On today's call, I'll offer some updates across these priorities. We're making strong progress across the board. Let's start with an update on vCE in DoubleClick. As we announced earlier this morning, comScore vCE in DoubleClick is now out of Beta and widely available to U.S.

Google DoubleClick customers across DoubleClick digital marketing, formerly 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 the 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 we're able to unlock the potential of vCE for DoubleClick customers.

Today vCE metrics are being pushed to advertisers on the homepage of the DoubleClick campaign manager and appear on 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've taken vCE in 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 to this partnership with Google will be in 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'm delighted to announce that Neal Mohan, who has been the key architect of 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 series of important announcements about our advertising product that I want to review. First, we continue to drive innovation in advertising measurements and significantly expand our vCE product portfolio and geographic footprint.

While vCE had its origins in digital display advertising on PCs, we've 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've seen strong client uptake of our mobile solution.

And in June mobile vCE reporting became a part of our syndicated offering 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 ensure 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 standard, something that is critical to our clients as video advertising becomes a large portion of an advertiser's budget.

We've also focused on making vCE video viewability widely available to the industry through partnership. Just last week we announced eight new partnerships with video advertising networks including AOL, Brightcove, FreeWheel, Gannett, Innovid, Smartclip, Vindico and Videology.

As with our work with Google, we're making sure that comScore data is integrated into the places clients use them. Now in Q2, we continued to see strong momentum for vCE as measured both by client uptake and the increases in the volume of ad measurement.

On the client front, comScore won a large commitment for vCE from the agency's 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's 3 billion daily impressions which do not include any volume from our Google DoubleClick partnership. Expanding our vCE momentum globally is a key priority for comScore. In Q2, we launched vCE 2.0 in nine additional international markets for a total of 13 markets.

Our total vCE global footprint of 44 markets matches that of comScore Media Metrix. vCE 2.0 dramatically expands the demographic data available to use allowing us to conduct more granular studies and measures smaller campaigns.

It also brings improved in-flight optimization and details on ad placements, enhancements which allow vCE to fold into client workflows and be used as a basis for billing. We'll continue to focus on expanding global vCE momentum and we'll be rolling up several new countries in the coming quarters.

On our last call, I talked at length about how comScore is focused in 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're 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, engagements and audience overlap and in the near future, we'll be providing a 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 we've received from clients has been uniformly positive and we're now delivering monthly data that dates back to January 2015.

Clients are paying for our syndicated cross-media service today and tell us its helping them convert on cross-media opportunities everyone understood were emerging, but until now couldn't be quantified or properly monetized. Let me highlight a couple of bits of data to explain why we're very excited about the prospects for this product.

One part of the puzzle we're solving for is measuring the incremental reach that digital platform 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 from 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 desktops, 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're 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 4x. While the notion that additional platforms create incremental reach may not be that surprising, we've discovered a new trend that isn't as intuitive. Cross-platform consumers are more engaged with the networks 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 if 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're discovering that cross-platform consumers watch more television on TV. This is good news for everyone in the ecosystem and we're 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're doing this is through partnerships with other companies that have unique assets.

You'll 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 offering in cross media. Moving on, less than six months ago we announced our long-term strategic partnership with Kantar.

We continued to make rapid progress in laying a strong foundation for our multiyear 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 cost and complexity.

We also announced that Spain would be the first pilot country for our joint cross-media measurement solution. Today, we're taking another step forward in announcing that comScore and Kantar will jointly build mobile panel for behavioral measurements. We are starting with two countries, Spain and Indonesia.

Mobile Panels are a 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'll 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 U.S.

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 model 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 head count and data acquisition costs associated with the development of new products. We expect R&D cost to decline in absolute dollars and as a percent of revenue during the remainder of 2015 as the costs 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 cost 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 U.S. and certain foreign jurisdictions. During the quarter, GAAP net loss was $4.8 million, or $0.12 per basic and diluted share, based on a 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 non-recurring 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 continued 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..

Thank you. . And our first question comes from Youssef Squali from Cantor Fitzgerald. Your line is now open..

Okay. Thank you very much. Good morning, guys. Congratulations on a very nice quarter..

Mr. Fitzgerald, we can't hear you..

