COMSCORE, INC. 10-Q

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, 2023 (the "2023 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), TV, 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, connected TV (CTV) devices and movie theaters. The information we analyze crosses geographies, types of content and activities, including websites, mobile and over-the-top applications, video games, television and movie programming, e-commerce and advertising. Results of Operations The following table sets forth selected Condensed Consolidated Statements of Operations and Comprehensive Loss data as a percentage of revenues for each of the periods indicated. Percentages may not add due to rounding. Three Months Ended March 31, 2024 2023 (In thousands) Dollars % of Revenue Dollars % of Revenue Revenues $ 86,795 100.0 % $ 91,558 100.0 % Cost of revenues 50,067 57.7 % 51,929 56.7 % Selling and marketing 15,364 17.7 % 17,154 18.7 % Research and development 8,767 10.1 % 8,919 9.7 % General and administrative 13,213 15.2 % 13,574 14.8 % Amortization of intangible assets 801 0.9 % 2,811 3.1 % Restructuring 460 0.5 % 998 1.1 % Total expenses from operations 88,672 102.2 % 95,385 104.2 % Loss from operations (1,877) (2.2) % (3,827) (4.2) % Other income (expense), net 275 0.3 % (1,812) (2.0) % Gain (loss) from foreign currency transactions 963 1.1 % (1,466) (1.6) % Interest expense, net (572) (0.7) % (352) (0.4) % Loss before income taxes (1,211) (1.4) % (7,457) (8.1) % Income tax benefit (provision) 157 0.2 % (1,214) (1.3) % Net loss $ (1,054) (1.2) % $ (8,671) (9.5) % 15 Table of Contents Revenues In the first quarter of 2024, we decided to evaluate revenue results using solution groups that better represent our evolving business and customer needs, which are largely centered around measurement and insights. Beginning with the first quarter of 2024, we are presenting revenues in the following two solution groups: • Content & Ad Measurement represents the measurement portion of our business - measuring audiences across content and advertisements for linear TV, CTV, desktops, laptops, tablets and mobile devices. Product offerings reported in this solution group include our legacy subscription-based syndicated offerings that measure audiences for linear TV (national and local), digital and streaming, as well as theatrical box office receipts. Also included in this solution group are our transaction-based cross-platform products, Proximic by Comscore ("Proximic"), our Activation solution suite, and Comscore Campaign Ratings ("CCR"). These syndicated and cross-platform products are used as currency to plan and execute ad campaigns, measure the outcome of ad campaigns, optimize ad campaigns that are in-flight, activate programmatic campaigns, and make content easier for programmatic advertisers to reach. • Research & Insight Solutions represents the custom solutions we provide that are tailored to our clients' specific needs. These offerings include custom TV, digital and cross-platform data feeds, as well as other data integrations. They also include our survey business, our Consumer Brand Health business, and other bespoke research, data and insight deliverables that help our clients better understand their business, competitive landscape, clients and market. We categorize our revenue along these two 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, 2024 and 2023 were as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Variance % Variance Content & Ad Measurement Syndicated Audience $ 64,600 74.4 % $ 70,466 77.0 % $ (5,866) (8.3) % Cross-Platform 8,020 9.3 % 6,245 6.8 % 1,775 28.4 % Total Content & Ad measurement 72,620 83.7 % 76,711 83.8 % (4,091) (5.3) % Research & Insight Solutions 14,175 16.3 % 14,847 16.2 % (672) (4.5) % Total revenues $ 86,795 100.0 % $ 91,558 100.0 % $ (4,763) (5.2) % Content & Ad Measurement revenue decreased due to lower revenue from our Syndicated Audience offerings, primarily related to lower renewals of our national TV and syndicated digital products, as well as lower variable cloud computing and processing reimbursements for certain custom TV data set deliveries. This decrease was partially offset by an increase in cross-platform revenue primarily driven by increased usage of our Proximic and CCR products. Research & Insight Solutions revenue decreased primarily due to lower deliveries of certain custom digital products. As discussed above, we changed the way we evaluate and present our revenues beginning in the first quarter of 2024. Prior to this change, through the fourth quarter of 2023, our products and services were organized in two different solution groups, as follows: • Digital Ad Solutions provided measurement of the behavior and characteristics of audiences across digital platforms, including computers, tablets, mobile and other connected devices. This solution group also included custom offerings that provided end-to-end solutions for planning, optimization and evaluation of advertising campaigns and brand protection across digital platforms, including transactional outcome-based measurement driven by our Activation and CCR products. • Cross Platform Solutions provided measurement of content and advertising audiences across local, national and addressable television, including consumption through connected (Smart) televisions, and were designed to help customers find the most relevant viewing audience whether that viewing was linear, non-linear, online or on-demand. This