COMSCORE, INC. 10-K

ITEM 7. 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 Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, or 10-K. 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 in future periods may differ materially from those anticipated or implied in these forward-looking statements as a result of many factors, including those discussed under Item 1A , "Risk Factors," and elsewhere in this 10-K. See also " Cautionary Note Regarding Forward-Looking Statements " at the beginning of this 10-K. Overview We are a global information and analytics company that measures advertising, content, and the consumer audiences of each, across media platforms. We create our products using a global data platform that combines information on digital platforms (connected (Smart) televisions, mobile devices, tablets and computers), TV, OTT devices, direct to consumer applications and movie screens with demographics and other descriptive information. We have developed proprietary data science that enables measurement of person-level and household-level audiences, removing duplicated viewing across devices and over time. This combination of data and methods enables a common standard for buyers and sellers to transact on advertising. This helps companies across the media ecosystem better understand and monetize their audiences and develop marketing plans and products to more efficiently and effectively reach those audiences. Our ability to unify behavioral and other descriptive data enables us to provide audience ratings, advertising verification, and granular consumer segments that describe hundreds of millions of consumers. Our customers include digital publishers, television networks, movie studios, content owners, brand advertisers, agencies and technology providers. The platforms we measure include televisions, mobile devices, computers, tablets, OTT devices and movie theaters. The information we analyze crosses geographies, types of content and activities, including websites, mobile and OTT apps, video games, television and movie programming, e-commerce, and advertising. Results of Operations The following table sets forth selected Consolidated Statements of Operations and Comprehensive Loss data as a percentage of revenues for each of the periods indicated. Years Ended December 31, 2020 2019 2018 (In thousands) Dollars % of Revenue Dollars % of Revenue Dollars % of Revenue Revenues $ 356,036 100.0 % $ 388,645 100.0 % $ 419,482 100.0 % Cost of revenues 180,712 50.8 % 199,622 51.4 % 200,220 47.7 % Selling and marketing 70,220 19.7 % 89,145 22.9 % 108,395 25.8 % Research and development 38,706 10.9 % 61,802 15.9 % 76,979 18.4 % General and administrative 55,783 15.7 % 66,419 17.1 % 84,535 20.2 % Amortization of intangible assets 27,219 7.6 % 30,076 7.7 % 32,864 7.8 % Impairment of right-of-use and long-lived assets 4,671 1.3 % — — % — — % Impairment of goodwill — — % 224,272 57.7 % — — % Impairment of intangible asset — — % 17,308 4.5 % — — % Investigation and audit related — — % 4,305 1.1 % 38,338 9.1 % Restructuring — — % 3,263 0.8 % 11,837 2.8 % Settlement of litigation, net — — % 2,900 0.7 % 5,250 1.3 % Total expenses from operations 377,311 106.0 % 699,112 179.9 % 558,418 133.1 % Loss from operations (21,275) (6.0) % (310,467) (79.9) % (138,936) (33.1) % Interest expense, net (35,805) (10.1) % (31,526) (8.1) % (16,465) (3.9) % Other income (expense), net 14,554 4.1 % 1,654 0.4 % (1,464) (0.3) % (Loss) gain from foreign currency transactions (4,490) (1.3) % 336 0.1 % 1,303 0.3 % Loss before income taxes (47,016) (13.2) % (340,003) (87.5) % (155,562) (37.1) % Income tax (provision) benefit (902) (0.3) % 1,007 0.3 % (3,706) (0.9) % Net loss $ (47,918) (13.5) % $ (338,996) (87.2) % $ (159,268) (38.0) % 35 Table of Conte nt s Revenues Our products and services are organized around solution groups that address customer needs. We evaluate revenues around three solution groups: • Ratings and Planning provides measurement of the behavior and characteristics of audiences of content and advertising, across television and digital platforms including connected (Smart) televisions, computers, tablets, mobile devices, and other connected devices. These products and services are designed to help customers find the most relevant viewing audience, whether that viewing is linear, non-linear, online or on-demand. • Analytics and Optimization includes custom solutions, activation, lift and survey-based products that provide end-to-end solutions for planning, optimization and evaluation of advertising campaigns and brand protection. • Movies Reporting and Analytics measures movie viewership and box office results by capturing movie ticket sales in real time or near real time and includes box office analytics, trend analysis and insights for movie studios and movie theater operators worldwide. We categorize our revenue along these solution groups; however, our cost structure is tracked at the corporate level and not by our solution groups. These costs include, but are not limited to employee costs, purchased data, operational overhead, data storage and technology that supports multiple solution groups. Revenues for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (In thousands) 2020 % of Revenue 2019 % of Revenue $ Variance % Variance Ratings and Planning (1) $ 253,652 71.2 % $ 271,623 69.9 % $ (17,971) (6.6) % Analytics and Optimization (1) 69,080 19.4 % 74,725 19.2 % (5,645) (7.6) % Movies Reporting and Analytics 33,304 9.4 % 42,297 10.9 % (8,993) (21.3) % Total revenues $ 356,036 100.0 % $ 388,645 100.0 % $ (32,609) (8.4) % (1) In the second quarter of 2020, we began classifying revenue from certain new and extended custom agreements for services that utilize its syndicated data set, previously classified under Analytics and Optimization, as Ratings and Planning. The impact was not material to either solution group. Total revenues decreased by $32.6 million, or 8.4%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Ratings and Planning revenue is comprised of revenue from our digital, television and cross-platform products. Ratings and Planning decreased by $18.0 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease was largely driven by lower revenue from our syndicated digital products due in part to the COVID-19 pandemic. Additionally, revenue from our smaller and international syndicated digital customers continued to be impacted by ongoing industry changes in ad buying and consolidations. While retention of syndicated digital enterprise customers remained high, revenue from our syndicated digital products represented 48% and 51% of our Ratings and Planning revenue for the years ended December 31, 2020 and 2019, respectively. Cross-platform revenue decreased due to fewer deliveries of data in 2020 versus 2019. TV revenue was higher due to our partnership with LiveRamp, additional deliveries of local and addressable TV solutions, and increased deliveries on contracts with political customers. TV revenue increased to 40% of Ratings and Planning revenue in 2020 as compared to 36% in 2019. Analytics and Optimization revenue decreased by $5.6 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease was primarily due to fewer deliveries of custom solutions, lift and survey deliverables, and branded content, due in part to the COVID-19 pandemic. These decreases were partially offset by higher activation usage during the year. Movies Reporting and Analytics revenue decreased by $9.0 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Revenue continues to be impacted by ongoing theater closures, delayed releases and shifts in consumer behavior as a result of the COVID-19 pandemic. We expect these factors to continue affecting movies revenue for the foreseeable future. Revenues for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, (In thousands) 2019 % of Revenue 2018 % of Revenue $ Variance % Variance Ratings and Planning $ 271,623 69.9 % $ 285,355 68.0 % $ (13,732) (4.8) % Analytics and Optimization 74,725 19.2 % 92,380 22.0 % (17,655) (19.1) % Movies Reporting and Analytics 42,297 10.9 % 41,747 10.0 % 550 1.3 % Total revenues $ 388,645 100.0 % $ 419,482 100.0 % $ (30,837) (7.4) % Total revenues decreased by $30.8 million, or 7.4%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. The decrease was driven by the Ratings and Planning and Analytics and Optimization solution groups. Ratings and Planning revenue decreased by $13.7 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018. The decrease was primarily driven by syndicated digital products, which declined 12% from 2019 to 2018. While 36 Table of Conte nt s retention of syndicated digital enterprise customers remained high in 2019, revenue from our smaller and international syndicated digital customers declined and continued to be impacted by ongoing industry changes in ad buying and consolidation. Syndicated digital revenue represented 51% and 55% of our Ratings and Planning revenue for 2019 and 2018, respectively. Revenue from vCE declined due to lower volumes of measured impressions as we transitioned to premium video content through our CCR product offering. Offsetting those decreases were increased revenue from our cross-platform and TV offerings. Cross-platform revenue increased from higher deliveries of data in 2019 versus 2018. TV revenue increased to 36% of Ratings and Planning revenue in 2019 as compared to 34% in 2018. TV revenue grew as a result of higher local TV revenue due to new customers and expansion of existing relationships, offset in part by lower national TV revenue, due in part to political revenue recognized in 2018 that did not recur in 2019. Analytics and Optimization revenue decreased by $17.7 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018. The decrease was primarily driven by lower sales and deliveries of digital custom solutions, survey and lift products in 2019. The decrease was offset by increased revenue from Activation products, which continued to experience year-over-year growth. Movies Reporting and Analytics revenue increased by $0.6 million for the year ended December 31, 2019 as compared to the year ended December 31, 2018 due to growth in new product revenue. Revenues by Geographic Location Revenue from outside of the United States was $45.3 million, $52.6 million and $60.1 million for the years ended December 31, 2020, 2019, and 2018, respectively. Revenue declines were due in part to our exit from certain countries as part of our restructuring activities, as well as the impact of the COVID-19 pandemic in 2020. Please refer to Footnote 14 , Organizational Restructuring , of the Notes