comScore Q3 2007 Earnings Call Transcript

comScore Inc. (SCOR)

Q3 2007 Earnings Call

October 31, 2007 4:30 pm ET

Executives

John Green - CFO

Magid Abraham - Co-Founder, President and CEO

Analysts

Maurice McKenzie - Signal Hill

Bill Morrison - ThinkEquity

Jeetil Patel - Deutsche Bank

Heath Terry - Credit Suisse

Youssef Squali - Jefferies & Company

AB Mendes - FBR Capital Markets

Brian Freiwald - William Blair & Company

Presentation

Operator

Good afternoon and welcome to the comScore Third Quarter 2007 Conference Call. At this time, all participants are in a listen-only mode. Following today's prepared presentation, instructions will be given for the question-and-answer session. (Operator Instruction). As a reminder, the webcast from this conference call will be archived and available on the Investor Relations section of comScore's website following completion of the call.

I would now like to turn the conference over to John Green, comScore's Chief Financial Officer.

John Green

Thank you. Good afternoon and welcome to comScore's earnings call for our third quarter of 2007. On the call with me today is Dr. Magid Abraham, comScore's President, CEO and Co-Founder.

Before we begin, let me read the following statements regarding the certain safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Except for historical information, all the statements, expectations and assumptions discussed during this call are forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 as amended. These forward-looking statements involve a number of risks and uncertainties, some of which cannot be predicted or quantified. It is possible that the assumptions made by management are not necessarily the most likely and may not materialize.

In addition, other important factors that could cause actual results to differ materially include the following, the early stage of the market for digital marketing intelligence and the rate of development of that market; the rate of development of the Internet advertising and eCommerce markets; comScore's ability to retain existing large customers and obtain new large customers; continued growth of the Internet as a medium for commerce, content, advertising and communications; changes in comScore's data-collection methodologies; inability to sell additional products and attract new customers; dependence on growth of international operations; product obsolescence with technological developments; volatility of quarterly results and analyst expectations; comScore's history of losses and the risk of future losses; comScore's utilization of net operating loss carryforwards; and the other risk factors set forth from time to time in the company's SEC filing. comScore takes no obligation to update or correct forward-looking statements.

I would also like to point out that in addition to the press release in Form 8-K relating to our third quarter 2007 results filed earlier today, we filed a separate press release in Form 8-K relating to another matter immediately prior to this earnings call. In accordance with our obligations under the securities laws and regulations, we will not be providing commentary or answer any questions during this call that relate to the matters described therein. We appreciate your cooperation in that regard.

I will now turn the call over to Magid.

Magid Abraham

Okay. Thank you, John. Good afternoon. Earlier today we released our financial results for the third quarter of '07, which ended in September 30th, 2007. I am pleased to report that our third quarter 2007 financial results show that we are experiencing strong success as we continue to grow our customer base and benefit from accelerating operating leverage in our comScore business model.

We've been able to grow our revenue among existing customers by successfully upselling products and by increasing our penetration of our existing customer base. We've also continued to add new customer at a strong pace both in the US and internationally. With over 800 customers worldwide, we feel that comScore is clearly stepping its leading position in enabling the monetization of physical medium.

Third quarter revenue was $22.4 million, which is an increase of 39% compared with the third quarter of 2006. That's also an increase of 8% sequentially over the second quarter of 2007. This revenue performance is on the high-end of the range that we provided during the announcement of preliminary third quarter results on October 8th, 2007. It also compares to the initial guidance of $21.5 million to $22 million for the third quarter of 2007 that we have provided on August 2nd, 2007.

Excellent performances across our product lines have generated the strong results this quarter. We continue to make progress with our goal to grow our subscription business and to add new customers to our expanding customer base. Our subscription revenue was $17.5 million for the third quarter, an increase of 39% over the prior year period. It now accounts for 80% of comScore's total revenue for the quarter compared to 78% of comScore's total revenue in the second quarter 2007.

