Hattie Young - IR Bryan Wiener - CEO Greg Fink - CFO.

Tim McHugh - William Blair & Company, LLC Surinder Thind - Jefferies Jason Holstein - Oppenheimer Alan Gould - Loop Capital.

Good day ladies and gentlemen and welcome to the comScore Second Quarter 2018 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 now like to introduce your host for today's call, Ms. Hattie Young. Please go ahead, ma'am..

Good afternoon. Thank you for joining us to discuss comScore's second quarter financial performance. Joining me on the call today are comScore's CEO, Bryan Wiener; and CFO, Greg Fink. A slide presentation that we'll use on this call is available under the Event & Presentation section of our Investor Relations' website.

Before we begin our prepared remarks, I'd like to remind all you that the following discussion contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements may include comments about our plans, expectations, and prospects, and are based on our view as of today, August 9th, 2018. We do not undertake any obligation to update our forward-looking statements to reflect new information after today's call.

We will be discussing non-GAAP measures during this call, for which we provided reconciliation in the appendices of today's press release and are posted on our website. Our actual results in future periods may differ materially and adversely from those certain expected because of a number of risks and uncertainties.

These risks and uncertainties include those outlined in our 10-K, our 10-Q and other filings and materials which you can find on our IR website or at sec.gov. I will now turn the call over to Bryan Wiener..

Hello everyone. Thank you for joining our second quarter financial results call. 2018 has been an eventful year for comScore. Our business is growing again.

We reclaimed our listing on NASDAQ and we have continued to make demonstrable improvement in streamlining and simplifying our cost structure, enabling us to pose positive adjusted EBITDA for the second straight quarter.

When I joined the Q1 earnings call, I outlined a three-step plan to return us to the profitable growth; through a focused strategy, accelerated product development, and a streamlined and simplified operational model.

We're well-positioned with sustainable advances by way of our data footprint and trench customers on all sides of the media marketplace and strong brand equity. We have a lot more work to do on taking costs out of the system and accelerating revenue growth, but our work to-date is yielding progress.

I've had over 60 meetings with customers over the last few months and the reaction has been enthusiastic about their desire and need for us to be successful. As evidenced by the recent announcement of our Campaign Ratings product, which I discussed later.

As I mentioned on our last call, it is truly unique for your customers to be your biggest advocates and strongest collaborators in driving innovation. The future is bright and I'm excited to go on to our strategic plan after Greg takes through our Q2 results.

Greg?.

Thanks Bryan and welcome everyone. Today we reported Q2 revenue of $101.4 million, which compares to revenue of $99.4 million reported in the second quarter one year ago. We experienced year-over-year in emerging products in the second quarter, which was offset by year-over-year decline in our more developed digital audience business.

Revenue from digital audience product in the second quarter was $49.9 million, down 8% from the same period last year. Our digital audience is made up of syndicated revenue and custom projects. Our digital audience revenue was negatively impacted by ongoing industry changes and ad buy that has weakened smaller publishers in the U.S.

and internationally and industry consolidation among some of our large customers like Yahoo and AOL. And at the same time, we are seeing opportunities for growth in mobile and video. Our TV and cross-platform revenue increased 16% year-over-year to $29.5 million in the quarter.

In the second quarter, we established standalone selling pricing over certain distinct performance obligations and arrangements that includes the purchase and sale of services, which resulted in us recognizing revenue of $1.9 million. In prior periods, this was recognized as a reduction of cost of sales.

There is no impact to our bottom-line from this change due to an offsetting increase in cost of sales. We expect similar treatment in future periods. Excluding this change, TV and cross-platform revenues would have increased 9% year-over-year.

Our advertising revenue increased 12% year-over-year to $11.7 million in the quarter, while news revenue increased 13% to $10.4 million in the quarter. Moving on to our operating performance in the second quarter. In the quarter, we continue to incur expenses associated with the overhang of ending the internal investigation and audit.

We believe that the cash outflows associated with this which includes legal and audit fees will be lower going forward. Also as I mentioned in May, during the second quarter, we recognize a one-time stock-based compensation charge for grant issued in June related to equity awards that we were unable to grant for over two years.

We also took a restructuring charge in Q2 related primarily to headcount reductions.