How about now? Is this better?.

Yup..

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's opt-in, opt-out? Who pays, it's the 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's not an issue, too great. I mean, you guys added $98 million. Historically, you've added $40 million 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..

Hi, Youssef. Thanks. So on Google, I figured everybody wants to know this. As I have mentioned before, the way we are, the way it's going to work is right after -- now that this thing has exited out of beta, it's 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're 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, we will go back and adjust it with Google.

We're definitely here on the same boat here with them..

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

No, there aren't any actually. It's really more of – we're going to literally 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're out of beta, I actually think that adoption is going to increase because let's face it. Now it is out of beta.

It's a full-fledged product. We have QA'ed the data. We have made sure all that infrastructure issues that we talked about in the previous quarters, all of 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 are going to be behind it. Not only did we put our press release out there today, Google put out a blog post already on this launch. And we're going to 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.

With that being said, we're 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, 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. And lastly, the volume is just incredible. The volume excluding DoubleClick is, as I mentioned in the script earlier, 3 billion daily impressions, is this something that no one internally had ever expected that we would be able to see.

So very, very pleased about where vCE is and where it's going. In terms of your second question related to net adds, especially on MMX MP. I don't know if it's 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's going on? Why is it? Why it's happening? And frankly the reason why this is all happening is because of mobile. It's 95% of the increases, 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's PC? What's video? What's mobile? That's when they have to then go and buy the individual product. So, again, too early to tell.

It's one data point Youssef in terms of the new norm, but really pleased about the uptake 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. So there is definitely a lot more upside here to go in the future quarters..

Great. Thank you very much..

Sure..

Thank you. Our next question comes from Robert Peck from SunTrust. Your line is now open..

Hey, Serge, congratulations on a great quarter and raising the guidance. I want to dig into two more questions on vCE. I think the answer to Youssef's question there was more for current DoubleClick customers.

Could you talk about how the economics flow if you're current vCE customer or Reston vCE, how do those economics flow? And then, 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..

Yeah. Hey Bob, thanks. You've clearly been doing your industry checks and been doing your home work. All I can say is a client is not going to pay for the same products twice. We've tried that in the past and believe me as good sales people as we are, it's 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 upsell 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, we've done our analysis.

We feel very confident of the trajectory. We wouldn't be committing to it for the first time publicly at a $100 million. I have to tell you the first two quarters have been incredible. So, we feel very, very good of where we are and we feel very good about the trajectory to get to the $100 million.

I know especially your analysis you had the bear and the bull, bullish analysis and frankly we feel very good. We are committing to $100 million by 2017 and we'll obviously be updating the Street if anything changes..

Thanks so much. Congratulations again..

Thanks..

Thank you. And our next question comes from Jason Helfstein from Oppenheimer. Your line is open..

Thanks. So what sounds like is, or confirmed, you're not really changing your outlook for vCE for this year, because it's too early. Is that fair? So I think previously you talked about $50 million and you were comfortable with that number even if Google stayed in Beta.

Clearly we're moving out of Beta, but effectively you're not really moving that number? Second Serge, can you talk about now that you've gotten to this point, how that's positioned you to ultimately win effectively vCE for YouTube and kind of what's going on there? Obviously, there is another company that really like to win that as well.

And lastly, just housekeeping modeling, could 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. Yeah, it is too early. Listen, we got out of Beta today. So I'm 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're 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 with the Google's ad server. We work with YouTube a lot. And stay tuned there, we're going to be trying to – we're working with clients on existing vCE for YouTube guarantees, so a lot of positive momentum there as well.

I know who you're 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 up to Mel..

Yeah, so ending basic, Jason was $40.1 million for the quarter and then I think you're looking for the outstanding and this will be filed here shortly. Yeah, let me get back to you on that. That will be filed obviously with the Q, but I want to get back to you on that. That will be as of August 3..

Okay, let me ask you then how many shares did you buyback in the quarter?.

Approximately 1 million..

You know 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 from Brean Capital. Your line is open..

Yeah, can you talk about how Google's decision to disband – or disband Google Plus is going to impact your data acquisitions and how you feel about that? And 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..

And 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's 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 U.S. 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 Nielsen talks a lot about efforts to get to an industry standard on that. It seems like they are pitching an idea, you're 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's going to take?.

