SCOR 2014 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________ 
Form 10-K
________________________________________ 
 (Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33520
________________________________________ 
 COMSCORE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
54-1955550
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
11950 Democracy Drive, Suite 600
Reston, Virginia 20190
(Address of Principal Executive Offices)
(703) 438-2000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
 
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
  
þ
  
Accelerated filer
  
¨
Non-accelerated filer
  
o  (Do not check if a smaller reporting company)
  
Smaller reporting company
  
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1,210.9 million (based on the closing sales price of the registrant’s common stock as reported by the NASDAQ Global Select Market on that date). Shares of the registrant’s common stock held by each officer and director and each person who owns more than 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of February 19, 2015, there were 34,118,719 shares of the registrant’s common stock outstanding.
________________________________________ 
 DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s Proxy Statement with respect to its 2015 annual meeting of stockholders, anticipated to be filed with the Securities and Exchange Commission no later than 120 days following the registrant’s fiscal year ended December 31, 2014, are incorporated by reference in Part III of this annual report on Form 10-K.
 



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COMSCORE, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE PERIOD ENDED DECEMBER 31, 2014
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Item 7 of this report, and other materials accompanying this Annual Report on Form 10-K contain forward-looking statements within the meaning of and safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. We attempt, whenever possible, to identify these forward- looking statements by words such as “intends,” “will,” “plans,” “anticipates,” “expects,” “may,” “estimates,” “believes,” “should,” “projects,” or “continue,” or the negative of those words and other comparable words. Similarly, statements that describe our business strategy, goals, prospects, opportunities, outlook, objectives, plans or intentions are also forward-looking statements. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, benefits and expectations regarding strategic partnerships and alliances, capital expenditures, introduction of new products, regulatory compliance, plans for growth, expected economic conditions, and future operations, as well as assumptions relating to the foregoing.
These statements are based on current expectations and assumptions regarding future events and business performance and involve known and unknown risks, uncertainties and other factors that may cause actual events or results to be materially different from any future events or results expressed or implied by these statements. These factors include those set forth in the following discussion and within Item 1A “Risk Factors” of this Annual Report on Form 10-K and elsewhere within this report.
You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report on Form 10-K. You should carefully review the risk factors described in other documents that we file from time to time with the U.S. Securities and Exchange Commission, or SEC. Except as required by applicable law, including the rules and regulations of the SEC, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise, other than through the filing of periodic reports in accordance with the Securities Exchange Act of 1934, as amended.




