Edgar Filing: COMSCORE, INC.

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

SCOR 6.30.15 10-Q, Q2 2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33520

________________________________

comScore, Inc.

(Exact name of registrant as specified in its charter)

________________________________



Delaware		54-1955550
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

11950 Democracy Drive, Suite 600 Reston, VA		20190
(Address of principal executive offices)		(Zip Code)

(703) 438-2000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 6, 2015, there were 39,158,755 shares of the registrant’s common stock outstanding.

Table of Contents

COMSCORE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2015

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosure about Market Risk	35
Item 4. Controls and Procedures	35
PART II. OTHER INFORMATION	36
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults Upon Senior Securities	56
Item 4. Mine Safety Disclosures	56
Item 5. Other Information	56
Item 6. Exhibits	56
SIGNATURES	57
EXHIBIT INDEX	58
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosure About Market Risk” under Items 2 and 3, respectively, of Part I of this report, and the sections entitled “Legal Proceedings,” “Risk Factors,” and “Unregistered Sales of Equity Securities and Use of Proceeds” under Items 1, 1A and 2, respectively, of Part II of this report, may contain forward-looking statements. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, macroeconomic trends that we expect may influence our business, plans for capital expenditures, expectations regarding the introduction of new products, regulatory compliance and expected changes in the regulatory landscape affecting our business, expected impact of litigation and litigation settlements, including the expected contribution by insurance providers, plans for growth and future operations, effects of acquisitions, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under the section entitled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue,” “seek” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events and/or results may differ materially.

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise, other than through the filing of periodic reports in accordance with the Securities Exchange Act of 1934, as amended. Investors and potential investors should not place undue reliance on our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of any of the events described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q could harm our business, prospects, operating results and financial condition. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMSCORE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	June 30, 2015			December 31, 2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	187,917		$	43,015
Accounts receivable, net of allowances of $2,359 and $2,079, respectively	79,893			98,185
Prepaid expenses and other current assets	18,438			11,015
Deferred tax assets	21,105			20,976
Assets held for sale	—			5,692
Total current assets	307,353			178,883
Property and equipment, net	45,172			42,365
Other non-current assets	992			1,017
Long-term deferred tax assets	12,124			12,369
Intangible assets, net	115,590			15,793
Goodwill	111,739			103,525
Total assets	$	592,970		$	353,952
Liabilities and Equity
Current liabilities:
Accounts payable	$	6,539		$	3,421
Accrued expenses	25,057			37,212
Deferred revenues	86,326			92,013
Deferred rent	1,530			1,738
Capital lease obligations	15,274			13,353
Liabilities held for sale	—			3,873
Total current liabilities	134,726			151,610
Deferred rent, long-term	9,433			9,738
Deferred revenue, long-term	954			2,063
Deferred tax liabilities, long-term	1,080			1,182
Capital lease obligations, long-term	15,222			13,072
Other long-term liabilities	994			1,022
Total liabilities	162,409			178,687
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.001 par value per share; 100,000,000 shares authorized; 40,967,656 shares issued and 39,702,311 outstanding as of June 30, 2015 and 35,919,340 shares issued and 34,174,466 shares outstanding at December 31, 2014, respectively	41			36
Additional paid-in capital	607,286			324,176
Accumulated other comprehensive loss	(8,848		)	(5,591		)
Accumulated deficit	(105,188		)	(93,076		)
Treasury stock, at cost, 1,265,345 and 1,744,874 shares as of June 30, 2015 and December 31, 2014, respectively	(62,730		)	(50,280		)
Total stockholders’ equity	430,561			175,265
Total liabilities and stockholders’ equity	$	592,970		$	353,952

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues	$	91,414		$	80,013		$	178,743		$	156,912
Cost of revenues (excludes amortization of intangible assets) (1)	28,508			23,232			53,400			46,673
Selling and marketing (1)	24,868			26,600			52,199			52,666
Research and development (1)	16,901			12,931			34,907			25,408
General and administrative (1)	14,994			14,642			39,995			27,986
Amortization of intangible assets	4,305			1,919			5,684			3,874
Loss on asset disposition	5,226			—			5,226			—
Settlement of litigation, net	(570		)	2,940			(660		)	2,860
Total expenses from operations	94,232			82,264			190,751			159,467
Loss from operations	(2,818		)	(2,251		)	(12,008		)	(2,555		)
Interest and other expense, net	(393		)	(304		)	(785		)	(507		)
Gain (loss) from foreign currency	469			(164		)	397			(317		)
Loss before income tax provision	(2,742		)	(2,719		)	(12,396		)	(3,379		)
Income tax (provision) benefit	(2,045		)	(481		)	284			(603		)
Net loss	$	(4,787	)	$	(3,200	)	$	(12,112	)	$	(3,982	)
Net loss available to common stockholders per common share:
Basic	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.12	)
Diluted	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.12	)
Weighted-average number of shares used in per share calculation - common stock:
Basic	40,071,707			33,688,945			36,928,323			33,601,610
Diluted	40,071,707			33,688,945			36,928,323			33,601,610

Comprehensive loss:
Net loss	$	(4,787	)	$	(3,200	)	$	(12,112	)	$	(3,982	)
Other comprehensive income (loss):
Foreign currency translation adjustment	1,108			88			(3,257		)	(70		)
Total comprehensive loss	$	(3,679	)	$	(3,112	)	$	(15,369	)	$	(4,052	)

(1) Amortization of stock-based compensation is included in the line items above as follows:
Cost of revenues	$	1,115		$	1,002		$	3,324		$	1,727
Selling and marketing	$	1,887		$	3,667		$	5,634		$	6,063
Research and development	$	1,041		$	856		$	3,224		$	1,581
General and administrative	$	4,574		$	3,535		$	18,190		$	6,912

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)



	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income/(Loss)			Accumulated Deficit			Treasury stock, at cost			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income/(Loss)			Accumulated Deficit			Treasury stock, at cost			Total Stockholders’ Equity
Balance at December 31, 2013	35,216,071		$	36	$	293,322		$	1,726		$	(83,173	)	$	(13,109	)	$	198,802
Net loss	—		—		—			—			(3,982		)	—			(3,982		)
Foreign currency translation adjustment	—		—		—			(70		)	—			—			(70		)
Exercise of common stock options	5,816		—		20			—			—			—			20
Issuance of restricted stock	201,698		—		—			—			—			—			—
Restricted stock canceled	(18,115	)	—		—			—			—			—			—
Restricted stock units vested	345,221		—		—			—			—			—			—
Common stock received for tax withholding	(384,062	)	—		(12,132		)	—			—			—			(12,132		)
Repurchases of common stock	(1,237,572	)	—		—			—			—			(36,292		)	(36,292		)
Excess tax benefits from stock-based compensation, net	—		—		1,181			—			—			—			1,181
Amortization of stock-based compensation	—		—		18,038			—			—			—			18,038
Balance at June 30, 2014	34,129,057		$	36	$	300,429		$	1,656		$	(87,155	)	$	(49,401	)	$	165,565

Balance at December 31, 2014	34,174,466		$	36	$	324,176		$	(5,591	)	$	(93,076	)	$	(50,280	)	$	175,265
Net loss	—		—		—			—			(12,112		)	—			(12,112		)
Foreign currency translation adjustment	—		—		—			(3,257		)	—			—			(3,257		)
Exercise of common stock options	275,617		—		11,619			—			—			—			11,619
Issuance of restricted stock	177,149		—		—			—			—			—			—
Issuance of common stock for acquisitions	4,438,353		4		224,859			—			—			—			224,863
Reissuance of treasury stock	1,605,330		—		35,025			—			—			47,518			82,543
Restricted stock canceled	(9,763	)	—		—			—			—			—			—
Restricted stock units vested	644,249		1		(1		)	—			—			—			—
Common stock received for tax withholding	(477,289	)	—		(24,289		)	—			—			—			(24,289		)
Repurchase of common stock	(1,125,801	)	—		—			—			—			(59,968		)	(59,968		)
Amortization of stock-based compensation	—		—		35,897			—			—			—			35,897
Balance at June 30, 2015	39,702,311		$	41	$	607,286		$	(8,848	)	$	(105,188	)	$	(62,730	)	$	430,561

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

COMSCORE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



	Six Months Ended June 30,
	2015			2014
Operating activities
Net loss	$	(12,112	)	$	(3,982	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	10,348			8,563
Amortization of intangible assets	5,684			3,874
Provision for bad debts	1,327			1,971
Stock-based compensation	30,372			16,283
Amortization of deferred rent	(920		)	(525		)
Deferred tax provision (benefit)	447			(1,432		)
Loss (gain) on asset disposal	5,226			(55		)
Changes in operating assets and liabilities:
Accounts receivable	16,044			1,200
Prepaid expenses and other current assets	(7,959		)	(12,164		)
Accounts payable, accrued expenses, and other liabilities	(4,361		)	10,281
Deferred revenues	(4,011		)	4,290
Deferred rent	426			36
Net cash provided by operating activities	40,511			28,340

Investing activities
Acquisitions, net of cash acquired	(10,117		)	—
Purchase of property and equipment	(2,483		)	(4,691		)
Cash paid for disposition of business	(2,035		)	—
Net cash used in investing activities	(14,635		)	(4,691		)

Financing activities
Proceeds from the issuance of common stock	204,741			—
Proceeds from the exercise of common stock options	11,619			20
Repurchase of common stock (withholding taxes)	(24,289		)	(12,132		)
Repurchase of common stock (treasury shares)	(59,968		)	(36,292		)
Excess tax benefits from stock-based compensation	—			1,181
Principal payments on capital lease obligations	(8,633		)	(5,573		)
Equity issuance costs	(3,356		)	—
Net cash provided by (used in) financing activities	120,114			(52,796		)
Effect of exchange rate changes on cash	(1,088		)	354
Net increase (decrease) in cash and cash equivalents	144,902			(28,793		)
Cash and cash equivalents at beginning of period	43,015			67,795
Cash and cash equivalents at end of period	$	187,917		$	39,002

Supplemental cash flow disclosures
Interest paid	$	784		$	598
Net income taxes paid	$	1,356		$	212
Supplemental noncash investing and financing activities
Stock issued in connection with acquisition	$	106,025		$	—
Cash due to buyer related to disposition of business	$	500		$	—
Capital lease obligations incurred	$	12,711		$	7,484
Leasehold improvements acquired through lease incentives	$	396		$	—
Accrued capital expenditures	$	72		$	855

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

COMSCORE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1.	Organization

comScore, Inc. (the “Company”), a Delaware corporation incorporated in August 1999, provides digital media analytics that enables its customers to make well-informed, data-driven decisions to effectively manage their business, build successful digital strategies and tactics, and optimize their marketing and advertising investments. The Company is a technology-driven company that measures what people do as they navigate the digital world across multiple technology platforms including personal computers, smartphones, tablets, televisions and interact with digital media, including websites, apps, video programming and advertising. The Company aspires to measure all digital interactions across all major digital platforms on a global basis.