Excluding these costs in the second quarter, specifically $23 million in stock-based compensation, $4.9 million in investigation and audit-related expenses, $5.3 million for the settlement of litigation, $3.8 million in restructuring costs, and $1.5 million in other income and expense, are non-GAAP net loss for the second quarter of 2018 of $17.5 million compared to a non-GAAP net loss of $19.4 million for the same period one year ago.

We reported adjusted EBITDA for the second quarter of $1.3 million -- adjusted EBITDA loss of $3.7 million reported for the same period one year ago. The $5 million improvement in our results reflects the impact of our ongoing cost reduction efforts today, many of which took full effect in the second quarter.

Year-to-date, our adjusted EBITDA is up more than $10 billion over the first half of 2017.

As a reminder, I will discuss operating results for Q2 of 2018 and 2017 on non-GAAP basis excluding stock-based compensation and other major recompiling items as spelled out in the tables accompanying our press release issued today and available on our Investor Relations website. Gross profit for the quarter was $53.6 million or 53% of sales.

This is mostly unchanged from one year ago. Gross margins in the second quarter reflect the decrease in employee costs as a result of capitalization as well as depreciation and other costs.

This was offset by an equal increase in data costs in our TV and cross-platform business and mobile investment as well as the $1.9 million increase I discussed earlier.

Selling and marketing expense for the first quarter decreased meaningfully to $23.9 million or 24% of sales as compared to $29.7 million or 30% of sales reported in the same quarter one year ago. R&D expense for the quarter was $16.9 million or 17% of sales as compared to $21.1 million or 21% of sales last year.

While we continue our investment in new product developments, the decrease was primarily related to our headcount reduction put into place last. We also capitalized $2.4 million in the quarter. G&A expense for the quarter was $19.2 million or 19% of sales as compared to $12.9 million or 13% of sales in the same quarter one year ago.

The increase related to legal, audit, and consulting professional fees not associated with the prior year audit as well as our compliance costs. We've been focused on improving efficiency around our administrative and accounting processes and strengthening our internal controls.

In general, we expect 2018 core operating costs to be lower than last year and even lower moving forward. For cost of sales, we expect an increase in 2018 and beyond related to our growing investment in data sources.

However, as many of the data costs are fixed and we have signed long-term agreements, future increases are expected to be lower than over the last few years. Major examples of our cost reduction initiatives include the following; first, our headcount cost.

Excluding stock-based compensation were $49.9 million in the quarter or 49% of revenue as compared to $57.6 million or 58% of revenue in the year ago period. While a portion of this decrease is the result of capitalized IT cost, our headcount in Q2 2018 was more than 10% lower than one year ago.

We believe the headcount costs will remain fairly consistent compared to current levels for the remainder of 2018. We also believe that our current headcount costs are adequate to support revenue growth and in turn, provide operating leverage in 2019.

Second, facilities and office costs, which are included in rent and depreciation, were $5.4 million in the second quarter and $11.3 million in the first half of 2018. On an annual basis, we expect these costs in 2018 to be about $1 million or 5% lower than 2017.

We plan to continue our process of rationalizing our locations and leases and believe that we can reduce these costs by another 10%, driving more operating leverage. Cost associated with the audit investigation we're $4.9 million in the quarter and $27 million lower as compared to the first quarter.

Putting all these cost initiatives together, we believe our business model is poised to achieve meaningful operating leverage as we integrate our operations and seek to accelerate revenue growth next year and beyond from new product innovation. Turning to our balance sheet for Q2.

To close the quarter with cash, cash equivalents, and restricted cash of $53.2 million, an increase of $8.1 million over year end. Although we used a significant amount of cash in the quarter and first half of 2018, much of that cash was used for investigation, legal, and audit costs, as well as restructuring expense.

While we will continue to use cash for these expenditures, we expect our use of cash to decline significantly over the next few quarters. In the second quarter, we received $15 million in cash in 1.4 million shares of our stock to the issuance of additional notes to Starboard Value as contemplated by the agreement we announced in January.

Subsequent to quarter end, we received $10 million in cash from the settlement of a derivative litigation. As we look at our liquidity, we continue to be focused on maximizing our flexibility in terms of sources, amounts, and the timing of any potential transactions in order to best position the company for future success.

