comScore's CEO Serge Matta on Q2 2014 Results - Earnings Call Transcript

Aug. 5.14 | About: comScore, Inc. (SCOR)

comScore, Inc. (NASDAQ:SCOR)

Q2 2014 Earnings Conference Call

August 4, 2014 8:30 AM ET

Executives

Kenneth Tarpey – CFO

Serge Matta – CEO

Analysts

Youssef Squali – Cantor Fitzgerald

Andre Benjamin – Goldman Sachs

Jason Helfstein – Oppenheimer

Todd Mitchell – Brean Capital

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2014 comScore, Incorporated Earnings Conference Call. My name is Michelle and I will be your operator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to hand the call over to Mr. Ken Tarpey. Please proceed.

Kenneth Tarpey

Thank you very much. Good morning and welcome to comScore’s earnings call for the second quarter of 2014. Again, I’m Ken Tarpey, and with me today is Serge Matta, our President and CEO.

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 meanings of the Securities Act of 1933, and the Securities Exchange Act of 1934 regarding future events or performance of the company that involve risks and uncertainties, including without limitation, the strength of comScore’s business; expectations as to the opportunities including new customers and markets for comScore; expectations regarding the benefits of partnerships with parties such as Google, Yahoo, and GroupM; expectations as to the growth and composition of comScore’s customer base and renewal rates; expectations regarding the impact and benefits of particular lines of business and products; expectations regarding the relative value of comScore’s products; expectations as to the development and release of new products and features; expectations as to the financial effects of comScore’s acquisition of MdotLabs; assumptions regarding tax rates and net operating loss carry-forwards; and forecasts of future financial performance for the third quarter and full year 2014, including related growth rates, exchange rates and assumptions.

Such statements are only predictions based on management’s current expectations. Actual events or results could differ materially from those predictions due to a number of risks and uncertainties, including those identified in the documents comScore files from time to time with the Securities and Exchange Commission. Those documents specifically include but are not limited to comScore’s Form 8-K filed earlier today relating to this call, and comScore’s Form 10-K for the period ending December 31, 2013, and comScore’s most recent quarterly reports on Form 10-Q. 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 refer for reference certain non-GAAP financial measures in the course of our presentation. You will find our press release on our Investor Relations website with 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 and presentations that accompanies our comments today. It might be helpful to follow it along with us.

Now with that, I will turn the call over to Serge.

Serge Matta

Thank you, Ken. And good morning everyone, and thank you for joining us today. Let me first provide you an overview of the quarter and then discuss key operational highlights. After that I’ll turn it over to Ken to review our financial performance before we take your questions.

Let’s begin with Slide 4; comScore delivered another quarter of record revenues and strong profitability demonstrating the continued positive momentum across our business. Second quarter 2014 revenues were $80.0 million, up 14% over last year’s results. Adjusted EBITDA was $16.7 million, a 20% year-over-year increase at a 21% EBITDA margin reflecting continued operating leverage in the business and disciplined expense management. We repurchased $14.8 million worth of shares during the quarter and our Board has authorized a new $50 million repurchase plan to enable future opportunistic share repurchases.

As you can see, our key operating metrics demonstrate the fundamental strength and continued momentum of our business. For the overall business we achieved 43 net new customers. During the quarter we added 54 new customers to our Media Metrix Multi-Platform service, also known as MMX MP, bringing our total customers using MMX MP to 405. What’s really exciting here is similar to previous quarters, two-thirds of these customers also brought Mobile Metrix and/or Video Metrix during the same quarter demonstrating the value customers seen our suite-of-service offerings. Our contract renewal rate with existing customers again remained above 90% on a constant dollar basis.

Turning to Slide 5, we have previously shared our corporate priorities with you, and want to put them in context. ComScore is uniquely positioned at the intersection of three significant mega trends in digital media. Consumers are rapidly transitioning their media and digital consumption to mobile and multi-platform devices. Digital video has increasingly become the standard of how TV, movies, and other forms of media are viewed. And advertising has become more automated with advancements in media buying technology. Our strategic priorities are focused on leveraging the tremendous market opportunity these intersecting trends present.