The Company's products and services provide its customers with deep and actionable insight into consumer behavior including objective, detailed information about consumer usage of digital content and advertising coupled with information on consumer demographic characteristics, attitudes, lifestyles and offline behavior. The Company combines its proprietary data with its clients’ own data and data from partners to provide valuable digital media analytics. The Company delivers on-demand and real-time products and services through a scalable Software-as-Service delivery model, which supports both Company branded products and also partner products integrating the Company's data and services.



2.	Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated upon consolidation. The Company consolidates investments where it has a controlling financial interest. The usual condition for controlling financial interest is ownership of a majority of the voting interest and, therefore, as a general rule, ownership, directly or indirectly, of more than 50% of the outstanding voting shares is a condition indicating consolidation. All of the Company's subsidiaries are wholly owned.

Unaudited Interim Financial Information

The consolidated interim financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated interim financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The consolidated interim financial statements included herein, reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. These consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed February 20, 2015 with the SEC. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2015 or thereafter. All references to June 30, 2015 and 2014 or to the three and six months ended June 30, 2015 and 2014 in the notes to the consolidated interim financial statements are unaudited.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expense during the reporting periods. Significant estimates and assumptions are inherent in the analysis and the measurement of deferred tax assets, the identification and quantification of income tax liabilities due to uncertain tax positions, the valuation and recoverability of intangible assets and goodwill, the collectability of accounts receivable and the allowance for doubtful accounts and evaluating the estimates used in accounting for nonmonetary transactions. The Company bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results could differ from those estimates.

Table of Contents

Fair Value Measurements

The Company evaluates the fair value of certain assets and liabilities using the fair value hierarchy. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company applies the three-tier value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1 — observable inputs such as quoted prices in active markets;

Level 2 — inputs other than the quoted prices in active markets that are observable either directly or indirectly;

Level 3 — unobservable inputs of which there is little or no market data, which require the Company to develop its own assumptions.

The Company does not currently have any assets or liabilities that are measured at fair value on a recurring basis. However, cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, deferred revenue, deferred rent and capital lease obligations reported in the consolidated balance sheets equal or approximate their respective fair values because of their short term nature.

Cash and Cash Equivalents and Investments

Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase. Cash and cash equivalents are maintained with several financial institutions. The combined account balances held on deposit at each institution typically exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes the risk is not significant.

Interest income on investments and excess cash balances was a nominal amount for the three and six months ended June 30, 2015 and 2014.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and are non-interest bearing. The Company generally grants uncollateralized credit terms to its customers and maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Allowances are based on management’s judgment, which considers historical experience and specific knowledge of accounts where collectability may not be probable. The Company makes provisions based on historical bad debt experience, a specific review of all significant outstanding invoices and an assessment of general economic conditions. If the financial condition of a customer deteriorates, resulting in an impairment of its ability to make payments, additional allowances may be required. Included within accounts receivable are unbilled accounts receivable, which relate to situations in which the Company has recognized revenue for services performed prior to invoicing a customer, but for which we have the legal right to invoice the customer. Typically, unbilled accounts receivable are invoiced in the following period.

Revenue Recognition

The Company recognizes revenues when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or the services have been rendered, (iii) the fee is fixed or determinable, and (iv) collection of the resulting receivable is reasonably assured.

The Company generates revenues by providing access to the Company’s online database or delivering information obtained from the database, usually in the form of periodic reports. Revenues are typically recognized on a straight-line basis over the period in which access to data or reports is provided, which generally ranges from three to twenty-four months. Sales taxes remitted to government authorities are recorded on a net basis.

Revenues are also generated through survey services under contracts ranging in term from two months to one year. Survey services consist of survey and questionnaire design with subsequent data collection, analysis and reporting. At the outset of an arrangement, total arrangement consideration is allocated between the development of the survey questionnaire and subsequent data collection, analysis and reporting services based on relative selling price. Revenue allocated to the survey questionnaire is recognized when it is delivered and revenue allocated to the data collection, analysis and reporting services is recognized on a straight-line basis over the estimated data collection period once the survey or questionnaire design has been delivered. Any change in the estimated data collection period results in an adjustment to revenues recognized in future periods.

Certain of the Company’s arrangements contain multiple elements, consisting of the various services the Company offers. Multiple element arrangements typically consist of either subscriptions to multiple online products or a subscription to the

Table of Contents

Company’s online database combined with customized services. The Company accounts for these arrangements in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-13, Multiple Deliverable Revenue Arrangements, which requires the Company to allocate arrangement consideration at the inception of an arrangement to all deliverables, if they represent a separate unit of accounting, based on their relative selling prices. The guidance establishes a hierarchy to determine the selling price to be used for allocating arrangement consideration to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) if VSOE is not available, or (iii) an estimated selling price (“ESP”) if neither VSOE nor TPE are available. VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable on a stand-alone basis. ESP reflects the Company’s estimate of what the selling price of a deliverable would be if it was sold regularly on a stand-alone basis.

The Company has concluded it generally does not have VSOE for its arrangements, and TPE is generally not available because the Company’s service offerings are highly differentiated and the Company is unable to obtain reliable information on the products and pricing practices of the Company’s competitors. As such, ESP is generally used to allocate the total arrangement consideration at the arrangement inception based on each element’s relative selling price.

The Company’s process for determining ESP involves management’s judgments based on multiple factors that may vary depending upon the unique facts and circumstances related to each product suite and deliverable. The Company determines ESP by considering several external and internal factors including, but not limited to, current pricing practices, pricing concentrations such as industry, channel, customer class or geography, internal costs and market penetration of a product or service. The total arrangement consideration is allocated to each of the elements based on the relative selling price. If the ESP is determined as a range of selling prices, the mid-point of the range is used in the relative-selling-price method. Once the total arrangement consideration has been allocated to each deliverable based on the relative allocation of the arrangement fee, the Company commences revenue recognition for each deliverable on a stand-alone basis as the data or service is delivered. ESP will be analyzed on an annual basis or more frequently if management deems it likely that changes in the estimated selling prices have occurred.

Generally, contracts are non-refundable and non-cancellable. In the event a portion of a contract is refundable, revenue recognition is delayed until the refund provisions lapse. A limited number of customers have the right to cancel their contracts by providing a written notice of cancellation. In the event that a customer cancels its contract, the customer is not entitled to a refund for prior services, and will be charged for costs incurred plus services performed up to the cancellation date.

Advance payments are recorded as deferred revenues until services are delivered or obligations are met and revenue can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues.

Multiple contracts with a single counterparty that are negotiated simultaneously and are considered contemporaneous are accounted for as one arrangement. If there are multiple contracts with one counterparty that are deemed independent of one another, they are accounted for as separate arrangements.

The Company accounts for nonmonetary transactions under Accounting Standards Codification ("ASC") 845, Nonmonetary Transactions. Nonmonetary transactions with commercial substance are recorded at the estimated fair value of assets surrendered including cash, if cash is less than 25% of the fair value of the overall exchange, unless the fair value of the assets received is more clearly evident, in which case the fair value of the assets received is used to estimate fair value for the exchange.

During the three and six months ended June 30, 2015, the Company recognized $10.8 million and $14.6 million of revenue related to nonmonetary transactions, respectively. During the three and six months ended June 30, 2015, the Company recognized $5.0 million and $9.2 million, respectively, in expense related to nonmonetary transactions, respectively.

During the three and six months ended June 30, 2014, the Company recognized $1.8 million and $4.0 million of revenue related to nonmonetary transactions, respectively. During the three and six months ended June 30, 2014, the Company recognized $2.8 million and $4.0 million, respectively, in expense related to nonmonetary transactions, respectively.

Due to timing differences in the delivery and receipt of the respective assets exchanged, expense recognized in each period is different from the amount of revenue recognized.

Refer to footnote 12, Related Party Transactions, for discussion of nonmonetary transaction with a related party.

Table of Contents

Stock-Based Compensation

The Company estimates the fair value of stock-based awards on the date of grant. The fair value of stock options with only service conditions is determined using the Black-Scholes option-pricing model. The fair value of market-based stock options and restricted stock units is determined using a Monte Carlo simulation embedded in a lattice model. The fair value of restricted stock awards is based on the closing price of the Company’s common stock on the date of grant. The determination of the fair value of the Company’s stock option awards, restricted stock units, and restricted stock awards is based on a variety of factors including, but not limited to, the Company’s common stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior. Additionally, the Company has estimated forfeitures for stock-based awards at the dates of grant based on historical experience and adjusted for future expectation. The forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates.

The Company issues restricted stock awards where restrictions lapse upon the passage of time (service vesting), achieving performance targets, or some combination of these restrictions. For those restricted stock awards with only service conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. For awards with both performance and service conditions, the Company starts recognizing compensation cost over the remaining service period, when it is probable the performance condition will be met. For stock awards that contain market vesting conditions, the Company recognizes compensation cost of the original estimate of the derived service period, based on its initial valuation analysis regardless of market performance. Stock awards that contain performance or market vesting conditions are excluded from diluted earnings per share computations until the contingency is met as of the end of that reporting period.

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized.

