Item 2. Management’s Discussion and Analysis
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 Condensed Consolidated Financial Statements and the related Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or 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 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" in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 10-K"), under Item 1A , "Risk Factors" in this 10-Q and elsewhere in this 10-Q. See also " Cautionary Note Regarding Forward-Looking Statements " at the beginning of this 10-Q.
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), television ("TV"), over the top devices ("OTT"), 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, content 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 information we analyze crosses geographies, types of content and activities, including websites, mobile and OTT applications ("apps"), video games, television and movie programming, electronic commerce ("e-commerce") and advertising.
Results of Operations
The following table sets forth selected Condensed Consolidated Statements of Operations data as a percentage of total revenues for each of the periods indicated. Percentages may not add due to rounding.
Three Months Ended March 31,
2021 2020
(In thousands) Dollars % of Revenue Dollars % of Revenue
Revenues $ 90,330 100.0 % $ 89,528 100.0 %
Cost of revenues 52,702 58.3 % 45,798 51.2 %
Selling and marketing 17,827 19.7 % 19,213 21.5 %
Research and development 10,353 11.5 % 10,136 11.3 %
General and administrative 14,468 16.0 % 15,543 17.4 %
Amortization of intangible assets 6,439 7.1 % 6,918 7.7 %
Impairment of right-of-use and long-lived assets — — % 4,671 5.2 %
Total expenses from operations 101,789 112.7 % 102,279 114.2 %
Loss from operations (11,459) (12.7) % (12,751) (14.2) %
Loss on extinguishment of debt (9,629) (10.7) % — — %
Other (expense) income, net (8,274) (9.2) % 7,194 8.0 %
Interest expense, net (7,045) (7.8) % (8,846) (9.9) %
Gain from foreign currency transactions 1,074 1.2 % 804 0.9 %
Loss before income taxes (35,333) (39.1) % (13,599) (15.2) %
Income tax (provision) benefit (1,022) (1.1) % 415 0.5 %
Net loss $ (36,355) (40.2) % $ (13,184) (14.7) %
Revenues
Our products and services are organized around solution groups that address customer needs. Accordingly, we evaluate revenue 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
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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 three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(In thousands) 2021 % of Revenue 2020 % of Revenue $ Variance % Variance
Ratings and Planning (1)
$ 65,806 72.9 % $ 63,521 71.0 % $ 2,285 3.6 %
Analytics and Optimization (1)
17,701 19.6 % 15,501 17.3 % 2,200 14.2 %
Movies Reporting and Analytics 6,823 7.5 % 10,506 11.7 % (3,683) (35.1) %
Total revenues $ 90,330 100.0 % $ 89,528 100.0 % $ 802 0.9 %
(1) In the second quarter of 2020, we began classifying revenue from certain new and extended custom agreements for services that utilize our syndicated data set, previously classified under Analytics and Optimization, as Ratings and Planning. The impact was not material to either solution group.
Revenues increased by $0.8 million, or 0.9%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
Ratings and Planning revenue is comprised of revenue from our digital, television, and cross-platform products. Ratings and Planning revenue increased by $2.3 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The increase was driven by higher TV revenue and services related to our international cross-platform offering, partially offset by lower revenue from our syndicated digital products. TV revenues were higher due to new partnerships, increased agency adoption and additional TV data deliveries as part of an expanded relationship with an enterprise customer. We also recorded $2.4 million in revenue for certain cross-platform services delivered in Europe related to the renewal of a multi-year agreement. Syndicated digital revenue was lower primarily due to our smaller and international customers who continue 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 45% and 50% of our Ratings and Planning revenue in the first quarter of 2021 and 2020, respectively.
Analytics and Optimization revenue increased by $2.2 million in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The increase was related to higher deliveries of custom solutions and Activation, which experienced double-digit year-over-year growth as we continued to bring new solutions to market.