Project revenue of $4.5 million grew by 38% in Q3 '07. And revenue from existing customers totaled $19.1 million, an increase of 40% compared to the third quarter of '06, while revenue from new customers added up to $3.3 million, and that is an increase of 29% compared to the third quarter of 2006.

During the third quarter of 2007, comScore added a net of 51 new customers, which brings the total number of customers to 837. That's a net increase of 161 new customers in the 12-month period following the end of the third quarter '06. Within this total customer count, the company added a net 52 new subscriber-based customers in Q3, resulting in a total of 739 subscription-based customers, which is a net increase of 151 subscription customers compared to the prior year period.

International revenue was $2.5 million in the third quarter, which is an increase of 61% compared to the prior period a year ago. International revenue now comprises 11% of the company’s total revenue, which is an increase from 9% of total revenue in the third quarter of 2006 and an increase from 10% of the revenue mix in the second quarter of '07.

During the third quarter, we have launched five new products, bringing up to 10 the number of new products we have launched so far this year. For example, we have introduced comScore Segment Metrix, our first site level behavioral targeting product. comScore Segment Metrix will enable the media organizations, agencies and advertisers to track, analyze and identify websites that target consumer group, such as healthy financial researchers or sports enthusiasts outside of the normal financial and sport site.

In addition, we launched qSearch 2.0, which is a second-generation monthly scorecard of the search market. This product expanded the tracking of the search market to include vertical searches and is now available on a global basis. These unique capabilities enhance comScore's competitive position in the marketplace and create more revenue opportunities for us.

We've also launched comScore Ad Metrix Publisher View, tracking what we call display ad view, which is a new industry metrix that measures display and rich media ads delivered across the Internet. These products contribute to revenue in 2008.

With that, I will turn the call back to John for a review of the detailed financial results. And after that, we will make a few closing comments and open up the call for questions. Thanks.

John Green

Thanks, Magid. Third quarter 2007 GAAP net income was $3.8 million, which is up $2.2 million or 138% compared to $1.6 million for the third quarter of 2007. We reported net income and earnings per share on a GAAP and non-GAAP basis. In addition, we also reported adjusted EBITDA free cash for this non-GAAP measure. The reconciliation of comScore's GAAP results to these non-GAAP measures is included in the financial tables accompanying the earnings press release.

Adjusted net income for the third quarter of 2007 was $4.6 million, an increase of $2.6 million or 131% compared to the $2 million in the third quarter of 2006. Adjusted EBITDA was $4.5 million, an increase of 78% compared to the prior year period. This is on the high end of the range with the adjusted EBITDA range provided when the preliminary third quarter of 2007 results were announced on October 8th, 2007. Results may exceed the original guidance for adjusted EBITDA of $3.4 million to $3.5 million that we provided on August 2nd, 2007.

The company’s adjusted EBITDA margin was 20%, an increase of approximately 4 percentage points compared to the second quarter of 2006. This modest improvement reflects the operating leveraged realized by comScore’s business model and was realized despite being totally offset by approximately 3.5 percentage points of margin attributable to approximately $800,000 in incremental public company cost incurred in the third quarter of 2007.

Deferred revenue was $29.1 million at the end of third quarter of 2007, an increase of 46% compared to the prior year period, reflecting the continued strong sales momentum through the first nine months of 2007.

Operating cash flow for the third quarter of 2007 was $7 million, which is an increase of $1.4 million or 25% compared to $5.6 million in the third quarter of 2006. Free cash flow defined by comScore's operating cash flow, less capital expenditures, was $5.8 million compared to $5 million in the third quarter of 2006.

As of September 30th, 2007, comScore had $98.2 million in cash, cash equivalents and short-term investments. Included in this amount is approximately $76.7 million of net proceeds raised by our company through its initial public offering of 5 million shares of common stock that was completed on July 2nd, 2007.