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PART I
 
ITEM 1.
BUSINESS
Overview
We provide trusted, independent data, metrics, products and services to clients in the media, advertising, and marketing industries. We deliver digital media analytics that help content owners and advertisers understand--and thus properly value--the composition of consumer media audiences, and we help marketers understand the performance and effectiveness of advertising targeted at these audiences.
We are a technology-driven company that measures what people do as they navigate the digital world across multiple technology platforms and devices including smartphones, tablets, televisions, and desktop computers. Our technology measures consumer interactions with digital media, including Web sites, apps, video programming and advertising.
We combine proprietary comScore data with our clients’ own data and data from partners, to provide uniquely valuable digital media analytics. We deliver on-demand and real-time products and services through a scalable Software-as-Service delivery model which supports both comScore branded products and also partner products integrating comScore data and services. During the year ended December 31, 2014, we provided service to approximately 2,550 customers worldwide with our broad geographic base of employees located in 32 locations in 24 countries.
Our Opportunity
comScore was founded on the thesis that digital technology would transform the interactions between people, media, and brands and subsequently generate demand for data and analytics about these interactions. Data about these consumer interactions has become a critical source of business intelligence to a wide range of companies including content publishers, broadcasters, consumer brands, network operators, and advertising agencies. Continued growth in digital devices, consumer access and usage of digital content and services, and spending on digital advertising and marketing create the need for our products and services.
We see three mega-trend drivers of the digital media and advertising ecosystem’s evolution. First, the rapid emergence of the multi-platform, cross-media consumer who interacts with digital content and advertising across multiple devices and platforms in different ways depending on the type of device, their demographic characteristics, geography, and time of day. Second, the ubiquity of video and television reaching consumers through digital channels demands that television audience measurement account for all viewing across all devices. As consumers consume media across multiple platforms and television viewing also expands to digital, advertising to audiences becomes more complex and fragmented. Brand marketers and their agencies for hire, need trusted data and analytics to understand how best to reach targeted consumers in a fragmented digital landscape while content owners such as publishers and broadcasters need digital media analytics to understand how to best monetize their audience and assets. These forces give rise to a third key trend, the automation of advertising transactions and data-driven “programmatic” buying and selling of digital advertising.
As we pursue our mission of making audiences and advertising more valuable, our strategy has been focused on leveraging the data assets, partnerships, and client relationships which give us a strong competitive position at the intersection of these trends. We have focused on expanding our cross-media services which combine digital and television measurement, extending the reach and differentiation of our flagship advertising offering, Validated Campaign Essentials (vCE), and worked to integrate comScore data and services into a wide range of third-party platforms. These strategic efforts have occurred in the context of continual investment in research and development, corporate acquisitions, and strategic partnerships.
Our investments and innovation have been focused on emerging digital media trends. In 2008, we acquired mobile-focused measurement company M:Metrics, adding metered-smartphone panels to our data collection assets. In 2009, we expanded beyond panel-based data collection and began building the comScore Census NetworkTM of tagged Web sites and apps, providing a rich data complement to our person-centric panels. We accelerated the development and expanded the global footprint of the comScore Census Network with the acquisition of the Latin American analytics firm Certifica in 2009 and European analytics firm NedStat in 2010. In 2011, we acquired the ad verification company, AdXpose, to provide additional technology and talent required to provide real-time advertising analytics. In 2014, we acquired advertising technology company mDot Labs, to provide technology and data science expertise to enhance our discovery of non-human and fraudulent digital traffic.
Strategic partnerships have been a key to our success and innovation. In 2012, in partnership with Arbitron and ESPN, we initiated the first five-platform measurement effort, “Project Blueprint,” to deliver digital media analytics across television, smartphone, tablet, PC, and radio. In early 2014, we entered into strategic agreements with Google and Yahoo to integrate our real-time advertising offering into their advertising management platforms. Toward the end of 2014, we entered into significant

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partnerships with Pandora to ingest demographic information about mobile consumers to improve our products and with Datalogix to incorporate their consumer segmentation data into our advertising product suite.
In February 2015, we announced that we would enter a long-term, global strategic partnership with Kantar, the data investment management arm of WPP, to jointly deliver cross-media audience and campaign measurement in markets outside the United States. Working together, we expect be able to combine digital media and video with television data to deliver new cross-media capabilities and products across the globe. This partnership is subject to the completion of certain conditions to closing that we expect resolved in early second quarter 2015.