Movies Reporting and Analytics revenue decreased by $3.7 million in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Revenue continued to be impacted by theater closures, delayed releases and shifts in consumer behavior as a result of the COVID-19 pandemic. While we expect these factors to continue affecting movies revenue in 2021, revenue is expected to improve through the year as major theater chains reopen both domestically and abroad.
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. These expenses include employee costs for 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 multichannel video programming distributor ("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.
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Cost of revenues for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(In thousands) 2021 % of Revenue 2020 % of Revenue
$ Change % Change
Data costs $ 18,303 20.3 % $ 15,267 17.1 % $ 3,036 19.9 %
Employee costs 10,643 11.8 % 10,280 11.5 % 363 3.5 %
Systems and bandwidth costs 6,835 7.6 % 5,758 6.4 % 1,077 18.7 %
Lease expense and depreciation 4,917 5.4 % 3,947 4.4 % 970 24.6 %
Panel costs 3,913 4.3 % 5,116 5.7 % (1,203) (23.5) %
Sample and survey costs 1,823 2.0 % 1,256 1.4 % 567 45.1 %
Technology 1,511 1.7 % 1,447 1.6 % 64 4.4 %
Professional fees 1,283 1.4 % 1,095 1.2 % 188 17.2 %
Royalties and resellers 425 0.5 % 987 1.1 % (562) (56.9) %
Other 3,049 3.4 % 645 0.7 % 2,404 372.7 %
Total cost of revenues $ 52,702 58.3 % $ 45,798 51.2 % $ 6,904 15.1 %
Cost of revenues increased $6.9 million, or 15.1%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Data costs increased by $3.0 million primarily due to new data licensing costs to increase our data footprint and data rights. Other expenses increased by $2.4 million primarily related to license costs associated with the delivery of our cross-platform products in Europe in connection with the multi-year agreement described above. Systems and bandwidth costs increased $1.1 million primarily due to increases in cloud-based data storage and bandwidth capacity. Offsetting these increases were lower panel costs primarily due to lower recruitment and support costs for our mobile panels, and lower royalty and reseller costs due to fewer sales of certain revenue-sharing products.
Selling and Marketing
Selling and marketing expenses consist primarily of employee costs for salaries, benefits, commissions, stock-based compensation and other related costs for personnel associated with sales and marketing activities. It also includes 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 lease expense and other facilities-related costs, and depreciation expense generated by general purpose equipment and software.
Selling and marketing expenses for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(In thousands) 2021 % of Revenue 2020 % of Revenue $ Change % Change
Employee costs $ 15,284 16.9 % $ 15,160 16.9 % $ 124 0.8 %
Lease expense and depreciation 1,041 1.2 % 1,387 1.5 % (346) (24.9) %
Professional fees 473 0.5 % 706 0.8 % (233) (33.0) %
Travel 28 — % 622 0.7 % (594) (95.5) %
Other 1,001 1.1 % 1,338 1.5 % (337) (25.2) %
Total selling and marketing expenses $ 17,827 19.7 % $ 19,213 21.5 % $ (1,386) (7.2) %
Selling and marketing expenses decreased by $1.4 million, or 7.2%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Travel costs decreased $0.6 million primarily due to reduced travel resulting from the COVID-19 pandemic. Lease and depreciation expense decreased $0.3 million primarily due to decreased rent as we reduced and sublet various locations throughout 2020.
Research and Development
Research and development expenses include product development costs, consisting primarily of employee costs for 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.
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Research and development expenses for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(In thousands) 2021 % of Revenue 2020 % of Revenue $ Change % Change
Employee costs $ 7,795 8.6 % $ 7,274 8.1 % $ 521 7.2 %
Technology 1,133 1.3 % 1,077 1.2 % 56 5.2 %
Lease expense and depreciation 859 1.0 % 1,189 1.3 % (330) (27.8) %
Professional fees 401 0.4 % 389 0.4 % 12 3.1 %
Other 165 0.2 % 207 0.2 % (42) (20.3) %
Total research and development expenses $ 10,353 11.5 % $ 10,136 11.3 % $ 217 2.1 %
Research and development expenses increased by $0.2 million, or 2.1%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Employee costs increased $0.5 million primarily due to increased employee equity awards in 2021 compared to 2020. These increases were partially offset by reduced lease and depreciation expense due to decreased rent as we reduced and sublet various locations throughout 2020.
