Serge Matta - CEO Mel Wesley - CFO Bill Livek - Executive Vice Chairman and President.
Matthew Thornton - SunTrust Jason Helfstein - Oppenheimer Youssef Squali - Cantor Fitzgerald Shyam Patil - SIG Timothy McHugh - William Blair Laura Martin - Needham Tim Nollen - Macquarie Tom Eagan - Telsey Advisory Group Tracy Young - Evercore ISI Allen Klee - Sidoti & Company Andre Benjamin - Goldman Sachs.
Good day, ladies and gentlemen. And welcome to the comScore Fourth Quarter 2015 Financial Results Call. 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. [Operator Instructions] As a reminder, this conference is being recorded.
I would like to introduce your host for today’s conference, Mr. Mel Wesley, Chief Financial Officer. Sir, please begin..
Thank you. Good morning, and welcome to comScore's earnings call for the fourth quarter and full fiscal year of 2015. I'm Mel Wesley, comScore's Chief Financial Officer, and with me today is our Chief Executive Officer, Serge Matta, Executive Vice Chairman and President of comScore, Bill Livek, and David Shiffman [ph], our Chief Revenue 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 period that may follow, representatives of the company may make forward-looking statements within the meaning of Securities laws, regarding future events or performance of the company that involve risks and uncertainties, including without limitation, that is outlined in the press release that proceeded in this presentation and identified on a written disclaimers of the slides included with this presentation.
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-Qs and Form S-4 related to the Rentrak acquisition.
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 ended 2015 with record results and strong momentum to carry us into what we hope will be a historic 2016 for comScore.
Less than three weeks ago, we completed our merger with Rentrak, creating a new cross-platform Measurement Company, built on a precise innovation lead understanding of audience and consumer behavior at massive scale.
We're extremely excited and bullish about the new comScore, and on today's call, we will spend a significant amount of time on details regarding the new vision.
That said, Rentrak's results will be included in our financials beginning January 30th of 2016, and not included in the financials we are reporting for comScore during the fourth quarter of 2015. As you can expect - as you can imagine, we expect today's call to run a little longer than usual.
As Bill and I take some time to walk through our post-merger business plans for 2016 and detail the momentum, we've already been building in the marketplace. But first, let's move now to a brief overview of the comScore legacy quarter, before we close the Rentrak merger.
Turning to slide four, comScore delivered another quarter and year of record revenues and strong profitability. We closed our 2015 with positive momentum across our business, setting us up well for game-changing 2016. Fourth quarter 2015 pro forma revenue was $97.7 million, up 10% over fourth quarter last year.
We have strong revenue growth, despite the continued negative effects of foreign currency adjustments. On a constant currency basis, our pro forma revenue grew 13% over last year, and we achieved record pro forma constant currency revenue of $100.9 million.
Adjusted EBITDA was $27 million, a 30% year-over-year increase and a 28% adjusted EBITDA margin, reflecting the significant operating leverage we have in the business. This adjusted EBITDA margin increased more than 400 basis points from the same quarter last year. I'm especially pleased that our pretax income for the quarter was $6.5 million.
This amount includes expenses for 1.3 million of Rentrak-related transaction fees. Excluding these transaction fees, our pretax income for the quarter would have been even stronger. Turning to the next slide, during the fourth quarter, we added 42 net new customers for our overall business for a total of 2,770 customers.
Our contract renewal rate for the entire business with existing customers again remained above 90% on a constant dollar basis.
Our flagship digital audience measurement service, Media Metrix Multi-Platform also known as MMXMP continue to do great adding 61 net adds for the quarter; also almost 60% of our Media Metrix client base have now upgraded to Media Metrix MP in the markets, where we offer the product.
And similar to previous quarters, about two-thirds of these Media Metrix MP clients also purchased our Mobile Metrix and or our Video Metrix Multi-Platform products. So, there is an upsell component to this momentum. We would expect a similar upsell momentum as we bring the services that Rentrak has to offer to the customers in our digital business.
Finally, to continue our momentum, we expect to rollout an additional eight countries in 2016, ranging from Brazil to India. I am also pleased to report that the Media Ratings Council, known widely the MRC accredited our flagship Media Metrix service.
This is the first time, the MRC has ever issued accreditation for digital audience measurement service, and it demonstrates our commitment to transparency and to working with the industry to deliver services, which are unmatched. We are committed to pursuing MRC accreditation for all of our flagship syndicated products including cross-platform.
Lastly, we are thrilled that our free cash flow position for 2015 was up 32% year-over-year to $55 million. In the past 16 years, comScore has built a great business, focused on providing shareholder value. Given that commitment, our Board believes that right now, our stock represents a great value.
With that in mind, our Board has authorized a new $125 million stock buyback program that will begin a few days from now. We expect this buyback program to be completed by the end of this calendar year. Turning to vCE, as many of you know, we have seen tremendous growth over the past 18 months here, and we continue to do so.
Year-over-year vCE grew by 56%, reaching $46 million. In the past year, the number of clients leveraging vCE analytics has increased by 64% and the number of users accessing our platform has increased by 98%. A key win during the fourth quarter was Kraft Heinz, which made a strategic decision to start using vCE in the United States.
In addition, we signed an important agreement with Twitter, whereby they will be the first tag less vCE integration with data directly available through Twitter’s advertiser user interface. We expect the Twitter integration to go live in early Q2 of this year.
Finally, our Google DoubleClick relationship has never been stronger, and we expect a few major initiatives to be announced in the first half of 2016. As you can tell, there is a lot of momentum over here and we are confident in our previous guidance that vCE will be at a $100 million in annual revenue in 2017.
Turning to slide seven, let’s now talk about the new comScore. We announced in September, our agreement to merge with Rentrak, and our merger creating the new comScore was completed on January 29th.
When Bill and I first began discussing the possibilities of joining our companies, we knew that there was a tremendous opportunity ahead of us and that our assets, talents and focus on execution would create a great company for our shareholders and our customers.
We also know that we could have significant synergies selling the products that each company has created and will create. In those initial meetings, neither of us fully appreciated the common corporate culture and how quickly would be able to build remarkable synergies between our teams, sales and our products.
We've only been a unified company for three weeks and we are incredibly proud of the focus and intensity, we see on display across our technology, product and sales teams. Everyone is truly fired up, focused on execution and delivering on the promises we are making to customers.
More importantly, our customers and future customers are even more excited and the need for speed in delivering scalable and quality insights has never been greater. As such, we want to take some time this morning to outline how we're moving forward as a new comScore and share with you the market momentum that is building in our favor.