Digital Media Analytics
Traditional media research approaches have often relied on “single source” data collected exclusively from a panel of consumers under study-to provide insight. The fragmentation of media delivery platforms and consumer consumption of media in the digital age, requires a fundamentally different approach that first and foremost must reconcile and unify multiple data observations into a coherent set of digital media analytics. Our digital media analytics products and services are built on digital measurement and analytics platforms comprised of proprietary databases, internally developed software, and a computational infrastructure that measures, analyzes and reports on digital activity. With our technology, scale, analytical software sophistication, access to digital census data, our panel data and big data and research experience, we are positioned to identify critical trends and provide actionable insights to our customers.
Data Collection
Data collected through a variety of sources and means provides the inputs used to produce digital media analytics:
We collect data from consumer panels of PC, tablet, and smartphone owners who have agreed to install passive metering software on their devices and/or their home network.
We collect data from our census network produced by comScore software code content owners have implemented on Web sites and in mobile applications.
We collect data from digital advertising campaigns which have incorporated comScore software code implemented by advertisers and agencies.
We conduct consumer surveys to gather information not easily obtainable through passive behavioral measurement and to enumerate populations under study.
Through partnerships:
We integrate set-top-box and third party panel data, for example television data from the Arbitron Personal People Meter panel, and
We integrate datasets with consumer demographic characteristics, attitudes, lifestyles and offline behavior.
Data Management
Integrating, managing, and analyzing very large quantities of data is our core competency. The comScore Census Network, just one of our data sources, generates more than 10 terabytes of new data each day from more than 50 billion daily tag events, which is roughly twice the number of internet page views each day in the United States. We have built a Big Data platform that provides us a significant scale and cost advantage and have architected our systems to protect consumer privacy and prevent data leakage. Our systems provide the flexibility for innovation in both data science and data delivery.
Data Science
Massive amounts of digital media data are useless unless that data can be transformed into meaningful and trusted digital media analytics. Among our innovations was the development of our Unified Digital Measurement™ methodology which allows us to combine person-centric panel data with machine-generated census data. Our formidable technological and data science expertise allows us to “deduplicate” the multi-platform audience using mathematical and statistical techniques which have been developed and tested in our unique Big Data environment.
Product Delivery
Our flexible system architecture allows us to deliver our data, products, and services through a scalable, Software-as-a-Service, or SaaS, delivery model. Each day our clients run more than more than 50 thousand reports through our platforms. All of our products and services are hosted and maintained by us, which significantly reduces the cost and complexity for our customers and provides significant operating efficiencies. We can quickly deploy or update our products with minimal lead time, which significantly enhances our customers’ productivity. Our Web-based analysis and reporting systems are used by thousands of active, unique users to produce more than several million reports each year.

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In addition to delivery via our own Web-based systems, we also have the flexibility to provide our products and services in different formats depending on client needs. On request, we can make our data available via an application programming interface (API) to integrate directly into client systems. We also have integrated our products and services directly into partner systems, such as ad management and programmatic ad trading platforms, to bring comScore data directly into existing client workflows.
Products, Services, and Solutions
Our digital media analytics products are aimed primarily at content publishers, advertisers, advertising agencies and network operators. Although, we operate our business within one operating segment, we leverage our platforms to provide products organized around three major lines of business:
Audience Measurement Products & Services measure the size, behavior and characteristics of online audiences across multiple platforms including PCs, tablets, smartphones, televisions, game consoles and other connected devices;
Advertising Products & Services provide end-to-end solutions for planning, optimization and evaluation of digital advertising performance and effectiveness;
Enterprise Solutions enable customers to use digital media analytics to optimize their business.
Audience Measurement Products & Services
Our audience measurement products provide independent, third-party measurement of the size, behavior and characteristics of Internet users across media types (video, mobile apps, Web sites) and multiple devices (including TVs, PCs, smartphones and tablets). Our core product offerings are built around our Media Metrix ® product, available in 44 markets globally (known in some markets as MMX). Our audience measurement products also include Video Metrix , Mobile Metrix , Plan Metrix and Ad Metrix .
Media Metrix ® Multi-Platform (MMX MP) provides a comprehensive view of digital consumer behavior across desktop computers, smartphones and tablets and is available in the United States, the United Kingdom, Spain, Canada, and seven additional global markets. In early 2015, Video Metrix Multi-Platform (VMX MP) launched as a beta product in the United States, providing a program-level view of the video/TV audience across digital platforms including desktop, smartphone, tablet and over-the-top devices. VMX MP is a prerequisite to the development of cross-media measurement products which combine video/television viewing measurement across both digital devices and linear television.
We typically deliver our audience analytics products electronically in the form of weekly, monthly or quarterly subscription-based reports. Customers can access current and historical data and analyze this data 24/7 through our online portal, My Metrix.
Advertising Products & Services
Our advertising products combine the proprietary information gathered from our comScore Census Network with the vertical industry expertise of comScore analysts to deliver digital media analytics, including the measurement of online advertising effectiveness, customized for specific industries. Our advertising products include the AdEffx suite and Media Planner 2.0 , which provide a solution for developing, executing and evaluating online advertising campaigns across multiple platforms, including television, Web (display and video) and mobile (smartphones and tablets). These products are typically delivered on a monthly, quarterly or ad hoc basis.
Our flagship advertising service is Validated Campaign Essentials (vCE). comScore vCE provides digital media analytics about validated impressions, ads that are actually seen, shown in safe content and delivered to the right target audience. vCE provides the option of real-time data delivery to allow advertisers to adjust their campaigns "on the fly," something that's not possible in traditional advertising mediums. While vCE provides key analytics about advertising campaigns to ad buyers, we also offer Validated Media Essentials (vME) to advertising sellers, allowing them to evaluate their advertising inventory and optimize their monetization strategy with metrics comparable to those used by ad buyers.
In 2015, we announced comScore Industry Trust (www.industrytrust.com) multi-part initiative that addresses a fundamental problem in today’s advertising ecosystem: the increasing lack of trust between ad buyers and sellers resulting from fraud and non-human traffic that has become a fixture of programmatic advertising. Industry Trust activates key comScore metrics-Non human traffic data, Media Metrix rankings, vCE viewability metrics, and demographics-directly in programmatic trading platforms. Industry Trust allows media buyers the ability to conduct traditional and programmatic buys based on the same set of trusted metrics. Industry Trust also supports the needs of ad sellers, providing a mechanism for premium publishers to distinguish themselves on programmatic platforms through the quality of their inventory, certified by comScore.