To maintain this long-term flexibility, we have entered into an amendment to our senior secured notes with Starboard Value that lowered our minimum cash requirement from $40 million to $20 million through March 31st, 2019. Adherence to the minimum cash covenant was one of the considerations of a contemplated near-term capital raise.

So, this modification results in a significant increase in our flexibility. We believe the added flexibility will allow us to continue to execute on our strategic plan and operational improvements and will allow for additional financing options over the longer term.

In exchange for the amendment we issued to Starboard Value, an additional $2 million of senior secured notes on the same terms as the existing notes. We believe this amendment will allow us to meet our anticipated liquidity requirements over time at a lower cost to the company than undertaking a larger scale financing in the near-term.

While we have not committed to any specific course of action or timing, we believe we now have a better-positioned ourselves to take advantage of market opportunities and will continue to evaluate the most opportune time for any financing we decide to undertake.

Our weighted average share count for EPS calculation purposes in Q2 was just over 55 million shares. During the second quarter, we issued 4 million shares associated with the securities litigation, which were put into float on June 21st, and therefore, factored in the ETS for only a portion of the quarter.

This increase was partially offset by Starboard Value's exchange of 1.4 million shares for notes and the transaction I mentioned earlier. We also grant to 2.1 million restricted stock units during the second quarter, representing over two years' worth of grants that we could not make in prior periods. Of these, 1.3 million shares vested immediately.

Looking forward, many of the channels that we had in the first half of the year are behind us and as Bryan will describe, we'll begin to execute on our strategic direction. With that, I'll turn the call back to Bryan to take you through our strategic plans going forward..

Thanks Greg. It's clear from talking to customers and analyzing the media trends that there is a growing need for a new kind of currency and a strong desire for an alternative to the current dominant provider in the market. I keep hearing over and over from our customers, the market is better off for the strong comScore, we comScore to be successful.

We estimate that the addressable market is over $4 billion, with our largest competitor making up the bulk of that and comScore being the clear number two. As you can see on slide nine, our strategy is to establish comScore as the trusted currency for planning, transacting, and evaluating media across platforms.

In particular, we are laser-focused on becoming the cross-platform standard, which we believe will positively stimulate our complementary planning and advertising effectiveness product lines.

To that end, our number one priority across the entire business is to continue to establish comScore as currency and the new standard for cross-platform measurement, with a focus on premium video. We also believe we have significant opportunities to take market share in the local television and the advanced television segments of the business.

Advanced TV includes addressable and audience-based advertising initiatives such as OpenAP. On slide 10, we highlight our key drivers for growth.

First, product innovation in cross-platform video, mobile, and marketing analytics; number two, driving buy-side adoption for transacting on comScore's currencies with a renewed focus on marketers and their agencies; and number three, aggressively promoting the differentiated products in our marketing analytics and optimization business.

As illustrated on slide 11, we've streamlined our product groups from four to three in the third quarter with clear metrics and aligned goals. Our first product group called ratings and planning is our largest with a business model derived primarily from an annual or multi-year contracts.

This group combines our TV and cross-platform product groups with our digital audience products into a single category starting in the third quarter. However, we will continue to provide insight into our syndicated digital revenue to supply investors with additional clarity into the comparable quarterly performance.

While we've had our challenges with growing the digital audience component of our business, our TV and cross-platform businesses have been growing even in the absence of material product innovation over the past two years.

We believe we can accelerate growth in 2019 and 2020 to more than offset for any weakness in digital audience based on the introduction of new products into the market and a revamped go-to-market strategy, focused heavily on bolstering our demand on the buy-side of the industry.

I've already referenced the announcement of Campaign Ratings, our new cross-platform video product and I cannot overstate just how amazing the reception has been with 13 partners signing on to our beta program, including more than 10 leading television networks; Hulu and WPP's GroupM.

There's also been an upswing in customers wanting to set up meetings to learn more, which provides our salesforce with the opportunity to introduce other solutions once we're in the door. Excitement is a leading indicator of sales.

And what's important to understand is the comScore is an essential part of the media infrastructure in a cross-platform world. You do not have to just take my word for it; you can just listen to what some of the most influential people in the media industry are saying.

The market is ripe for true cross-platform measurement that provides critical insight into unduplicated audience reach and cold viewing behavior, said the Chief Research and Analytics Officer at CBS Network.