The Company records a valuation allowance when it determines, based on available positive and negative evidence, that it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. The Company determines the realizability of its deferred tax assets primarily based on the reversal of existing taxable temporary differences and projections of future taxable income (exclusive of reversing temporary differences and carryforwards). In evaluating such projections, the Company considers its history of profitability, the competitive environment, the overall outlook for the online marketing industry and general economic conditions. In addition, the Company considers the time frame over which it would take to utilize the deferred tax assets prior to their expiration.

For certain tax positions, the Company uses a more-likely-than-not threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of tax benefits determined on a cumulative probability basis, which are more-likely-than-not to be realized upon ultimate settlement in the financial statements. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

Earnings Per Share

Basic net income/loss per common share excludes dilution for potential common stock issuances and is computed by dividing net income/loss by the weighted-average number of common shares outstanding for the period. Diluted net income/loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share assumes the exercise of stock options and warrants using the treasury stock method. The Company's restricted stock awards are participating securities when the Company has net income. The weighted-average shares outstanding-common stock has been adjusted to reflect share repurchases made during the three and six months ended June 30, 2015. See Footnote 10 for more information pertaining to the Company's share repurchases.

Table of Contents

The following table provides a reconciliation of the numerators and denominators used in computing basic and diluted net loss per common share:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands, except share and per share data)						(In thousands, except share and per share data)
Net loss	$	(4,787	)	$	(3,200	)	$	(12,112	)	$	(3,982	)
Net loss per share - common stock:
Basic	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.12	)
Diluted	$	(0.12	)	$	(0.09	)	$	(0.33	)	$	(0.12	)
Weighted-average shares outstanding-common stock, basic and dilutive	40,071,707			33,688,945			36,928,323			33,601,610

The following is a summary of common stock equivalents for the securities outstanding during the respective periods that have been excluded from the earnings per share calculations as their impact was anti-dilutive.



	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Stock options and restricted stock	761,222	552,325	812,316	706,419

Recent Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers, which will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. In July 2015, the FASB decided to defer by one-year the effective date of the standard to January 1, 2018, with an option that would permit companies to adopt the standard as early as the original effective date of 2017. The Company is currently evaluating the methods of adoption allowed by the new standard and the impact the standard is expected to have on the Company's financial statements and related disclosures.

In April 2014, FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update requires that the disposal of a component of an entity shall be reported in discontinued operations if the disposal represents a strategic shift that will have a major effect on an entity's operations and financial results. This update is effective January 1, 2015 for interim and annual reporting periods. The Company will evaluate the impact of this standard on its consolidated financial statements in the event of a future disposition.

Table of Contents



3.	Business Combinations

The Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business combination date, its estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. The Company records adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in its operating results in the period in which the adjustments were determined.

Acquisition of Kantar Group's European IAM Business

On April 1, 2015, the Company closed on material definitive agreements with WPP plc and its affiliates (collectively, "WPP"). Under the agreements, the Company acquired all of the outstanding common stock in WPP's internet audience measurement business in Norway, Sweden and Finland ("European IAM Business") and entered into an alliance in which the Company and WPP will collaborate on cross-media audience measurement business outside the United States (the "Strategic Alliance").

Pursuant to the agreements, the Company issued 1,605,330 shares of common stock, which were issued from treasury shares, representing 4.45% of the Company's post-transaction outstanding common stock with a fair value of $82.5 million in exchange for the European IAM Business and the Strategic Alliance.

The agreements also provided that immediately following the signing of such agreements, WPP would conduct a tender offer to purchase an amount of shares at a price per share equal to $46.13. In the event the combination of shares issued for the European IAM Business and the Strategic Alliance and the shares purchased in the tender offer failed to result in beneficial ownership by WPP of at least 15% of the Company's outstanding common stock, the Company agreed to directly issue and sell additional shares at the tender offer price of $46.13 to WPP to achieve the minimum of 15%. As WPP was unable to acquire sufficient shares through the tender offer, the Company sold and WPP purchased 4,438,353 newly issued shares of the Company's common stock in exchange for cash of $204.7 million. As of the date of issuance, the difference between the fair market value of the shares issued and the tender offer price was $23.6 million.

Total fair value consideration for the transactions was $310.8 million for which the Company issued 6,043,683 shares of outstanding common stock. The fair value of the European IAM Business was determined to be approximately $8.5 million and the fair value of the intangible asset associated with the Strategic Alliance was determined to be approximately $98.6 million, adjusted for the capitalization of asset acquisition costs of $1.0 million. The Strategic Alliance was recorded as a definitive-lived intangible asset classified as, acquired relationship / technology, that will be amortized over the ten year life of the agreement. Further, the Company received $201.3 million in cash, net of equity issuance costs incurred of $3.4 million.

The acquisition of the European IAM Business resulted in goodwill of approximately $5.4 million. This amount represents the residual of the fair value of the business after allocation of net assets and identifiable intangible assets acquired. The amount is consistent with the Company's intention for the acquisition of the European IAM Business. During the six months ended June 30, 2015, the Company incurred transaction costs related to its acquisition of the European IAM Business and Strategic Alliance of approximately $1.9 million.

In addition, as part of the acquisition of the European IAM Business, the Company acquired definitive-lived intangible assets totaling $3.0 million. The following table outlines the fair value of the intangible assets and the useful life for each type of intangible asset. The intangible assets are amortized using a straight-line method.



	Fair Value (in thousands)		Useful Lives (Years)
Name and trademarks	$	370	6.0
Panel	1,580		2.0
Intellectual property	840		2.0
Customer relationship	200		7.0
	$	2,990

In addition to the definitive-lived intangible assets above, the Company acquired less than $0.1 million of net tangible assets.

The Company is still in the process of evaluating the opening balance sheet of the European IAM Business and may adjust the preliminary purchase accounting after obtaining more information. The results of the European IAM Business have

Table of Contents

been included in the financial statements since the date of acquisition and were not material to the overall consolidated results of the Company.

As of April 1, 2015, WPP's aggregate holdings amount to 15% of the Company's common stock, see footnote 12, Related Party Transactions.

Acquisition of Proximic

On April 23, 2015, the Company entered into an Agreement and Plan of Merger to acquire Proximic, Inc. ("Proximic") for $9.5 million cash in exchange for all of the outstanding capital stock of Proximic. The Company acquired Proximic to power enhancements to brand safety and content categorization capabilities across the Company's product offerings.

The acquisition of Proximic resulted in goodwill of approximately $4.5 million, none of which is deductible for tax purposes. This amount represents the residual amount of the total purchase price after determining the fair value for net assets and identifiable intangible assets acquired. The amount recorded as goodwill is consistent with the Company's intentions for the acquisition of Proximic. During the six months ended June 30, 2015, the Company incurred transaction costs related to its acquisition of Proximic of approximately $0.4 million.

The preliminary purchase price of Proximic is allocated as follows (in thousands):



Net tangible assets acquired	$	714
Definite-lived intangible assets acquired	4,290
Goodwill	4,496
Total purchase price, net of cash acquired	$	9,500

The following table outlines the fair value of the intangible assets and the useful life for each type of intangible asset. The intangible assets are amortized using a straight-line method.



	Fair Value (in thousands)		Useful Lives (Years)
Name and trademarks	$	190	1.5
Customer relationship	1,700		5.0
Acquired methodologies/technology	2,400		3.0
	$4,290

The Company is still in the process of evaluating the opening balance sheet and may adjust the preliminary purchase accounting after obtaining more information. The results of Proximic have been included in the financial statements since the date of acquisition and were not material to the overall consolidated results of the Company.

Table of Contents



4.	Asset Dispositions

Disposition of the mobile operator analytics business

On May 11, 2015, the Company sold certain assets related to its mobile operator analytics business ("CSWS") to a Buyer. CSWS, formerly known as Nexius, Inc. was acquired on July 1, 2010.

In connection with the disposition, the Buyer assumed certain customer liabilities. Further, the Company paid the Buyer for customer balances collected in 2015. The Company entered into a loan and security agreement which allows the Buyer to borrow up to $1.5 million, subject to various restrictions, and annual reductions in the borrowing amount of $0.5 million per year until April 30, 2018. The loan is secured by all of the assets of the Buyer, with interest due quarterly. As of June 30, 2015, the Buyer has not borrowed any funds under the agreement. The Company, without compensation, will provide ongoing technology and transitional services to the Buyer for up to one year from the closing date of the transaction. The costs associated with these services are not significant.

As a result of the disposition, during the three months ended June 30, 2015, the Company recorded a loss on the disposition of $5.2 million, determined as follows (in thousands):



Relief from certain customer obligations	$	3,551
Carrying value of net assets disposed	(6,242		)
	(2,691		)
Cash due to buyer related to disposition of business	(500		)
Cash paid for disposition of business	(2,035		)
Loss on sale of assets	$	(5,226	)

The remaining $0.5 million of cash due to Buyer related to the disposition will be paid during 2015 and its payment is not contingent on the future performance of either party.



5.	Goodwill and Intangible Assets

The change in the carrying value of goodwill for the six months ended June 30, 2015 is as follows (in thousands):



Balance as of December 31, 2014	$	103,525
Acquisition of Proximic	4,496
Acquisition of European IAM Business	5,430
Translation adjustments	(1,712		)
Balance as of June 30, 2015	$	111,739

The carrying values of the Company’s amortizable acquired intangible assets are as follows (in thousands):



	June 30, 2015							December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Acquired methodologies/technology	$	8,857	$	(5,679	)	$	3,178	$	6,612	$	(5,180	)	$	1,432
Acquired relationship/technology	98,622		(2,465		)	96,157		—		—			—
Customer relationships	19,796		(13,523		)	6,273		19,201		(12,970		)	6,231
Intellectual property	14,429		(6,406		)	8,023		13,562		(5,528		)	8,034
Panel	3,252		(1,827		)	1,425		1,617		(1,521		)	96
Trade names	2,127		(1,593		)	534		1,690		(1,690		)	—
	$	147,083	$	(31,493	)	$	115,590	$	42,682	$	(26,889	)	$	15,793

Table of Contents

Amortization expense related to intangible assets was approximately $4.3 million and $5.7 million for the three and six months ended June 30, 2015, respectively, and $1.9 million and $3.9 million for the three and six months ended June 30, 2014, respectively.