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Enterprise Solutions
Our enterprise solutions center on Digital Analytix (DAx), our SaaS-based product for digital media businesses.
Digital Analytix integrates a client’s digital media data from multiple sources including web, mobile, video and social media interactions and is further enhanced by comScore audience measurement data. A key advantage of DAx is its ability to leverage our data science methods to provide a unified view of multi-platform consumers across a client’s digital media channels. Our data architecture provides clients with a flexible business intelligence tool for digital media analytics which can also be integrated with additional data from third party providers and internal systems used for tasks such as customer relationship management (CRM). Customers can access DAx data sets and reports at any time via a secure online interface.
Customers
As of December 31, 2014, we had approximately 2,550 customers, including approximately 90 Fortune 500 companies. Our customers include Internet-based companies such as Microsoft, AOL, Google and Yahoo!, as well as market leading companies in a variety of industries, including Internet service providers, investment banks, creative media agencies, consumer banks, wireless carriers, pharmaceutical manufacturers, credit card issuers and consumer packaged goods companies.
Selling and Marketing
We sell the majority of our products through a direct sales force organized in teams focused on (1) new business development, (2) care, renewal, and new sales to existing clients, and (3) vertical specialists focused on selling into the consumer packaged goods, entertainment, financial services, media, pharmaceutical, retail, technology, telecommunications and travel industries. Our sales and account representatives receive a base salary and are eligible for bonuses or commissions based on performance.
Our marketing organization is composed of teams responsible for (1) corporate marketing and support, including digital marketing, marketing automation, brand and communication, (2) product marketing specialists with domain expertise about our audience, advertising, and enterprise offerings, and (3) regional marketers with responsibility for specific geographical markets. This matrixed organization allows us to both scale our efforts and retain flexibility to respond to market developments and new opportunities. A component of our marketing strategy focuses on driving comScore data and market insights into both general and industry-specific media outlets, building brand awareness on top of reporting about technology and media trends.
Technology and Infrastructure
Our technology and infrastructure is a competitive asset, as digital media analytics requires operation at a scale unprecedented in the media analytics industry. We operate one of the world’s largest data collection platforms, gathering information from a diverse set of sources including our opt-in panels, our census network consisting of all calls from our tagging partners, and from third party sources such as mobile operators. Our operation leverages several distributed processing technologies, proprietary software and methodology, and operational control systems to process and publish our services in near-real time. Our technology infrastructure is operated in multiple, third-party Tier-1 co-location facilities (located in the United States and Europe). Our systems have multiple redundancies and are structured to ensure the continuation of business operations in the event of network failure or if one of our data centers has been rendered inoperable. As of December 31, 2014, our technology team (excluding employees devoted to research and development) was comprised of approximately 326 full-time employees working in different geographic locations, who design, develop, maintain and operate our technology infrastructure. In addition, we may outsource discrete responsibilities to third parties who have undergone a comprehensive vetting and training process and are subject to confidentiality and intellectual property restrictions.
Research and Development
Our research and development efforts focus on extending core capabilities in data collection across all digital platforms, driving efficiency into data processing at scale, and developing and deploying new research methodologies. These efforts drive both new product offerings and the extension of existing products to evolve with the digital media landscape and our customers’ digital media analytics needs. As of December 31, 2014, we had approximately 314 full-time employees working on research and development activities (excluding employees on our technology team cited under “Technology and Infrastructure” ). In addition, we involve management and operations personnel in our research and development efforts. In 2014, 2013, and 2012, we incurred $60.4 million, $41.0 million and $34.0 million, respectively, on research and development.
Intellectual Property
We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions together with confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We