to Consolidated Financial Statements. We generate the majority of our revenues from the sale and delivery of our products within the United States. For information with respect to sales by geographic markets, refer to Footnote 3 , Revenue Recognition , of the Notes to Consolidated Financial Statements. Our chief operating decision maker (our Chief Executive Officer ("CEO")) does not evaluate the profit or loss from any separate geography. We anticipate that revenues from our U.S. sales will continue to constitute a substantial and increasing portion of our revenues in future periods. We expect our international revenues to continue to decline as a percentage of our total revenues as a result of relative growth in our domestic product offerings. WPP Related Party Revenue We provide WPP and its affiliates, in the normal course of business, services relating to our different product lines and receive various services from WPP and its affiliates in supporting our data collection efforts. For the years ended 2020, 2019, and 2018, related party revenues with WPP and its affiliates were $13.3 million, $15.9 million and $11.6 million, respectively. Cost of Revenues Cost of revenues consists primarily of expenses related to producing our products, operating our network infrastructure, the recruitment, maintenance and support of our consumer panels and amortization of capitalized fulfillment costs. Expenses associated with these areas include employee costs including salaries, benefits, stock-based compensation and other related personnel costs of network operations, survey operations, custom analytics and technical support, all of which are expensed as they are incurred. Cost of revenues also includes costs to obtain MVPD data sets and panel, census based and other data sets used in our products as well as operational costs associated with our data centers, including depreciation expense associated with computer equipment and internally developed software that supports our panels and systems. Additionally, cost of revenues includes allocated overhead, lease expense and other facilities-related costs. 37 Table of Conte nt s Cost of revenues for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (In thousands) 2020 % of Revenue 2019 % of Revenue $ Variance % Variance Data costs $ 63,598 17.9 % $ 60,165 15.5 % $ 3,433 5.7 % Employee costs 38,920 10.9 % 50,996 13.1 % (12,076) (23.7) % Systems and bandwidth costs 24,349 6.8 % 25,023 6.4 % (674) (2.7) % Panel costs 19,075 5.4 % 20,901 5.4 % (1,826) (8.7) % Lease expense and depreciation 16,970 4.8 % 15,052 3.9 % 1,918 12.7 % Technology 5,710 1.6 % 5,887 1.5 % (177) (3.0) % Sample and survey costs 5,133 1.4 % 7,225 1.9 % (2,092) (29.0) % Professional fees 4,272 1.2 % 6,985 1.8 % (2,713) (38.8) % Royalties and resellers (33) — % 4,027 1.0 % (4,060) (100.8) % Other 2,718 0.8 % 3,361 0.9 % (643) (19.1) % Total cost of revenues $ 180,712 50.8 % $ 199,622 51.4 % $ (18,910) (9.5) % Cost of revenues decreased by $18.9 million, or 9.5%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Employee costs decreased $12.1 million primarily due to lower headcount. Royalties and resellers costs decreased $4.1 million primarily due to a $2.0 million one-time, non-cash benefit related to certain revenue share arrangements recorded in the fourth quarter of 2020 and lower costs due to less revenue associated with revenue sharing arrangements. Professional fees decreased $2.7 million primarily due to a decrease in consulting services. Sample and survey costs decreased $2.1 million primarily due to lower sales and deliveries of digital marketing solutions. Panel costs decreased $1.8 million driven by lower recruitment and support costs for our mobile panels. Offsetting these decreases was an increase in data costs of $3.4 million primarily due to increases in data licensing agreements as we continued to invest in product solution offerings through the acquisition of additional TV data. We expect this increase in data costs to continue in 2021. Lease expense and depreciation increased $1.9 million primarily due to increased depreciation related to internally developed software. Cost of revenues for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, (In thousands) 2019 % of Revenue 2018 % of Revenue $ Variance % Variance Employee costs $ 50,996 13.1 % $ 57,490 13.7 % $ (6,494) (11.3) % Data costs 60,165 15.5 % 53,248 12.7 % 6,917 13.0 % Systems and bandwidth costs 25,023 6.4 % 27,033 6.4 % (2,010) (7.4) % Panel costs 20,901 5.4 % 22,670 5.4 % (1,769) (7.8) % Lease expense and depreciation (1) 15,052 3.9 % 12,753 3.0 % 2,299 18.0 % Technology 5,887 1.5 % 6,492 1.5 % (605) (9.3) % Sample and survey costs 7,225 1.9 % 6,295 1.5 % 930 14.8 % Professional fees 6,985 1.8 % 5,470 1.3 % 1,515 27.7 % Royalties and resellers 4,027 1.0 % 3,389 0.8 % 638 18.8 % Other 3,361 0.9 % 5,380 1.3 % (2,019) (37.5) % Total cost of revenues $ 199,622 51.4 % $ 200,220 47.7 % $ (598) (0.3) % (1) As discussed in Footnote 2 , Summary of Significant Accounting Policies, in our 2019 10-K , we adopted ASC 842, Leases as of January 1, 2019. Lease expense and depreciation for the year ended December 31, 2019 is not comparable to the year ended December 31, 2018 due to our adoption of ASC 842. Cost of revenues decreased by $0.6 million, or 0.3%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Employee costs decreased $6.5 million due to reduced headcount and restructuring efforts as discussed in Footnote 14 , Organizational Restructuring . Systems and bandwidth costs decreased $2.0 million due to our technology transformation to reduce complexity, increase capacity, and transition to a cloud-based environment from data centers. Panel costs decreased $1.8 million due to lower costs associated with incentive plans used in certain countries and the use of more cost-effective recruitment solutions. Other costs decreased $2.0 million due to reduction in travel costs from lower headcount and certain license expenses that are now included in data costs. Offsetting these decreases was an increase in data costs of $6.9 million due to increased costs associated with our long-term data contracts with MVPDs. We continued to invest in product solution offerings through the acquisition of additional TV data. Lease expense and depreciation increased $2.3 million primarily due to increased depreciation related to internally developed software. Professional fees increased $1.5 million due to an increase in data governance and technology consulting services to improve operational processes. Selling and Marketing Selling and marketing expenses consist primarily of employee costs, including salaries, benefits, commissions, stock-based compensation and other related costs for personnel associated with sales and marketing activities, as well as costs related to online and 38 Table of Conte nt s offline advertising, industry conferences, promotional materials, public relations, other sales and marketing programs and allocated overhead, which is comprised of lease expense and other facilities-related costs, and depreciation expense generated by general purpose equipment and software. Selling and marketing expenses for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (In thousands) 2020 % of Revenue 2019 % of Revenue $ Variance % Variance Employee costs $ 57,629 16.2 % $ 71,979 18.5 % $ (14,350) (19.9) % Lease expense and depreciation 4,980 1.4 % 5,690 1.5 % (710) (12.5) % Professional fees 2,651 0.7 % 2,521 0.6 % 130 5.2 % Technology 2,579 0.7 % 2,726 0.7 % (147) (5.4) % Travel 720 0.2 % 3,260 0.8 % (2,540) (77.9) % Other 1,661 0.5 % 2,969 0.8 % (1,308) (44.1) % Total selling and marketing expenses $ 70,220 19.7 % $ 89,145 22.9 % $ (18,925) (21.2) % Selling and marketing expenses decreased by $18.9 million, or 21.2%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Employee costs decreased $14.4 million primarily as a result of lower headcount and a decrease in sales commissions. Travel costs decreased $2.5 million, and other costs decreased $1.3 million, primarily due to a reduction in travel and lower marketing and event costs as a result of the COVID-19 pandemic. Selling and marketing expenses for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, (In thousands) 2019 % of Revenue 2018 % of Revenue $ Variance % Variance Employee costs $ 71,979 18.5 % $ 87,591 20.9 % $ (15,612) (17.8) % Lease expense and depreciation (1) 5,690 1.5 % 7,670 1.8 % (1,980) (25.8) % Travel 3,260 0.8 % 4,780 1.1 % (1,520) (31.8) % Technology 2,726 0.7 % 1,042 0.2 % 1,684 161.6 % Professional fees 2,521 0.6 % 3,311 0.8 % (790) (23.9) % Other 2,969 0.8 % 4,001 1.0 % (1,032) (25.8) % Total selling and marketing expenses $ 89,145 22.9 % $ 108,395 25.8 % $ (19,250) (17.8) % (1) As discussed in Footnote 2 , Summary of Significant Accounting Policies, in our 2019 10-K , we adopted ASC 842, Leases as of January 1, 2019. Lease expense and depreciation for the year ended December 31, 2019 is not comparable to the year ended December 31, 2018 due to our adoption of ASC 842. Selling and marketing expenses decreased by $19.3 million, or 17.8%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Employee costs decreased $15.6 million due to reduced headcount and restructuring efforts as discussed in Footnote 14 , Organizational Restructuring . Lease expense and depreciation decreased $2.0 million as a result of various lease terminations and decreased depreciation expense as various assets reached the end of their depreciable lives. Travel costs decreased $1.5 million from lower headcount while professional fees decreased $0.8 million from reduced use of consultants. Offsetting these decreases in costs was an increase of $1.7 million in technology costs due certain license expenses that were previously included in research and development expense. Research and Development Research and development expenses include product development costs, consisting primarily of employee costs including salaries, benefits, stock-based compensation and other related costs for personnel associated with research and development activities, third-party expenses to develop new products and third-party data costs and allocated overhead, which is comprised of lease expense and other facilities-related costs, and depreciation expense related to general purpose equipment and software. Research and development expenses for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (In thousands) 2020 % of Revenue 2019 % of Revenue $ Variance % Variance Employee costs $ 28,512 8.0 % $ 47,626 12.3 % $ (19,114) (40.1) % Technology 4,322 1.2 % 4,164 1.1 % 158 3.8 % Lease expense and depreciation 3,999 