General and Administrative
General and administrative expenses consist primarily of employee costs for 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, Board compensation and expenses incurred for other general corporate purposes.
General and administrative expenses for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(In thousands) 2021 % of Revenue 2020 % of Revenue $ Change % Change
Employee costs $ 8,298 9.2 % $ 6,564 7.3 % $ 1,734 26.4 %
Professional fees 2,989 3.3 % 4,611 5.2 % (1,622) (35.2) %
Lease expense and depreciation 474 0.5 % 586 0.7 % (112) (19.1) %
Other 2,707 3.0 % 3,782 4.2 % (1,075) (28.4) %
Total general and administrative expenses $ 14,468 16.0 % $ 15,543 17.4 % $ (1,075) (6.9) %
General and administrative expenses decreased by $1.1 million, or 6.9%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Professional fees decreased $1.6 million primarily due to reduced legal and consulting fees in 2021 as compared to 2020. Other expenses decreased $1.1 million primarily due to lower bad debt expense in 2021 as the allowance increased in the first quarter of 2020 as a result of the COVID-19 pandemic. These decreases were offset by an increase in employee costs of $1.7 million primarily due to increased equity awards and other compensation.
Impairment of Right-of-use and Long-lived Assets
In the first quarter of 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.
Loss on Extinguishment of Debt
Loss on extinguishment of debt represents the difference between the carrying value of our debt instruments and any consideration paid to our creditors in the form of cash or shares of our Common Stock on the extinguishment date.
In the first quarter of 2021, we recorded a $9.6 million loss on debt extinguishment related to the payoff of the senior secured convertible notes (the "Notes") and the secured promissory note (the "Secured Term Note") on March 10, 2021. The primary drivers of the extinguishment loss are the write-off of unamortized deferred financing costs and issuance discounts, the issuance of additional shares of Common Stock in connection with the extinguishment, and the derecognition of the interest rate reset derivative liability on the Notes. These components are described in Footnote 4 , Debt .
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Other (Expense) Income, Net
Other (expense) income, net represents income and expenses incurred that are generally not recurring in nature or are not part of our regular operations. The following is a summary of other (expense) income, net for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
(In thousands) 2021 2020
Change in fair value of financing derivatives $ 1,800 $ 2,387
Change in fair value of warrants liability (10,001) 4,651
Other (73) 156
Total other (expense) income, net
$ (8,274) $ 7,194
Other (expense) income, net for the three months ended March 31, 2021 was largely driven by a loss from change in fair value of our warrants liability related primarily to the exercise price adjustment described in Footnote 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity , offset by a gain from the change in fair value of our financing derivatives. Other income, net for the three months ended March 31, 2020 primarily related to gains from the changes in fair value of our financing derivatives and warrants liability.
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. Interest expense relates to interest on our Notes, Secured Term Note and our finance leases.
During the three months ended March 31, 2021 and 2020, we incurred interest expense, net of $7.0 million and $8.8 million, respectively. The decrease in interest expense in the first quarter of 2021 compared to 2020 was primarily due to the extinguishment of the Notes and the Secured Term Note in March 2021 as described in Footnote 4 , Debt.
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. Our international currency exposures that relate to the translation to U.S. Dollars are in a net liability position and our international currency exposures that relate to the translation from U.S. Dollars are in a net asset position. For the three months ended March 31, 2021 and 2020, the gain from foreign currency transactions was $1.1 million and $0.8 million, respectively. The gains in both periods were primarily driven by fluctuations in the Chilean Peso against the U.S. Dollar and Euro and the U.S. Dollar against the Euro and Canadian Dollar exchange rates.
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 and U.S. deferred taxes for tax deductible goodwill and other indefinite-lived liabilities.