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seek patent protection on inventions that we consider important to the development of our business, and we have also acquired patent portfolios covering various aspects of our business. We control access to our proprietary technology and enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with other third parties.
Our success depends in part on our ability to develop patentable products and obtain, maintain and enforce patent and trade secret protection for our products, including successfully defending these patents against any third-party challenges, both in the United States and in other countries. We may be able to protect our technologies from unauthorized use by third parties to the extent that we own or have licensed valid and enforceable patents or trade secrets that cover them. However, the degree of future protection of our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
Our intellectual property portfolio currently includes approximately 32 U.S. patents and 29 international patents. In addition, we also currently have approximately 70 U.S. and international patent applications pending. However, patents may not be issued for any pending or future pending patent applications owned by or licensed to us, and claims allowed under any issued patent or future issued patent owned or licensed by us may be declared invalid or may not be sufficiently broad to protect our technologies. Any issued patents owned by or licensed to us now or in the future may be challenged, invalidated, held unenforceable or circumvented, and the rights under such patents may not provide us with the expected benefits. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture or increase their market share with respect to related technologies. 
Under current U.S. law, the statutory term for a patent is 20 years from its earliest effective filing date. Various circumstances, such as the provisions under U.S. patent law for patent term adjustment and patent term extension, may extend the duration of patents. Similarly, various circumstances may shorten the duration of patents, such as a change in U.S. law or a need or decision on our part to terminally disclaim a portion of the statutory term of any of these patents.
In addition to patent and trade secret protection, we also rely on several trademarks and service marks to protect our intellectual property assets. We are the owner of numerous trademarks and service marks and have applied for registration of our trademarks and service marks in the United States and in certain other countries to establish and protect our brand names as part of our intellectual property strategy. Some of our registered marks include comScore, Media Metrix, MyMetrix, and vCE.
For additional, important information related to our intellectual property, please review the information set forth in Part I, Item 1A of this Annual Report on Form 10-K, “Risk Factors - Risks Related to Our Business and Our Technologies.”
Competition
The market for digital marketing products is highly competitive and is evolving rapidly. We compete primarily with providers of digital media intelligence and related analytical products and services. We also compete with providers of marketing services and solutions, with full-service survey providers and with internal solutions developed by customers and potential customers. Our principal competitors include:
online advertising companies that provide measurement of online ad effectiveness and ad delivery used for billing purposes, including Nielsen, DoubleClick (owned by Google), Atlas (owned by Facebook), and certain divisions and products within Kantar (owned by WPP);
full-service market research firms and survey providers that may measure online behavior and attitudes, including Harris Interactive, Ipsos, Synnovate, GFK, certain divisions and products within Kantar (owned by WPP) and Nielsen;
companies that provide advertising technology point solutions, including DoubleVerify, Integral Ad Science, MOAT, and WhiteOps;
companies that provide behavioral, attitudinal and qualitative advertising effectiveness, including Toluna/Nurago, DataLogix (being acquired by Oracle), Context Web's Aperture, Ipsos OTX, Dynamic Logic, Insight Express and Marketing Evolution;
companies that provide audience ratings for TV, radio and other media that have extended or may extend their current services, particularly in certain international markets, to the measurement of digital media, including Nielsen, Arbitron (owned by Nielsen), certain divisions and products within Kantar, Rentrak and Taylor Nelson Sofres (owned by WPP);
large and small companies that create proprietary data and analysis of consumers' online behavior, including Nielsen, Effective Measures, Gemius, Compete Inc. (owned by WPP), Google, Inc., Hitwise (owned by Experian), Quantcast, and Visible Measures;
analytical services companies that provide customers with detailed information of behavior on their own data, content, or web traffic, including Omniture (owned by Adobe), Coremetrics (owned by IBM), and WebTrends; and systems providers including Accenture, HP, Pivotal, HortonWorks, Cloudera and Terradata; and