1.1 % 5,958 1.5 % (1,959) (32.9) % Professional fees 1,258 0.4 % 2,860 0.7 % (1,602) (56.0) % Other 615 0.2 % 1,194 0.3 % (579) (48.5) % Total research and development expenses $ 38,706 10.9 % $ 61,802 15.9 % $ (23,096) (37.4) % Research and development expenses decreased by $23.1 million, or 37.4%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Employee costs decreased $19.1 million primarily due to lower headcount. Lease expense and 39 Table of Conte nt s depreciation decreased $2.0 million primarily as a result of various lease terminations and executed sublease agreements. Professional fees decreased $1.6 million primarily due to a decrease in consulting services. Research and development expenses for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, (In thousands) 2019 % of Revenue 2018 % of Revenue $ Variance % Variance Employee costs $ 47,626 12.3 % $ 60,490 14.4 % $ (12,864) (21.3) % Lease expense and depreciation (1) 5,958 1.5 % 7,057 1.7 % (1,099) (15.6) % Technology 4,164 1.1 % 5,057 1.2 % (893) (17.7) % Professional fees 2,860 0.7 % 2,668 0.6 % 192 7.2 % Other 1,194 0.3 % 1,707 0.4 % (513) (30.1) % Total research and development expenses $ 61,802 15.9 % $ 76,979 18.4 % $ (15,177) (19.7) % (1) As discussed in Footnote 2 , Summary of Significant Accounting Policies, in our 2019 10-K , we adopted ASC 842, Leases as of January 1, 2019. Lease expense and depreciation for the year ended December 31, 2019 is not comparable to the year ended December 31, 2018 due to our adoption of ASC 842. Research and development expenses decreased by $15.2 million, or 19.7%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Employee costs decreased $12.9 million due to reduced headcount and restructuring efforts as discussed in Footnote 14 , Organizational Restructuring . Lease expense and depreciation decreased $1.1 million as a result of various lease terminations and decreased depreciation expense as various assets reached the end of their depreciable lives. Technology costs decreased $0.9 million due to certain license expenses that are now included in selling and marketing expense. General and Administrative General and administrative expenses consist primarily of employee costs including salaries, benefits, stock-based compensation and other related costs, and related expenses for executive management, finance, human capital, legal and other administrative functions, as well as professional fees, overhead, including allocated overhead, which is comprised of lease expense and other facilities-related costs, depreciation expense related to general purpose equipment and software, and expenses incurred for other general corporate purposes. General and administrative expenses for the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, (In thousands) 2020 % of Revenue 2019 % of Revenue $ Variance % Variance Employee costs $ 28,205 7.9 % $ 34,435 8.9 % $ (6,230) (18.1) % Professional fees 12,922 3.6 % 18,385 4.7 % (5,463) (29.7) % Lease expense and depreciation 2,114 0.6 % 2,491 0.6 % (377) (15.1) % Bad debt expense 1,693 0.5 % 727 0.2 % 966 132.9 % Transition services agreement — — % 667 0.2 % (667) (100.0) % Other 10,849 3.0 % 9,714 2.5 % 1,135 11.7 % Total general and administrative expenses $ 55,783 15.7 % $ 66,419 17.1 % $ (10,636) (16.0) % General and administrative expenses decreased by $10.6 million, or 16.0%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Employee costs decreased $6.2 million primarily due to $3.3 million in severance costs for certain executives who exited in 2019, as well as lower headcount and a decrease in stock-based compensation expense. Professional fees decreased $5.5 million primarily due to reduced audit and legal fees in 2020 as compared to 2019, and fees related to the issuance of Common Stock and warrants in 2019. These decreases were offset by an increase in bad debt expense of $1.0 million primarily due to increased reserves related to customers impacted by the current economic environment. General and administrative expenses for the years ended December 31, 2019 and 2018 are as follows: Year Ended December 31, (In thousands) 2019 % of Revenue 2018 % of Revenue $ Variance % Variance Employee costs $ 34,435 8.9 % $ 38,094 9.1 % $ (3,659) (9.6) % Professional fees 18,385 4.7 % 21,528 5.1 % (3,143) (14.6) % Lease expense and depreciation (1) 2,491 0.6 % 3,711 0.9 % (1,220) (32.9) % Transition services agreement 667 0.2 % 9,035 2.2 % (8,368) (92.6) % Bad debt expense 727 0.2 % 966 0.2 % (239) (24.7) % Other 9,714 2.5 % 11,201 2.7 % (1,487) (13.3) % Total general and administrative expenses $ 66,419 17.1 % $ 84,535 20.2 % $ (18,116) (21.4) % (1) As discussed in Footnote 2 , Summary of Significant Accounting Policies, in our 2019 10-K , we adopted ASC 842, Leases as of January 1, 2019. Lease expense and depreciation for the year ended December 31, 2019 is not comparable to the year ended December 31, 2018 due to our adoption of ASC 842. 40 Table of Conte nt s General and administrative expenses decreased by $18.1 million, or 21.4%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. The decrease was largely attributable to a reduction in transition services agreement costs, employee costs, professional fees and lease depreciation expense. Transition services agreement costs decreased $8.4 million as a result of the termination of a three-year transition services agreement. Employee costs decreased primarily due to reduced headcount and restructuring efforts as discussed in Footnote 14 , Organizational Restructuring , partially offset by a $3.3 million increase in severance expense related to the departure of certain executives in 2019. Professional fees decreased $3.1 million as a result of lower audit and compliance costs, offset by transaction costs associated with the sale of shares of Common Stock and warrants in June 2019. Lease expense and depreciation decreased $1.2 million as a result of decreased depreciation expense as various assets reached the end of their depreciable lives and decreased lease expense from various lease terminations and executed sublease agreements. Amortization of Intangible Assets Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions, primarily our Rentrak merger in which we acquired $170.3 million of finite-lived intangible assets. Amortization of intangible assets decreased by $2.9 million, or 9.5%, for 2020 as compared to 2019 due to the impairment of an intangible asset as described below. Amortization of intangible assets decreased by $2.8 million, or 8.5%, for 2019 as compared to 2018 due to the impairment of an intangible asset as described below. Impairment of Right-of-use and Long-lived Assets In 2020, we recorded a $4.7 million impairment charge related to our facility lease right-of-use assets and associated leasehold improvements for certain properties on the market for sublease. The impairment charge was driven by changes in our projected undiscounted cash flows for certain properties, primarily as a result of changes in the real estate market related to the COVID-19 pandemic, that led to an increase in the estimated marketing time and a reduction of expected receipts. Impairment of Goodwill and Intangible Asset In 2019, as a result of a sustained decline in our stock price and market capitalization, changes in management, and lower revenue, among other factors, we performed an interim impairment review of our goodwill and long-lived assets. Our reporting unit did not pass the goodwill impairment test, and as a result we recorded a $224.3 million impairment charge. We also recorded an impairment charge related to our strategic alliance intangible asset during 2019. Changes in our projected revenue in certain non-U.S. geographic markets due to the changing international competitive landscape as well as significant reductions in international staffing, resulted in a change in our long-term view of the viability of the intangible asset. As such, our assessment yielded that the benefit of the strategic alliance would not be realized. The fair value of the strategic alliance intangible asset was estimated using an income approach, resulting in an impairment charge for the full carrying value of the long-lived asset of $17.3 million. While this was a non-cash charge, it reduced amortization expense by approximately $3.0 million on an annualized basis. For further information refer to Footnote 9 , Goodwill and Intangible Assets and Item 7 , Critical Accounting Policies . Investigation and Audit Related Investigation and audit related expenses were $4.3 million and $38.3 million for the years ended December 31, 2019 and 2018, respectively. No similar costs were incurred during the year ended December 31, 2020. Investigation expenses include professional fees associated with legal and forensic accounting services rendered in connection with the previously disclosed internal Audit Committee investigation into matters related to the Company's revenue recognition practices, disclosures, internal controls, corporate culture and employment practices prior to 2017. Audit related expenses consist of professional fees associated with accounting related consulting services and external auditor fees associated with the audit of our Consolidated Financial Statements for the prior years. Litigation related expenses include legal fees associated with various lawsuits or investigations, including those initiated either directly or indirectly as a result of the Audit Committee's investigation. The decrease in investigation and audit related expenses in 2019 as compared to 2018 was due to the conclusion of the Audit Committee investigation and multi-year audit in 2018, as well as the resolution of related legal proceedings. We resolved the related SEC investigation in September 2019, and as such, incurred no investigation and audit related expenses during 2020. Restructuring We incurred restructuring expenses of $3.3 million and $11.8 million for the years ended December 31, 2019 and 2018, respectively, related to significant reductions in headcount and reorganization of our business. No such expenses were incurred during 2020. For further information refer to Footnote 14 , Organizational Restructuring. 