Looking at our balance year outlook, our company is forecasting forth quarter 2007 revenue of approximately $25 million to $25.3 million, an increase of 37% to 39% compared to the fourth quarter of 2006. This translates into a sequential growth of approximately 12% to 13% compared to an already strong third quarter of 2007. For the fourth quarter of 2007, comScore is projecting adjusted net income $5 million to $5.3 million. We are also forecasting non-GAAP adjusted net income for the fourth quarter of 2007 of $6.2 million to $6.5 million.

Adjusted EBITDA for the fourth quarter of 2007 is forecasted to be $6.2 million to $6.5 million, an increase of 66% to 74% compared to the fourth quarter of 2006, and up 38% to 44% on a sequential basis compared to the adjusted EBITDA in the third quarter of 2007.

The adjusted EBITDA forecast for the fourth quarter of 2007 assumes an estimated $500,000 in incremental public company expenses. The adjusted EBITDA forecast for the fourth quarter results in an adjusted EBITDA margin of 25% to 26% or 4 percentage points to 5 percentage points compared to the prior year period.

Free cash flow for the fourth quarter of 2007 is forecasted to be in the range of $9 million to $9.5 million, an increase of 527% to 562% compared to the fourth quarter of 2006. We are also revising our full year 2007 revenue forecast to a range of $86.9 million to $87.2 million compared to the prior year full year 2007 guidance of $85.9 million to $86.7 million. This revised guidance represents full year growth of 31% to 32% over 2006 full year revenue.

Similarly, we are increasing the adjusted EBITDA forecast for the full year 2007 in the range of $17.6 million to $17.9 million compared to the prior full year period of 2007 guidance of $16.4 million to $16.9 million. This revised adjusted EBITDA guidance represents a growth of 73% to 76% as compared to the full year of 2006. It results in a projected adjusted EBITDA margin in the range of approximately 20% for the full year of 2007, up approximately 5 percentage points as compared to the full year of 2006.

For the full year 2007, comScore is projecting GAAP net income $11.6 million to $11.9 million. We are also forecasting non-GAAP adjusted net income for the full year 2007 of approximately $16 million to $16.3 million. Free cash flow for the full year of 2007 is projected to be in the range of $20.9 million to $21.4 million, an increase of 143% to 149% compared to the full year of 2006. This compares to our previous full year 2007 guidance of $13.9 million to $14.6 million.

I'll now turn the call back over to Magid for closing remarks.

Magid Abraham

Thanks, John. Again, we're pleased with the revenue and margin momentum that we achieved in the third quarter. The company's performance has accelerated since we completed the IPO at the end of June. We believe that these achievements demonstrate the increasing recognition of comScore's unique and industry-leading technological capabilities and its strong track record of innovation.

It also reflects the increasing customer demand for actionable digital marketing intelligent solutions that comScore provides to support our customers in leveraging the power of the Internet to grow their business.

Now we'd open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions)

We'll go first Maurice McKenzie with Signal Hill.

Maurice McKenzie - Signal Hill

Great. Good afternoon, guys. Just a couple of questions. The first is solid improvement in margins. Can you discuss operating leverage in the business model, particularly in the cost of goods sold and the sales and marketing lines? And can you just talk about where do you see long-term margins, both in the gross and EBITDA margin lines?

John Green

Good afternoon, Maurice.

Maurice McKenzie - Signal Hill

Good afternoon.

John Green

In terms of the third quarter, where we continued to realize our greater leverage was in the cost of revenue area. Again, we found out we've been able to maintain our panel cost at approximately $2 million on an annual basis to support the continued strong growth in the business. So we're getting significant leverage there, both our technology infrastructure in terms of the capital that we're putting into the business as well as the increase in our employees in the technology side has continued to grow with probably about 40% of the rate of our topline growth. So that's where we have been realizing the most significant cost margin leverage in the business.

In terms of the sales and the marketing, we're also getting really strong productivity from our sales force. We now have 77 quota carrying sales people across our entire business, both Media Metrix and comScore Marketing Solutions. We have been adding additional sales people ahead of the growth curve, given that we feel that the market potential is so strong out there. So the leverage hasn't been quite as strong in the near-term.