First, we continue to expand our cross-media offerings and remain on track to deliver a syndicated cross-media product by the end of this year that includes our total video measurement solution. As a reminder, our cross-media product with total video includes the following; linear TV, digital usage across PCs, tablets, Smartphone’s or through over -the-top video, game consoles and internet connected Smart TVs.

Second, we’re continuing to extend our vCE market leadership, we’re seeing good adoption of our vCE mobile product and are preparing to expand vCE 2.0 to new international markets. Our vCE integration with Yahoo is live, and our partnership with Google is on track. These partnerships both provide strong evidence of increasing market validation of the value vCE and support our third priority for 2014 which is to integrate comScore data into the places where clients use them.

Lastly, we remain focused and committed to sharp execution and returning capital to investors, both of which we delivered on during the second quarter and through the first half of this year.

Turning to Slide 6, today we are jointly announcing that our vCE product integration with Yahoo is live. After successful soft launch in June as promised, Yahoo has fully integrated vCE throughout its unified advertising solutions. With the integration complete, Yahoo will now offer advertisers the opportunity to ensure and verify audience delivery on display and video campaigns by direct or programmatically based on comScore vCE. Yahoo is the first publisher to fully integrate vCE data throughout its ad buying and reporting platforms for both, display and video campaigns. Having reached this milestone, our partnership with Yahoo will continue to develop with plans to ensure audience delivery for mobile campaigns against vCE and expand to international advertisers in later phases.

Our Google partnership which integrates vCE into the double click ad platform and delivers real-time reporting to advertisers is also solidly on track. A pilot with leading brands, many of whom are represented by the Publicis Groupe is well underway, and we look forward to formally launching Google in the late third quarter as we previously noted. We are very pleased with the progress on these key strategic partnerships that extend the reach of vCE as it helps – and the industry to understand [ph] the true value of media and advertising.

Now to be clear, the 2014 guidance we are providing today does not reflect any meaningful revenue benefit from the Yahoo or Google agreement. While we are very optimistic and excited about the prospects for these partnerships, it’s simply way too early to have clear visibility on the revenue trajectory and impact on other financial metrics. We anticipate both of these strategic agreements will begin to provide us incremental revenues, starting later this year. We have not factored these future revenue benefits in our current guidance, and we’ll update you as these partnerships roll out.

Now moving to Slide 7, we continue to strong momentum across our vCE product offerings. I’m very pleased to announce that in Q2 we expanded our relationship with GroupM, and are now a Preferred Strategic Partner, which will further enhance our vCE client base globally. As you know, GroupM is WPP’s consolidated media investment management operation serving as the parent company to agencies including Maxus, MEC, Mediacom, Mindshare, Catalyst and Xaxis. GroupM is the leader in worldwide advertising billings and global market share. This partnership with GroupM, in addition to our previously announced relationships with the Publicis Groupe, the Interpublic Group Of Companies, also known as IPG and Omnicom represent a tremendous vote of confidence for vCE and our advertising solutions from the holding companies that control the majority of the world’s ad spending.

Turning to Slide 8, in addition to the support from media and agencies, vCE continues to find strong support among leading brands and we continue to execute on our product roadmap. In Q2, P&G, the world’s largest advertiser renewed its preferred partnership with comScore. In April, we announced the availability of vCE Mobile which provides actionable metrics for brand advertising on Smartphone’s and tablets for both, in-app and mobile web-app. Throughout the second quarter we have seen adoption of vCE Mobile by major brands, and dozens of the industry’s largest mobile app servers and networks, including YouTube, have become vCE Mobile authorized tagging partners. More than a hundred publishers are now in the process of certifications. We continue to focus on delivering the best product to our clients with the most granular data and today vCE leverages more than 1.6 billion demographic profiles worldwide.

Finally, we’re on track to expand the footprint of vCE 2.0 around the world, and in the second half of the year, we will be rolling out this next generation of vCE outside the U.S to the U.K., Canada and Italy.