41 Table of Conte nt s Settlement of Litigation, Net Settlement of litigation, net consists of gains and losses from the settlement of various litigation matters. The $2.9 million net settlement of litigation expense for 2019 relates to the conclusion of the SEC investigation. A civil monetary penalty of $5.0 million payable to the SEC was offset by a clawback of $2.1 million from our former CEO, Serge Matta. The $5.3 million net settlement of litigation expense for 2018 relates to the settlement and final resolution of a prior federal securities class action and shareholder derivative actions. Interest Expense, Net Interest expense, net consists of interest income and interest expense. Interest income primarily consists of interest earned from our cash and cash equivalent balances and imputed interest on our minimum commitment agreements with WPP. Interest expense primarily relates to interest on our Notes, our Secured Term Note and our finance leases of computer equipment and automobiles. Interest expense, net, increased $4.3 million during 2020 to $35.8 million as compared to $31.5 million in 2019. Interest expense increased in 2020 primarily as a result of the interest rate reset feature on the Notes, and the issuance of the Secured Term Note in December 2019. Interest expense, net, increased $15.1 million during 2019 to $31.5 million as compared to $16.5 million in 2018. Interest expense increased in 2019 primarily as a result of the interest rate reset feature on the Notes. Refer to Footnote 4 , Debt for information on the interest rate reset feature. Other Income (Expense), Net Other income (expense), net represents income and expenses incurred that are generally not recurring in nature or are not part of our normal operations. Income from transition services represents reimbursement of costs incurred under the Digital Analytix transition services agreement, which expired in 2019, and is offset as expense in cost of revenues and general and administrative expenses. The following is a summary of other income (expense), net: Years Ended December 31, (In thousands) 2020 2019 2018 Change in fair value of financing derivatives $ 10,287 $ 5,100 $ (14,226) Change in fair value of warrants liability 4,894 (2,411) — Change in fair value of interest make-whole derivative (871) — — Change in fair value of investment in equity securities — (2,324) 1,443 Transition services agreement income — 534 9,029 Other 244 755 2,290 Total other income (expense), net $ 14,554 $ 1,654 $ (1,464) Total other income, net for the year ended December 31, 2020 was $14.6 million as compared to total other income, net of $1.7 million in 2019. The increase in other income, net was primarily driven by the change in fair value of warrants liability and financing derivatives. Additionally, we had no loss on equity securities in 2020 compared with a decline in the fair value of equity securities that were sold in 2019. Total other income, net for the year ended December 31, 2019 was $1.7 million as compared to total other expense, net of $1.5 million in 2018. The shift to other income was primarily driven by the change in fair value of financing derivatives. Offsetting the increase to other income was a decrease in transition services income, a decline in the fair value of equity securities that were sold in 2019 and a decrease resulting from patent income in 2018. (Loss) Gain from Foreign Currency Transactions Our foreign currency transactions are recorded as a result of fluctuations in the exchange rate between the transactional currency and the functional currency of foreign subsidiary transactions. For the year ended December 31, 2020, the loss from foreign currency transactions was $4.5 million. The loss was primarily driven by fluctuations in the Chilean Peso against both the U.S. Dollar and Brazilian Real and the U.S. Dollar against the Euro. For the year ended December 31, 2019, the gain from foreign currency transactions was $0.3 million. The gain was primarily driven by fluctuations of the average Chilean Peso against the U.S. Dollar. For the year ended December 31, 2018, the gain from foreign currency transactions was $1.3 million. The gain was primarily related to fluctuations in the average U.S. Dollar to Euro, Canadian Dollar and Chilean Peso. 42 Table of Conte nt s Income Tax (Provision) Benefit A valuation allowance has been established against our net U.S. federal and state deferred tax assets, and certain foreign deferred tax assets, including net operating loss carryforwards. As a result, our income tax position is primarily related to foreign tax activity. During the years ended December 31, 2020, 2019, and 2018, we recorded an income tax (provision) benefit of $(0.9) million, $1.0 million, and $(3.7) million, resulting in an effective tax rate of 1.9%, (0.3)%, and 2.4%, respectively. These effective tax rates differ from the U.S. federal statutory rate primarily due to the effects of certain permanent items, foreign tax rate differences, and increases in the valuation allowance against our domestic deferred tax assets. Included within the tax expense for the year ended December 31, 2020 are income tax adjustments of $8.9 million for permanent differences in the book and tax treatment of certain stock-based compensation, limitations on the deductibility of certain executive compensation, nondeductible interest expense on debt instruments and associated derivatives, and other nondeductible expenses. Also included is an adjustment of $11.2 million for a permanent difference related to foreign earnings taxable in the U.S. as a result of a tax restructuring that occurred during the year. Included within the tax benefit for the year ended December 31, 2019 are income tax adjustments of $58.6 million related to the impairment of goodwill and $15.2 million for permanent differences in the book and tax treatment of certain stock-based compensation, limitations on the deductibility of certain executive compensation, nondeductible interest expense on debt instruments and associated derivatives, and other nondeductible expenses. Income tax expense of $17.3 million has also been included for increases in the valuation allowance recorded against our deferred tax assets to offset the tax benefit of our operating losses in the U.S. and certain foreign jurisdictions. Included within the tax expense for the year ended December 31, 2018, is an income tax adjustment of $19.7 million for permanent differences in the book and tax treatment of certain stock-based compensation, limitations on the deductibility of certain executive compensation, nondeductible interest expense on debt instruments and associated derivatives, and other nondeductible expenses. Income tax expense of $19.0 million for increases in the valuation allowance recorded against our deferred tax assets to offset the tax benefit of our operating losses in the U.S. and certain foreign jurisdictions. The COVID-19 pandemic has a global reach, and many countries have introduced measures that provide relief to taxpayers in a variety of ways. We have evaluated these measures, including the CARES Act in the United States, and have concluded that these did not have a significant impact on our income tax provision for the year ended December 31, 2020. Non-GAAP Financial Measures To provide investors with additional information regarding our financial results, and to comply with a covenant under our Notes (described below), we are disclosing herein Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") and non-GAAP net loss, each of which are non-GAAP financial measures used by our management 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, as they permit our investors to view our core business performance using the same metrics that management uses to evaluate our performance. EBITDA is defined as GAAP net income (loss) plus or minus interest, taxes, depreciation and amortization of intangible assets and finance leases. We define Adjusted EBITDA as EBITDA plus or minus stock-based compensation expense as well as other items and amounts that we view as not indicative of our core operating performance, specifically: charges for matters relating to the prior-year Audit Committee investigation, such as litigation and investigation-related costs, costs associated with tax projects, audits, consulting and other professional fees; other legal proceedings specified in the Notes; settlement of certain litigation; restructuring expense; transaction costs related to the issuance of equity securities; non-cash impairment charges; and non-cash changes in the fair value of financing derivatives, warrants liability and investments in equity securities. We define non-GAAP net loss as GAAP net income (loss) plus or minus stock-based compensation expense and amortization of intangible assets, as well as other items and amounts that we view as not indicative of our core operating performance, specifically: charges for matters relating to the prior-year Audit Committee investigation, such as litigation and investigation-related costs, costs associated with tax projects, audits, consulting and other professional fees; other legal proceedings specified in the Notes; settlement of certain litigation; restructuring expense; transaction costs related to the issuance of equity securities; non-cash impairment charges; and non-cash changes in the fair value of financing derivatives, warrants liability and investments in equity securities. Our use of these non-GAAP financial measures has limitations as an analytical tool, and investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. The limitations of such non-GAAP measures include the following: • Adjusted EBITDA does not reflect tax or interest payments that represent a reduction in cash available to us (or, in the case of interest paid in Common Stock, that represent additional dilution to our existing stockholders); • Depreciation and amortization are non-cash charges and the assets being depreciated may have to be replaced in the future. Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; 43 Table of Conte nt s • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA and non-GAAP net loss do not reflect cash payments relating to fees incurred in connection with issuance of equity securities, restructuring, litigation and the prior-year Audit Committee investigation, such as litigation and investigation-related costs, costs associated with tax projects, audits and other professional, consulting or other fees incurred in connection with our prior-year audits and certain legal proceedings, all of which have represented a reduction in cash available to us; • Adjusted EBITDA and non-GAAP net loss do not consider the impact of stock-based compensation and similar arrangements that represent dilution to our existing stockholders; • Adjusted EBITDA and non-GAAP net loss do not consider impairment of goodwill, right-of-use and other long-lived assets, which represents a decline in the value of our assets; • Adjusted EBITDA and non-GAAP net loss do not consider possible cash gains or losses related to our financing derivatives, warrants liability or investment in equity securities; and • Other companies, including companies in our industry, may calculate any of these non-GAAP financial measures differently, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider Adjusted EBITDA and non-GAAP net loss alongside GAAP-based financial performance measures, including GAAP revenue and various cash flow metrics, net income (loss) and our other GAAP financial results. Management addresses the inherent limitations associated with using non-GAAP financial measures through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and a reconciliation of Adjusted EBITDA and non-GAAP net loss to the most directly comparable GAAP measure, net income (loss). Under our Notes, we are required to disclose Consolidated EBITDA, a non-GAAP financial measure, on a quarterly basis. Consolidated EBITDA, as defined for purposes of the Notes, was the same as Adjusted EBITDA as presented below. The following table presents a reconciliation of net loss (GAAP) to Adjusted EBITDA for each of the periods identified: Years Ended December 31, (In thousands) 2020 2019 2018 Net loss (GAAP) $ (47,918) $ (338,996) $ (159,268) Interest expense, net 35,805 31,526 16,465 Amortization of intangible assets 27,219 30,076 32,864 Depreciation 14,064 12,778 17,259 Amortization expense of finance leases 1,652 2,413 — Income tax provision (benefit) 902 (1,007) 3,706 EBITDA 31,724 (263,210) (88,974) Adjustments: Stock-based compensation expense 10,073 16,695 37,151 Impairment of right-of-use and long-lived assets 4,671 — — Impairment of goodwill — 224,272 — Impairment of intangible asset — 17,308 — Investigation and audit related — 4,305 38,338 Restructuring — 3,263 11,837 Settlement of certain litigation, net (1) — 2,900 5,250 Other (income) expense, net (2) (14,164) 682 12,783 Adjusted EBITDA $ 32,304 $ 6,215 $ 16,385 (1) Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. (2) Adjustments to other (income) expense, net, reflect non-cash changes in the fair value of financing derivatives, warrants liability and equity securities investment included in other income (expense), net and certain legal expenses defined by the Notes and classified as general and administrative expenses on our Consolidated Statements of Operations and Comprehensive Loss. Additionally, we recorded transaction costs related to the issuance of warrants, which costs were allocated to the warrants liability and recorded in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs were recorded in additional paid-in capital in the Consolidated Balance Sheets. For more information regarding this adjustment, see Footnote 5 , Stockholders' Equity. 44 Table of Conte nt s The following table presents a reconciliation of net loss (GAAP) to non-GAAP net loss for each of the periods identified: Years Ended December 31, (In thousands) 2020 2019 2018 Net loss (GAAP) $ (47,918) $ (338,996) $ (159,268) Adjustments: Amortization of intangible assets 27,219 30,076 32,864 Stock-based compensation expense 10,073 16,695 37,151 Impairment of right-of-use and long-lived assets 4,671 — — Impairment of goodwill — 224,272 — Impairment of intangible asset — 17,308 — Investigation and audit related — 4,305 38,338 Restructuring — 3,263 11,837 Settlement of certain litigation, net (1) — 2,900 5,250 Other (income) expense, net (2) (14,164) 682 12,783 Non-GAAP net loss $ (20,119) $ (39,495) $ (21,045) (1) Settlement of certain litigation, net includes settlement amounts incurred for certain legal proceedings defined by the Notes, which amounts are classified as general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. (2) Adjustments to other (income) expense, net, reflect non-cash changes in the fair value of financing derivatives, warrants liability and equity securities investment included in other income (expense), net and certain legal expenses defined by the Notes and classified as general and administrative expenses on our Consolidated Statements of Operations and Comprehensive Loss. Additionally, we recorded transaction costs related to the issuance of warrants, which costs were allocated to the warrants liability and recorded in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs were recorded in additional paid-in capital in the Consolidated Balance Sheets. For more information regarding this adjustment, see Footnote 5 , Stockholders' Equity. Liquidity and Capital Resources The following table summarizes our cash flows for each of the periods identified: Years Ended December 31, (In thousands) 2020 2019 2018 Net cash provided by (used in) operating activities $ 717 $ (4,636) $ (72,575) Net cash used in investing activities (15,555) (10,460) (13,814) Net cash (used in) provided by financing activities (2,096) 31,973 93,119 Effect of exchange rate changes on cash, cash equivalents and restricted cash 902 (302) (1,657) Net (decrease) increase in cash, cash equivalents and restricted cash (16,032) 16,575 5,073 Overview Our principal uses of cash consist of cash paid for data, payroll and other operating expenses, payments related to investments in equipment, primarily to support our consumer panels and technical infrastructure required to deliver our products and services and support our customers, and service of our debt and lease facilities. In prior years, we incurred significant professional fees relating to our Audit Committee's investigation, subsequent audit and compliance efforts, as well as management changes and various legal proceedings. As of December 31, 2020, our principal sources of liquidity consisted of cash, cash equivalents and restricted cash totaling $50.7 million, including $19.6 million in restricted cash. Our principal sources of liquidity have historically been our cash and cash equivalents, as well as cash flow generated from operations. Our operating losses, including the significant investigation and audit costs in prior years, resulted in a need to secure long-term financing. In 2018, we entered into agreements with funds affiliated with or managed by Starboard Value LP (collectively, "Starboard"), pursuant to which we issued and sold to Starboard a total of $204.0 million in Notes as well as warrants to purchase shares of our Common Stock in exchange for $100.0 million in cash and 4,000,000 shares of Common Stock. See "Senior Secured Convertible Notes" below. In 2019, we issued 2,728,513 shares of our Common Stock and four series of warrants in a private placement to CVI Investments, Inc. ("CVI") in exchange for gross cash proceeds of $20.0 million. See "Sale of Common Stock and Warrants" below. During 2019, we sold our investment in equity securities for total cash proceeds of $3.8 million, of which $3.1 million was received in July 2019. See Footnote 2 , Summary of Significant Accounting Policies for additional information. In 2019, we issued the Secured Term Note for gross proceeds of $13.0 million. See "Secured Term Note" below. 45 Table of Conte nt s On each of January 2, 2020, April 1, 2020 and July 1, 2020, we paid quarterly accrued interest of $6.1 million on the Notes in cash. On October 1, 2020, we paid quarterly accrued interest on the Notes through the issuance of 1,474,201 PIK Interest Shares and $3.1 million in cash. On January 25, 2021, we paid quarterly accrued interest through the issuance of 2,802,454 PIK Interest Shares. The accrued interest we paid on January 25, 2021 was classified within other non-current liabilities in the Consolidated Financial Statements as of December 31, 2020. The COVID-19 pandemic and related government mandates and restrictions have had a significant impact on the media, advertising and entertainment industries in which we operate. To date, the COVID-19 pandemic has had some impact on our business, including with respect to the execution of new and renewal contracts, the impact of closed movie theaters on our customers, customer payment delays and requests to modify contractual payment terms. These conditions have negatively impacted our liquidity and cash flows and are expected to continue to have an impact in future periods. In the second quarter of 2020, we continued to see delays in cash collections, leading our management team to take actions to mitigate the near-term impact on our liquidity. These actions, some of which continued into the third and fourth quarters of 2020, included freezing hiring, exiting non-critical consultants and contractors, terminating or negotiating reductions in vendor agreements and leases, reducing compensation for our senior leadership team and board of directors, and reducing certain travel, marketing, recruiting and other corporate activities not deemed critical to the business in the current environment. We continue to monitor our liquidity and cash flows and will re-evaluate these actions as appropriate. On March 27, 2020, Congress enacted the CARES Act. The CARES Act, among other things, includes tax provisions for the deferral of certain employer payroll tax liabilities, refundable employee retention credits, rollbacks of TCJA limitations on net operating losses, the acceleration of alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We began deferring certain payroll taxes in April 2020, as permitted by the CARES Act. In addition, during the second quarter of 2020, we claimed the refundable employee retention credit created by the CARES Act. On December 27, 2020, Congress enacted the Consolidated Appropriations Act, 2021 ("CAA"), which contains a number of additional COVID-19 relief tax provisions and extensions of temporary tax provisions, including an extension and significant expansion of the employee retention credit created by the CARES Act. We continue to evaluate the impact of the CARES Act, the CAA and additional legislation and government guidance related to the COVID-19 pandemic on our business operations and financial results. Our liquidity could be negatively affected by a decrease in demand for our products and services or additional losses from operations, as well as payment of expenses incurred in prior periods in addition to current-period expenses. It is possible that long-term changes in consumer behavior will impact our customers' operations, and thus their demand for our services and ability to pay, even after the spread of COVID-19 has been contained and businesses are permitted to resume normal operations. While we are taking actions (as described above) to mitigate the impact of the COVID-19 pandemic, control costs and improve our working capital balance, these steps may not be successful or adequate to offset future