The Head of Research and Marketplace Analysis at WPP's GroupM said, a robust comprehensive video currency is essential to maintaining a healthy video marketplace. And the EVP of Advanced Advertising at Viacom said, this is a critical effort not for the future of television, but for its present.

And we're just getting started as illustrated on slide 12. We have an aggressive roadmap for cross-platform currency and planning products to provide measurement on both media consumption and advertising exposure.

We are streamlining our current offerings and rolling out new ones, so we can have one robust product in each category; simple, yet powerful and differentiated.

We plan to be highly aggressive in launching new products and version releases over the next six to 12 months and we believe this can propel the company to accelerated growth by taking market share as we move into the back half of 2019 and into 2020.

We believe we can launch products quickly because we've spent years assembling a massive cross-platform data footprint and tackling complex research and data science methodologies that are prerequisites for launching currency-grade solutions. So, with that, let's turn our attention to our digital audience business as a subset of ratings and planning.

As a reminder, digital audience is made up of our syndicated digital products and our media metrics suite. It is clear that small publishers in the U.S. and abroad are under intense market pressure, which continues to impact their renewal rate with comScore.

While that downward pressure is something we are working to mitigate, we are also seeing opportunities to expand revenue in other segments of digital audience, including with our multi-product platform and video measurement services, especially as we generate more traction as the video currency in the future.

Our second major product category is called movies reporting and analytics. This product group's business model also primarily comes from annual or multi-year contracts. Our box office reporting solutions are the undisputed standard for measuring and transacting on theater ticket sales.

And while our solutions have high global penetration, there is untapped growth potential in providing complementary analytical and marketing solutions to movie studios and other key industry stakeholders via our existing assets.

For instance, the production company behind the upcoming Michael Moore documentary use comScore's forecast tool to identify the most optimal release date to the film based on historical data. It has been estimated that the release date optimization can lead to an increase of 4% to 8% in global box office revenue.

Our third product group is called marketing analytics and optimization, which used to be called advertising. Revenue in this group is primarily generating contracts that are campaign-based or project-oriented. Importantly, this product group builds upon the success of our currency-based products in media and movies.

As we bolster our currency businesses, we expect the solutions in this group to scale in time. That being said, we have too many different offerings in this area and there is an opportunity to streamline our focus in order to maximize growth and profitability.

Moreover, GDPR and other changes to consumer data privacy standards have impacted the way we look at some of our behavioral activation and [Indiscernible] solutions.

Now, at the same time, these changes in the privacy environment have made our contextual advertising solutions more attractive and revenue from our content activation products have more than doubled in revenue year-over-year.

We also believe we are going to see an uptick in demand for our custom marketing solutions due to our improved mobile footprint. And we have set forth on a roadmap to productize and launch solutions that measure the ability of advertising to support to tuning and driving to movie theaters.

In conclusion, we believe 2018 will serve as a base for accelerated growth in 2019 and 2020 as we launch new products and go-to-market strategies centered on becoming a leading currency for video advertising. We have a large addressable market within which we are the clear number two, but have a lot of room to capture additional market share.

We have made significant progress in reducing our cost structure and we believe there's ample opportunity to continue taking out cost in 2019, while also speeding up innovation with new product launches as we fully integrate and further automate our platform. As such, we expect our operating leverage to increase significantly over the next two years.

Predicting the exact time for an accelerated revenue growth is a little bit harder, given there's approximately a two quarter lag from customer discussion to revenue impact and I'm only two months into my tenure. But as I said when I started, this turnaround will not happen overnight, but we will measure progress in quarters not years.

And we believe we have a plan and a business model that will reward shareholders in the long run. With that, I'd like to open up the call the question. Operator, please go ahead..

Thank you. [Operator Instructions] Our first question comes from Tim McHugh with William Blair..

Thanks.

First on the digital side, can you talk about the difference in trends that you're seeing in the project side versus the syndicated side of that business?.

Sure. I'll start with the syndicated side; it's really a mixed bag of things, some negative and some positive. As I mentioned, there's continued weakness among the small to medium sized business segment, which is both in the U.S. and abroad.

The second issue is some industry consolidation, in particular with Yahoo and AOL coming together; we retain the overall business, but with less than them added up together. But on the positive side, we see increasing value for video, for multi-platform, some of our mobile services, as well as OTT.