The weighted average remaining amortization period by major asset class as of June 30, 2015, is as follows:



	(In years)
Acquired methodologies/technology	2.9
Acquired relationship/technology	9.8
Customer relationships	3.0
Intellectual property	5.9
Panel	1.8
Trade names	4.4

The estimated future amortization of acquired intangible assets as of June 30, 2015 is as follows:



	(In thousands)
2015	8,398
2016	16,293
2017	14,356
2018	11,670
2019	10,813
Thereafter	54,060
	$	115,590



6.	Long-term Debt and Other Financing Arrangement

Capital Leases

The Company has a lease financing arrangement with Banc of America Leasing & Capital, LLC in the amount of $10.0 million, of which the Company can utilize approximately $10.0 million as of June 30, 2015, for future capital leases. This arrangement allows the Company to lease new software, hardware and other computer equipment as it expands its technology infrastructure in support of its business growth. Under this arrangement, the Company may enter into new capital leases prior to May 15, 2016. Some of the amounts the Company has utilized to date under this arrangement have not lowered the amount available for future capital leases, because those amounts have been assigned by Banc of America Leasing & Capital, LLC under separate third-party arrangements. In addition, the Company enters into capital leases under non-committed arrangements, typically directly with equipment manufacturers.

Future minimum payments under capital leases with initial terms of one year or more are as follows:



	(In thousands)
2015	$	7,798
2016	14,519
2017	8,000
2018	1,871
2019	18
Total minimum lease payments	32,206
Less amount representing interest	(1,710		)
Present value of net minimum lease payments	30,496
Less current portion	(15,274		)
Capital lease obligations, long-term	$	15,222

During the six months ended June 30, 2015 and 2014, the Company acquired $12.7 million and $7.3 million, respectively, in computer hardware and software through the issuance of capital leases.

Table of Contents

Revolving Credit Facility

On September 26, 2013, the Company entered into a Credit Agreement (the "Credit Agreement") with several banks (the "Lenders"). Bank of America, N.A. (“Bank of America”) is the administrative agent, and lead lender of this Revolving Credit Facility. The Credit Agreement provides for a five-year revolving credit facility of $100.0 million, which includes a $10.0 million sublimit for issuance of standby letters of credit, a $10.0 million sublimit for swing line loans and a $10.0 million sublimit for alternative currency lending. The maturity date of the Credit Agreement is September 26, 2018. The Credit Agreement also contains an expansion option permitting the Company to request an increase of the credit facility up to an aggregate additional $50.0 million, subject to certain conditions. Borrowings under the Revolving Credit Facility shall be used towards working capital and other general corporate purposes as well as for the issuance of letters of credit. On June 23, 2014, the Company executed the First Amendment to the Credit Agreement. This amendment reset the equity repurchase limit to $50.0 million and permits the Company to repurchase equity interests in the Company outside the $50.0 million limit during the remainder of the five-year revolver term, provided that certain financial thresholds are met.

Base rate loans and swing line loans will bear interest at the Base Rate plus the Applicable Rate, as such terms are defined in the Credit Agreement and summarized below. The Base Rate is the highest rate of the following: (a) the Federal Funds rate plus 0.50%, (b) the publicly announced Bank of America prime rate, and (c) the Eurocurrency rate, as defined in the Credit Agreement plus 1.0%. The Applicable Rate for base rate loans and swing line loans is 0.50% to 1.50% depending on the Company’s funded debt-to-EBITDA ratio at the end of each fiscal quarter. Amounts supporting letters of credit bear interest at the applicable rate for revolving loans. Each Eurocurrency rate loan will bear interest at the Eurocurrency Rate plus the Applicable Rate ranging from 1.50% to 2.50% depending on the Company's funded debt-to-EBITDA ratio at the end of each fiscal quarter. Beginning on September 26, 2013 through the maturity date of the five-year revolver term, the Company is obligated to pay a fee, payable quarterly in arrears, based on the average unused portion of the available amounts under the Credit Agreement at a rate of 0.20% to 0.35% per annum depending on the Company’s funded debt-to-EBITDA ratio at the end of each fiscal quarter.

The Credit Agreement contains various usual and customary covenants, including, but not limited to: financial covenants requiring maximum funded debt-to-EBITDA ratio, cash flow-to-fixed charge ratios and a minimum liquidity during equity repurchase periods as well as covenants relating to the Company’s ability to dispose of assets, make certain acquisitions, be acquired, incur indebtedness, grant liens and make certain investments. As of June 30, 2015 the Company was in full compliance with all covenants contained in the Credit Agreement.

As of June 30, 2015, the Company did not have an outstanding balance under the terms of the Credit Agreement.

The Company maintains letters of credit in lieu of security deposits with respect to certain office leases as well as to satisfy performance guarantees under certain contracts. As of June 30, 2015, $3.6 million in letters of credit were outstanding, leaving $6.4 million available for additional letters of credit. These letters of credit may be reduced periodically provided the Company meets the conditional criteria of each related lease agreement.



7.	Contingencies

Contingencies

From time to time, the Company is involved in various legal proceedings and claims arising from the normal course of business. Although the outcome of any legal proceeding cannot be predicted with certainty, management believes that the final outcome and resolution of current matters, if any, will not materially affect the Company’s consolidated financial position or results of operations.



8.	Income Taxes

The Company’s income tax provision for interim periods is calculated by applying its estimated annual effective tax rate on ordinary income before taxes to year-to-date ordinary book income before taxes. The income tax effects of any extraordinary, significant unusual or infrequent items not included in ordinary book income are determined separately and recognized in the period in which the items arise.

During the three and six months ended June 30, 2015, the Company recorded an income tax provision of $2.0 million and an income tax benefit of $0.3 million, respectively, resulting in effective tax rates of (74.6%) and 2.3%, respectively. During the three and six months ended June 30, 2014, the Company recorded income tax provisions of $0.5 million and $0.6 million, respectively, resulting in effective tax rates of 17.7% and 17.8%, respectively. These effective tax rates differ from the Federal

Table of Contents

statutory rate of 35% due to the effects of state income taxes, foreign income taxes, nondeductible expenses such as certain stock compensation and meals and entertainment, unrecognized tax benefits and changes in statutory tax rates which took effect during the year. The effective tax rate for the three and six months ended June 30, 2015 decreased compared to the effective tax rate for the three and six months ended June 30, 2014 primarily as a result of tax benefits associated with the disposition of the mobile operator analytics business.

As of June 30, 2015 and December 31, 2014, the Company had unrecognized tax benefits of approximately $1.4 million, of which approximately $0.9 million is netted against certain deferred tax assets on the accompanying consolidated balance sheets. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.



9.	Stockholders’ Equity

1999 Stock Option Plan and 2007 Equity Incentive Plan

Prior to the effective date of the registration statement for the Company’s initial public offering (“IPO”) on June 26, 2007, eligible employees and non-employees were awarded options to purchase shares of the Company’s common stock, restricted stock or restricted stock units pursuant to the Company’s 1999 Stock Plan (the “1999 Plan”). Upon the effective date of the registration statement of the Company’s IPO, the Company ceased using the 1999 Plan for the issuance of new equity awards. Upon the closing of the Company’s IPO on July 2, 2007, the Company established its 2007 Equity Incentive Plan, as amended (the “2007 Plan” and together with the 1999 Plan, the “Plans”). The 1999 Plan will continue to govern the terms and conditions of outstanding awards granted thereunder, but no further shares are authorized for new awards under the 1999 Plan. As of June 30, 2015 and December 31, 2014, the Plans provided for the issuance of a maximum of approximately 12.7 million shares and 11.4 million shares, respectively, of common stock. In addition, the 2007 Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year beginning with the 2008 fiscal year, equal to the lesser of: (i) 4% of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; (ii) 1,800,000 shares; or (iii) such other amount as the Company’s Board of Directors may determine. The vesting period of options granted under the Plans is determined by the Board of Directors, although, for service-based options the vesting has historically been generally ratable over a four-year period. Options generally expire 10 years from the date of the grant. Effective January 1, 2015, the shares available for grant increased by 1,366,979 pursuant to the automatic share reserve increase provision under the 2007 Plan. Accordingly, as of June 30, 2015, a total of 2,556,263 shares were available for future grant under the 2007 Plan.

The Company estimates the fair value of stock option awards using the Black-Scholes option-pricing formula and a single option award approach. The fair value of market-based stock options and market-based restricted stock units is determined using a Monte Carlo simulation embedded in a lattice model. The fair value of restricted stock awards is based on the closing price of our common stock on the date of grant. The Company then amortizes the fair value of awards expected to vest on a ratable straight-line basis over the requisite service periods of the awards, which is generally the period from the grant date to the end of the vesting period.

During the twelve months ended December 31, 2014, the Company granted 1,969,453 market-based options and 283,356 market-based restricted stock units to its named executive officers and other key management personnel.

These market-based grants were designed to motivate management to drive enterprise value toward a significantly higher market capitalization over the next three years. In addition, the 30-day price average and bifurcated vesting provisions described below were intended to promote sustainability of the achievement.

The awards were granted effective as of November 7, 2014. The market-based options were issued with an exercise price of $42.92 per share, which is equal to the closing price of the Company’s common stock as reported by the NASDAQ Global Market on November 7, 2014. Each of the awards is subject to market-based vesting, as follows:

•

66% of the shares subject to each option award, and 48% of the restricted stock units will vest in the event that the closing price of the Company’s common stock as reported by the NASDAQ Global Market exceeds an average of $48 per share for a consecutive thirty calendar day period prior to November 7, 2017. Such target represents a 25% increase over the 30-day average closing price of the Company’s common stock as reported by the NASDAQ Global Market ending on the date of award.


•	10% of the shares subject to each option award, and 10% of the restricted stock units will vest in the event that the closing price of the Company’s common stock as reported by the NASDAQ Global Market exceeds an average of $50 per share for a consecutive thirty calendar day period prior to November 7, 2017.