solution group also included custom offerings that provided end-to-end solutions for planning, optimization and evaluation of advertising campaigns across platforms. In addition, this solution group included products that measured movie viewership and box office results by capturing movie ticket sales in real time or near real time and included box office analytics, trend analysis and insights for movie studios and movie theater operators worldwide. Revenues for the three months ended March 31, 2024 and 2023 based on the old solution groups would have been as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Variance % Variance Digital Ad Solutions $ 49,667 57.2 % $ 50,447 55.1 % $ (780) (1.5) % Cross Platform Solutions 37,128 42.8 % 41,111 44.9 % (3,983) (9.7) % Total revenues $ 86,795 100.0 % $ 91,558 100.0 % $ (4,763) (5.2) % 16 Table of Contents 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 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, which is comprised of lease expense and other facilities-related costs, and depreciation expense generated by general purpose equipment and software. Cost of revenues for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Change % Change Data costs $ 18,787 21.6 % $ 18,129 19.8 % $ 658 3.6 % Employee costs 9,895 11.4 % 9,706 10.6 % 189 1.9 % Systems and bandwidth costs 6,781 7.8 % 8,877 9.7 % (2,096) (23.6) % Lease expense and depreciation 6,099 7.0 % 5,518 6.0 % 581 10.5 % Panel costs 3,037 3.5 % 3,922 4.3 % (885) (22.6) % Sample and survey costs 1,740 2.0 % 1,580 1.7 % 160 10.1 % Professional fees 1,257 1.4 % 1,858 2.0 % (601) (32.3) % Royalties and resellers 1,203 1.4 % 970 1.1 % 233 24.0 % Technology 1,035 1.2 % 1,078 1.2 % (43) (4.0) % Other 233 0.3 % 291 0.3 % (58) (19.9) % Total cost of revenues $ 50,067 57.7 % $ 51,929 56.7 % $ (1,862) (3.6) % Systems and bandwidth costs decreased primarily due to lower cloud computing and processing costs attributable to certain custom TV data set deliveries. 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, as well as costs related to online and offline advertising, industry conferences, promotional materials, public relations, other sales and marketing programs and allocated overhead, which is comprised of 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, 2024 and 2023 were as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Change % Change Employee costs $ 11,928 13.7 % $ 13,847 15.1 % $ (1,919) (13.9) % Marketing and advertising 847 1.0 % 466 0.5 % 381 81.8 % Technology 794 0.9 % 778 0.8 % 16 2.1 % Professional fees 697 0.8 % 788 0.9 % (91) (11.5) % Lease expense and depreciation 690 0.8 % 845 0.9 % (155) (18.3) % Other 408 0.5 % 430 0.5 % (22) (5.1) % Total selling and marketing expenses $ 15,364 17.7 % $ 17,154 18.7 % $ (1,790) (10.4) % Employee costs decreased primarily due to a decrease in employee headcount, related to our restructuring plan. 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. 17 Table of Contents Research and development expenses for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Change % Change Employee costs $ 6,751 7.8 % $ 6,984 7.5 % $ (233) (3.3) % Technology 790 0.9 % 881 1.0 % (91) (10.3) % Lease expense and depreciation 599 0.7 % 639 0.7 % (40) (6.3) % Professional fees 526 0.6 % 256 0.3 % 270 105.5 % Other 101 0.1 % 159 0.2 % (58) (36.5) % Total research and development expenses $ 8,767 10.1 % $ 8,919 9.7 % $ (152) (1.7) % 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, amortization of cloud-computing implementation costs, changes in the fair value of our contingent consideration liability, Board of Directors compensation and expenses incurred for other general corporate purposes. General and administrative expenses for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, (In thousands) 2024 % of Revenue 2023 % of Revenue $ Change % Change Employee costs $ 6,415 7.4 % $ 7,236 7.9 % $ (821) (11.3) % Professional fees 3,947 4.5 % 3,810 4.2 % 137 3.6 % Technology 857 1.0 % 863 0.9 % (6) (0.7) % Lease expense and depreciation 350 0.4 % 368 0.4 % (18) (4.9) % Other 1,644 1.9 % 1,297 1.4 % 347 26.8 % Total general and administrative expenses $ 13,213 15.2 % $ 13,574 14.8 % $ (361) (2.7) % Amortization of Intangibles Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions. Amortization of intangible assets was $0.8 million and $2.8 million during the three months ended March 31, 2024 and 2023, respectively. The decrease of $2.0 million was primarily due to amortization related to certain customer relationships, methodologies and technology intangibles related to our 2016 Rentrak merger reaching the end of their useful lives in 2023. Organizational Restructuring We incurred $0.5 million and $1.0 million of restructuring expenses during the three months ended March 31, 2024 and 2023, respectively, related to the implementation of a restructuring plan that included a workforce reduction communicated in 2022. We expect the 2022 restructuring plan to be substantially complete in 2024. For further information refer to Footnote 9 , Organizational Restructuring . 