Turning to slide eight, one outcome of the merger has been the dramatic expansion of the market opportunity that comScore is positioned to address and profit from. As many of you know, pre-merger, comScore’s total addressable market also known as TAM was primarily focused on the digital advertising ecosystem.
The new comScore incorporates a myriad of new platforms, including traditional TV, video on demand, movies, mobile video and over-the-top. Undoubtedly, this'll have significant impact on the overall TAM, and we expect that for the U.S. alone, the opportunity can be north of $2 billion.
The Rentrak merger allows us to enter new markets and deliver new powerful insights that we simply couldn’t do in the past. We're aggressively going after this expanded opportunity with the new approach for our market need that has yet to be fulfilled, cross-platform measurement.
Now contrary to what many of you may have heard, this is a new market category where no one truly has market share. comScore is focused on being number one in this new category. As you know, the new comScore is creating the new model for a dynamic cross-platform world.
It’s a dynamic world that’s characterized by tremendously fragmented audiences who are watching and engaging with more choices of programs and content than ever before. And consumers are doing this across screens in the movie theaters, on the wall in your home, on their desk, and in their hands, yes everywhere.
We are breaking new ground, delivering new currencies, and insights for our clients across the whole media and advertising ecosystem. These are currencies the market has asked for and desperately need, because they have not been provided in the past.
In part, because building them is hard and complex, without our massive, passive and in many cases, census [ph] like information that only comScore has the unique ability to combine into our products. So, let us make it simple to understand.
Moving to slide 10, our new model combines massive scale and smarter methodologies to deliver better information and more precise results. Now better information and more precise result is what the market is hungry for. Better information means the ability to use advanced demographics to plan and execute media bytes [ph].
The ability to link detailed consumer demographics that go far beyond age and gender with the exact TV shows, websites, or mobile experiences that the target consumer is watching.
Yes, the advanced demographics of the cars consumers drive, how they vote, the products they purchase and consume in their home and much, much more, all linked with how they use the media that we measure at scale. Better information means new currencies that allow media companies to properly value their complete cross-screen audience.
Better information also means that the media companies no longer sell themselves short, because of lack of measurement on all the screens their audiences use.
This measurement has to be complete and include viewing over linear TV, VOD, over-the-top, mobile or the desktop; and it must measure all of the programs that are available, not just a sampling of them, and they have to be in all markets.
New currencies that enable transactions based on trusted and independent metrics that reflect a media and consumer landscape that's fundamentally changed. Better information means the ability to know equally, who's viewing TV on major networks and highly targeted networks, cable networks, local stations, on new video platforms and on mobile.
And not just knowing something about the aggregate audience, but know in detail characteristics of these audiences with the depth to create powerfully targeted advertising campaigns and can improve that those campaigns worked.
Now, the only way to achieve this is to deliver the advanced demography, new currencies and granular, but stable insights is through the new model that comScore is pioneering. In many ways, it comes down simply to math, not simple math, you can't just total up the audiences starting with the TV base. You need two things.
One, massive and diverse information assets. And two, smart and sophisticated methods to unify these assets to create precise metrics and industry-changing product. We have both at comScore. Now, let's talk about scale, about data scale.
In the United States on slide 12, comScore is now measuring behavior on more than 260 million desktop screens, a 160 million mobile phone screens, 95 million tablet screens, 40 million television screens, a 120 million video on demand television screens.
Adding in our movie box office business, we have information of more than 100 million movie goers, viewing 40,000 movie theater screens.
Our footprint is unsurpassed and includes 500 national television networks, 2000 local TV stations, nearly 9 billion VOD transactions more than 10 billion desktop and mobile websites and more than 10,000 mobile apps from every movie and program title. Now let's be clear, it's not enough to have lots and lots of input.
You need smart and sophisticated methods and our power house technology platform to turn this information into insight and currencies. comScore and Rentrak both have been inventing and patenting proprietary methods for handling massive measurement datasets for years.
Our unified digital measurement methodology was a step change in how the digital world of desktops and mobile usage have been measured and understood in the digital world. And both comScore and Rentrak have been developing methods to unify TV and digital for a long time.
The industry is finally in a position, where they are ready to purchase and certify new currencies. Slide 14, we're moving swiftly and decisively. We have begun briefing clients and we're making several concrete promises, which I will share shortly.
First, we will have products in client’s review in early April, in time for the TV upfront and new prompt [ph] season. Second, we'll bring to the market a new syndicated Cross Media service time for the fall TV season.
That service will have person level reporting across linear TV, time-shifted TV, VOD, over-the-top and digital video with advanced demographics and a broad range of measures for national and local markets.
We're able to move so quickly because of how closely aligned our philosophies and approaches were as Rentrak and comScore operated and because we've all been preparing for the moment to make this happen. Slide 15, now I know a lot of our investors have been asking on exact specifics on what and when we will be delivering this year.
And as such, for giving an advance, but for the sake of being sorrow, we felt it was necessary in this call to provide everyone what we are going to develop. As mentioned earlier, we are going to provide a ton of new insights fast. Starting in early April, we will provide the industry Cross Media series reports that includes person level ladies.
And these reports will be segmented by linear TV, VOD and digital, and by age and gender demographics. We will immediately provide 15 months of historical data as part of our service. This is a huge milestone centered to leverage the massive datasets of the new comScore.
In Q2, we will evolve from series reporting to the telecast level and provide the incremental reach for each audience by platform. We are hearing our clients’ needs and we are providing them the metrics, they are begging for. In Q3 of this year, we plan on delivering most of our new capabilities in a new syndicated user interface.
We will also be moving to daily reporting cross-platforms. Finally, in Q3, we will add the advance demographics that is auto intenders, consumer package goods, buyers et cetera, and incorporate them into the overall products.
On the activation side, one of the benefits of having a mature technology platform with massive datasets is our ability to integrate into major data management platforms. Excuse me, also known as DMPs and provide cross-platform insights. An example of major DMP is Oracle's BlueKai.
Our strategy of integrating across DMPs is rooted in our focus on being a trusted independent provider of information and currencies. We don't want to be in the business of owning a DMP. We want to help power the sector and as such remain agnostic.
This approach also allows comScore information and insight to be used at scale on a myriad of clients versus going to each client one-by-one. In Q1, we expect to activate TV-based segments digitally, and in Q2 of this year, we intend to move to cross-platforms. In addition, we expect all of our DMP relationships to leverage our advanced demographics.
This will help our clients to identify likely customers and their viewing habits. Finally, since I know curious minds will ask, we are absolutely moving towards delivering vCE results in a cross-platform manner in the U.S. This is critical and we will have that starting in Q2 of this year.