declines. If our efforts to control costs are not sufficient, or if customer demand or cash collection efforts are further impacted by the COVID-19 pandemic or other factors, we may not be able to meet our financial obligations to our vendors or others. Beginning in 2019 and continuing through 2020, we conducted a comprehensive review of strategic and financing alternatives with a view toward the maturity of the Notes (with a principal balance of $204.0 million) in January 2022. On January 7, 2021, we entered into separate Securities Purchase Agreements with Charter, Qurate, and Pine pursuant to which, at the closing of the Transactions contemplated thereby, we will issue and sell (a) to Charter, 27,509,203 shares of Series B Convertible Preferred Stock in exchange for $68.0 million, (b) to Qurate, 27,509,203 shares of Series B Convertible Preferred Stock in exchange for $68.0 million and (c) to Pine, 27,509,203 shares of Series B Convertible Preferred Stock in exchange for $68.0 million. The proceeds of the Transactions will be used to repay the Notes. Additionally, in connection with the closing, we expect to repay the Secured Term Note and certain transaction-related expenses with cash from our balance sheet. Following the Transactions, the holders of Series B Convertible Preferred Stock will be entitled to annual cash dividends at a rate of 7.5% per year, paid annually in arrears, and can request a special cash dividend after January 1, 2022. The Transactions and related matters were approved by our stockholders on March 9, 2021 and are expected to be completed on or around March 10, 2021. Repayment of the Notes and the Secured Term Note will result in termination of the affirmative and negative covenants set forth in these instruments, including the Notes covenant requiring maintenance of certain minimum cash balances, and is expected to improve our financial position and liquidity. We continue to be focused on maintaining financial flexibility. We believe the approved Transactions will provide us with adequate sources of funding to satisfy our estimated liquidity needs for at least one year after the date that these financial statements are issued. However, we cannot predict with certainty the outcome of our actions to generate liquidity or whether such actions would generate the expected liquidity as currently planned. 46 Table of Conte nt s Restricted Cash Restricted cash represents our requirement to collateralize the Secured Term Note, outstanding letters of credit, and lines of credit related to certain of our corporate credit card programs. As of December 31, 2020 and 2019, we had $19.6 million and $20.2 million of restricted cash, respectively. Credit Facility In 2018, we entered into a Security Agreement with Wells Fargo Bank, N.A. to issue standby letters of credit on our behalf. As of December 31, 2020, $3.3 million in letters of credit were outstanding and cash collateralized under the Security Agreement with Wells Fargo Bank, N.A. Sale-Leaseback Financing Transaction In 2019, we entered into an arrangement with a vendor to sell and lease back certain previously acquired computer and other equipment. The arrangement, which resulted in cash proceeds of $4.3 million, requires lease payments over a 24-month term for total consideration of $4.8 million, with control of the equipment transferring to the vendor at the end of the lease term. Sale of Common Stock and Warrants On June 23, 2019, we entered into a Securities Purchase Agreement with CVI pursuant to which we sold to CVI for aggregate gross proceeds of $20.0 million (i) 2,728,513 shares of Common Stock and (ii) Series A Warrants, Series B-1 Warrants, Series B-2 Warrants and Series C Warrants to initially purchase up to 11,654,033 shares of Common Stock (the "Private Placement"). On October 14, 2019, we issued 2,728,513 shares of Common Stock to CVI upon exercise by CVI of the Series C Warrants. As a result of this exercise, the number of shares issuable under our Series A Warrants was increased by 2,728,513. On January 29, 2020, the Series B-1 Warrants expired unexercised. On August 3, 2020, the Series B-2 Warrants expired unexercised. For additional information on the Private Placement, refer to Footnote 5 , Stockholders' Equity . Senior Secured Convertible Notes On January 16, 2018, we entered into certain agreements with Starboard, pursuant to which we issued and sold to Starboard $150.0 million in Notes in exchange for $85.0 million in cash and 2,600,000 shares of Common Stock. We also agreed to issue to Starboard warrants to purchase 250,000 shares of Common Stock at a price of $0.01 per share, as adjusted pursuant to the terms of the warrants. The warrants were issued on October 12, 2018 and exercised in full on April 3, 2019 for 323,448 shares of Common Stock. On May 17, 2018, we issued and sold to Starboard $50.0 million of Notes in exchange for $15.0 million in cash and 1,400,000 shares of Common Stock. Later in 2018 we issued an aggregate of $4.0 million in Notes to Starboard, bringing the total balance of Notes as of December 31, 2020 to $204.0 million. The Notes currently have an annual interest rate of 12% that is payable quarterly in cash, PIK Interest Shares or a combination thereof at our election. The Notes contain certain affirmative and restrictive covenants with which we must comply, including covenants with respect to (i) limitations on additional indebtedness, (ii) limitations on liens, (iii) limitations on certain payments, (iv) maintenance of certain minimum cash balances (currently $40.0 million) and (v) the timely filing of certain disclosures with the SEC. We were in compliance with the Notes covenants as of December 31, 2020. As discussed above, we expect to repay the Notes (and thus eliminate the related covenants) in connection with the Transactions. For additional information about the terms of the Notes, refer to Footnote 4 , Debt . Secured Term Note On December 31, 2019, our wholly owned subsidiary, Rentrak B.V., entered into an agreement with several third parties for the Secured Term Note in exchange for gross proceeds of $13.0 million. The Secured Term Note matures on December 31, 2021 and has an annual interest rate of 9.75% that is payable monthly in cash. As discussed above, we expect to repay the Secured Term Note in connection with the Transactions. For additional information about the terms of the Secured Term Note, refer to Footnote 4 , Debt. Operating Activities Our primary source of cash provided by operating activities is revenues generated from sales of our Ratings and Planning, Analytics and Optimization, and Movies Reporting and Analytics products and services. Our primary uses of cash from operating activities include personnel costs and costs related to data and infrastructure used to develop and maintain our products and services. As discussed above, we have experienced delays in customer payments and requests to modify contractual terms in connection with the COVID-19 pandemic and related government mandates and restrictions. 47 Table of Conte nt s Cash used in operating activities is calculated by adjusting our net loss for changes in working capital, as well as by excluding non-cash items such as: depreciation, non-cash operating lease expense, amortization expense of finance leases and intangible assets, impairment of right-of-use assets, stock-based compensation, deferred tax provision, change in the fair value of financing derivatives, warrants liability and equity securities, non-cash interest expense on the Notes, accretion of debt discount, and amortization of deferred financing costs. Net cash provided by operating activities in 2020 was $0.7 million compared to net cash used of $4.6 million in 2019. The increase in cash provided by operating activities during 2020 as compared to 2019 was primarily attributable to a decrease in net loss, lower investigation and audit related expenses, decrease in headcount, and results of restructuring, offset by additional cash interest paid on the Notes of $21.4 million in 2020 in comparison to $3.0 million in 2019. Net cash used in operating activities in 2019 was $4.6 million compared to net cash used of $72.6 million in 2018. The decrease in cash used in operating activities during 2019 as compared to 2018 was primarily attributable to a decrease in cash operating expenses driven by lower investigation and audit related expenses and headcount, and extended trade payables. This drove a net increase in operating assets and liabilities of $4.3 million for the year ended December 31, 2019 as compared to a net decrease of $23.2 million for the year ended December 31, 2018. In addition, there was a net decrease in cash used of $4.4 million related to interest payments made on the Notes in stock in lieu of cash during 2019. Investing Activities Cash used in investing activities primarily consists of payments related to capitalized internal-use software costs, purchases of computer and network equipment to support our technical infrastructure, and furniture and equipment. The extent of these investments will be affected by our ability to expand relationships with existing customers, grow our customer base and introduce new digital formats, as well as constraints on cash expenditures in the current economic environment. Net cash used in investing activities in 2020 was $15.6 million compared to net cash used in investing activities of $10.5 million in 2019. This increase in net cash used in investing activities was attributable to an increase of $3.6 million in payments for capitalized internally developed software and a decline of $3.8 million compared to receipts from the sale of an investment in 2019, partially offset by a $2.3 million decrease in purchases of property and equipment in 2020 compared with 2019. Net cash used in investing activities in 2019 was $10.5 million compared to net cash used in investing activities of $13.8 million in 2018. The decrease in net cash used in investing activities was attributable to $3.8 million in cash received from the sale of an investment in 2019 (noted above). Increased capitalized costs of $1.9 million were offset by a $1.5 million decrease in purchases of property and equipment. Financing Activities Net cash used in financing activities in 2020 was $2.1 million compared to net cash provided by financing activities of $32.0 million in 2019. The shift to cash used in financing activities from cash provided by financing activities was largely due to gross cash proceeds of $20.0 million from the sale of shares of Common Stock and warrants in the Private Placement, $13.0 million from the issuance of the Secured Term Note, and $4.3 million from the sale-leaseback transaction during 2019. These were offset by a decrease of $2.5 million in principal payments on finance lease and software licensing arrangements. Net cash provided by financing activities in 2019 was $32.0 million compared to net cash provided by financing activities of $93.1 million in 2018. In 2019, we raised gross cash proceeds of $20.0 million from the sale of shares of Common Stock and warrants in the Private Placement, $13.0 million from the issuance of the Secured Term Note, and $4.3 million from the sale lease-back transaction. We also had a decrease of debt issuance costs of $5.1 million in 2019 compared to 2018. In 2018 we generated gross cash proceeds of $100.0 million from the issuance of Notes, partially offset by a $9.7 million decrease in proceeds from subscription receivables which ended in 2018. 