As presented on Slide 9, one of the most persistent [ph] issues in digital media measurement has been the problem of non-human traffic and fraud. Non-human traffic inflates side-traffic metrics and data on ad delivery leading advertisers unable to accurately evaluate their ad buys and diminishing the value of digital advertising overall. As a result, there is a significant amount of advertising dollars being wasted. According to the data sited by the IAB, more than 30% of web traffic is considered fake. comScore data shows that in some digital ad campaigns, more than 50% of ads are served to non-humans. To ensure accurate reporting, a key goal of comScore has been to detect and remove non-human traffic from our digital measurement.

Since 2002 we have used a variety of increasingly sophisticated approaches to eliminate non-human traffic from our reporting including the Media Metrix and vCE product suite, so that our customers can be confident they are receiving accurate leads on their audience composition and advertising spend. Increasingly, non-human traffic is driven by fraud. This dynamic distorts the true value of digital media and hurts the industry’s ability to properly value advertising and growth.

Last night we announced our acquisition of MdotLabs, a leading provider of sophisticated ad fraud detection technology. MdotLabs uses signal processing, statistics, machine learning, and applied math to identify a variety of malicious activities including bops, click farms, pay per view networks, and a growing list of traffic generation technique. The acquisition of Mdot will enhance comScore’s non-human traffic and HT detection method and we believe these sophisticated detection methods will become a key product differentiator in the future.

The entire Mdot team’s lab of 12 engineers and data scientists will be joining comScore, including Co-Founder’s Timur Yarnall, and Paul Barford. We look forward to scaling Mdot’s agile NHT detection approaches across our expensive media metrics and vCE platforms. From a financial standpoint, we are fortunate that this acquisition will not have a material impact on our full year 2014 guidance or our Q3 revenue or EBITDA projections. In our thoughts, we are not revising our estimates to reflect the acquisition.

As you may have seen today, we also announced that Mel Wesley will be joining us as Chief Financial Officer starting at the end of August. Mel has extensive technology in public company experience, having most recently been CFO of Mandiant Corporation, and prior to that, CFO of OPNET Technologies. We’re excited to welcome Mel to our team as we drive to the next phase of comScore’s growth.

I’d also like to thank Ken Tarpey for his service as comScore’s CFO over the past five years. With his guidance, comScore has made meaningful strides in growing our revenues and expanding our operating margins, and he has helped establish a strong financial foundation for comScore’s future. We are pleased that Ken will be joining our Advisory Board after he completes his service as CFO.

To sum up, we’ve had another record quarter for revenue at comScore. We’re executing well against clear priorities which we’re confident will continue to enhance our market position, fuel our growth and drive value for our shareholders. We’ve demonstrated in the first half of 2014 that we’re building momentum in our businesses and are focused on sustaining the momentum for the rest of this year and beyond.

Now I’ll turn over the call to Ken for a review of our financial results.

Kenneth Tarpey

Thank you, Serge. Let’s take a look at our second quarter results in more detail.

Revenues in the second quarter was $80 million, up 14.5% versus results in the same quarter last year. Subscription revenue in the second quarter was $72.6 million, up 22% versus results in Q2 ‘13. Subscription and project revenue represented 91% and 9% of total revenue respectively. The ongoing success and adoption of vCE as subscription service by our customers continues to drive the subscription revenue mix higher. Revenue from existing customers was up 17% year-over-year in the second quarter at $73.3 million, representing 92% of total revenues. Our renewal rate with existing customers remains above 90% on a constant dollar basis. During the quarter, we also added 43 net new customers bringing our total customer count to 2,459. Our international revenues continue to grow well, up 17% year-over-year and representing 30% of total revenue.

Now turning to expenses and margins, our gross margin was 71%, an increase of 1.9% margin points over Q2 ‘13 levels. The higher Q2 gross margin in 2014 can be primarily attributed to the fall through benefit from the operating leverage of our business model. G&A expenses increased to $14.6 million for the second quarter which reflected a higher employee compensation cost to support the company’s business growth, higher stock comp costs, with the recent transition of executive management and the higher bad debt provision on a year-over-year basis.