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specialty information providers for certain industries that we serve, including Manhattan Research (healthcare) and The Now Factory (telecommunications).
Some of our current competitors have longer operating histories, access to larger customer bases and substantially greater resources than we do. As a result, these competitors may be able to devote greater resources to marketing and promotional campaigns, panel retention, panel development or development of systems and technologies than we can. In addition, some of our competitors may adopt more aggressive pricing policies and some have started to provide some services at no cost. Furthermore, large software companies, Internet portals and database management companies may enter our market or enhance their current offerings, either by developing competing services or by acquiring our competitors, and could leverage their significant resources and pre-existing relationships with our current and potential customers.
We believe the principal competitive factors in our markets include the following:
the ability to provide analytics across multiple digital media platforms
the ability to provide actual and perceived high-quality, accurate and reliable data regarding Internet and other digital media audience behavior and activity in a timely manner, including the ability to maintain a large and statistically representative sample panel;
the ability to provide reliable and objective third party evidence that is widely accepted in the marketplace;
the ability to adapt product offerings to emerging digital media technologies and standards;
the breadth and depth of products and their flexibility and ease of use;
the availability of data across various industry verticals and geographic areas and expertise across these verticals and in these geographic areas;
the ability to offer survey-based information combined with digital media usage, eCommerce data and other online information collected from panelists;
the ability to offer high-quality analytical services based on Internet and other digital media audience measurement information;
the ability to offer products that meet the changing needs of customers and provide high-quality service; and
the prices that are charged for products based on the perceived value delivered.
We believe that we compete favorably with our competitors on the basis of these factors. However, if we are unable to compete successfully against our current and future competitors, we may not be able to acquire and retain customers, and we may consequently experience a decline in revenues, reduced operating margins, loss of market share and diminished value from our products.
Government Regulation
Although we do not believe that significant existing laws or government regulations adversely impact us, our business could be affected by different interpretations or applications of existing laws or regulations, future laws or regulations, or actions by domestic or foreign regulatory agencies. For example, privacy concerns could lead to legislative, judicial and regulatory limitations on our ability to collect, maintain and use information about Internet users in the United States and abroad. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may prevent us from selling our products or increase the costs associated with selling our products, and may affect our ability to invest in or jointly develop products in the United States and in foreign jurisdictions. In addition, failure to comply with these and other laws and regulations may result in, among other things, administrative enforcement actions and fines, class action lawsuits and civil and criminal liability. State attorneys general, governmental and nongovernmental entities and private persons may bring legal actions asserting that our methods of collecting, using and distributing Web site visitor information are illegal or improper, which could require us to spend significant time and resources defending these claims. The impact of any of these current or future laws or regulations could make it more difficult or expensive to attract or maintain panelists, particularly in affected jurisdictions, and could adversely affect our business and results of operations.
Privacy
Since the founding of our company, we have endeavored to undertake such data collection and analysis responsibly and only with consumer permission. Participation in our research panel is voluntary. Our policies require that participants consent to our privacy and data security practices before our software collects information on the user’s online activity. In addition, we provide panelists with multiple opportunities and methods to remove themselves from our panel. We strive to limit the type of information that we collect by identifying and filtering certain personal information from the data collected. The collected data is secured using multiple layers of physical and digital security mechanisms. Moreover, we maintain a strict policy of not sharing comScore panelists’ personally identifiable information with our customers. We also provide, and require that our partners provide, opt-out opportunities, for data collection through our tagging partners. We believe that these actions and policies are consistent with the AICPA/CICA WebTrust criteria for online privacy.