48 Table of Conte nt s Contractual Payment Obligations We are subject to certain contractual arrangements that are long-term in nature. The information set forth below summarizes our contractual obligations as of December 31, 2020 that are fixed and determinable. (In thousands) Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Long-term debt obligations (1) $ 217,000 $ 13,000 $ 204,000 $ — $ — Unconditional purchase obligations with MVPDs (2) 72,574 27,620 44,954 — — Operating lease obligations (3) 62,900 12,175 19,202 17,240 14,283 Finance lease obligations (4) 3,476 2,201 1,275 — — Sale-leaseback financing transaction (5) 1,422 1,422 — — — Other long-term obligations (6) 36,446 14,868 21,428 150 — Total $ 393,818 $ 71,286 $ 290,859 $ 17,390 $ 14,283 (1) In 2018, we entered into several agreements with Starboard whereby we issued Notes in exchange for cash and shares of Common Stock. In 2019 our wholly owned subsidiary Rentrak B.V., entered into a Secured Term Note. See Footnote 4 , Debt for more information. (2) Unconditional purchase obligations with MVPDs include contractual arrangements with MVPDs for the purchase of TV viewing data that is used in our products, primarily reported in the Ratings and Planning solution group. If these arrangements are canceled by the MVPDs, we have the ability to terminate contracts with our end customers. Commitments reflected herein relate to service periods after December 31, 2020. (3) Operating lease obligations represent future lease commitments, primarily for real estate leases, accounted for under ASC 842. Refer to Footnote 8 , Leases. (4) Finance lease obligations represent future lease commitments, primarily for equipment leases, accounted for under ASC 842. Refer to Footnote 8 , Leases. (5) We entered into a sale-leaseback arrangement with a vendor in June 2019. See Footnote 4 , Debt for more information. (6) Other long-term obligations primarily reflect future commitments for software licenses and the right to access cloud-based solutions under long-term contracts. Future Capital Requirements Our ability to generate cash is subject to our performance, general economic conditions, industry trends and other factors, including the timing of cash collections from our customers, data costs and other trade payables, service of our debt and lease facilities, dividend payment obligations following the Transactions, and expenses from ongoing compliance efforts and legal matters. As discussed above, we have experienced delays in customer payments and requests to modify contractual terms in connection with the COVID-19 pandemic and related government mandates and restrictions. We have also incurred significant costs in connection with our strategic review and the pending Transactions. To the extent that our existing cash, cash equivalents and operating cash flow, together with proceeds from the Transactions and savings from cost-reduction initiatives undertaken by management, are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. The current disruption and volatility in global capital and credit markets could impact our ability to access capital resources on terms acceptable to us or allowable under applicable financing arrangements, or at all. If we issue additional equity securities in order to raise additional funds or pay interest or dividends, further dilution to existing stockholders may occur. Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K). Critical Accounting Policies 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 generally accepted accounting principles in the U.S. ("GAAP"). 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 to Consolidated Financial Statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the ongoing and potential impacts of the COVID-19 pandemic and related government mandates and restrictions. Actual results may differ from these estimates. While our significant accounting policies are described in more detail in the Notes to Consolidated Financial Statements included in Item 8 of this 10-K, we believe the following accounting policies to be the most critical to the judgments and estimates used in the preparation of our Consolidated Financial Statements. Accounting for Warrants During 2019, we issued warrants which were determined to be freestanding financial instruments that qualify for liability treatment as a result of a net cash settlement feature associated with a cap on the issuance of shares under certain circumstances. Changes in the fair value of these instruments are immediately recorded in other income (expense), net in the Consolidated Statements of Operations and Comprehensive Loss. 49 Table of Conte nt s The fair value of the warrants is determined using a Monte Carlo simulation analysis within an option pricing model. The fair value estimate is determined using an estimate for our credit rating, probability of change of control, dividend yield, risk-free rate, remaining term of the warrants and volatility. The valuation is derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification of the warrants as a Level 3 fair value measurement. The fair value of the warrants is estimated using forward projections of stock issuances with relative certainty and estimated cash payments at each exercise date discounted back to the valuation date at rates commensurate with the remaining term of the related warrants. The primary sensitivity in the valuation of the warrant liability is driven by our Common Stock price at the measurement date and the observable volatility of the Common Stock. The exercise price of our Series A Warrants is subject to anti-dilution adjustment in certain circumstances, including upon certain issuances of capital stock. As a result of the Transactions discussed in Item 1 , Business , we expect to adjust the exercise price of the Series A Warrants to the closing price of the Transactions. Refer to Footnote 6 , Fair Value Measurements for the significant inputs used to determine the fair value of the warrants as of December 31, 2020. Impairment of Right-of-use ("ROU") and Long-Lived Assets Our long-lived assets consist of property and equipment and finite-lived intangible assets. We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. If an indication of impairment is present, we compare the estimated undiscounted future cash flows to be generated by the asset group to its carrying amount. Recoverability measurement and estimation of undiscounted cash flows are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If the undiscounted future cash flows are less than the carrying amount of the asset group, we record an impairment loss equal to the excess of the asset group's carrying amount over its fair value. The fair value is determined based on valuation techniques such as a comparison to fair values of similar assets or using a discounted cash flow analysis. During 2019, we evaluated our strategic alliance asset group for recoverability. Our assessment considered the changes in our projected revenue in certain non-U.S. geographic markets due to the changing international competitive landscape as well as significant reductions in international staffing during the second quarter, which resulted in a change in our long-term view of the viability of the intangible asset. As such, our analysis yielded that the benefit of the strategic alliance would not be realized, and the related investment would not be recoverable. The fair value of the strategic alliance intangible asset was estimated using the income approach, resulting in a non-cash impairment charge for the full carrying value of the asset. Consequently, we recorded a $17.3 million impairment charge during the year ended December 31, 2019 in our Consolidated Statements of Operations and Comprehensive Loss. We apply the provisions of Accounting Standards Codification ("ASC") 360, Property, Plant and Equipment, to determine whether our ROU and related long-lived assets may be impaired. We evaluate our ROU and long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. For facility lease ROU and related long-lived assets, we compare the estimated undiscounted cash flows generated by a sublease to the current carrying value of the ROU and related long-lived assets. If the undiscounted cash flows are less than the carrying value of the ROU and related long-lived assets, we record an impairment loss equal to the excess of the ROU and long-lived assets' carrying value over their fair value consistent with other long-lived assets. We performed an interim analysis as of March 31, 2020, as changes in market conditions indicated the carrying value of certain facility lease ROU and other long-lived assets may not be recoverable, and determined certain ROU assets, and related leasehold improvements, were impaired. We recorded a $4.7 million impairment charge related to our ROU assets, and related leasehold improvements, for the three months ended March 31, 2020, with corresponding adjustments of $2.8 million and $1.9 million to the operating lease ROU asset and property and equipment, net line items, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020. The impairment charge was driven by changes in our projected undiscounted cash flows for certain properties, primarily as a result of changes in the real estate market related to the COVID-19 pandemic that led to an increase in the estimated marketing time, and a reduction of expected receipts, for properties on the market for sublease. The fair value of these ROU assets, and related leasehold improvements, was estimated using an income approach and a discount rate of 12.0%. Although we believe that the carrying values of our long-lived assets are appropriately stated, changes in strategy or market conditions, significant