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 regular operations. The following is a summary of other income (expense), net for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, (In thousands) 2024 2023 Change in fair value of warrants liability $ 286 $ (1,815) Other (11) 3 Total other income (expense), net $ 275 $ (1,812) The change in other income (expense), net for the three months ended March 31, 2024 as compared to 2023 was largely driven by changes in the fair value of our warrants liability. The gain on the warrants liability for the three months ended March 31, 2024 was primarily due to a decrease in the trading price of our Common Stock during the quarter. The loss on the warrants liability for the three months ended March 31, 2023 was primarily due to the exercise price adjustment described in Footnote 4 , Convertible Redeemable Preferred Stock and Stockholders' Equity and an increase in the trading price of our Common Stock during the quarter. 18 Table of Contents Gain (Loss) 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 foreign currency exposures that relate to the translation to U.S. Dollars are in a net liability position and our foreign currency exposures that relate to the translation from U.S. Dollars are in a net asset position. For the three months ended March 31, 2024, the gain from foreign currency transactions was $1.0 million. For the three months ended March 31, 2023, the loss from foreign currency transactions was $1.5 million. The gain during the three months ended March 31, 2024 was primarily driven by fluctuations between the Chilean Peso, U.S. Dollar and Euro exchange rates. The loss during the three months ended March 31, 2023 was primarily driven by fluctuations between the Euro, Chilean Peso and U.S. Dollar exchange rates. 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 senior secured revolving credit agreement (the "Revolving Credit Agreement") and our finance leases. We incurred interest expense, net of $0.6 million and $0.4 million during the three months ended March 31, 2024 and 2023, respectively. Income Tax Benefit (Provision) 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. For the three months ended March 31, 2024 and 2023, we recorded an income tax benefit of $0.2 million and an income tax provision of $1.2 million, respectively, resulting in effective tax rates of 13.0% and 16.3%, 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 changes in the valuation allowance against our domestic deferred tax assets. Liquidity and Capital Resources The following table summarizes our cash flows for each of the periods identified: Three Months Ended March 31, (In thousands) 2024 2023 Net cash provided by operating activities $ 6,868 $ 7,251 Net cash used in investing activities (6,096) (5,832) Net cash used in financing activities (4,407) (1,656) Effect of exchange rate changes on cash, cash equivalents and restricted cash (384) 467 Net (decrease) increase in cash, cash equivalents and restricted cash (4,019) 230 Overview Our principal uses of cash consist of cash paid for data, payroll and other operating expenses, including expenses incurred in prior periods; 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; service of our debt and lease facilities; and deferred payment obligations with respect to our 2021 acquisition of Shareablee. As of March 31, 2024, our principal sources of liquidity consisted of cash, cash equivalents and restricted cash totaling $18.9 million (including $0.2 million in restricted cash), cash flows from our operations, and amounts available to us under our Revolving Credit Agreement, as described below. We had outstanding borrowings of $16.0 million and issued and outstanding letters of credit of $3.2 million under the Revolving Credit Agreement as of March 31, 2024. On May 3, 2024, we entered into an amendment to the Revolving Credit Agreement. Among other things, the amendment extended the maturity date of the facility from May 5, 2024 to November 5, 2024 and reduced our aggregate borrowing capacity under the Revolving Credit Agreement from $40.0 million to $25.0 million. The amendment also limited our ability to make certain restricted payments (including dividends) with respect to our equity interests and required a repayment of $6.0 million to reduce the principal amount outstanding under the Revolving Credit Agreement. As of May 3, 2024, after taking into account the $6.0 million repayment, we had borrowings of $10.0 million and letters of credit totaling $3.2 million outstanding under the Revolving Credit Agreement. At an annual meeting of stockholders held on June 15, 2023 (the "Annual Meeting"), our stockholders approved proposals permitting the payment of annual dividends on the Preferred Stock in the form of cash, shares of Common Stock, additional shares of Preferred Stock, or a combination thereof, subject to conditions set forth in the Certificate of Designations governing the Preferred Stock. In 2023, each holder of Preferred Stock waived its right to receive on June 30, 2023 (and subsequently on December 31, 2023) the annual dividends otherwise payable by us on that date. Pursuant to these waivers and the Certificate of Designations, the deferred dividends will continue to accrue and accumulate at 19 Table of Contents a rate of 9.5% per year until declared and paid, with payment to occur on or before June 30, 2024. As of March 31, 2024, accrued dividends for the Preferred Stock totaled $28.4 million. Macroeconomic Factors Over the past two years, macroeconomic challenges such as inflation, rising interest rates, capital market disruptions and recession concerns have caused some advertisers to reduce or delay advertising expenditures. These declines have had a direct impact on demand for our products, particularly those that are tied to discretionary advertising spend. We expect that softness in the advertising market will continue to affect our business in 2024. Although we cannot quantify the impact of macroeconomic factors on our future results, any worsening of ad market conditions could negatively impact our financial position and liquidity. Preferred Stock On March 10, 2021, we issued 82,527,609 shares of Preferred Stock in exchange for gross cash proceeds of $204.0 million. Net proceeds from the issuance totaled $187.9 million after deducting issuance costs. Shares of Preferred Stock are convertible into Common Stock as described in Footnote 4 , Convertible Redeemable Preferred Stock and Stockholders' Equity . As of March 31, 2024, each share of Preferred Stock was convertible into 0.056954 shares of Common Stock, with such conversion rate scheduled to return to 0.05 upon payment of accrued dividends. 