GAAP pretax loss for Q2 2014 this quarter was $2.7 million compared to a GAAP pretax income of $918,000 in the same quarter last year, related to comp stores outstanding privacy class action litigation. Absentees to extraordinary expense items, we would have experienced a modest pretax income.

In the second quarter, stock comp expense was $9.1 million. The Q2 tax provision was $481,000 to provide taxes for year-to-date profits in certain international countries where profits could not be offset by other operating losses for GAAP purposes. Our cash taxes remain low, both for the quarter and year-to-date at approximately 6% of 2014 non-GAAP net income since we do hold net operating loss carry forwards in the U.S. and certain prime jurisdictions.

In the second quarter, GAAP net loss was $3.2 million or $0.09 per basic and diluted share based on a basic and diluted share count of 33.7 million shares. The loss reflects the impact of the unusual expense accrual which I just mentioned. Non-GAAP net income for the quarter was $11.3 million or $0.73 per diluted share, excluding stock-based compensation, amortization of intangibles, acquisition related expenses, and other non-recurring item. EPS calculation is based on a Q2 fully diluted share count of 34.6 million shares.

The second quarter Adjusted EBITDA was $15.7 million or 20% increase over the prior year, representing an Adjusted EBITDA margin of 21%. The Q2 EBITDA increase can mostly be attributed to the higher revenues and the results in gross margins which I previously mentioned.

Looking at our balance sheet, we ended the quarter with cash and cash equivalents of $39 million, a decrease of $12.8 million from March 31, and a decrease of $46.8 million from a year ago. The decrease in our cash position primarily reflects the impact of the repurchase program of $14.8 million of stock repurchase in the second quarter, and $49.4 million cumulatively. Cash flow from operations for the second quarter of 2014 was $9 million, and capital expenditures for the quarter were $2.8 million, resulting in a Q2 free cash flow of $6.1 million. This cash flow was lower, both sequentially and year-over-year, primarily as a result of three items.

First, payables and accruals were down sequentially by plus $10 million, simply reflecting the timing of payments. Second, cash from operations in the second quarter 2014 reflected the litigation settlement accrual, and more details about that accrual are provided in footnote 7 of our Q2 10-Q which will be filed later today. And thirdly, capital expenditures were up both, sequentially and year-over-year, to support our growth.

Now I’m turning to Slide 12 regarding guidance. This guidance for the third quarter of 2014 is provided on a GAAP basis as there is no impact in 2014 of our Non-Health Copy Testing and Configuration Manager products which we divested in Q1, 2013. For the third quarter of 2014, we anticipate revenues in the range of $80.6 million to $82.7 million. We anticipate third quarter GAAP income loss before income taxes in the range of $1.1 million pretax loss to pretax income of $700,000. We anticipated Adjusted EBITDA for the third quarter 2014 to be in the range of $15.7 million to $17.4 million which represented an Adjusted EBITDA margin of approximately 19% to 21% or 20% at the midpoint of our revenue and Adjusted EBITDA guidance ranges.

Our estimated fully diluted share count for the third quarter 2014 is 34.6 million shares. We’re now raising our full year 2014 revenue outlook due to the continuing momentum of the business. For 2014, we now anticipate revenues in the range of $320.5 million to $329.5 million. We anticipate 2014 GAAP income loss before income taxes in the range of $3.9 million pretax loss to pretax income of $200,000. We anticipate Adjusted EBITDA for 2014 to be in the range of $62.5 million to $69.5 million which represents an Adjusted EBITDA margin of approximately 19% to 21% or 20% at the midpoint of revenue on Adjusted EBITDA guidance ranges.

Our estimated fully diluted share count for 2014 is 34.7 million shares. Currently – as Serge had mentioned, this guidance does not reflect any revenues from the Yahoo or Google agreements – during the future calls, after these partnerships are fully implemented.