We will also be leveraging our vCE platform and incorporating a very scalable approach to measure online and offline sales, a key need for advertisers. We will make sure to provide you a much more detailed overview of this initiative during our Analyst Day in mid-March.
I hope by now you've heard the passion and enthusiasm in my voice, while I was describing the new model we're building. Our clients have the same enthusiasm. Moving to slide 18, on our last call, we introduced the newest measurement platform we've invented and are investing in; the comScore Total Home Panel.
With the Total Home Panel, we are able to measure the full range of connected devices, including TVs, smartphones, tablets, game consoles, over-the-top devices and other connected devices. One of the most exciting developments to report is our ability to support the measurement of content consumption on TV.
The technology that we are rolling up to the panel will enable the measurement of over-the-top services like Netflix and Amazon Prime with title level information. The rollout of this technology is expected to be complete in Q3 of this year and will then be incorporated in our Cross Media insights.
As mentioned in our last call, the Total Home Panel is real and we are in the recruitment phase. We are measuring today approximately 4000 active devices and we expect 60,000 active devices by the summer and over 300,000 devices by the end of 2016.
We are extremely excited about this development and the initial data has all the operators in the United States and is representative of the entire U.S. population. Now, since it's on everyone's mind, the investment in 2016 to achieve the Total Home recruiting goals is approximately $10 million to $15 million and is included in our annual guidance.
Continued innovation is a hallmark at comScore and the Total Home Panel is a comScore first. We will be leveraging this to inform our census data across all screens. Now, I'd like Bill to talk in detail about our TV sector..
Thank you, Serge. comScore is in a unique position in TV, as a result of having a measurement service that measures and reports all 210 [ph] intent local markets projected to our national television service.
This includes every program and every movie on video on demand and every television show, whether that television show is watched live or on a consumer's DVR or VOD over the course of a month.
The benefits of our service is stable and highly granular information that gives our customers the ability to do advanced demographic segmentation and the ability to sell and buy advertising, beyond age and gender demographics. Yes, comScore measures TV precisely and everywhere.
National broadcasters are embracing our television solutions, as we continue to watch our client base growth. We count 107 national broadcasters as clients and up to 21% of the national TV broadcasters in the U.S. We have signed up about one-half of the top 50 television networks, and about one-half of the top 100 networks.
As many of you know, comScore works with four of the top five major broadcast networks with our television service. comScore's video on demand in digital services works with all major networks. Again, another synergy in bringing our two companies together will be a big revenue driver in the future is this focused approach in the national marketplace.
On slide 23, the local television market is another proof point supporting that our approach is working at comScore. Local broadcasters and local agencies need to understand their local audience in great detail, especially now in this political season and big automobile repurchase cycle that we are in.
Last quarter, we tipped over 625 client mark in the local service and have contracts with 93% of the television stations that are owned and operated by ABC, CBS, NBC and Fox.
We announced in November that we signed deals with Sinclair, the largest television station group in the United States, enlarging our deal with them from 57 stations to their entire group of 164 television stations. Also since last time we visited with you, we signed another 15 Nexstar stations, bringing our Nexstar station count to 96.
That's nearly all of the television stations. Remember, Nexstar recently announced that they're acquiring Media General, and we look forward to them closing that deal. Today, our total station count is 641, or 32% of all U.S. TV stations. In all, our current local broadcaster client base represents about half of the total U.S. television audience.
Our advanced demographics on the cars that consumers drive, how they vote, the products they purchase and consume, and much, much more are all linked with how consumers watch television. About 20% of our stations use us as their exclusive TV currency. On slide 24, you know that agencies are important to our success.
All the major agency holding companies are clients. Agency usage is a key driver of local broadcast and national momentum. Today, more than two-thirds of our local agencies are using comScore local TV as currency for media planning and buying, and this number continues to grow.
Today on this call, we are announcing for the first time that GroupM, the world's largest media agency in 2016 will use comScore's local market TV information as the standard local TV audience metric for trading in almost 90% of the markets.
Some of you may not understand the magnitude of this announcement, but the endorsement by GroupM, we believe will significantly increase our local TV market share. That’s incredible validation of our approach and we and our clients believe that local and national markets need stable and granular information in this dynamic cross-platform world.
Before I turn the call over to Mel, we are bullish on our movie and our television businesses and as such are confident to a 25% to 30% year-over-year growth rate for our movie business and a 55% to 65% year-over-year growth rate for TV. Now, I’ll turn the call over to Mel to talk about our financial results.
Mel?.
Removal of January revenue from Rentrak, reflecting the deal close date of January 29, 2016. A decrease of $4.5 million in revenue and adjusted EBITDA, reflecting estimated purchase accounting adjustments to deferred revenue.
Of this $4.5 million, we have reduced Q1 revenue and adjusted EBITDA by 3 million based on the estimated run out of contracts and deferred revenue as of deal closing.
Capitalized software development of $12 million, reflecting continued capitalization of Rentrak’s internally-developed customer-facing software and amortization of capitalized software of $2 million. comScore’s software related costs are primarily from maintenance to existing application, which we will continue expensing as incurred.
Revenue synergies of $10 million associated with the expected expansion of existing customer accounts and addition of new customer accounts. Net cost synergies of approximately $10 million associated with the net reduction of overlapping costs and resources.
For the first quarter of 2016, we anticipated revenue on a pro forma basis in the range of $105 million to $111 million. We anticipate GAAP income before income taxes on a pro forma basis in the range of $1.9 million loss to income of $6.5 million.
We anticipate adjusted EBITDA to be in the range of $19 million to $23.5 million, which represents an adjusted EBITDA margin range of approximately 18% to 21%, or 20% of at the midpoint of our revenue and adjusted EBITDA guidance ranges. Our estimated fully diluted share count for Q1 is $52 million and does not include any projected buyback activity.
For the full year of 2016, we anticipate revenue on a pro forma basis in the range of $508 million to $532 million. We anticipate GAAP loss before income taxes on a pro forma basis in the range of $26.9 million to $3.5 million.
We anticipate adjusted EBITDA to be in the range of $116 million to $132 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 range. Our estimated fully diluted share count for 2016 is $56.2 million and does not include any projected buyback activity.
Our 2016 pro forma revenue guidance represents 17% growth over pro forma revenue generated by both companies in 2015. Our adjusted EBITDA guidance represents 28% growth over adjusted EBITDA generated by both companies in 2015. With that, we will now open the line for questions..
Thank you. [Operator Instructions] Our first question is from Matthew Thornton of SunTrust. Your line is open..