And then, as we've been sharing in terms of our investor conferences and during the IPO road show is that we aren't giving guidance for the next, hopefully, years right now. But in terms of our long-term target is that that we see us growing from the full year adjusted EBITDA margin forecasted for '07 of 20% to at least 30%, again, long-term.

Maurice McKenzie - Signal Hill

Thank you, John. And second question is on mobile. With mobile making many headlines, can you just discuss initiatives that you've taken in the mobile, area of mobile measurement? And then, can you discuss unique challenges and opportunities that exist in developing a measurement technique around the mobile platform? Thanks.

Magid Abraham

Okay. We have been working on mobile since late last year. Obviously, it's a strategic opportunity for us. And we have a number of solutions that we are working on simultaneously to be able to address the challenge from a number of different ways. Ultimately, we will choose the best solution, but we are not taking any chances.

Our plans are to provide a solution with the software that would fit on a handset and would be able to collect work usage and other types of usage on the phone. And the technology will be -- and the kind of information will conceptually be very similar to what we do on a PC.

There are some opportunities to get data from carriers, but that involves negotiations with carriers. And that's probably something that might be reasonable to expect in the long-term, but our solution next year would at a minimum include a panel like the panel that we have on a PC.

Originally, our offering will not be as large, because we don't really need to measure e-commerce on cell phones. That's still a miniscule market. But what we see a big opportunity is internationally -- in fact, we have already lunched a mobile tracking service in Japan in August, I believe. And the reason why we chose Japan is that it is the only country where work usage on mobile phone exceeds work usage on PCs. And there is a significant portion of time that's now being spent on mobile phones.

The solution that we have in Japan right now is survey-based, but will be migrated to passive electronic monitoring sometime next year.

Maurice McKenzie - Signal Hill

Thank you very much.

Operator

Moving on, we'll take our next question from William Morrison with ThinkEquity.

Bill Morrison - ThinkEquity

Hi. It's Bill Morrison from ThinkEquity.

Magid Abraham

Hi, Bill

Bill Morrison - ThinkEquity

Good afternoon. A couple of questions. One, Magid -- you've been on a pretty torrid pace of new product development this year, and I was wondering if you could just comment on whether you expect that pace to continue into next year, or maybe give us some kind of an idea on if the number of product launches you expect annually over the next few years will continue in the current pace. And then I was curious if you've got any initial feedback or data points on comScore market, which I believe you launched recently? Thanks.

Magid Abraham

Okay. Well, you know some of the products that we have to launch next year such as the Mobile Tracking, and there are some of the products that we have launched this year that have sort of enhanced versions coming out next year. This year has been an exceptional year in terms of number of new products introduced.

But I would say that we, to some extent, we are market-driven and demand-driven, and the business continues to change, and we will be responding to the challenge. You know, it's hard for me at this point to make a forecast in terms of number of new products. But I'd say something around half the number would be probably more reasonable, but that doesn't -- that's not a firm number that we have on drawing board right now.

Sorry, there was another part of the question or --

Bill Morrison - ThinkEquity

Just an initial maybe -- could you share some of your initial experiences with the launch of comScore Marketer?

Magid Abraham

Yes. comScore Marketer seems to be pretty well received. We have gotten very positive feedbacks from the data clients and some of the early clients that have signed up. And interestingly, we saw that this was going to be a product that would be somewhat competitive to hitch-wise. And we've got some feedback that people will consider it as complimentary.

So that was a surprise point of feedback. But we are optimistic that this is a product that will successfully attract the long tail of marketers on the Internet and will represent a strong opportunity for us next year.

Bill Morrison - ThinkEquity

Thank you very much.

Magid Abraham

Sorry, strong revenue opportunity next year.

Bill Morrison - ThinkEquity

Thanks.

Magid Abraham

Okay.

Operator

(Operator Instructions)

We'll take out next question from Jeetil Patel with Deutsche Bank.