Thank you. And operator, we’re now available for questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question we have comes from the line of Youssef Squali from Cantor Fitzgerald. Please go ahead, your line is now open.

Youssef Squali – Cantor Fitzgerald

Thank you very much. And good morning, Ken and Serge, congratulations on a very nice quarter, two quick questions please. First, just to be clear, was there any revenue from the Yahoo relationship, this – I know it’s very early but I was just wondering if you could acknowledge if there was any revenue from that? And then, related to that, do you have any better visibility into the revenue potential from both of these partnerships? I know that you’re not modeling any in your guidance but just how should we be thinking about the revenue potential there, particularly for – I guess, really once it’s all rolled out I guess in for 2015? And then, on the Metrix, we noticed that your ARPU was up pretty substantially, we don’t remember the last time I think it was up in double digits and it was up about 11.2%, was it all vCE or just – how – what drove that and the sustainability of that going forward? Thank you.

Kenneth Tarpey

Youssef, thanks. Good morning. On the Yahoo revenue, no, absolutely not, there was no revenue associated with Yahoo in Q2. Yahoo went live as a soft launch on June 30 as we promised but between June 30 and literally up till last night we were working on getting all the operational things up and running, testing the service, and today we’re fortunate that it has gone live. So now advertisers have been – no advertisers were flowing through the system until it started happening, obviously today. In terms of visibility related to both of these deals, the one thing that I can say is like we’ve said before, as obviously, we feel like it’s incremental but more importantly, we’ve noticed the trend over the past few months and quarters as evidenced in our deck today that we feel like we’re going to be renewing all of the big partnerships that we had prior to announcing these deals, and they will continue being with us in addition to the Yahoo and Google deals. So what I mean specifically is, take for example P&G; P&G has decided yes, we will – obviously, we want to work directly with you comScore on a relationship but then also we will benefit from P&G working directly with both, Google and/or Yahoo. In some cases they will work with both, and we will benefit from those as well. So, there is – we are feeling very good about it, in the beginning of the year it was really hard to tell how much will client swap one for the other, we feel like more and more as we are now six to eight months into it – we feel that there will be – if anything it’s going to be incremental and clients will renew their existing business with us and then there will be additional investments that we get, additional revenue that we get from both, Yahoo and Google.

And then on your last question on ARPU, Youssef, it’s predominantly on two things, vCE absolutely, and then also on Media Metrix Multi-Platform and Mobile Metrix. We saw significant increases on those two main product lines. So vCE and Media Metrix MPE/Mobile Metrix.

Youssef Squali – Cantor Fitzgerald

Alright, that’s great. Thank you so much.

Kenneth Tarpey

Sure, thank you.

Operator

Thank you. The next question we have comes from the line of Andre Benjamin from Goldman Sachs. Please go ahead, your line is now open.

Andre Benjamin – Goldman Sachs

Hi, good morning. The first question, I was wondering if you could give us a little bit of an update on how much of the revenue currently comes from the audience measurement versus advertising solutions, and where you currently stand in terms of penetrating the opportunity for – say, Media Metrix in the U.S. versus ad solutions?

Kenneth Tarpey

Andre, this is Ken. In terms of the majority of the business, it is on the audience side. It’s a little north of about 50% but as you know, the growth rates in some of the new products, both on the Mobile side, particularly vCE, are higher than our good overall growth rate. So we expect that that element will – the pie will continue to evolve over the next year plus as all these new opportunities take revenue traction.

Serge Matta

One thing just to add there Andre, to give you some color is – on Media Metrix Multi-Platform, we now have 405 total MP customers. We believe that’s only – approximately 36% or so penetration in terms of our existing base. So we feel like there is still significant upside on just going and upselling Media Metrix MP to our existing Media Metrix audience base, just in the U.S. And then obviously, as we roll out additional countries then the denominator increases even further.