Table of Contents


•	14% of the shares subject to each option award, and 22% of the restricted stock units will vest in the event that the closing price of the Company’s common stock as reported by the NASDAQ Global Market exceeds an average of $55 per share for a consecutive thirty calendar day period prior to November 7, 2017.


•	10% of the shares subject to each option award, and 20% of the restricted stock units will vest in the event that the closing price of the Company’s common stock as reported by the NASDAQ Global Market exceeds an average of $60 per share for a consecutive thirty calendar day period prior to November 7, 2017.

The following are the weighted-average assumptions used in valuing the stock options granted during the year ended December 31, 2014 and a discussion of the Company’s assumptions.



	Year Ended December 31,
	2014
Dividend yield	0.00	%
Expected volatility	34.11	%
Risk-free interest rate	0.96	%
Expected life of options (in years)	3.00

Dividend yield — The Company has never declared or paid dividends on its common stock and has no plans to pay dividends in the foreseeable future.

Expected volatility — Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The expected volatility is calculated based on the weekly closing price volatility of the Company’s common stock for the period from its initial public offering until the grant date.

Risk-free interest rate — The Company used rates on the grant date of zero-coupon government bonds with maturities over periods covering the term of the awards, converted to continuously compounded forward rates.

Expected life of the options — This is the period of time that the options granted are expected to remain outstanding.

A summary of the Plans is presented below:



	Number of Shares		Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2014	1,980,308		$	42.71	9.81	7,359
Options granted	—		—		—	—
Options exercised	(275,617	)	42.16		—	2,990
Options forfeited	—		—		—	—
Options expired	(200	)	4.25		—	—
Options outstanding at June 30, 2015	1,704,491		$	42.81	9.34	17,814
Options exercisable at June 30, 2015	1,505,904		$	42.79	9.34	15,761

The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of our common stock as of the close of the exercise date. The aggregate intrinsic value of options exercised for the three months ended June 30, 2015 was $3.0 million. The aggregate intrinsic value for all options outstanding were $17.8 million and $7.4 million, respectively, under the Company’s stock plans as of June 30, 2015 and December 31, 2014. The aggregate intrinsic value for all options exercisable was $15.8 million as of June 30, 2015. The weighted average remaining contractual lives for all options outstanding were 9.34 and 9.81 years, respectively, under the Company’s stock plans as of June 30, 2015 and December 31, 2014. The weighted average remaining contractual live for all options exercisable was 9.34 years as of June 30, 2015. As of June 30, 2015, total unrecognized compensation expense related to outstanding options and exercisable options was $0.7 million, which will be fully recognized during 2015.

Table of Contents

The Company’s non-vested stock awards are comprised of restricted stock and restricted stock units. The Company has a right of repurchase on such shares that lapse at a rate of twenty-five percent (25)% of the total shares awarded at each successive anniversary of the initial award date, provided that the employee continues to provide services to the Company. In the event that an employee terminates his or her employment with the Company, any shares that remain unvested and consequently subject to the right of repurchase shall be automatically reacquired by the Company at the original purchase price paid by the employee. During the three months ended June 30, 2015, 8,113 forfeited shares of restricted stock have been repurchased by the Company at no cost and were subsequently retired.

A summary of the status for non-vested stock awards as of June 30, 2015 is presented as follows:



Non-vested Stock Awards	Restricted Stock		Restricted Stock Units		Total Number of Shares Underlying Awards		Weighted Average Grant-Date Fair Value
Non-vested at December 31, 2014	476,993		1,410,581		1,887,574		$	26.88
Granted	177,149		266,916		444,065		47.88
Vested	(512,240	)	(644,249	)	(1,156,489	)	32.63
Forfeited	(9,763	)	(60,272	)	(70,035	)	36.39
Non-vested at June 30, 2015	132,139		972,976		1,105,115		$	28.70

The aggregate intrinsic value for all non-vested shares of restricted stock and restricted stock units outstanding as of June 30, 2015 was $57.3 million. The aggregate intrinsic value of restricted stock and restricted stock units vested during the three months ended June 30, 2015 was $6.4 million.

The Company granted non-vested stock awards at no cost to recipients during the three months ended June 30, 2015. As of June 30, 2015, total unrecognized compensation expense related to non-vested restricted stock and restricted stock units was $23.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.0 year. Total unrecognized compensation expense may be increased or decreased in future periods for subsequent grants or forfeitures.

Of the 114,057 shares of the Company’s restricted stock and restricted stock units vesting during the three months ended June 30, 2015, the Company repurchased 46,511 shares at an aggregate purchase price of approximately $2.63 million pursuant to the stockholder’s right under the Plans to elect to use common stock to satisfy tax withholding obligations. The repurchased shares were subsequently retired.

Shares Reserved for Issuance

At June 30, 2015, the Company had reserved for future issuance the following shares of common stock:



Common stock available for future issuances under the Plans	2,556,263
Common stock reserved for outstanding options and restricted stock units	2,677,467
	5,233,730



10.	Share Repurchases

As part of the Company's share repurchase program, shares may be purchased in open market transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act. The timing, manner, price and amount of any repurchases will be determined at our discretion, and the share repurchase program may be suspended, terminated or modified at any time for any reason. Shares repurchased are classified as Treasury Stock. Details of the share repurchases during the three and six months ended June 30, 2015 and 2014 under the Company's share repurchase program were as follows:



	Three Months Ended June 30,		Six Months Ended June 30,
	2015 (1)(2)	2014 (3)	2015 (1)(2)	2014 (3)
(Amounts in millions, except share and per share data)
Total number of shares repurchased	1,045,140	482,199	1,125,801	1,237,572
Average price paid per share	$53.77	$30.68	$53.27	$29.33
Total value of shares repurchased (as measured at time of repurchase)	$56.2 million	$14.8 million	$60.0 million	$36.3 million

(1) May 2015 Share Repurchase Program

On May 5, 2015 the Company announced that its board of directors had approved the repurchase of up to $150.0 million of the Company's common stock which commenced on May 6, 2015. Such repurchases may be made from time to time subject to pre-determined price and volume guidelines established by our board of directors. As of June 30, 2015, there was $96.0 million remaining under the share repurchase program.

During the period July 1 through August 6, 2015, the Company has repurchased approximately 555,665 shares of the Company's common stock for approximately $30.6 million. As of August 6, 2015, there was approximately $65.4 million remaining under the May 2015 Share Repurchase Share Repurchase Program.

(2) June 2014 Share Repurchase Program

On June 5, 2014 the Company announced that its board of directors had approved the repurchase of up to an additional $50.0 million of our common stock. Such repurchases may be made from time to time subject to pre-determined price and volume guidelines established by our board of directors and commenced on June 6, 2014. This repurchase program concluded on May 5, 2015 and resulted in the repurchase of $6.9 million of shares (as measured at the time of repurchase).

(3) June 2013 Share Repurchase Program

On June 3, 2013 the Company announced that its board of directors had approved the repurchase of up to $50 million of the Company's common stock. Such repurchases may be made from time to time subject to pre-determined price and volume guidelines established by the Company's board of directors and commenced on June 4, 2013. This repurchase program concluded on May 29, 2014 and resulted in the repurchase of $49.4 million of shares (as measured at the time of repurchase).



11.	Geographic Information

The Company attributes revenues to customers based on the location of the customer. The composition of the Company’s sales to unaffiliated customers between those in the United States and those in other locations for the three and six months ended June 30, 2015 and 2014 is set forth below:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(In thousands)				(In thousands)
United States	$	65,649	$	56,105	$	129,735	$	110,259
Europe	16,514		13,684		30,690		27,217
Canada	3,183		3,468		6,392		6,693
Other	6,068		6,756		11,926		12,743
Total revenues	$	91,414	$	80,013	$	178,743	$	156,912

Table of Contents

The composition of the Company’s property and equipment between those in the United States and those in other countries as of the end of each period is set forth below:



	June 30, 2015		December 31, 2014
	(In thousands)
United States	$	39,112	$	38,240
Europe	5,191		3,375
Canada	158		195
Other	711		555
Total	$	45,172	$	42,365



12.	Related Party Transactions

Transactions with WPP

As of June 30, 2015, WPP owned approximately six million shares of the Company's outstanding common stock, representing approximately 15% ownership in the Company.

The Company provides to WPP and its affiliates, in the normal course of business, subscription-based products and custom revenue projects and receives various services from WPP and its affiliates supporting the Company's data collection efforts.

The Company's results from transactions with WPP and its affiliates for the three and six months ended June 30, 2015:



	Three Months Ended June 30,		Six Months Ended June 30,
	2015		2015
	(In thousands)
Revenue	$	2,879	$	2,879
Expenses	$	1,141	$	1,141

Data Exchange Agreement

In addition, in 2013, the Company entered into an agreement to exchange certain data assets with a corporation. During the three months ended December 31, 2014, the Company and the corporation modified the existing agreement, where the parties will provide additional data assets. A member of the Company’s Board of Directors also serves as a member of the Board of Directors of that corporation and therefore, the Company has considered the corporation to be a related party. The transaction was considered to have commercial substance under the guidance in ASC 845 and the Company estimated the fair value of the services delivered based on similar monetary transactions with third parties. No cash was exchanged in this transaction.

During the three and six months ended June 30, 2015, the Company recognized $2.2 million and $4.3 million of revenue and expense of $2.1 million and $4.1 million, respectively, for related party nonmonetary transactions.

During the three and six months ended June 30, 2014, the Company recognized $1.5 million and $3.2 million of revenue and expense of $2.4 million and $3.2 million, respectively, for related party nonmonetary transactions.

Table of Contents



ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q . In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk factors” and elsewhere in this document. See also “Cautionary Note Concerning Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q.

Overview

We provide trusted, independent data, metrics, products and services to clients in the media, advertising, and marketing industries. We deliver digital media analytics that help content owners and advertisers understand--and thus properly value--the composition of consumer media audiences, and we help marketers understand the performance and effectiveness of advertising targeted at these audiences.

We are a technology-driven company that measures what people do as they navigate the digital world across multiple technology platforms and devices including smartphones, tablets, televisions, and desktop computers. Our technology measures consumer interactions with digital media, including websites, apps, video programming and advertising.