Jeetil Patel - Deutsche Bank

Hey, guys, a couple of questions. One, on Segment Metrix -- can you talk about how or where you are accessing your data from to build this product out? And I guess also, early feedback from customers or pricing or revenue opportunity for '08, can you discuss a bit more the financial model behind Segment Metrix?

And then, typically in fourth quarter, there is always a big push towards renewals for 2008. Can you give us an early glimpse as to how that's looking? I know it's still early in the quarter, but just an idea of what type of feedback you're getting on the renewals and looking out into the next year, especially with the new suite of products you've rolled out recently?

Magid Abraham

Okay. First of all on Segment Metrix, let me just explain that there are two types of behavioral targeting that you can do. The first type of behavioral targeting is by being able to find which sides have an affinity to the target that you're looking for. And then, the second one is individually personalize the advertising to be able to leverage the best information you know about the individual.

Segment Metrix does the first level of behavioral targeting. So we have taken and we have divided it into over 300 segments. And those 300 segments are available as an option and for a Media Metrix subscription that an agency or a publisher can leverage to say, "I have this high value kind of customer. Instead of targeting them on the basis on demographics, I'm going to target them on the basis of what I know about them, and I'm going to find sites where I can find them out of context, meaning if there are heavy financial researchers, obviously, I can get them on a finance site. But I want to also get them outside of finance sites. Segment Metrix will allow us to do that." So that's the notion of being able to track the people as a group, not out of context and being able to target them outside of that.

So that's what Segment Metrix is. There is no new data that we are acquiring for it. It is an upgrade to existing Media Metrix subscriptions, and with a price range of about a 30% increase on the existing Media Metrix subscription. As far as the renewal for the fourth quarter, we continue to enjoy high renewal rates in the 90s, and there is really nothing in the fourth quarter that would change from that.

Jeetil Patel - Deutsche Bank

Got it. Are you getting any feedback or any sort of a specific interest around the other five products you've launched lately, in terms of your conservations with customers over the last couple of, call it four to six weeks or eight weeks now? And then, is there any interest in going into the customer level segmentation behavioral targeting going forward?

Magid Abraham

Well, some of the products that we launched during the year involve measuring some new forms of media, like widgets or conversational media. We never expected those products to be strong revenue generators, but we wanted to be on the forefront of measuring those emerging form of media to maintain comScore's leadership in terms of measuring whatever digital media there is.

Some of the other products like Campaign Metrix that has been very successful in the marketplace and Ad Metrix were getting good early reaction to it. We've talked about comScore Marketer and Segment Metrix also enjoying a good reaction.

The second part of your question was…I forgot to note it.

Jeetil Patel - Deutsche Bank

The customer level behavioral targeting interest?

Magid Abraham

Yes. We are looking very seriously into that. Obviously, that is going to entail new data sources that will allow us to track or develop individual level segment that publishers can be using to target advertising on an individual basis. That's something that we think has a lot of potential. We are working on, and beyond that I can't really forecast what is going to happen.

Jeetil Patel - Deutsche Bank

Thank you.

Operator

Moving on, we will take our next question from Heath Terry with Credit Suisse.

Heath Terry - Credit Suisse

Great. Thank you. I was just wondering, given the 51 new customers that you added this quarter, can you talk about how the breakdown among products is for those customers? How many of them are for the core comScore audience measurement product versus search versus some of the new things that you've added new products you've added more recently?

John Green

Well, we don't provide the breakeven, Heath.

Heath Terry - Credit Suisse

Even if it's just kind of rough, I mean, I'm not looking for exact numbers as to what's working.

John Green

Certainly, we continued to build our new customer base on the subscriber side. That's been very strong internationally as well as in the US. So it has come to core Media Metrix audience measurement products has certainly been one big source of growth.

Magid Abraham

To some extent, you can get a clue from the fact that we added actually more subscribers in total customers, which means that there is a very, very strong subscription growth and that we're adding a lot of customers on the subscription side.

Heath Terry - Credit Suisse

Okay. Great. Thank you.