Yeah, obviously this is not going to be an overnight solution and 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're coming up with a unique solution here.

It is not going to be based on a panel-based only solution. Now we do believe in panels, so that's why our solution has the best of both worlds. It includes a panel which is from the Arbitron, PPM data now called Nielsen Audio. And obviously it includes the set-top-box data that we have procured internally and partnered with companies like Rentrak.

So for us it's a unique differentiator. It's the best of both worlds. In terms of adoption, it's still early innings here. We will see the way – this all goes is getting adoption by not only the big broadcaster, but also the agencies.

And fortunately for us, we have existing relationships with all of those constituencies, so we feel good about our prospects there, but time will tell. We feel that we have an excellent solution. It's a unique, it's a differentiated solution, but it's going to take time.

I'm 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..

Sure..

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

Thanks. Good morning, guys..

Hi 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 started yet?.

It has been decided. We are expanding to international. We are expanding to mobile, but realistically we needed to get out of Beta for vCE in the U.S. and get that out the door. Now that that is off 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's just we needed to get out of Beta for the U.S. Once we got out of that now we can focus on the other stuff..

And I would say you've been very successful coming out with products that kind of go after either new markets or markets that your largest competitors have had been the leader in for a while.

Do you have any thoughts on the potential competitive implications from Nielsen launching its own new syndicated audience measurement product with Adobe? I know you haven't seen it yet, so it's hard to give a robust response, but any early thoughts there?.

Yeah, no, we continue to measure – we continue to monitor, sorry, DAR and what Nielsen is up to. Nielsen is a fantastic competitor and they have done a good job and we will continue to monitor. As you said, it's still early. That being said, we talk to our clients.

We have mutual clients, both overlapping clients between us and Nielsen and 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're not ignoring them.

We know what they're up to and we feel confident of where we are..

Thank you..

Sure..

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

Yes. Hi, I had a few questions, just on the guidance on margins and expenses, kind of what are the factors behind, I think I heard that gross margins might – I'm not sure how long they would have be a little constrained and then what's driving SG&A and R&D to be down in the second half? Thank you..

Got you. So, hey Allen, it's Mel. On margin, basically what's happening is we're seeing a shift of cost from R&D to cost of sales and it's going to be somewhere around for the next couple of quarters, probably about 4% of revenue.

And that's primarily because as we're developing new products, the data cost associated with that are recorded in research and development, but then once these 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-based comp associated with it. And through the end of June as of 06/30 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 now open..

Great, thank you very much. A 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 slide, how do you position the metrics or the currency I guess for the widest appeal to the networks? And then I have a follow-up. Thanks..

You know first for the networks we need to show them the incremental reach, that's one thing that they have been complaining about that they're losing audiences or they're 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's 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 shown, as the data has shown so far that on average the cross-media TV consumer spends a lot more time over 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 – on just on regular TV than – so it's good news for both parties, not just for the OTT players, but also for the broadcasters..

Right. I guess, I was thinking that the incremental reach per se of Viacom would be very different from the incremental reach for a CBS.

So how do you position what metrics that you use to kind of appeal to the widest group of networks?.

Well, we're going to obviously, it's – 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, its 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're consistent across all of the different broadcasters..

Right. Okay. And you mentioned a partnership with other companies such as IRI or Rentrak. Regarding Rentrak how much do you think the cross-media service could be enhanced if you use linear measurement on VOD? Thanks..

Yeah, 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. So we are very close to 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's early innings. We believe it's – we're not talking here tens of millions of dollars. We're talking significantly more..

Right..

But I can't give you a specific number at this point. We just launched this product. The sale cycles are much longer than our typical digital products.

These are usually six to nine months sale cycles, but we put a lot of effort here and so we're not chasing something that's in the tens of millions of dollars, we're chasing something in the hundreds of millions of dollars..

Right. Great. Thank you..

Sure..

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

Sure. Thank you for your participation today. Our record second quarter results reflect the momentum we've been building across our business and continues to validate both our strategy and our execution against our strategic priority.

It's a great time to be at comScore and I'm hoping many of you can join us next month for comScore's first industry summit.

We're 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'll 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..