Hey. Good morning, guys. Thanks for taking the questions, and congrats on getting the deal done. Maybe one for Serge, and then a follow-up for Mel, if I could. Serge, on the first couple of iterations of XMEDIA that you talked about getting the daily reporting by the fall.
What kind of update frequency do you expect in the first two iterations? And maybe, if you could just talk a little bit about kind of the initial demand hold you're seeing from the client base. And then, I'll come back with couple of follow-ups for Mel..
Sure. Hey, Matt. So, in terms of Cross Media, yes, we did say in the - just a few minutes ago and I know there was a lot to cover especially when providing details of our product roadmap, which is unusual in an investor call, but we felt it was very important to do that based on the merger.
We will be moving to daily in Q3, in Q1, and in April, starting in April through Q3, it will be based on a monthly cadence. So, that’s how to think about it. Now, it will include as I mentioned, person level ratings, most of all, all of the digital platforms, linear TV, VOD will obviously cross-tab it with age and gender demographics.
We will be enhancing it with over-the-top. And the key thing here is, we will also be providing, it’s not just a total audience, we will be providing an incremental reach by platform.
So, think about it this way, if you have 30,000 people watching x show and you have another 20,000 people on their mobile device and another 20,000 people watching on TV, we’re not showing a total audience of 50,000, we’re going to be showing the incremental reach in audience for the each of the platform to say, is that 30,000? Is that 40,000? Or potentially if there is no duplication, it would be all 50,000, but we will be factoring in the duplication and measuring that by each platform.
Is that helpful?.
Yeah, that’s very, very helpful. And Serge maybe if you can just quickly give us a little sense of how the demand pull, or the questions or feedback you’re getting from, from clients out of the gate here.
And then a lot of questions I get from clients and investors quite often is around your Total Home and how this kind of folds into the XMEDIA platform, does it just fill in kind of your streaming video or TPPs or will this augment kind of across the board there?.
Yeah, great question. So, in terms of client demand, I have to tell you, since the merger has happened, we’ve been, both Bill and I have been on many, many sales calls and actually client briefing just to tell to share this product roadmap. I have 16 years at comScore. I have never seen this level of excitement.
I think the only time I saw this excitement was when we introduced our Unified Digital Measurement service back in 2006 or 2007.
It is - clients are hungry for this, the one feedback that we’ve been receiving is probably a bit of a surprise is, when is it going to happen and how quickly can you have it? We met with one of the major broadcasters, eight days after the close of the merger and their question was why is it not yet ready? And our first question was, guys, we’ve only closed it in eight days, give us somewhat of a break.
But, we are going to be moving fast. You saw the roadmap, it’s starting in April, in Q2, we’ll have more data and more insights. In Q3, we’ll have more - we’re just going to move extremely fast, because we know time is not our friend.
We understand that, but we are very, very bullish on what we can deliver and the beautiful thing about this is, it’s not theoretical. We’ve been doing this. We’ve been - we’ve partnered with Rentrak in advance of this merger for specific clients.
So, it’s not like this is the first time that our teams are coming together or this is the first time that we are seeing each of our data insights. We know our data. We know the platforms and as a result, we can move much, much faster.
Now, in terms of Total Home, yes, a lot of excitement here that’s probably a huge innovation like I mentioned that comScore first, it measures everything within the home.
It measures over-the-top devices, it measures wearables, it measures internet of things, it measures mobile, PC, everything, now it’s opt-in, it’s privacy friendly, it will fill in some of the holes that we don’t specifically have directly from the operators or from the content providers.
So for example, the one of the biggest holes that it will fill and what we mentioned earlier in this call is the hole of measuring at the title level i.e. the show level detail of Netflix and Amazon Prime, that’s a huge milestone. Without Total Home, we would not be able to do that.
And contrary to what people may have heard, this is not going to cost us hundreds of millions of dollars. This is going to cost us $10 million to $15 million and is included in the guidance. So, you can tell, I'm really bullish about this. It’s very unique data and it’s real. It’s - we’re recruiting every single day..
That’s really helpful. I appreciate that Serge.
And then Mel just really quickly, I am running long here, cash conversion for the year, I mean obviously you guys are seeing a lot of NOLs, how can we think about cash tax rates, your CapEx working capital, how can we think about this for the year?.
Yeah, so obviously, we’re still in the process of finishing up our purchase accounting, but in terms of our cash tax rate, what I would do is, we’re going to still be in the range of cash taxes this year between that is for ‘16 or between like 2 million and 4 million.
So, that’s what I would base your model off of for a provision rate at this point, it’s a bit early to give a projection on that. We can update you on that moving forward. But yeah for right now, we will just assume that the cash tax rate between 2 million and 4 million and then rolled out through the model. You had a second question on, I'm sorry..
CapEx as a percentage of revenue and just how working capital, I mean should this be positive or negative use of cash? Thanks..
Yeah. On CapEx, I would estimate something in the low-teens. It's going to be somewhat dependent upon how quickly our Total Home Panel ramps. There is a bit of CapEx associated with that.
The operating expense is associated with that consistent with what Serge mentioned in the model of between 10 million and 15 million, and working capital I would model that as basically no net drag or increase on for the year on cash flow..
But Matt, we're really bullish and especially with our performance on free cash flow this in 2015 at 32% year-over-year increase is not too shabby as they say..
No, terrific. Thanks, guys and congrats, again..
Appreciate Matt..
Thanks..
Thank you. Our next question is from Jason Helfstein of Oppenheimer. Your line is open..
Thanks, guys, and appreciate the detail this morning..
Anytime..
So, just few things, to start on the Home Panel question.
So, how much revenue you are using in the guidance and then basically, is there - help us understand like how much Home revenue, Home Panel is in the guidance? Second question, if we go to slide 22 that Bill focused on, particularly the audience rank 1 to 50 were 48% of the networks or clients.
What would that overlap look like with comScore? So, if you look at those same companies, are the missing 48% basically comScore clients and does that, does putting us together increase the likelihood of these guys signing up.
So basically help us understand kind of where the synergy is really taken that? On the free cash flow question, I think you converted 58% of EBITDA to free cash in '15, when we think about '16, you do have, I guess I'll call the Rentrak working capital drag, Mel maybe address, how do you plan on to kind of improving the Rentrak free cash flow conversion ratio.
Thanks..
Got you. Let me take your first question on the Home Panel revenues. So we are going to have a bit of headwind on Total Home Panel this year, that's in the guidance though as Serge mentioned, we have about $10 million to $15 million in costs. We do have revenue model for that, but that revenue starts to ramp later in the year.
Certainly next year, we expect that to flip significantly. But this year, we do have revenue model that is lower than 10 million to 15 million in costs. But again that's all included in our guidance..