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 (including in connection with the 2023 dividend waivers described below). In addition, 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 4 , Convertible Redeemable Preferred Stock and Stockholders' Equity . We may be obligated to obtain 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. Moreover, this obligation could lead us to refinance or terminate the Revolving Credit Agreement prior to its maturity, due to its restrictions on our ability to incur additional debt and pay dividends. At the Annual Meeting held on June 15, 2023, our stockholders approved proposals permitting the payment of annual dividends on the Preferred Stock in the form of cash, shares of Common Stock, additional shares of Preferred Stock, or a combination thereof, subject to conditions set forth in the Certificate of Designations governing the Preferred Stock. On the same date, each holder of Preferred Stock waived its right to receive on June 30, 2023 the annual dividends otherwise payable by us on that date. Upon receipt of the waivers, our Board unanimously agreed to defer the June 2023 payment in order to provide flexibility to our management team to continue to execute our strategic plan and consider dividend payment options later in the year. Under the waivers and the Certificate of Designations, the deferred dividends would accrue and accumulate at a rate of 9.5% per year from June 30, 2023 until declared and paid, with payment to occur on or before December 31, 2023. On December 26, 2023, at our request, each holder of our Preferred Stock waived its right to receive the deferred dividends on or before December 31, 2023. Under these most recent waivers and the Certificate of Designations, the deferred dividends will continue to accrue at a rate of 9.5% per year until paid, with payment to occur on or before June 30, 2024, subject to certain conditions. Payment of annual dividends (including deferred dividends) in the form of cash could significantly impact our financial position and liquidity, including by requiring us to refinance or terminate the Revolving Credit Agreement. Revolving Credit Agreement On May 5, 2021, we entered into the Revolving Credit Agreement, which matures in November 2024. The Revolving Credit Agreement provides a borrowing capacity equal to $25.0 million, which was reduced from $40.0 million on May 3, 2024. 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 under the Revolving Credit Agreement is subject to compliance with the financial covenants, satisfaction of various conditions precedent to borrowing and other provisions of the Revolving Credit Agreement. Notably, the Revolving Credit Agreement contains financial covenants that require us to maintain a minimum Consolidated Fixed Charge Coverage Ratio, a minimum Consolidated Asset Coverage Ratio and minimum Liquidity through maturity (each term as defined in the Revolving Credit Agreement). As of March 31, 2024, we were in compliance with our covenants under the Revolving Credit Agreement, and based on our current plans, we do not anticipate a breach of these covenants that would result in an event of default under the Revolving Credit Agreement. As of March 31, 2024, we had outstanding borrowings of $16.0 million and outstanding letters of credit totaling $3.2 million under the Revolving Credit Agreement. On May 3, 2024, we entered into an amendment to the Revolving Credit Agreement that, among other things, (i) extended the maturity date of the facility from May 5, 2024 to November 5, 2024; (ii) reduced our borrowing capacity from $40.0 million to $25.0 million; (iii) increased the Applicable Rate payable on SOFR-based loans to 4.50%; (iv) increased the minimum Consolidated Asset Coverage Ratio covenant and decreased the minimum Liquidity covenant; (v) limited certain restricted payments (including dividends) with respect to our equity interests; (vi) required a repayment of $6.0 million to reduce the principal amount outstanding under the facility; and (vii) provided for certain amendment fees, including a fee of 2.0% of aggregate commitments due on the maturity date unless all obligations are paid in full prior to such date. As of May 3, 2024, following the $6.0 million repayment described above, we had borrowings of $10.0 million and 20 Table of Contents letters of credit totaling $3.2 million outstanding under the Revolving Credit Agreement, leaving a remaining borrowing capacity of $11.8 million . The borrowed funds were used to reduce our accounts payable balances, primarily related to expenses incurred in prior periods, and support our working capital position. While we continue to take steps to reduce our outstanding trade payables and improve our working capital position, our liquidity could be negatively affected if we are unable to generate sufficient cash from operations to satisfy outstanding payables and meet our other financial obligations as they come due. Our liquidity could also be negatively affected if we are unable to repay or refinance our outstanding borrowings under the Revolving Credit Agreement upon its maturity in November 2024. For additional information on the Revolving Credit Agreement, refer to Footnote 5 , Debt . 