So, we're seeing increased demand in one area and the some weakness in the other. And I think it's one of those things that I'm absolutely advising closely and just need more time to evaluate. On the project side, that is a lumpy business where we see continued demand for that, but the timing of projects bounces around from quarter-to-quarter.

And so it's a little bit harder to predict. It's also the trend line and that is a little different..

Okay. I guess a part of why I was asking; I'm trying to understand -- and we've gone from kind of Q4 down 11% in digital to flat in Q1 to down 8%.

And so we've had improvement and then weakening and so trying to understand how much of that is lumpiness around project and then what the real kind of underlying trend which I wouldn't think this syndicate business would be as volatile as those results would tell us..

Yes, this is Greg. I think that's a great question. I think Bryan kind of hit on it. We don't we break -- break out those pieces, but yes, in certain quarters, we will have more projects that close, they might get pulled forward, meaning we thought it was going to close in one month and it gets closed before the quarter ends.

In the first quarter, we saw more of that than we did this quarter, but the overall timing in the number of projects continues to be strong, which was a question of when they fall and how they fall out..

And Tim its Bryan. Just to kind of follow-up on that. I would say we are optimistic and as plans are putting in place stabilize, but one of the reasons why we're not giving specific revenue guidance is we really need to see how some of these enthusiastic meetings we're having actually play out and see what those trends are..

Okay. And can you talk about -- you mentioned I guess the activation side, at least, what you used to call activation, there are some things that you don't -- what you're going to deemphasize given too many products in there.

I guess how big is the bucket of things you don't want to focus on in the future as much versus I guess just maybe leave it there. I'm trying to quantify or think about the risk around moving away from some products there..

Yes, I understand the question. We -- I'm 70 days in, so what -- I don't have the answer to that. Well, we're looking at this and saying there are too many different products that are subscale and that we need to get -- working with Greg and his team, to get to the bottom of the actual profitability by products.

So, -- and then working with the commercial team and meeting with customers to understand what the growth potential is. And so I've committed that by the end of the year, we will make all of those decisions.

But what I can say overall given everything that we've said is we are optimistic that this overall product group has nice growth potential and that we can grow both the topline and the bottom-line on it..

Thank you. Our next question comes from Surinder Thind with Jefferies..

Good afternoon. Bryan thanks for laying out kind of the big picture here.

Maybe following up on that, can you talk a little bit about maybe what you might be focused on more near-term and maybe how that differs, kind of, from maybe your longer term goals?.

Well, the near-term, as I said, there's sort of three buckets, right. There's laying out a strategy and that we can create is a North Star and I think I've done that on this call and certainly have done that for employees, which is really helping make us more efficient because people know what to focus on.

The second one was accelerating product development. I think one of the real reasons that given our sales cycle of a couple of quarters, the revenue growth and the revenue that we're having is really a result of the product offering and the sales that is happening in Q1 and Q4 -- Q4 2017 and Q1 of this year. So, there's quite a lag there.

The real key to driving sustainable accelerated revenue growth is product innovation. So, that's the second bucket.

But when you get to what am I doing in the very near-term to move results, that would be in the streamlining and simplified bucket and I think as Greg outlined, we have not only taken out significant cost out of our system and far more predictability as he laid out in what the future quarters and year looks like.

But we've also made it easier for us to roll our products and easier to operate by simplifying what we're offering to the market, simplifying what we are offering internally and our whole mantra is easier to buy, easier to operate and we believe that that's one of the reasons why we're going to be able to accelerate product development, accelerate revenue growth, while not growing cost.

It's not hard to usually do those things all the same time. And we believe streamlining and simplifying is not just a euphemism for cutting costs, it's actually a different fundamental operating model and we're spending quite a bit of time there and I think we think we've made a lot of progress..

That's helpful. And then maybe as you talk a little bit about some of the new products that you're rolling out. Obviously, there's the cross-platform ad measurement recent announcement.

Can you maybe discuss your kind of view the competitive environment you're offering there and maybe some of the color around maybe the conversations you're having with the clients at this point in terms of the kind of feedback that you're getting?.

Well, as you could tell from that announcement and the press release where we had now the participation of the quotes from our client, there's a clear need for the ability to count in advertising terms reaching frequency in Layman's Terms, how many different people are consuming content or viewing ads and how frequently they're consuming that content or viewing ads.