And again, Jason we're really playing it conservatively, right? This is a brand new thing for the industry and as such, you can only imagine, while eyes get just wide, wide open when they see the potential of it.
We also have to be realistic that people are not going to come in and start spending seven figure deals on it immediately, they've probably want to at least unjust it, understand it. In a lot of cases, they have no idea what's even happening in the Home. So, this is probably going to be a lot of it, brand new insights for them..
Yeah, and Jason, I'll touch on the free cash flow conversion in terms of the Rentrak business specifically. So, the main difference between our conversion and theirs is our billing practices, whereas we try to build upfront where possible.
They are typically billing on a monthly basis, which is one reason, they don't have a large deferred revenue balance. And overtime, we're obviously going to look at that and see, do we have the opportunity to do more billings upfront. But, we're obviously very sensitive to how that impacts the customers.
But that's an evaluation that is ongoing and we'll continue to give updates on that as we move forward..
Yeah. And in terms of your other question Jason, in terms of the overlap with digital. Absolutely, there is a significant amount. I don't have the exact number here with me. I'm happy to go ahead and calculate it for you.
But if you look at the logos right off hand, I can tell you, all the major networks, most of the top 50 to 100 are existing comScore clients from ESPN to CBS to CW to Fox to MSNBC.
These are all big existing comScore digital clients, so yeah, absolutely you should think of it as while the sales cycles here for cross-platform is going to be a bit longer, because the fact of the matter is, these are larger deals in dollar amount.
The great thing about it is, we don’t actually have to go in and establish a new relationship, negotiate a master services agreement, those are things that usually take as we know in some of these companies with their legal departments, it will take them two to three to four months just to get in master services agreement agreed to, that’s already been done, now we can just focus on the statement of work and focus on the exact insights that we want to provide them..
And Jason, the digital clients have told us that the ability to merge and integrate the television information meets the demands that their CEOs have mandated on them and that’s to bring television and digital together, to be more efficient, to present to their existing advertising clients and their future advertising clients, the extended reach.
And how these audiences in digital and what I like to call regular TV works together. The enthusiasm is also there in spades in local, because the local television business up to this point have really not monetized their digital platform.
So, if you think about any of your favorite television station that you watch local news on, you maybe also have their app on your telephone, or around your tablet that you are going to check traffic or new story or weather and those audiences are pretty much given away at this point.
The operators, the CEOs and COOs of these television companies are so enthusiastic about merging these two data such together. So, we see the sales synergy is enormous. We talked about it during the merger, that was what drives this deal and it continues to drive the industrial logic of it..
Thank you..
Sure..
Thank you. Our next question is from Youssef Squali of Cantor Fitzgerald. Your line is open..
Thank you very much. Congrats for an eventful 2015, and nice close to the year. So, a few questions.
I guess Mel starting with you, if I look at your guidance for 2016 and I kind of compare it to the guide, not the guide, but the expectations, consensus expectations for the two separate entities I come up with 520 at the midpoint of your guidance throughout versus something like 545 million, if you were to just add up the two separately.
Now, I think you called out $4 million to $5 million in deferred revenues that you’re going to have to write-down, was just trying to see if you can help us to bridge the gap for the rest is it as Serge discussed earlier, out of conservatism or is there anything else that you guys are deemphasizing into revenues of either companies that you haven’t called out? And then on the EBITDA margin, very impressed with the 28%, didn’t think you guys are going to get there this quickly, but obviously your guidance calls for mid-20s, again I think 24% for 2016 on a combined basis.
How do we look at the EBITDA margin overtime now? Are we still looking at the high 20s as a buoy for that? Thanks..
Yes, sure. So, let me first address your S4 question, I think the numbers you see I have written down correctly where you were looking at 545 against our 520 midpoint. So, there is really three main drivers to that difference. The first two, I mentioned, when I gave guidance, I didn’t quantify one, but I can give you a little direction there.
The three categories are, first of all, we’ve got to remove the January revenue from Rentrak. When we provided estimates on the S4 or that are in the S4, those were on a calendar year basis, right. So, obviously we closed on January 29, so we have to adjust those, if we’re looking at 2016 for that January 29 close.
Rough numbers, you could say, look, I think the street estimates right now for Rentrak standalone for the first quarter, first calendar quarter are about 41 million, 42 million, so maybe you just divide that by a third and say, okay, well, there is a third of that revenue that you have to remove from the 545 to adjust for January.
The second piece is the decrease that we are projecting as a result of the deferred revenue purchase accounting adjustment.
We believe that total decrease is going to be about 4.5 million for the full year, and as I said about 3 million of that is going to actually impact the first quarter, because the deferred that they have as of January 29, the way that waterfall runs out that would have gone into their revenue in the first quarter, so those are the two first components.
The third component is the fact that we ended up closing the deal a little over a month later than we expected. So, obviously the benefits of that deal and the benefits of getting the products out in the marketplace. We basically lose a month in that, or a month and a half in that, if you basically compartmentalize calendar 2016, right.
Because had we initially closed in December or mid-December, which was what we initially expected, we would have come out of the gate in 2016, obviously already being a combined company.
So, and it’s hard to put an actual number on that, but certainly that’s not an insignificant number, if you were to assign a number to it from a loss or revenue perspective in calendar 2016, because again that S4 number was a 12 months’ calendar number.
Is that helpful?.
Yeah. That’s super helpful.
And margin?.
And Youssef, you know us more than anyone on this call, we like to play it conservatively. So, let’s keep that in mind..
Yeah, and then your other - you asked the question about the EBITDA margin and I think for the calendar Q4 quarter in ‘15, and then you’re also looking at a K, what is the midpoint in ‘16 and how should we think about that and how should we think about that going forward.
So, as Serge just mentioned, we are trying to approach this with the conservative posture.
We do have some investments in the model, one probably the most notable is the Total Home Panel investment, look, I mean we are going to have some headwinds from that in the year from an adjusted EBITDA perspective, we’re going to be upside down on that, but look that’s going to pay huge benefits across the solution portfolio, in addition to revenue in future years.
So, that’s a no brainer, but look we’ve got to start that and get that off the ground. And look, we do continue to expect expansion in adjusted EBITDA moving forward out 2016. We’ll be talking more about that at our Analyst Day that’s going to be coming up here in mid-March.
We believe there is a ton of opportunity, especially as these synergies really start to get traction, to continue to further expand that adjusted EBITDA number..
Okay. This is great. Thanks a lot..
Thank you. Our next question is from Shyam Patil of SIG. Your line is open..