Andre Benjamin – Goldman Sachs

And then – I know it’s still early, it hasn’t even been launched yet but – with the anticipation of the total video product come out by the end of the year, I don’t know if there is any updated views or color you can provide on how we can, even at a more conservative scenario think about the potential economic impact, either – but on a growth basis or how do you want to characterize that margins, whatever?

Kenneth Tarpey

Total video is on track, like we said, it’s on track to be released by the end of the year. We think that – we will confident that we’ll start seeing bookings, also known as CV here, and later in this year but none of that will materialize into revenue until 2015. That being said, there will be subscription based, these are usually going to be in the high six figures, low seven figure deals. We will confident about renewing ESPN this year, ESPN has been a great client of ours and continue to be a great client, but as far as projections and all that, again, way too early. But kind of some color, it’s going to be subscription based, the high six figures, low seven figures, and a lot of that revenue will start materializing in 2015.

Andre Benjamin – Goldman Sachs

Thank you.

Kenneth Tarpey

Sure.

Operator

The next question we have comes from the line of Jason Helfstein from Oppenheimer. Please go ahead, your line is now open.

Jason Helfstein – Oppenheimer

Thanks. Just two questions, both really around vCE, so – we’ve heard that the take rate [ph] is around 2% up spin, can you comment on that? And depending on whether it comes through different channels or just direct or the third party is going to – how wide that range could – depends – could it be double that, could it be less than that? And then, when we think about sizing this longer term, I think BIB had U.S. display, about 8 billion in 2013, mobile and digital video, about 10 billion. How much ultimately are you guys trying to target and is there kind of phases where initially you’re largely focused on display and then kind of – mobile/digital video longer term? And then secondly, from what you’re seeing when people sign up for vCE do they need some of the legacy products at last? So should we think about – as somebody who meaningfully runs their vCE, do they give back other syndicate of products that they have brought in the past? Thanks.

Kenneth Tarpey

Sure, thanks Jason. The take rate is hard to tell but the 2% to 4% is what kind of what we’ve heard as well, we’re seeing. So, that’s kind of where I would put it at right now. In terms of the overall pie, the size, that’s a tough one. Today we feel like we have probably penetrated less than 20% of the top advertisers up there, there is still a lot more to go. Obviously, with Google and Yahoo coming on board, that will increase significantly. And in terms of our focus, I just want to be extremely clear, our focus is 100% display and video, video being equally important to display. So both of those are equally important and then obviously, since we just released Mobile vCE, Mobile is a key priority of us. Now that’s key priority for us. Now that being said, Mobile is still way behind compared in terms of penetration, compared to both display and video but that’s also a big focus. And lastly, we can think of this as a U.S. only solution and we think of this as totally 100% global. So it terms of priorities for us, display and video is number one, mobile is right behind them, and then international comes as well.

As far as your question related to swapping, we’ve haven’t seen that. We’ve – there has not been – at least not a single client that I know has basically told us, while we signed up for vCE we don’t need Media Metrix anymore. That is not something that we’re seeing, I think the nice thing about the products are they are completely complimentary. It’s not a trend that we’ve seen one bit. So that’s just – hopefully, I’m actually pretty confident that we don’t – we won’t see that happening but if it does, we’ll let you guys know.

Jason Helfstein – Oppenheimer

Thanks, I appreciate the comment.

Kenneth Tarpey

Sure.

Operator

Thank you. The next question we have comes from the line of Todd Mitchell from Brean Capital. Please go ahead, your line is now open.

Todd Mitchell – Brean Capital

Yes, thank you. I want to ask about vCE and the integration with Yahoo and Google on the demographic profile. So, I see in your slide deck that you’re saying 1.6 billion demographic profiles will wire [ph]. Can you just kind of flush out what that really means for me? Is – where are they coming from? What market and what distribution means to it – encumbers – and is this available for real-time for integrations with the ad exchanges? Thank you.