And our clients tell us that that is a vacant space in the marketplace. And in fact, they wanted us to fill that for a while and we've had the assets to fill it which is why we were able to announce the product launch so quickly after I joined.

And so, on our website, in the presentation side of it, we actually have a grid that shows our product roadmap for the next 12 months in the cross-platform area, both what we call currency products as well as the planning products. And we believe that the currency products are really the driver for our value.

And there are only two companies in the entire space that can be currency and that is Nielsen and us. And we believe as we drive, in particular, video -- as we drive ourselves as a video currency, the value of our planning, measurement, ad effectiveness, activation products, all increase in value.

So, when we get out of bed in the morning, the first thing we have to think about as a company is how to increase the value of us as a currency and not to say we weren't focusing on these other areas, but that is really the lead horse..

Thank you. Our next question is from Jason Holstein with Oppenheimer..

Thanks. So, if -- just as I go back, one of the big issues with the video measurement -- the integrated video measurement is that your biggest clients in the past have disagreed with the conclusion or there's been sitting on data until the clients were happy with the output. I don't think Nielsen isn't fully out with kind of their cross-platform.

So, do you know -- as you're starting with the new slate, can you comment on what you think about that and kind of speed-to-market versus making everybody happy because no one's ever going to always be happy. But on the other hand you want their revenue. So, that's question number one. Question number two.

You do think the household panel is big enough, particularly on the IP side -- IP and the OTT side or you have to further expand that? And a last question given your point that there's just a very long lead-time between when you start conversations, get signed agreements, would you consider giving a bookings metric at some point that can kind of measure that, so investors can understand the future better? Thanks..

Okay. So, the first question was about -- okay, the adoption of basically the clients. I'd say we have a huge advantage here. You are right that innovation has been slowed.

And I think one of the reasons why our customers have been so enthusiastic about this is that they feel like the fact that comScore had not been innovating, had hurt not only what comScore is offerings, but that have slowed down innovation overall in the market. So, what I can tell you is you're 100% right, you cannot please everyone.

But by -- every single network that we approach about this product, signed on and is excited about it and I think that's fundamentally because their marketplace is freezing a bit and that buyers are becoming uncomfortable and the audience is moving more and more off of linear in buying across these different platforms without knowing how many different people they are and how frequently they're reaching, which is the underpinnings of how you buy advertising.

And so we think that actually this is being driven by buyer demand.

It's also why one of the things that we see the key to success is we historically have not been as focused on the buy-side, meaning marketers and their agencies as we have been on the media partners and that is a big opportunity for us to drive demand and get products into the market.

Your second question was about the Household Panel, basically, the coverage area. We're very comfortable with our footprint. We think that there are some opportunities potentially where we need to look at how do we get increased coverage on OTT or as more customers are going over-the-air and that's something we're looking into.

This morning we announced our partnership with Inscape for smart screens. That particular partnership is for lift studies, but we are going to be assessing whether or not smart Televisions are an efficient way to capture that. We are also looking at a number of other different ways to do that.

But we think that we are very comfortable with our data footprint and that we believe that the vast majority of expenditures we have made in this area have been made. And then the last one was about the booking metric. I think, Jason, we're all for getting more visibility to our investors and the analysts.

As I said, I'm 70 days in and we're trying to assess all the analytical metrics ourselves, which are going to help us understand what the relationship is between what the sales team is telling us and what they're putting in salesforce and the probability that they're putting in and what does that actually translate into closing in and at what time.

And so those are things we're closely observing and we're going to be learning over the coming quarters. But we absolutely know and believe and want to be get more visibility in our topline. What we thought this call was if we can get more visibility for the topline, let's be very clear on how we see the bottom -- the operating expenses playing out.

So, you could look at a range of outcomes from the topline..

Thank you. Our next question comes from Alan Gould with Loop Capital..

Thank you. I've got two questions please; one for Bryan and one for Greg.

Bryan with respect to the new cross-platform measurement product that you've come out with, its beta in September, what sort of milestone should we be looking at to know that the product is working? How it's being accepted by the marketplace? How long from going from beta until it's actually out there as an ongoing product? And a question for Greg, to give $50 million of cash, now you can get down to $20 million by March of 2018 to -- March of 2019, do you see yourself becoming free cash flow positive by that point in time?.