During the three months ended March 31, 2021, and 2020, we recorded an income tax (provision) benefit of $(1.0) million, and $0.4 million, respectively, resulting in an effective tax rate of 2.9% and (3.1)%. 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. The increase in the tax provision during the first quarter of 2021 as compared to 2020 was primarily due to an increase in U.S. deferred tax expense for tax deductible goodwill and an increase in estimated foreign tax expense in 2021.
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 continue to evaluate new legislation as it is introduced, but none of these measures had an impact on our income tax (provision) benefit for the three months ended March 31, 2021.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, refer to Footnote 2 , Summary of Significant Accounting Policies .
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Liquidity and Capital Resources
The following table summarizes our cash flows for each of the periods identified:
Three Months Ended March 31,
(In thousands) 2021 2020
Net cash provided by (used in) operating activities $ 17,888 $ (4,781)
Net cash used in investing activities (3,692) (3,917)
Net cash used in financing activities (30,477) (549)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (588) (927)
Net decrease in cash, cash equivalents and restricted cash (16,869) (10,174)
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 (and, beginning in 2021, our dividend payment obligations).
As of March 31, 2021, our principal sources of liquidity consisted of cash, cash equivalents and restricted cash totaling $33.9 million, including $4.8 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 and interest payments on our Notes and Secured Term Note, as well as the scheduled maturity of the Notes in January 2022, resulted in a need to secure long-term financing to extinguish the Notes and increase working capital.
In March 2021, we entered into separate Securities Purchase Agreements with each of Charter Communications Holding Company, LLC ("Charter"), Qurate Retail, Inc. ("Qurate") and Pine Investor, LLC ("Pine") (the "Transactions"). At the closing of the Transactions, we issued and sold (a) to Charter, 27,509,203 shares of Series B Convertible Preferred Stock ("Preferred Stock") in exchange for $68.0 million, (b) to Qurate, 27,509,203 shares of Preferred Stock in exchange for $68.0 million and (c) to Pine, 27,509,203 shares of Preferred Stock in exchange for $68.0 million.
The proceeds from the Transactions were used to repay the Notes. See "Senior Secured Convertible Notes" below. In connection with the closing, we also repaid the Secured Term Note and certain transaction-related expenses with cash from our balance sheet. See "Secured Term Note" below. For additional information on the Transactions and related debt extinguishments, refer to Footnote 4 , Debt and Footnote 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity.
Pandemic Impact
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 revenue and cash flows, particularly in our Movies Reporting and Analytics business, and could continue to have an impact in future periods.
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 have taken actions 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 if customer demand or cash collection efforts are further impacted by the COVID-19 pandemic or other factors.
Preferred Stock
On March 10, 2021, in connection with the Securities Purchase Agreements described above, we issued 82,527,609 shares of Preferred Stock in exchange for gross cash proceeds of $204.0 million. The shares were issued at a par value of $0.001. Net proceeds from the Transactions totaled $188.2 million after deducting issuance costs. Shares of Preferred Stock are convertible into Common Stock as described in Footno t e 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity . As of March 31, 2021, each share of Preferred Stock was convertible into 1.005 shares of Common Stock.
The holders of Preferred Stock are entitled to participate in all dividends declared on the Common Stock on an as-converted basis and are also entitled to a cumulative dividend at the rate of 7.5% per annum, payable annually in arrears and subject to increase under certain specified circumstances. In addition, after January 1, 2022, such holders are entitled to request, and we must take all actions reasonably necessary to pay, a one-time special dividend on the Preferred Stock equal to the highest dividend that our Board of Directors determines can be paid at the applicable time (or a lesser amount agreed by the holders), subject to additional conditions and limitations described in Footnote 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity . We may be obligated to obtain
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debt financing in order to effectuate the special dividend, which could significantly impact our financial position and liquidity depending on the timing and scope of the dividend payment and related financing.