We combine proprietary comScore data with our clients’ own data and data from partners to provide valuable digital media analytics. We deliver on-demand and real-time products and services through a scalable Software-as-Service delivery model which supports both comScore branded products and also partner products integrating comScore data and services. During the three months ended June 30, 2015, we provided service to approximately 2,683 customers worldwide with our broad geographic base of employees located in 37 locations in 25 countries.

Our company was founded in August 1999, and we have been publicly traded since our initial public offering in 2007. As we have grown as a public company, we have continued to evolve. For example, from 2008 to 2011, we completed targeted acquisitions of several businesses with complementary research and analytics capabilities and businesses with an established presence in Europe and Latin America to expand our global footprint. Our revenues and expenses grew through this period, driven primarily by growth in our product offerings, increased sales to existing customers, and the resulting expansion of our customer base outside the United States following our acquisitions and increased international sales efforts. Since 2010, we have increasingly focused our technology, research, and data science assets and expertise on developing new products and services that report on advertising performance and effectiveness, most notably our advertising product Validated Campaign Essentials.

In April 2015, we acquired WPPs internet audience measurement businesses in certain European markets to further expand our customer base and data services. In addition, we acquired Proximic, Inc. to power enhancements to brand safety and content categorization capabilities across our products.

In May 2015, we completed the sale of certain assets related to our mobile operator analytics business to a buyer in exchange for assumption of certain of our liabilities.

We have also made large investments in multi-platform and cross-media solutions measuring digital content consumption across smartphone, tablet and desktop platforms, and also linking digital video consumption with metrics measuring traditional linear television viewing. In recent years, our strategy has also involved a series of strategic partnerships, such as our April 2015 relationship with WPP/Kantar, along two dimensions: Product development and product distribution. Product development has been enhanced through partnerships which provide us with large volumes of consumer demographics and segmentation data which improves the accuracy and granularity of our products and services. Product distribution has been significantly widened through partnerships which integrate our products and services into the third party platforms used by clients. We believe these investments in advertising measurement and multi-platform/cross-media measurement will drive revenue growth in the years ahead as we pursue our mission of making audiences and advertising more valuable.

Table of Contents

Key Metrics



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(dollars in thousands)
Revenue⁽¹⁾	$	91,258		$	78,804		$	178,342		$	154,775
Adjusted EBITDA*⁽¹⁾	$	22,875		$	17,585		$	44,170		$	34,615
Adjusted EBITDA Margin*	25		%	22		%	25		%	22		%


*	Adjusted EBITDA is not calculated in accordance with generally accepted accounting principles, or GAAP. A reconciliation of this non-GAAP measure to the most directly comparable GAAP-based measure along with a summary of the definition and its material limitation are included in the section titled “Non-GAAP Financial Measures.”

⁽¹⁾We divested our mobile operator analytics division CSWS during the second quarter of 2015. The division was classified as held for sale in the fourth quarter of 2014. Amounts for three and six months ended June 30, 2015, and 2014 include adjustments to exclude the mobile operator analytics division and are based on management’s estimates of the revenue and results of operations of the division.

We monitor the key financial and operating metrics set forth in the preceding table to help us evaluate trends and measure the effectiveness and efficiency of our operations. We discuss our revenue in the section titled “Our Revenues” and “Results of Operations” and Adjusted EBITDA and Adjusted EBITDA margin in the section titled “Non-GAAP Financial Measures.”

Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, we have disclosed adjusted EBITDA and adjusted EBITDA margin, which are both non-GAAP financial measures.

We present these non-GAAP financial measures because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends. We believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

We define adjusted EBITDA as net income (loss) plus; amortization of intangible assets, impairment of intangible assets, stock-based compensation, costs related to acquisitions, restructuring and other infrequently occurring items, settlement of litigation, pro-forma adjustment to exclude the mobile operator analytics division, deferred and current cash tax provision, depreciation, and interest expense (income), net. Adjusted EBITDA margin is the quotient of Adjusted EBITDA divided by total pro-forma revenue.

Our use of these non-GAAP financial measures has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. These limitations are:


•	although depreciation and amortization are non-cash charges, the assets being depreciated may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;


•	adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;


•	adjusted EBITDA does not consider the impact of equity-based compensation;


•	adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and


•	other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP financial results. Management addresses the inherent limitations associated with using adjusted EBITDA through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income (loss). Further, management also reviews GAAP measures, and evaluates individual measures that are not included in adjusted EBITDA such as our level of capital expenditures and interest expense, among other items.

Table of Contents

The following table presents a reconciliation of adjusted EBITDA to net loss, the most comparable GAAP measure, for each of the periods identified:



	Three Months Ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
	(dollars in thousands)
Net loss	$	(4,787	)	$	(3,200	)	$	(12,112	)	$	(3,982	)
Amortization of intangible assets	4,305			1,919			5,684			3,874
Stock-based compensation	8,617			9,060			30,372			16,283
Costs related to acquisitions, restructuring and other infrequently occurring items	1,775			825			3,180			3,436
Settlement of litigation	(570		)	2,940			(660		)	2,860
Loss on asset disposition	5,226			—			5,226			—
Adjustment to exclude Mobile Operator Analytics Division	533			876			1,631			2,471
Non-cash portion of current tax provision related to excess tax benefits from stock-based compensation (2)	—			916			—			1,181
Deferred tax (benefit) provision	(68		)	(1,177		)	447			(1,432		)
Current tax provision (benefit)	2,113			742			(731		)	854
Depreciation	5,338			4,380			10,348			8,563
Interest and other expense, net	393			304			785			507
Adjusted EBITDA (1)	$	22,875		$	17,585		$	44,170		$	34,615
Adjusted EBITDA margin(1)	25		%	22		%	25		%	22		%

(1)

Management estimates pro forma revenues of $156 and $401, respectively, for three and six months ended June 30, 2015, compared to revenues of $1,209 and $2,137, respectively, for three and six months ended June 30, 2014 related to our Mobile Operator Analytics Division. Pro forma expenses were $688 and $2,031, respectively, for the three and six months ended June 30, 2015, compared to expense of $2,085 and $4,608 during the three and six months ended June 30, 2014. We classified our Mobile Operator Analytics Division as held for sale as of December 31, 2014. Calculating based on revenues excluding those amounts, adjusted EBITDA margin would have been 25% during the three and six months ended June 30, 2015 and 22% for three and six months ended June 30, 2014.


(2)	Included in the tax provision for the three and six months ended June 30, 2014 was $0.9 million and $1.2 million, respectively, of non-cash current tax expense related to excess tax benefits from stock-based compensation.

Our Revenues

We derive our revenues primarily from the fees that we charge for subscription-based products, customized projects, and software licenses. We define subscription-based revenues as revenues that we generate from products that we deliver to a customer on a recurring basis, as well as arrangements where a customer is committing up-front to purchase a series of deliverables over time, which includes revenue from software licenses as further discussed below. We define project revenues as revenues that we generate from customized projects that are performed for a specific customer on an infrequently occurring basis. A significant characteristic of our SaaS-based business model is our large percentage of subscription-based contracts. Subscription-based revenues accounted for 92% and 90% of total revenues in the six months ended June 30, 2015 and 2014, respectively. Many of our customers who initially purchased a customized project have subsequently purchased one of our subscription-based products. Similarly, many of our subscription-based customers have subsequently purchased additional customized projects.

Historically, we have generated most of our revenues from the sale and delivery of our products to companies and organizations located within the United States. We continue to expand our international revenues by selling our products and deploying our direct sales force model in additional international markets. For the six months ended June 30, 2015, our international revenues were $49.0 million, or 27% of our total revenues. International revenues comprised approximately 29% of our total revenues for the fiscal years ended December 31, 2014 and 2013, respectively. The decline in the percentage of international revenue to total revenue for the six months ended June 30, 2015 was primarily attributable to the appreciation of the U.S. Dollar as compared to foreign currencies in our key international markets.

Table of Contents

We anticipate that revenues from our U.S. customers will continue to grow and constitute a substantial portion of our revenues in future periods, but we expect that revenues from customers outside of the U.S. will grow faster and therefore increase as a percentage of total revenues as we build greater international recognition of our brand and expand our sales operations globally.

We account for nonmonetary transactions under Accounting Standards Codification ("ASC") 845, Nonmonetary Transactions. Nonmonetary transactions with commercial substance are recorded at the estimated fair value of assets surrendered including cash, if cash is less than 25% of the fair value of the overall exchange, unless the fair value of the assets received is more clearly evident, in which case the fair value of the assets received is used to estimate fair value for the exchange.

Subscription Revenues

We generate a significant portion of our subscription-based revenues from our Media Metrix ^® product suite. Products within the Media Metrix ^® suite include: Video Metrix ^™, Mobile Metrix ^™, Plan Metrix ^™, Ad Metrix ^™and Media Metrix ^®Multi-Platform (MMX MP). These product offerings provide subscribers with intelligence on digital media usage, audience characteristics, audience demographics and online and offline purchasing behavior. Customers who subscribe to our Media Metrix products are provided with login IDs to our website, have access to our database and can generate reports at any time.

In recent years, we began generating additional subscription revenues from our flagship advertising product, Validated Campaign Essentials (vCE). In January 2014, we entered into a partnership agreement with Google to integrate vCE directly into the DoubleClick ad management platform, allowing DoubleClick customers to add vCE to their ad campaigns with a single click. While vCE provides key analytics about advertising campaigns to ad buyers, we also offer Validated Media Essentials (vME) to advertising sellers, allowing them to evaluate their advertising inventory and optimize their monetization strategy with metrics comparable to those used by ad buyers.

We also generate subscription-based revenues from certain reports and analyses provided through our customer research product, if that work is procured by customers on a recurring basis. Through our customer research products, we deliver digital media analytics relating to specific industries, such as automotive, consumer packaged goods, entertainment, financial services, media, pharmaceutical, retail, technology, telecommunications and travel. This marketing intelligence leverages our global consumer panel and extensive database to deliver information unique to a particular customer’s needs on a recurring schedule, as well as on a continual-access basis. Our Marketing Solutions customer agreements typically include a fixed fee with an initial term of at least one year. We also provide these products on a non-subscription basis as described under “Project Revenues.”