Alan, its Bryan. I'll take your question first. It's a great one. So, it's going to be in beta, we're going to be running campaigns on each of these. We also have committed or indicated that we are going to be launching the products in full in Q4, which means that it's going to be available for the buy-side to be able to compare across networks.

And so we believe that we are going to be selling this and generating revenue in Q1. There will be a ramp, but when I say it is a two quarter lag, one of the nice things about going into beta first is we're still selling through it.

So, it won't quite be two quarters before we're able to generate any revenue, but it's going to take some time to move up. I think one of the things about currency products that's important now is they're not like analytics products, good enough doesn't work.

Currency means the two parties are willing to actually exchange money against that metric and so they have to feel comfortable.

So, the reason why I said the product is going in beta, it's not that the product itself is in beta, it's that the buyers and sellers want to be comfortable with the results before they're actually willing to exchange dollars against it. And so that's what they're going to be dealing and observing in Q4.

So, we believe in Q1 that we will start to see revenue and you will see a ramp throughout the year. And when you look at the rest of our roadmap, you can start to see this sort of stacked grouping there.

But that's why we say, I think, we believe that the real acceleration of revenue will take place in the second half as these new products have a chance to get out in the market..

Hi Alan, appreciate the comment in the question. Let me just give you a quick overview. First, as you can imagine, we're not going to provide a specific guidance around free cash flow, but let me reiterate just a couple of points that I made in my prepared remarks.

We believe that the significant use of cash is now behind us and we expect that that use of cash will decline quite substantially as we move forward into the coming quarters.

And so when we took a step back, as I outlined in my remarks, we thought that this change in the covenant would provide flexibility and allow us to see how our plan and strategic direction over the next few quarters will play out relative to revenue growth and the curves that we've been putting on spending and reducing our operating cost.

And as those come together, that will give us a much better view of what our long-term needs would be.

So, when we add those two together, it's one of those situations where I think as we move over the course of Q3 and Q4, we'll have much better visibility into what we need in the long-term and we'll provide more information around that as we move forward..

Thank you. [Operator Instructions] We do have a follow-up question from Surinder Thind with Jefferies..

Thank you for taking a follow-up. So, Greg a question or two for you here. Maybe just following up on some earlier comments about the operating leverage and kind of where core expenses are at this point.

Can I provide a little bit more color on maybe how we should think about the trajectory for core expenses at this point as we can look ahead over the next six to 12 months?.

So, as you recall back in December when we took a restructuring charge and reduced headcount substantially, we had shared that that would take $20 million of operating cost out of the core expenses. We also took a restructuring charge this quarter, right, which also was a function of headcount.

As you as you think about, more than 10% of our employee not being here today that were here a year ago today. That's a pretty substantial amount moving forward. At the same time, I highlighted facility cost and leases; we're in the process of relooking at all of those and that will also bring substantial savings.

But I think as you dig through the financial statements in our 10-Q, you'll see virtually every area of the company, our operating expenses are lower as compared to where they were a year ago as we put in some of the substantial parameters around where we're spending our money.

And I think if you think about that moving forward, I think as I highlighted, you'll continue to see -- headcount we talked about stabilizing or being flat, but there are lots of other opportunities for us to continue to drive other costs out of our operating environment through efficiencies and being more effective in how we do things.

We talked about streamlining company, that will drive out more efficiencies, which will drive us into the 2019. So, I think the trajectory continues to be around and should be for a while..

Thank you. That's helpful. And then in terms of just -- obviously, there's still a lot of noise in the P&L. You walked through a lot of the kind of the one-time items.

Can you talk about maybe if we look ahead to maybe next year, should we expect that most of that noise will be gone?.

I think if you take a step back and look at what is driving many of these things, it's really the -- I used the term overhang in my remarks and much of what's driving that is the overhang from the audit. And as we move forward, we would expect many of those items to go away.

You read in our 10-Q, we talk a lot about some of the aspects of things that we couldn't do over the course of the last few years, like the stock-based compensation. You already see in Q2 versus Q1, the audit and investigation cost going down $27 million as you saw in my remarks and we talk about that will subside over time.

The expectation would be over time as we move forward and further away from the year-end audit, those costs will subside from our P&L..

Thank you. That's it for me..

Thank you..

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