Operator

(Operator Instructions)

We'll go next to Youssef Squali with Jefferies & Company.

Youssef Squali - Jefferies & Company

Thank you very much. Hi, Magid. Hi, John. It's Youssef Squali. A number of questions. First, John, your deferred revenues were, of course, 6% year-on-year in Q3. I was wondering if you can provide us the same number for Q2 and Q1 of this year?

John Green

For Q2, it was up 50%. And then for the first quarter, it was lower -- that number doesn't come to mind. But again, we've seen our bookings continue to increase significantly during the course of the year.

Youssef Squali - Jefferies & Company

Okay. But do you think it was lower than 50%.

John Green

In the first quarter, yes. I think -- we'll dig it up. But I think it was--

Youssef Squali - Jefferies & Company

All right. Okay. We can follow up offline. And then, secondly, if I look at what your guidance implies for Q4 in terms of incremental EBITDA margin, it's about 68%. If I do the same math for last year, it was 52%. So clearly, the model is working. I was wondering how sustainable is that 68%? Or said in a different way, can the incremental EBITDA margin stay at that kind of level as you continue to invest in these new product.

Magid Abraham

Well, again, this one kind of referenced the long-term target on a full year basis is 30%. And as you are aware, in the first half of the year, there is a higher seasonality of cost as it relates to -- you know, we bring on a lot of our plans, our new hirers in the first half of the year, plus the impact of vacation accruals. So we are seeing the real ramp-up in the operating leverage with the adjusted EBITDA in the back half of the year. So we anticipate that on a seasonal basis that we would see similar ramp-ups in future years.

Also, in terms of the new products -- that's what we have been touching upon before --Magid touched upon it as well -- is that we don't have big incremental cost in terms of our panel size, and we are leveraging our existing R&D and product development people. So it's not where we have some incremental cost there. So the new product pipeline in and of itself is not contributing as the person to our operating leverage.

Youssef Squali - Jefferies & Company

Okay. That's helpful. And also staying with these new product launches, is there any way for us to kind of quantify the lift that you have gotten from a lift to growth rates that you have gotten so far this year from all these products that you have launched? And I know and I understand some of the them are just not generating any revenues. But has any of them really moved the needle so far or driven in '08 impact?

John Green

Again, first I just want to get back to that the first quarter deferred revenue was up 15% versus end of March of '06.

Youssef Squali - Jefferies & Company

15.

Magid Abraham

Yes, 15.

John Green

Yes, 15.

Youssef Squali - Jefferies & Company

Okay. Thanks.

Magid Abraham

From now until Q1?

John Green

From now until Q1, we progressed by 15 gross points.

Youssef Squali - Jefferies & Company

Okay.

John Green

So that basically says it was in the 31% range over this point -- discount. Right? Okay.

Youssef Squali - Jefferies & Company

Okay.

John Green

Okay. And then Youssef, again, we've said that we aren't giving kind of specifics of product level detail. Certainly, the new products have been contributing some to the revenue growth in end of '07. But since most of them were launched at the end of the second quarter for the balance of the year, then we'll be seeing much more of a ramp-up in revenue growth from the new products in '08.

Youssef Squali - Jefferies & Company

Okay. And then my last question is to you, Magid, on the international side, top 61% year-on-year, so 11% of total revenue. Is there -- I know this isn't area of focus for you -- is there a goal there that you'd like to kind of get to or achieve within the next, say, two or three years considering how successful your competitors have been internationally?

Magid Abraham

Sure. I would certainly like to see us over 25% of the revenue within two years internationally. And I think that as time goes on, we are getting much stronger from a product standpoint, and we have some unique markets where we can leverage. So I think that the growth from 9% to 11% in international revenue contribution is something that we'd like to see accelerate.

Youssef Squali - Jefferies & Company

Okay. And you think you can get there organically?

Magid Abraham

We think we can. Yes, I am talking about organic growth. Now, whether we do an acquisition that will sort of accelerate our presence there, you know, will give us more infrastructure and something already existing to build on, that's good. But I'm talking about revenue increasing from the core business.