In addition, we generate subscription-based revenues from survey products that we sell to our customers. In conducting our surveys, we generally use our global Internet user panel. After questionnaires are distributed to the panel members and completed, we compile their responses and then deliver our findings to the customer, who also has ongoing access to the survey response data as they are compiled and updated over time. This data include responses and information collected from the actual survey questionnaires and can also include behavioral information that we passively collect from our panelists. If a customer has a history of purchasing survey products in each of the last four quarters, then we believe this indicates the surveys are being conducted on a recurring basis, and we classify the revenues generated from such survey products as subscription-based revenues. Our contracts for survey services typically include a fixed fee with terms that range from two months to one year.

Project Revenues

We generate project revenues by providing customized information reports to our customers on a nonrecurring basis through comScore Marketing Solutions. For example, a customer in the media industry might request a custom report that profiles the behavior of the customer’s active online users and contrasts their market share and loyalty with similar metrics for a competitor’s online user base. If this customer continues to request the report beyond an initial project term of at least nine months and enters into an agreement to purchase the report on a recurring basis, we begin to classify these future revenues as subscription-based.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

Table of Contents

Management considers an accounting policy to be critical if it is important to our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by our management. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions.

Our significant accounting policies are described in more detail in the notes to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q and in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2014. For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the year ended December 31, 2014 under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Seasonality

Historically, a higher percentage of our customers have renewed their subscription products with us during the fourth quarter than in other quarters.

Results of Operations

The following table sets forth selected consolidated statements of operations data as a percentage of total revenues for each of the periods indicated.



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014			2015		2014
Revenues	100.0	%	100.0	%		100.0	%	100.0	%
Cost of revenues	31.2		29.0			29.9		29.7
Selling and marketing	27.2		33.2			29.2		33.6
Research and development	18.5		16.2			19.5		16.2
General and administrative	16.4		18.3			22.4		17.8
Amortization of intangible assets	4.7		2.4			3.2		2.5
Loss on asset disposition	5.7		—			2.9		—
Settlement of litigation, net	(0.6	)	3.7			(0.4	)	1.8
Total expenses from operations	103.1		102.8			106.7		101.6
Loss from operations	(3.1	)	(2.8	)		(6.7	)	(1.7	)
Interest and other expense, net	(0.4	)	(0.4	)		(0.4	)	(0.3	)
Gain (loss) from foreign currency	0.5		(0.2	)		0.2		(0.2	)
Loss before income tax (provision) benefit	(3.0	)	(3.4	)		(6.9	)	(2.2	)
Income tax (provision) benefit	(2.2	)	(0.6	)		0.2		(0.4	)
Net loss attributable to common stockholders	(5.2	)%	(4.0	)%		(6.7	)%	(2.6	)%

Three and Six Months Ended June 30, 2015 Compared to the Three and Six Months Ended June 30, 2014

Revenues



	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2015		2014		$		%		2015		2014		$		%
	(In thousands)								(In thousands)
Revenues	$	91,414	$	80,013	$	11,401	14.2	%	$	178,743	$	156,912	$	21,831	13.9	%

Total revenues increased by approximately $11.4 million, or approximately 14%, during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. We attribute the revenue growth to a combination of increased sales to our existing customer base and increased sales to new customers. Revenue from existing customers increased $6.7 million from $73.3 million for the three months ended June 30, 2014 to $80.0 million for the three months ended June 30, 2015, while revenue from new customers increased $4.7 million from $6.7 million for the three months ended June 30, 2014 to $11.4 million for the three months ended June 30, 2015.

Table of Contents

We experienced continued growth in subscription revenues, which increased by approximately $11.1 million during the three months ended June 30, 2015, from $72.6 million in the prior year period to $83.7 million. The increase in subscription revenues is attributable to custom solutions sold on a subscription basis and mobile syndicated products. We experienced a modest increase in our project revenues as there were fewer product deliveries and renewals of projects began delivering on a recurring basis and are classified as subscription revenues. During the three months ended June 30, 2015, project revenues increased by approximately $0.3 million, from $7.4 million in the prior period to $7.7 million.

Revenues from U.S customers were $65.6 million for the three months ended June 30, 2015, or approximately 72% of total revenues, while revenues from customers outside of the U.S. was $25.8 million for the three months ended June 30, 2015, or approximately 28% of total revenues. International revenues grew modestly during the three months ended June 30, 2015 as compared to the prior year period primarily due to the appreciation of the U.S. Dollar as compared to foreign currencies in our key international markets.

During the three months ended June 30, 2015, we recognized $10.8 million of revenue related to nonmonetary transactions as compared to $1.8 million during the three months ended June 30, 2014.

Total revenues increased by approximately $21.8 million, or approximately 14%, during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. We attribute the revenue growth mainly to increased sales to our existing customer base. Revenue from existing customers increased $16.0 million from $143.1 million for the six months ended June 30, 2014 to $159.1 million for the six months ended June 30, 2015, while revenue from new customers increased $5.8 million from $13.9 million for the six months ended June 30, 2014 to $19.7 million for the six months ended June 30, 2015.

We experienced continued growth in subscription revenues, which increased by approximately $22.2 million during the six months ended June 30, 2015, from $141.7 million in the prior year period to $163.9 million. The increase in subscription revenues is attributable to custom solutions sold on a recurring basis and mobile syndicated products. We experienced a decline in our project revenues as there were fewer product deliveries and renewals of projects began delivering on a recurring basis and are classified as subscription revenues. During the six months ended June 30, 2015, project revenues decreased by approximately $0.3 million, from $15.2 million in the prior period to $14.9 million.

Revenues from U.S customers were $129.8 million for the six months ended June 30, 2015, or approximately 73% of total revenues, while revenues from customers outside of the U.S. was $49.0 million for the six months ended June 30, 2015, or approximately 27% of total revenues. International revenues grew modestly during the six months ended June 30, 2015 as compared to the prior year period primarily due to the appreciation of the U.S. Dollar as compared to foreign currencies in our key international markets.

During the six months ended June 30, 2015, we recognized $14.6 million of revenue related to nonmonetary transactions as compared to $4.0 million during the six months ended June 30, 2014.

Operating Expenses

The majority of our operating expenses consist of employee salaries and related benefits, stock-based compensation expense, professional fees, rent and other facility related costs, depreciation expense, amortization and litigation-related expenses. Our single largest operating expense relates to our people. In order to effectively motivate our employees and to provide them with proper long-term incentives, we pay the vast majority of our annual bonuses with equity-based instruments.

Our total operating expenses increased by approximately $12.0 million, or approximately 15%, during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. This increase is primarily attributable to increased loss on asset disposal of $5.2 million associated with the disposition of our mobile operator analytics business, data and bandwidth costs related to our data collection efforts of $4.3 million, and employee salaries, benefits and related costs of $3.6 million associated with increased headcount primarily related to our growth and through acquisitions . In addition, we experienced an increase in amortization expense associated with acquisitions of $2.4 million. These costs were offset by the settlement of certain patent litigation lawsuits, net of insurance recoveries, and by gains related to the settlements of certain patent litigation lawsuits for a net decrease of $3.5 million.

During the three months ended June 30, 2015, we recognized $5.0 million of expense related to nonmonetary transactions compared to $2.8 million during the three months ended June 30, 2014.

Our total operating expenses increased by approximately $31.3 million, or approximately 20%, during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. This increase is primarily attributable to increases in stock compensation expense of $14.1 million primarily associated with market-based grants issued in November 2014,

Table of Contents

increased employee salaries, benefits and related costs of $6.7 million associated with our increased headcount, and increased loss on asset disposal of $5.2 million associated with the disposition of the mobile operator analytics business. In addition, we experienced increases in data and bandwidth costs of $3.9 million related to our data collection efforts, third-party data costs of $3.5 million to support development and implementation of new products to support the enhancement of existing products, and amortization expense of $1.8 million associated with our acquisitions. These costs were offset by the settlement of certain patent litigation lawsuits, net of insurance recoveries, and by gains related to the settlements of certain patent litigation lawsuits for a net decrease of $3.5 million.

During the six months ended June 30, 2015, we recognized $9.2 million of expense related to nonmonetary transactions compared to $4.0 million during the three months ended June 30, 2014.

Cost of Revenues



	Three Months Ended June 30,						Change			Six Months Ended June 30,					Change
	2015			2014			$	%		2015		2014			$		%
	(In thousands)									(In thousands)
Cost of revenues	$	28,508		$	23,232		5,276	22.7	%	53,400		$	46,673		$	6,727	14.4	%
As a percentage of revenues	31.2		%	29.0		%				29.9	%	29.7		%

Cost of revenues consists primarily of expenses related to operating our network infrastructure, producing our products, and the recruitment, maintenance and support of our consumer panels. Expenses associated with these areas include the salaries, benefits, stock-based compensation, and related personnel expenses of network operations, survey operations, custom analytics and technical support, all of which are expensed as they are incurred. Cost of revenues also includes data collection costs for our products, operational costs associated with our data centers, including depreciation expense associated with computer equipment that supports our panel and systems, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense generated by general purpose equipment and software.

Cost of revenues increased by approximately $5.3 million during the three months ended June 30, 2015 compared to the three months ended June 30, 2014. This increase is primarily attributable to an increase from data and bandwidth costs of $4.3 million related to our data collection efforts, and $0.7 million for rent and depreciation expense generated by general purpose equipment and software.

Cost of revenues increased by approximately $6.7 million during the six months ended June 30, 2015 compared to the six months ended June 30, 2014. This increase is primarily attributable to an increase from data and bandwidth costs of $3.9 million related to our data collection efforts, increased employee salaries, benefits and related costs of $1.6 million associated with our increased headcount, increased stock compensation expense of $1.5 million primarily associated with market-based grants issued in November 2014.

Cost of revenues increased as a percentage of revenues during the three and six months ended June 30, 2015 as compared to the same period in 2014, due to increased data and data collection efforts to drive revenue growth.