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) 136,425 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 582,701 shares of Common Stock (the "Private Placement"). On October 14, 2019, we issued 136,425 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 136,425. On January 29, 2020, the Series B-1 Warrants expired unexercised. On August 3, 2020, the Series B-2 Warrants expired unexercised. The exercise price of our Series A warrants was adjusted in connection with the Preferred Stock transactions in March 2021 and further adjusted in connection with shares issued to non-executive employees under our annual incentive compensation plan in March 2023 and March 2024. For additional information on the Private Placement and the adjustments to our Series A Warrants (which adjustments could reduce the cash proceeds we receive upon exercise of the Series A Warrants), refer to Footnote 4 , Convertible Redeemable Preferred Stock and Stockholders' Equity. 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. Cash provided by 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, stock-based compensation, non-cash operating lease expense, amortization expense of intangible assets and finance leases, deferred tax benefit or provision and change in the fair value of contingent consideration and warrants liability. Net cash provided by operating activities for the three months ended March 31, 2024 was $6.9 million compared to $7.3 million for the three months ended March 31, 2023. The decrease in cash provided by operating activities was primarily attributable to lower contract liability and customer advances than in the prior year and the timing of prepaid expenses and other assets. 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 due to our financial position and the current economic environment. Net cash used in investing activities for the three months ended March 31, 2024 was $6.1 million compared to $5.8 million for the three months ended March 31, 2023. The increase in cash used in investing activities was primarily due to an increase in cash paid for capitalized internally developed software as we continue to increase our focus on product infrastructure and innovation. Financing Activities Net cash used in financing activities during the three months ended March 31, 2024 was $4.4 million compared to $1.7 million during the three months ended March 31, 2023. The increase in cash used in financing activities was primarily due to the second installment of contingent consideration for our 2021 Shareablee acquisition initially recorded at fair value being paid during the three months ended March 31, 2024. Contractual Payment Obligations We have certain long-term contractual arrangements that have fixed and determinable payment obligations including purchase obligations with MVPDs and connected (Smart) TV providers, operating and financing leases, and data storage and bandwidth arrangements. We have data licensing agreements with a number of MVPDs and other providers for set-top box and connected TV data. These agreements have remaining terms of less than one year to seven years. As of March 31, 2024, the total fixed payment obligations related to set-top box and connected TV data agreements are $288.7 million and $28.3 million, respectively. We have both operating and financing leases related to corporate office space and equipment. Our leases have remaining terms from less than one to four years. As of March 31, 2024, the total fixed payment obligation related to these agreements is $36.9 million. 21 Table of Contents 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 less than two years. As of March 31, 2024, the total fixed payment obligation related to this agreement is $25.0 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, dividend payment obligations, and expenses from ongoing compliance efforts and legal matters. To the extent that our existing cash, cash equivalents and operating cash flow, together with savings from repayment of prior debt arrangements 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 repay our Revolving Credit Agreement upon maturity or pay dividends 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 at all. If we issue additional equity securities in order to raise additional funds, pay dividends or for other purposes, further dilution to existing stockholders may occur. Critical Accounting Estimates 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. Refer to the critical accounting estimates disclosed in Item 7 , "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2023 10-K for detailed information about the estimates and assumptions that we consider to be the most critical to an understanding of our financial condition and results of operations. These estimates and assumptions involve significant judgments and uncertainties, and actual results in these areas could differ from our estimates.