Youssef Squali - Jefferies & Company

Okay. Great. Thanks a lot.

Magid Abraham

Thanks..

John Green

Okay. We are going to try one more time. For the deferred revenue, again, as of the end of our second quarter, that was up 50% versus the end of June of '06 that I stated earlier; and it was up 36% as of the end of March of '07 compared to the end of March of '06.

Youssef Squali - Jefferies & Company

So the progression is 36, 50, 46.

John Green

Yes.

Youssef Squali - Jefferies & Company

Okay.

Operator

(Operator Instructions)

We will go next to [AB Mendes] with FBR Capital Markets.

AB Mendes - FBR Capital Markets

Sorry, that's AB. Thanks for taking my question, guys. A couple of quick ones here. Did you guys -- I might have missed this early on the call -- did you discuss Microsoft as a percentage of revenues quarter?

Magid Abraham

No we --

John Green

That's 11%.

AB Mendes - FBR Capital Markets

Okay. And do you also have any kind breakout as far as top 10 or top 20 customers along the same lines.

John Green

Yes, the top 20 customers comprised 45% of total revenue for the third quarter, and that group alone was up 3%, 4% again reflecting a continued success in realizing real pricing and up-selling.

AB Mendes - FBR Capital Markets

Sure. Thank you. And in terms of the two-year goal of 25%-plus of international -- are they are coming from international market? Does that assume entering any other major markets or is that based recurring on the platform that you have put in place already.

Magid Abraham

Well, we have to answer other markets. Right now in Europe, we are primarily in the UK, and we need to target the larger markets in Europe. We just opened up in Japan and we're working on an entry point in China. Those are the key markets that I would expect to have physical presence in, and then there may be other regions that will be more judicious in terms of where we invest our resources to start up commercially.

The key point to remind everyone is that the panel is there, the data is there. What we are talking about is really having a presence on the ground or a marketing effort to try to market that data. And we are starting to pay a lot more attention to it.

AB Mendes - FBR Capital Markets

Great. That's all I had. Thanks very much, guys.

John Green

Thank you.

Operator

We'll take our next question from Brian Freiwald with William Blair & Company.

Brian Freiwald - William Blair & Company

Hi. This is Brian for Troy Mastin. How are you guys doing today?

Magid Abraham

Hi, Brian. Good.

Brian Freiwald - William Blair & Company

Given the financial downturn on the sub-prime fallout, have you guys seen any change in spending patterns from your financial services client?

Magid Abraham

No. Not really.

Brian Freiwald - William Blair & Company

Okay. And you mentioned a little bit about your expansion internationally. Can you comment on any acquisitions on that front that you're planning on making, or any companies you have been talking to over there?

Magid Abraham

We can't really comment on acquisitions other than saying, you know, something that gives us a presence internationally is one of the desired criteria for making acquisitions.

Brian Freiwald - William Blair & Company

Sure, sure. And can you give us any more color, I know you mentioned in Japan you are doing well with the mobile tracking, but any more details on how your launch in Japan in going?

John Green

We got a few contracts in Q3. We are getting good reception from clients for a couple of reasons, I think. We are entering the market with a number of unique features, and then we are -- I think there has been a lack of innovation and client orientation in the market before our entry.

So those are two things that are creating a good reaction to our entry. So we are optimistic that in the next year Japan will be a good contributing country to our revenue.

Brian Freiwald - William Blair & Company

Okay. Thank you very much.

Operator

And there appears to be no further questions at this time. I will turn the conference back over to our speakers for any additional or closing comments.

Magid Abraham

Well, thank you very much. As always, if there are any further questions, John is more than happy to dig up statistics and I would be more than happy to take calls as well. But we are happy with the quarter and with how the year is going and we look forward to our fourth quarter call.

Thank you very much.

John Green

Thank you.

Operator

And that does conclude today's conference call. We thank you all for your participation and you may now disconnect.

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