Selling and Marketing Expenses



	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2015			2014			$			%		2015			2014			$			%
	(In thousands)											(In thousands)
Selling and marketing	$	24,868		$	26,600		$	(1,732	)	(6.5	)%	$	52,199		$	52,666		$	(467	)	(0.9	)%
As a percentage of revenues	27.2		%	33.2		%						29.2		%	33.6		%

Selling and marketing expenses consist primarily of salaries, benefits, commissions, bonuses, and stock-based compensation paid to our direct sales force and industry analysts, as well as costs related to online and offline advertising, industry conferences, promotional materials, public relations, other sales and marketing programs, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense generated by general purpose equipment and software. All selling and marketing costs are expensed as they are incurred. Commission plans are developed for our account managers with criteria and size of sales quotas that vary depending upon the individual’s role. Commissions are expensed as selling and marketing costs when a sales contract is executed by both the customer and us.

Table of Contents

Selling and marketing expenses decreased by 1.7 million during the three months ended June 30, 2015 compared to the three months ended June 30, 2014. This decrease is primarily attributable to decreased stock compensation expense of $1.8 million. These costs were partially offset by increased employee salaries, benefits and other related costs of $0.4 million associated with our sales force.

Selling and marketing expenses decreased by $0.5 million during the six months ended June 30, 2015 compared to the six months ended June 30, 2014. This decrease is primarily attributable to a decrease in travel expenditures of $0.6 million and decreased stock compensation expense of $0.4 million. These costs were partially offset by increased professional fees of $0.5 million to support our sales force.

Selling and marketing expenses decreased as a percentage of revenues during the three and six months ended June 30, 2015 as compared to the same period in 2014, due to decreased expenses, as well as increased operating leverage as our revenues continue to grow.

Research and Development Expenses



	Three Months Ended June 30,						Change				Six Months Ended June 30,						Change
	2015			2014			$		%		2015			2014			$		%
	(In thousands)										(In thousands)
Research and development	$	16,901		$	12,931		$	3,970	30.7	%	$	34,907		$	25,408		$	9,499	37.4	%
As a percentage of revenues	18.5		%	16.2		%					19.5		%	16.2		%

Research and development expenses include new product development costs, consisting primarily of salaries, benefits, stock-based compensation and related costs for personnel associated with research and development activities, fees paid to third parties to develop new products and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software.

Research and development expenses increased $4.0 million during the three months ended June 30, 2015 compared to the three months ended June 30, 2014. This increase is primarily attributable to an increase in employee salaries, benefits and related costs of $2.3 million associated with increased resourcing and third-party data costs of $0.6 million to focus on the development and implementation of new products to support the enhancement of existing products, increased expenditures for increased stock compensation expense of $0.3 million and increased expenditures of $0.3 million related to professional fees.

Research and development expenses increased $9.5 million during the six months ended June 30, 2015 compared to the six months ended June 30, 2014. This increase is primarily attributable to increased expenditures for third-party data costs to support the enhancement of existing products of $3.5 million, increased employee salaries, benefits and related costs of $3.5 million focused on the development and implementation of new products and to support the enhancement of existing products, increased stock compensation expense of $1.7 million and increased expenditures of $0.3 million for professional fees.

Research and development expenses increased as a percentage of revenues for the three and six months ended June 30, 2015 compared to the same period in 2014, due primarily to an increase in third-party data costs and employee salary costs for new product development and existing product enhancements.

General and Administrative Expenses



	Three Months Ended June 30,						Change				Six Months Ended June 30,					Change
	2015			2014			$		%		2015			2014		$		%
	(In thousands)										(In thousands)
General and administrative	$	14,994		$	14,642		$	352	2.4	%	$	39,995		$27,986		$	12,009	42.9	%
As a percentage of revenues	16.4		%	18.3		%					22.4		%	17.8	%

General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and related expenses for executive management, finance, accounting, human capital, legal and other administrative functions, as well as professional fees, overhead, including allocated overhead, which is comprised of rent and other facilities related costs, and

Table of Contents

depreciation expense generated by general purpose equipment and software, and expenses incurred for other general corporate purposes.

General and administrative expenses increased by $0.4 million during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014. This increase is primarily attributable to increased stock compensation expense of $1.0 million primarily associated with market-based grants issued in November 2014 and an increase in employee salaries, benefits and related costs of $0.4 million. The costs were largely offset by a decrease in bad debt expense of $1.1 million, due to strong collection activity.

General and administrative expenses increased by $12.0 million during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. This increase is primarily attributable to an increase in stock compensation expense of $11.3 million primarily associated with market-based grants issued in November 2014 and an increase in employee salaries, benefits and related costs of $0.9 million. The costs were partially offset by a decrease in bad debt expense of $0.6 million, due to strong collection activity.

General and administrative expenses decreased as a percentage of revenues during the three months ended June 30, 2015 as compared to the same period in 2014, due to accelerated revenue growth. General and administrative expenses increased as a percentage of revenues during the six months ended June 30, 2015 as compared to the same period in 2014, mainly due to the market-based grants issued in November 2014.

Amortization Expense



	Three Months Ended June 30,						Change				Six Months Ended June 30,					Change
	2015			2014			$		%		2015			2014		$		%
	(In thousands)										(In thousands)
Amortization expense	$	4,305		$	1,919		$	2,386	124.3	%	$	5,684		3,874		$	1,810	46.7	%
As a percentage of revenues	4.7		%	2.4		%					3.2		%	2.5	%

Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions.

Amortization expense increased $2.4 million during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014, primarily due to the acquisition of certain intangible assets in the second quarter of 2015.

Amortization expense increased $1.8 million during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, primarily due to the acquisition of certain intangible assets in the second quarter of 2015.

Loss on Asset Disposition

The loss on asset disposition for the three and six months ended June 30, 2015 totaled $5.2 million, an increase of $5.2 million over the three and six months ended June 30, 2014. The loss on asset disposition relates to the sale of certain assets related to its mobile operator analytics business ("CSWS") to a Buyer. In connection with the disposition, the Buyer assumed certain customer liabilities. Further, we paid the Buyer for customer balances collected in 2015. We will provide ongoing technology and transitional services to the Buyer. As a result of the disposition, during the three months ended June 30, 2015, we recorded a loss on the disposition of $5.2 million.

Settlement of Litigation, Net

Settlement of litigation, net consists of losses from the settlement related to our outstanding privacy class-action litigation offset by gains from our patent litigation settlements. The loss is net of insurance proceeds.

Settlement of litigation, net for the three months ended June 30, 2015 and 2014 resulted in a net gain of $0.6 million and net expense of $2.9 million, respectively. Settlement of litigation, net for the six months ended June 30, 2015 and 2014 resulted in a net gain of $0.7 million and net expense of $2.9 million, respectively. The net gains for 2015 related to the settlements of certain patent litigation lawsuits while the net losses in the prior year related to expenditures for settlement of certain privacy litigation lawsuits, net of insurance recoveries.

Interest and Other Expense, Net

Table of Contents

Interest and other income/expense, net, consists of interest income, interest expense and gains or losses on disposals of fixed assets.

Interest income consists of interest earned from our cash and cash equivalent balances. Interest expense is incurred due to capital leases pursuant to several equipment loan and security agreements to finance the lease of various hardware, software, and other equipment purchases and our revolving credit facility. Our capital lease obligations are secured by a senior security interest in eligible equipment.

Interest and other expense, net for the three and six months ended June 30, 2015 was $0.4 million and $0.8 million, respectively, compared to $0.3 million and $0.5 million of net interest and other expense, respectively, for the three and six months ended June 30, 2014.

Foreign Currency Translation Adjustment

The functional currency of our foreign subsidiaries is the local currency. All assets and liabilities are translated at the current exchange rates as of the end of the period, and revenues and expenses are translated at average rates in effect during the period. The gain or loss resulting from the process of translating the foreign currency financial statements into U.S. dollars is included as a component of other comprehensive (loss) income.

We recorded transaction gains of $0.5 million and of $0.4 million during the three and six months ended June 30, 2015, respectively, as compared to a transaction losses of $0.2 million and $0.3 million during the three and six months ended June 30, 2014, respectively. Our foreign currency transactions are recorded primarily as a result of fluctuations in the exchange rate between the U.S. dollar and the British Pound, euro, and the functional currencies of our Latin America entities.

Provision for Income Taxes

During the three and six months ended June 30, 2015, we recorded an income tax provision of $2.0 million and an income tax benefit of $0.3 million, respectively, resulting in effective tax rates of (74.6%) and 2.3%, respectively. The tax provision for the three months ended June 30, 2015 was attributable to a current tax provision of $2.1 million and a deferred tax benefit of $0.1 million. The tax benefit for the six months ended June 30, 2015 was attributable to a current tax benefit of $0.7 million and a deferred tax expense of $0.4 million.

During the three and six months ended June 30, 2014, we recorded income tax provisions of $0.5 million and $0.6 million, resulting in effective tax rates of 17.7% and 17.8%, respectively. The tax provisions for the three and six months ended June 30, 2014 were attributable to current tax expense of $1.7 million and $2.0 million, respectively, and deferred tax benefits of $1.2 million and $1.4 million, respectively. Also, included in the tax provision for the three and six months ended June 30, 2014 was $0.9 million and $1.2 million, respectively, of non-cash current tax expense related to excess tax benefits from stock-based compensation.

The effective tax rate for the three and six months ended June 30, 2015 decreased compared to the effective tax rate for the three and six months ended June 30, 2014 primarily as a result of tax benefits associated with the disposition of our mobile operator analytics business.

Recent Accounting Pronouncements

Recent accounting pronouncements are detailed in Note 2 to our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Table of Contents

Liquidity and Capital Resources

The following table summarizes our cash flows:



	Six Months Ended June 30,
	2015			2014
	(In thousands)
Consolidated Cash Flow Data
Net cash provided by operating activities	$	40,511		$	28,340
Net cash used in investing activities	(14,635		)	(4,691		)
Net cash provided by (used in) financing activities	120,114			(52,796		)
Effect of exchange rate changes on ca