Kenneth Tarpey

Sure. Todd, in terms of the 1.6 billion and vCE, Yahoo, and Google – those are the demographics we get from the users that use both, Yahoo and Google’s properties. It is not just Yahoo.com, it is not just Google.com, it would include Gmail, it would include Tumbler, it would include all of the services that Yahoo and Google have – Google Plus that they include. Now, what we get from them is nothing that’s personally identifiable, it is simply for now, age and gender. It has nothing else to do more than just age and gender, and it is worldwide. So – in Yahoo’s case for example, they are – as part of our agreement, we are getting demographics for a few countries ready; Italy, the U.K., Canada being some, and we plan on rolling out additional countries. As we roll out vCE 2.0 in these countries, then we start getting additional demographics from them.

So – again, there are high level demographics, they are based on age and gender, there is nothing that’s personally identifiable, so 100% privacy compliance. And then, and it will scale overtime as we grow into additional markets. And then in terms of real-time, absolutely, that’s the whole point of the Google integration – it is going to be in real-time, and we plan on – when we rolled that out, that will be both on – programmatically or through direct it will be done but – and leveraging all of these demos that we have. The nice thing about our servers, about vCE, is we’re not reliant on one source of demographics, we are – we use multiple sources of demographics, some coming from Yahoo, some coming from Google, some coming from other data providers that we have relationships, both here in the U.S. and overseas. And we blended all together and we decide as the independent third-party to decide which is the best demographic source to use for the individuals viewing that campaign. So that’s the value proposition that we provide as the ref in this game if you want to call it that.

Todd Mitchell – Brean Capital

Can I just follow-up for two seconds here?

Kenneth Tarpey

Sure.

Todd Mitchell – Brean Capital

Two things; when you say as we integrate further, we’ll get higher level demographics. Can you explain to me what that means? And also, I’m assuming ultimately or right now, does this also include multiple devices? And can you tell – can you identify duplication?

Kenneth Tarpey

Higher level demos means down the road it could expand to not just age and gender, we all know that’s the most important demos right now but we also feel that as the product evolves, it needs to include extended demographics like we call them things such as income, such as education, household size, presence of children, stuff like that but then also more importantly, it could also include behavioral segments, or offline segments, the people that have a tendency to buy X grocery product offline, whatever the case maybe, or people that are sports addicts online. Those are the kind of behavioral online and offline segments that could be included in this product.

vCE today outside of Yahoo and Google already includes those extended demographics and target groups, if you want our segments, what we plan on doing it is, with Yahoo and Google, we want to integrate those additional things at scale. So that’s – that was in terms of your high levels and excuse me, for not writing, what was the second – the last question?

Todd Mitchell – Brean Capital

Mobile and duplication.

Kenneth Tarpey

Mobile – today, we are working with both Yahoo and Google to also get demographics from them. From mobile, we anticipate that that will happen and we will then be able to identify down to a device level and differentiate down to a device level. But that will not happen until we both go live with these two for both the PC service. And now that Yahoo has gone live, our next step with them is to focus on Mobile. We’ve already started the ground work with that. It basically has to – we have to instrument a few things into the app, the Yahoo Apps, so to allow us to get the demographics and we will be doing the same thing with Google once it goes live. Definitely on the roadmap, I anticipate that we’ll both have Yahoo and Google demos on mobile later in the year.

Todd Mitchell – Brean Capital

Thank you.

Kenneth Tarpey

Sure.

Operator

Thank you. I’d now like to turn the call over to Serge Matta for closing remarks.

Serge Matta

Thank you again for your participation today. Our second quarter 2014 results reflect continued strong execution and momentum across our business. We’re capitalizing on significant multi-platform and cross media opportunities, including meaningful progress with our strategic Yahoo and Google partnerships, as well as our total video measurement efforts. In addition, the talent and capabilities now available to us as a result of our acquisition of MdotLabs will continue to enhance our product offerings as we work to further strengthen the foundation of our long-term success.

We remained focused on our key priorities on the sharp execution of our strategy and on delivering value to our shareholders. We look forward to speaking with you again on the next conference call. Thank again. Take care.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Thank you for joining, and enjoy the rest of your day.

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