technological developments or significant changes in legal or regulatory factors could significantly impact these judgments and require future adjustments to recorded asset balances. Revenue Recognition We apply the provisions of ASC 606, Revenue from Contracts with Customers and all related appropriate guidance. We recognize revenue under the core principle of depicting the transfer of promised goods and services to our customers in an amount that reflects the consideration to which we expect to be entitled. In order to achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, 50 Table of Conte nt s (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. Our contracts with customers may include multiple promised goods and services, c onsisting of the various services we offer. Contracts with multiple performance obligations typically consist of a mix of subscriptions to online products, our online database and custom products and services. At contract inception, we identify performance obligations by evaluating whether the promised goods and services are capable of being distinct within the context of the contract. Promised goods and services that are not distinct are combined until the combined bundle of goods and services is distinct. In general, transaction price is determined by estimating the fixed amount of consideration to which we are entitled for transfer of goods and services and all relevant sources and components of variable consideration. Variable consideration is estimated based on the most likely amount or expected value approach. Once we select a method to estimate variable consideration for a particular type of performance obligation, we will apply that method consistently. We will constrain estimates of variable consideration only to the extent that it is probable that significant reversal in the amount of cumulative revenue recognized will not occur. Significant judgment is required to determine the stand-alone selling price ("SSP") for each performance obligation. We allocate transaction price to each performance obligation based on relative SSP. For the majority of our products and services, we apply an adjusted market assessment approach for the determination of SSP for identified performance obligations. In general, we bundle multiple products and very few are sold on a standalone basis. We use rate cards and pricing calculators that are periodically reviewed and updated to reflect the latest sales data and observable inputs by industry, channel, geography, customer size, and other relevant groupings. Certain products are sold on a standalone basis in a narrow band of prices. If a product is sold outside of the narrow band of prices, it will be assigned the midpoint of the narrow band for purposes of allocating transaction price on a relative SSP basis. We recognize revenue when (or as) we satisfy a performance obligation by transferring promised goods or services to a customer. Customers may obtain the control of promised goods or services over time or at a point in time. We enter into a limited number of monetary contracts that involve both the purchase and sale of services with a single counterparty. We assess each contract to determine if the revenue and expense should be presented gross or net. In some instances, we may provide free distinct goods or services as a form of non-cash consideration to the counterparty. We recognize revenue for these contracts to the extent that SSP is established for distinct services provided. Any excess consideration above the established SSP is presented as an offset to cost of revenues in the Consolidated Statements of Operations and Comprehensive Loss. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed when a business is acquired. The valuation of goodwill involves the use of management's estimates and assumptions and can have a significant impact on future operating results. Goodwill is not amortized but is evaluated for impairment at least annually, as of October 1, by comparing the fair value of a reporting unit to its carrying value including goodwill recorded by the reporting unit. We have one reporting unit. As such, we perform the impairment assessment for goodwill at the enterprise level. Goodwill is reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below the carrying value. We initially assess qualitative factors to determine if it is necessary to perform the goodwill impairment review. We review the goodwill for impairment if, based on our assessment of the qualitative factors, we determine that it is more likely than not that the fair value of our reporting unit is less than the carrying value, or if we decide to bypass the qualitative assessment. We review the carrying value of our reporting unit utilizing a combination of the discounted cash flow model and a market value approach. We make assumptions regarding estimated future cash flows, discount rates, long-term growth rates and market values to determine the estimated fair value of our reporting unit. A discounted cash flow analysis requires the use of various assumptions, including; expectations of future cash flows, growth rates, tax rates, and discount rates in developing the present value of projected cash flows. The following assumptions are significant to our discounted cash flow analysis: Projected financial performance: expected future cash flows and growth rates are based upon assumptions of our future revenue growth and operating costs. Actual results of operations and cash flows will likely differ from those utilized in our discounted cash flow analysis, and it is possible that those differences could be material. We monitor for events and circumstances that could negatively impact the key assumptions in determining fair value, including long-term revenue growth projects, profitability, discount rates, volatility in our market capitalization, and general industry, micro and macro-economic conditions. Long-term growth rate: the long-term growth rate represents the rate at which our single reporting unit's earnings are expected to grow or losses to decrease. Our assumed long-term growth rate was based on projected long-term inflation and gross domestic product growth estimates for the countries in which we operate and a long-term growth estimate for our business and the industry in which we operate. The long-term growth rate utilized in the 2020 annual impairment analysis was 3.0%. 51 Table of Conte nt s Discount rate: our reporting unit's future cash flows are discounted at a rate that is consistent with our average weighted cost of capital that is likely to be utilized by market participants. The weighted-average cost of capital is our estimate of the overall returns required by both debt and equity investors, weighted by their respective contributions of capital. We used a discount rate of 13.5% in the 2020 annual impairment analysis. In addition, we also use a market-based approach to estimate the value of our reporting unit, including a guideline public company method and guideline transaction method based on multiples of EBITDA and revenue for the last twelve months. The market value is estimated by comparing our reporting unit to publicly-traded companies and/or to publicly-disclosed business mergers and acquisitions in similar lines of business. The value of the business entity is based on pricing multiples of certain financial parameters observed in the comparable companies. Goodwill allocated to our single reporting unit as of December 31, 2020 was $418.3 million. As of our October 1, 2020 annual assessment, the estimated fair value of our reporting unit exceeded its carrying value by approximately 30%. The projected long-term cash flows used in our fair value estimate are consistent with our most recent operating plan and are dependent on the successful execution of our business plan, overall industry growth rates and the competitive environment. We monitor for events and circumstances that could negatively impact the key assumptions in determining fair value, including long-term growth projections, profitability, discount rates, volatility in our market capitalization, and general industry, market and macro-economic conditions. If the reporting unit's future performance falls below our expectations, or there are negative revisions to other significant assumptions, including the long-term growth rate or discount rate, we may need to record a material, non-cash goodwill impairment charge in a future period. Derivative Financial Instruments We have derivative financial instruments that are not hedges and do not qualify for hedge accounting. Changes in the fair value of these instruments are immediately recorded in other income (expense), net in the Consolidated Statements of Operations and Comprehensive Loss. The fair value of our interest rate reset derivative liability is determined using a with-and-without approach, using a standard binomial tree convertible bond model. The fair value estimate is determined using an estimate for the Company's credit rating, the premium attributable to the payment-in-kind feature of the Notes, and premium estimates for company-specific risk factors (together, the credit adjusted discount rate). The valuation is derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification of the interest rate reset derivative liability as a Level 3 fair value measurement. The fair values of change of control redemption derivative liabilities are determined using a probability adjusted binomial lattice model. The fair value estimates are determined using management's estimate for the probability of change of control, credit adjusted discount rate, risk-free rate, and remaining term of the redemption features. The valuations are derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification of the change of control redemption liabilities as Level 3 fair value measurements. The fair values of our financing derivatives are estimated using forward projections and are discounted back at rates commensurate with the remaining term of the related derivative. The primary sensitivity in the interest rate reset derivative liability is driven by our Common Stock price at the measurement date, the observable volatility of the Common Stock, and the discount rate used to determine the present value of the instrument. The primary sensitivity for the change of control redemption derivative liabilities is driven by the probability of a change of control. Refer to Footnote 6 , Fair Value Measurements for the significant inputs used to determine the fair value of the derivatives as of December 31, 2020. 52 Table of Conte nt s