Revolving Credit Agreement
On May 5, 2021, we entered into a senior secured revolving credit agreement (the "Revolving Credit Agreement") among the Company, as borrower, certain subsidiaries of the Company as guarantors, Bank of America N.A., as administrative agent, and the lenders from time to time party thereto. The Revolving Credit Agreement has a maturity of three years from the closing date of the agreement.
The Revolving Credit Agreement provides a borrowing capacity equal to $25.0 million. We may also request the issuance of letters of credit under the Revolving Credit Agreement in an aggregate amount up to $5.0 million, which reduces the amount of available borrowings by the amount of such issued and outstanding letters of credit. The amount we are able to borrow is subject to compliance with the financial covenants, satisfaction of various conditions precedent to borrowing and other provisions of the Revolving Credit Agreement.
We do not have any borrowings or letters of credit outstanding under the Revolving Credit Agreement.
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 and the adjustment to the exercise price of our Series A Warrants in connection with the Transactions (which adjustment could reduce the cash proceeds we receive upon exercise of the Series A Warrants), refer to Footnote 5 , Convertible Redeemable Preferred Stock and Stockholders' Equity .
Senior Secured Convertible Notes
On January 16, 2018, we entered into certain agreements with funds affiliated with or managed by Starboard Value LP (collectively "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. 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 proceeds from the Transactions were used to repay the Notes issued to Starboard, resulting in termination of related covenants under the Notes, including limitations on indebtedness and liens and maintenance of certain minimum cash balances that had limited our financial flexibility in prior periods.
For additional information on 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 had an annual interest rate of 9.75% payable monthly in cash. In connection with the Transactions, we repaid the Secured Term Note and certain transaction-related expenses with cash from our balance sheet.
For additional information on the Secured Term Note, refer to Footnote 4 , Debt .
Restricted Cash
Restricted cash represents outstanding letters of credit, and lines of credit related to certain of our corporate credit card programs. As of December 31, 2020, restricted cash also represented our requirement to collateralize the Secured Term Note. As of March 31, 2021 and December 31, 2020, we had $4.8 million and $19.6 million of restricted cash, respectively. Repayment of the Secured Term Note resulted in the termination of the collateralization requirement thereunder, and no cash was restricted relating to the Secured Term Note as of March 31, 2021.
Operating Activities
Our primary source of cash provided by operating activities is revenues generated from sales of our 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.
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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 for the three months ended March 31, 2021 was $17.9 million compared to net cash used of $4.8 million for the three months ended March 31, 2020. The shift in cash was primarily attributable to a decrease in the cash interest paid on the Notes in 2021 of $6.1 million (which interest was instead paid in shares of Common Stock), as well as a net increase in operating assets and liabilities of $11.9 million for the three months ended March 31, 2021 as compared to a net decrease of $6.6 million for the three months ended March 31, 2020. The shift from a net decrease in operating assets and liabilities to a net increase was primarily due to increases in our accounts payable and accrual balances in 2021 compared to 2020, due in part to new licensing costs to increase our data footprint and data rights as well as the timing of certain employee compensation.
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 for the three months ended March 31, 2021 was $3.7 million compared to net cash used in investing activities of $3.9 million for the three months ended March 31, 2020. This decrease in cash used in investing activities was primarily attributable to a decrease in payments for capitalized internally developed software in 2021 compared with 2020.
Financing Activities
Net cash used in financing activities during the three months ended March 31, 2021 was $30.5 million compared to net cash used in financing activities of $0.5 million during the three months ended March 31, 2020. The increase in cash used in financing activities was primarily due to the repayment of the Notes and the Secured Term Note in March 2021, offset by cash proceeds of $204.0 million from the issuance of Preferred Stock discussed above, netted by $15.8 million of related transaction costs.
Contractual Payment Obligations
We have certain long-term contractual arrangements that have fixed and determinable payment obligations including unconditional purchase obligations with MVPDs, operating and financing leases, and data storage and bandwidth arrangements.
We have data licensing agreements with a number of MVPDs for set-top box data. These agreements have remaining terms from one to ten years. As of March 31, 2021, the total fixed payment obligation related to these agreements is $396.3 million.