Hey guys. Thank you, and my congrats as well on the merger.
Just on the joint product, can you talk about just what you’re assuming for uptake, not necessarily this year, but over the next couple of years, whether in terms of bookings or revenue, and what kind of profitability do you expect on the joint product that the Cross Media product that is versus kind of the corporate average?.
Yeah, let me - I can answer the first piece and I’ll stick to the numbers, and then I’ll let Bill and Serge talk a little bit more about the products themselves and what we’re planning to do. But, look we’re right now focused on obviously the projections we gave in the S4. We noted the $10 million in synergies from revenue perspective.
We have in 2016 and look, what we provided in the S4 from the perspective of how that’s going to run out in the first couple of years, following this close. We’re still along with that in our expectations, obviously we want to overachieve. We believe we can, but we’ve got a lot of work to do here in the first couple of months.
And obviously we’ll be giving updates along the way, but look we fully expect to be able to overachieve those numbers, and I’ll let Serge and Bill give you a little bit more color..
Let me - anytime, absolutely we fully expect to overachieve on the synergies, but that being said, we have to be realistic, right. So, these are - like I said earlier to Jason or Matt, these are longer sales cycles, we know that.
When you’re going in asking for seven figure deals, in some cases, even double-digit seven figures, if not even more, they don't get it done in 30-60 days. They get done in a lot of - in a longer timeframe and they have to be approved by a lot of different stakeholders in these networks.
But we are bullish, because this is what the market is asking for. There is so many quotes from leading TV executives that have been begging for this information.
Like I said, the only negative that we have heard and if you want to call it a negative that we have heard is in the past three weeks is, why is it not done yet, even though we just merged in three weeks. It is actually kind of laughable.
But the fact is, starting in April, we are off to the races and you'll start seeing a lot of the different products out the door, as mentioned in the roadmap and I think Bill want to say something..
If you follow the consumer and that's why we're all doing this. It's the viewers watching TV shows either live delayed on VOD or their DVR or watching it on streaming devices. There are actually more individuals watching the best shows out there than ever before. And in some cases, the poor shows, there is a lot fewer people watching.
But the one common denominator is that extended viewing on all these different platforms is going under monetized. It went from not being monetized to under monetize. And so, it's difficult to predict how fast the contracts get signed.
But one thing for sure that quantification needs to happen, because the audience aren't just additive, they're different.
You've heard us talk at different presentations, as you get further out in the viewing cycle on many shows, the audience changes dramatically on who they are, they may be more affluent, they maybe a little bit less affluent, they buy different types of cars, they consume different types of brands at the grocery stores.
These are things that comScore can prove and we are the only company putting that additional dimension on who we are as consumers and how we are watching the great television shows on all these platforms. That was the industrial logic for the merger and that's the excitement, we're seeing from the prospects.
So, we are in a great place to capitalize this, and we know, this is a world where the winner is not going to take all. We now developed a platform and the marketplace is sensitized that they want two currencies and we're one of the major currencies that are being used today and will be used in the future..
Great, that's very helpful. And I just have one modeling question. Mel, how should we think about just the linearity of EBITDA throughout the year? I know you talked in the past about the synergies maybe being realized more kind of as you progress throughout the year.
Just kind of wondering, how we should think about the linearity of EBITDA as you progress..
If you look at Q1 versus Q4 in the linearity and obviously we're not giving specific quarter guidance, by quarter for the year. But we would expect to see probably a 300 to 400 basis point increase or more from Q1 through Q3/Q4.
So, we're definitely going to see an increase and if you look at our linearity this year, in addition to last year, you'd see something very, very similar..
Great. Thanks, guys. Congrats again..
Sure..
Thank you. Our next question is from Tim McHugh of William Blair. Your line is open..
Hey guys, thanks.
Just wondering, can you give us a sense of how Rentrak performed in Q4 revenue or EBITDA, just to have a baseline for next year?.
Sure..
Sure, Tim. It's David. We - our TV revenue was up 17% in Q4, which is way under our expectations. When we announced the deal, our clients were incredibly excited, as Bill and Serge have mentioned about the combined prospects for the company.
However, a number of the larger prospects wouldn't buy the TV product on its own and wanted cross-platform product instead, which is great because as Serge said, the price on the cross-platform product is a whole lot higher.
We are working aggressively to deliver that product and they are engaging with us to try to learn more about this even in advance of the delivery. So, we feel very good about where that's coming from. And as Bill said, we expect TV revenue to grow 55% to 65 % in 2016, as indicative of the success we expect to have with cross-platform..
Okay. And then I guess just the total revenue or Serge I mean an EBITDA for the quarter, I guess….
I don’t have that in front of me right now, but it's clearly the TV drove the performance for the group. We should share with you. We'll share all of that..
All right. Okay. And then, I guess just competitively with Nielsen pushing their digital content ratings to product.
I mean what is the client feedback to you been relative to Media Metrix, and I guess just what’s your latest thought on that as a competitive dynamic?.
We are very, very bullish on our product, really and I'm going to speak too much about the Nielsen product, because that’s really up for the clients to decide. That being said, I know we mentioned it, but we just got the MRC accreditation; that’s a huge validation from an independent third party to validate our measurement service.
It’s the first one ever to be validated in terms of a digital audience, media planning service. And the other thing to note is the Media Metrix Multi-Platform that we keep on mentioning it in every single call, because it’s been live now for over a year, a year and a half to two years.
We constantly are seeing fantastic net adds every single quarters, in this quarter, for example, we have 61 net adds in it, we are going to be launching Media Metrix Multi-Platform in eight different countries ranging like I said, from Brazil to India. There is a lot of momentum just in the digital.
Remember, this is just the unduplicated reach in frequency of our digital devices from PC to mobile to tablets, you name it. So Nielsen, I know is working on there.
I'm not going to really focus on that, as I'm really just focusing on ours and the fact that the core component of it has been accredited, the fact that we have so many customers already using it. We feel good of where we are. And then we actually, in the meantime, as we were talking, it sounds like they have the numbers for you, Tim..
Yeah Tim, the total revenue for the quarter for Rentrak was $29.4 million. Adjusted EBITDA was $1.9 million, which was an 11.3% EBITDA margin. And as I said, the results were driven by the lower TV revenue..
Okay. And then, I guess lastly, just on a little bit on the legacy Rentrak TV business. There has been news about the FTC making some changes, I guess to the set-top box market in terms of how easy they make it for people to get it from outside their cable provider.
Can you talk about does that change your thinking at all and I guess, how does it impact your thinking going forward?.
I hope that happen, so, for a lot of reasons.