We have both operating and financing leases related to corporate office space and equipment. Our leases have remaining terms from one to seven years. As of March 31, 2021, the total fixed payment obligation related to these agreements is $67.3 million.
We have an agreement for cloud-based data storage and bandwidth to help process and store our data. The remaining term for this agreement is three years. As of March 31, 2021, the total fixed payment obligation related to this agreement is $26.8 million.
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 and dividend payment obligations, 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. To the extent that our existing cash, cash equivalents and operating cash flow, together with savings from repayment of the Notes and Secured Term Note and cost-reduction initiatives undertaken by our 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. We may also be required to raise additional funds in order to pay a special dividend to holders of our Preferred Stock, as described above. Our history of net losses, as well as 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 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).
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Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported in our Condensed Consolidated Financial Statements and the accompanying Notes to Condensed 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 (with respect to the three months ended March 31, 2021) the ongoing and potential impacts of the COVID-19 pandemic and related government mandates and restrictions. Actual results may differ from these estimates.
Our critical accounting policies are those that are both material to the presentation of our financial condition and results of operations and require management's most subjective and complex judgments. Other than our accounting policies related to the accounting for the Preferred Stock, and application of Accounting Standards Codification ("ASC") 470, Debt related to extinguishment of the Notes and Secured Term Note, there have been no material changes or updates to our critical accounting policies and estimates during the three months ended March 31, 2021 as compared to the critical accounting policies and estimates disclosed in our 2020 10-K .
Preferred Stock
On March 10, 2021, in connection with the Transactions described above, we issued 82,527,609 shares of Preferred Stock in exchange for gross cash proceeds of $204.0 million. The shares were issued at a par value of $0.001. Net proceeds from the transaction totaled $188.2 million after deducting issuance costs.
The Preferred Stock is contingently redeemable upon certain deemed liquidation events, such as a change in control. Because a deemed liquidation event could constitute a redemption event outside of our control, all shares of Preferred Stock have been presented outside of permanent equity in mezzanine equity on the Condensed Consolidated Balance Sheets. The instrument is initially recognized at fair value net of issuance costs. We reassess whether the Preferred Stock is currently redeemable, or probable to become redeemable in the future, as of each reporting date. If the instrument meets either of these criteria, we will accrete the carrying value to the redemption value. The Preferred Stock has not been adjusted to its redemption amount as a deemed liquidation event is not considered probable.
All financial instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g. more equity-like or debt-like). Features identified as embedded derivatives that are material are recognized separately as a derivative asset or liability in the consolidated financial statements.
Effective January 1, 2021, we early-adopted Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40). This ASU simplifies accounting for convertible instruments, enhances disclosure requirements related to the terms and features of convertible instruments, and amends the guidance for the derivatives scope exception for contracts settled in an entity's own equity. This ASU removes from GAAP the separation models for (1) convertible debt with a Cash Conversion Feature and (2) convertible instruments with a Beneficial Conversion Feature. Upon adoption of this new ASU, entities will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock, unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815, or (2) a convertible debt instrument was issued at a substantial premium.
As a result of the adoption, no embedded features were identified requiring bifurcation under the new model, other than the change of control redemption feature. We adopted the standard using the modified retrospective approach. The standard had no impact on the Notes and, as a result, there was no cumulative adjustment recorded upon adoption.
Loss on Extinguishment of Debt
We apply the provisions of ASC 470, Debt , to determine whether amendments to, or repayments of, our debt agreements should be accounted for as a modification or extinguishment event. Loss on extinguishment of debt represents the difference between the carrying value of our debt instruments and any consideration paid to our creditors in the form of cash or shares of our Common Stock on the extinguishment date.
In the three months ended March 31, 2021, we recorded a $9.6 million loss on debt extinguishment related to the payoff of the Notes and the Secured Term Note on March 10, 2021. These transactions are described in Footnote 4 , Debt .
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