Because the audience data is actually owned by the people who produce content, and it makes companies like ours that take this raw material that in of itself is not very useful unless it’s clean, projected, aggregated and mixed with other important information like auto registration, the purchase products that we purchase at stores or online.
So, the more fractional illustration that happens, it’s our friend. So, we hope it happens. We also believe that it will happen, if it does slowly because all of these new entrance that may occur will have to behave with the privacy of constraints that around the cable act and other standards like Gramm Leach Bliley on the financial side.
To our knowledge, only comScore or U.S. legacy Rentrak has figured out the way to navigate those strappy waters. So, we’re excited about it. We think it’s pro-consumer. And it does help us from a business perspective, continue to differentiate what we’ve already differentiated a great TV product offering..
Okay. Thank you..
Sure..
Thank you. Our next question is from Laura Martin of Needham. Your line is open..
Hello, Serge, maybe two for you. Thanks for the product you’re making in U.S., could you talk about international and what’s going on in the Kantar offshore, because this similar product program was offshore first, I’m interested in what’s happening there.
And then the WPP local deal using you guys as a currency for local sounds really interesting, so I’m interested in, do you think that rolls out across the other agencies and let’s talk about the financial implications of that WPP announcement that you’re making today..
Sure, Laura. I'll answer the first one and then I will give it to Bill in terms of WPP on the local TV measurement.
On international with Kantar, our Kantar relationship is fantastic, we’ve had a very strong relationship with them, really nothing meant in this call that we didn’t highlight them, we really wanted to focus a lot about it, about the Rentrak merger. That being said, we have launched in quite a few countries in mobile with them from Spain to Indonesia.
We have created a partnership with Millward Brown Digital across the different countries. We are rolling it out. Now, we just have to be cognizant here that, these things take quite a bit of time. This is a minimum 10-year deal that we have with Kantar.
And initially, I didn’t appreciate the 10 years because in digital, nothing - people don’t sign up for 10 year deals, as you know, Laura.
But here, the dynamic that we are working with, in a lot of these countries is you have to socialize the product and your product roadmap with so many different stakeholders including what they call these joint industry committees.
So, you have to make sure first that you get those guys onboard and that’s a process, but very, very bullish on our Kantar relationship, it continues to expand, it’s just - it will take some time. And then in terms of the GroupM relationship what we announced today, it’s a huge milestone, but I’ll have Bill to talk about it..
Yeah, how are doing Laura?.
Hi, Bill..
The WPP deal is a big deal, because they are clearly the largest agency, but they are not the first to move down this road, Zenith was actually the first. Now, if you look at the average television station, most of their revenue, the vast majority of it is coming from local agencies that’s why we focus there.
Now depending on the station 20% to 40% of the revenue comes from these ad agencies like Zenith, WPP and others.
So, that is Rentrak now comScore is adopted, it makes it easier for these television stations to use comScore local TV as their primary currency and as you know for a long time that’s been our point of view as in this world of basket of currencies, we want to be used as the primary currency and these ad agencies as they have additional pressure to prove accountability that they're picking the right TV shows, those TV shows maybe folks that are in the purchase cycle for a new car, releasing a car in this political season its folks that are persuasive of voters.
We think the adoption rate will continue and pickup in 2016 with all the local and the larger shops..
So, basically you have 50% of the local TV stations and this accelerates maybe the adoption of the rest of them is that the idea here --?.
Absolutely Laura. We think it will dramatically pick up the acceleration of station subscriptions and it will also foster the additional multi-platforms as we talked about in our prepared remarks, our comScore tags will beyond all of the video assets with these television stations at a certain moment.
So, they can look at one screen, look at their live audience, their delayed audience on DVR and their extended audience on digital and will be able to put price on it that’s fair for the local advertisers and the national advertisers..
Very helpful. Thanks so much guys..
Sure..
Next question is from Tim Nollen of Macquarie. Your line is open..
Hi, thanks. Actually my questions have been answered, but I wanted to ask one other thing which was about the integration of your businesses seems to me anytime two companies get together, there is always potential for IT or data or any other sort of operating integration risk, you seem to be very optimistic about how it’s going.
I'm just wondering if you could talk about what some of the items you might be running into are and or I think you mention Serge also going better than expected, if you could just comment on the integration please..
Integration has been if I have to say has been extremely, we worried about it always at the beginning when you put two companies together. It has been really, really good. It's really boils down to culture. It boils down to the teams knowing how to work together. While the math is really complicated here, especially in cross-platform.
Let's be honest here, we are two big data companies that are very innovative and there is just a lot of excitement, a lot of fire in our employee base.
It's really unbelievable in terms of actual technology integration, I'm happy to follow up with you there, but I know we are specifically on data centers for example, we are moving very, very quickly there. In early to mid-2016, we'll be integrating a lot of our data center. So, there is just a lot going on.
We have a specific integration team that's dedicated to making this a success. And at the end of the day what it all boils down to in the success of building these two companies together is really as I said, it's all about having an innovative culture and that's what we have here..
Good. And I guess I was worried coming end at the IT and the data itself can be very complex issues..
I would not worry about that one bit..
Good. Thank you..
Sure..
Thank you. Our next question is from Tom Eagan of Telsey Advisory Group. Your line is open..
Great. Thank you very much. I have a question for the TV and the cross-platform video. Where are you getting the percent level data from, is that from the Home Panel and if not, what is the real benefit of Home Panel. Is it about getting data from OTT or being able to do duplicate? Thanks..
Let me address the Total Home Panel first, and then I'll talk about where we are getting the percent level data. The benefits of Total Home is not only to measure OTT, like I mentioned earlier, getting sole level or title level information is critical on Netflix and on Amazon Prime that gives us that. But it's beyond that, right.
It gives us so many mobile devices because to give you a - Tom, to give you step, in each home on a minimum, we are seeing at least 10 to 12 different devices within the Home that we are able to monitor and measure on an opt-in basis. That's the great thing about this. It's a one to many approach, which is fantastic.
Now the other thing that we will be able to measure as part of Total Home doesn't totally affect cross-platform, but it helps significantly on the digital business. It's the ability to measure M-commerce for example behaviorally. That's a huge benefit that frankly on a unique differentiated that nobody today has.
Nobody today Tom, I can tell you what people bought on Amazon through their mobile device. What exactly did they buy, that's and how much did they spend. We've been doing it remember at comScore via on the PC for many, many years. Now we will be able to do that exact same comparison on mobile, which is what everybody is asking for.
So, it's not only has a cross-platform application. But in a benefit, but it also has a significant benefit for our regular digital or comScore legacy digital business.
In terms of the person-level stuff we have panels, we have TV panels and we have approaches on how we have and to be able to develop exactly the cross-platform, so we can identify down to the individual. Now it's a calibration panels, we don't have panels for every single one of those 40 million TV screens in the United States.
But we have panels in our disposals that it is not the Total Home that we can use in our - that we use as a calibration source..
Great. Thank you very much..
Sure..
Thank you. Our next question is from Tracy Young of Evercore ISI. Your line is open..
Sorry, most of my questions have been answered, I guess.
The only question is in terms of the rollout of the Total Home Panel, the 10 million to 15 million is that going to be front-end loaded or pretty even throughout the year?.
No it won’t be front-end loaded it will be expense as we’re building the panel which will be, it’s not ratable throughout the year but it is spread significantly in the back three quarters of the year..
Okay. Thank you..
Sure..
Thank you. Our next question is from Allen Klee of Sidoti. Your line is open..
Good morning.
Can you talk about your steps you’re taking in pathways for MRC accreditation for Rentrak?.
As you know Rentrak has been will continue to be in the new comScore committed to total transparency and accreditation with the MRC. comScore has had that same philosophy that we do> We’re working hard at it. We’ll continue to work through with the members and the staff of the MRC and….
Like Bill said, if anything nothing’s really changed anything we’ve actually put even bigger focus now with the joint company with on the MRC. You saw our commitment with the MRC, with Media Metrix, we have a lot of our advertising products already accredited.
We are as a joint company more than ever committed to the MRC and to transparency and we will continue doing that. It just, we have to be realistic again with ourselves. These things don’t happen overnight. We have to start the process.
We have to get these cross-platform products out the door and then start the process, but believe me we are extremely committed to the MRC..
Yeah, and remember these products are incredibly complicated and that’s the reason we have a great business here is, because it’s not easy for anyone to do it. And so, bringing people to speed on how this is constructed does take time. But as Serge had mentioned in his prepared calls.
We are committed at comScore to have accredited all of our major syndicated services. So, it is part of our thinking..
Thank you..
Sure..
Thank you. Our next question is from Andre Benjamin of Goldman Sachs. Your line is open..
Thanks. Good morning, guys..
Good morning, Andre.
How are you?.
I'm good, Thanks.
So, first, I was wondering how is pricing trending for the Media Metrix suite, if my math is right it seems like the revenue per customer growth is still positive, but it’s slowed a bit over the last couple of quarters, understand the client interest is very high and you continue to have very nice adds, I don’t know if there’s any impact from new product launches from competitors or anything like that that's having an impact on pricing?.
None that we have heard of, none that I have seen so, no absolutely not. Our renewal rates are high. We get price increases. So, nothing that I can really point you to. I'm happy to follow-up specifically, but I would have - I think Mel and I would have heard, if we’re starting to see pricing pressure on Media Metrix.
But frankly, the fact that it’s if anything, the MRC accreditation by the way will help us significantly in 2016 now that we’ve announced it in January not only of increasing prices, because as the validation that they’ve given us so nothing that we’re seeing there Andre..
And then on the Total Home Panel, it's pretty interesting and clearly it’s been - how people and consumer the cross devices.
You talked about the importance of the size of the duplication panel across these many different mediums in the past, can you maybe talk a bit about now that the companies are combined like how we should think about the million digital panel is the 70,000 TV, ultimately what the target numbers with Total Home like how much of that actually becomes the underlying panel for doing the deduplication across these millions of screens?.
Yeah, I think the way we’re looking at it right now is, we’re going to have all three. And the more the better because it’s - some of it’s still in different holes, right. So, you do still need a large PC panel, absolutely.
You still do need a mobile panel and a tagging solution on mobile because remember Total Home is only as the name suggest coverage within the home; it doesn’t measure anything outside of the home. You do need obviously the TV panel. And so it's really and that's the beautiful thing about this, it's complicated, but we know how to do this.
We know - we have the data scientist that we have with both comScore and Rentrak been working together now for a few weeks and it's - we know how to do this; we know it's the crazy amount of Venn diagrams that go around with all the different platforms.
This is the special soft that we have with the special unique individual that we have in the company. It's complicated. Don't get me wrong. But it is something that we feel extremely bullish. But for now, like I said, we expect to have all three of those panels and leveraging them.
Total Home right now will be around, like we said 300,000 or so devices by the end of the year, and then we will see, we may copy it all then, we may increase it, we may decrease the sea panel. We'll play with it. You know what Andre that would be a fantastic problem to have. And as you can tell, we're really bullish about it..
Thank you..
Sure..
Thank you. We have a follow-up from Youssef Squali of Cantor Fitzgerald. Your line is open..
Youssef?.
Yes. Hi, again. Sorry. Mel, you were really helpful with helping kind of bridge in the gap on the revenue side for 2016.
I was wondering, if you could help us also bridge the EBITDA, so by my math on the combined basis, the EBITDA is about 132.5 prior, if you just take the two entities and if I look at your guidance of 116 to 132, it implies maybe I don't know $10 million lower. So, if you can just help us bridge that gap. I know people care about that. Thanks..
Absolutely yes, the simplest to bridge it is to just basically apply a flow-through percentage to adjusted EBITDA from the revenue delta. I think you were talking about 25 million.
So if you apply a 60% 65% 70% flow-through to that, that's the easiest way to get there because in many cases like from a deferred revenue perspective losing $4.5 million to purchase accounting obviously the cost of that revenue have largely been incurred when they were sold. So, we lose that dollar for dollar.
Some of the other reductions are not dollar for dollar. They would more closely approximate some of the corporate margin average. But if you took a blended of like a 60% to 65% and apply that to the revenue decline of 25 that's probably the best way to get there..
Okay. All right, thanks..
Thank you. At this time, I show no additional questions in queue. I'd like to turn it back to Mr. Matta for any closing comments..
Sure. Thank you. Like I said earlier, this was going to be a longer call than normal. So, thanks for bearing with us. We really appreciate it. Remember, our fourth guidance results confirm that we're executing well and we've launched into a 2016, a bigger and a better company with clear vision in pursuit of a very large and ripe opportunity.
No other company has the innovative technology platform, massive data scale, entrepreneurial heritage to precisely measure extremely fragmented and dynamic audiences in the dramatic innovation ways required to succeed and that's what we are focused on. We are laser-focused on that. Today, we had a chance to give you the highlights of our business.
But I am really looking forward myself, Bill, Mel and David and the entire management team, really looking forward to diving into more depth four weeks from now at our March 16 Investor Day in New York City. I hope you can join us and thank you for your time..
Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may now disconnect. Everyone have a great day..