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Additionally, the adoption, modification or interpretation of laws or regulations relating to the Internet or our customers’ digital operations could negatively affect the businesses of our customers and reduce their demand for our products. For additional, important information related to government regulation of our business, please review the information set forth in Part I, Item 1A of this Annual Report on Form 10-K, “Risk Factors - Risks Related to Our Business and Our Technologies.”
Executive Officers of the Registrant
The following table sets forth the names and ages of our current executive officers: 

Name
 
Age
 
Position
Serge Matta
 
40
 
President, Chief Executive Officer and Director
Magid M. Abraham, Ph.D.
 
56
 
Executive Chairman of the Board of Directors
Gian M. Fulgoni
 
67
 
Chairman Emeritus and Director
Melvin Wesley III
 
43
 
Chief Financial Officer
Christiana L. Lin
 
45
 
EVP, General Counsel and Chief Privacy Officer
Cameron Meierhoefer
 
43
 
Chief Operating Officer
Serge Matta has served as our Chief Executive Officer since March 2014 and as our President since June 2013. From March 2012 to June 2013, Mr. Matta served as President, Commercial Solutions. Prior to that, he served in various senior positions at the Company, including as President, Mobile and Operator Solutions and as Executive Vice President, overseeing the Company's worldwide Telecommunications and Mobile practice. Prior to joining the Company in 2000, Mr. Matta held positions at MicroStrategy within the consulting group. Mr. Matta holds a B.S. degree in Finance from George Mason University and a M.B.A. from American University.
Magid M. Abraham, Ph.D. one of our co-founders, served as our President and Chief Executive Officer from September 1999 to March 2014, when he assumed his current role as Executive Chairman of the Board of Directors. Dr. Abraham has served as a member of our Board of Directors since September 1999. In 1995, Dr. Abraham founded Paragren Technologies, Inc., which specialized in delivering large scale Customer Relationship Marketing systems for strategic and target marketing, and served as its Chief Executive Officer from 1995 to 1999. Prior to founding Paragren, Dr. Abraham was employed by Information Resources, Inc. from 1985 to 1995, where he was President and Chief Operating Officer from 1993 to 1994 and Vice Chairman of the Board of Directors from 1994 to 1995. Dr. Abraham received a Ph.D. in Operations Research and a M.B.A. from the Massachusetts Institute of Technology. He also holds an Engineering degree from the École Polytechnique in France.
Gian M. Fulgoni, one of our co-founders, has served as our Chairman Emeritus since March 2014 and as a member of our Board of Directors since September 1999. He served as Executive Chairman of our Board of Directors from September 1999 to March 2014. Prior to co-founding comScore, Mr. Fulgoni was employed by Information Resources, Inc., where he served as President from 1981 to 1989, Chief Executive Officer from 1986 to 1998 and Chairman of the Board of Directors from 1991 to 1995. Mr. Fulgoni has served on the board of directors of PetMed Express, Inc., a NASDAQ-listed online retailer, since 2002 and previously served on its board from August 1999 to November 2000. Mr. Fulgoni has also served on the board of directors of the Advertising Research Foundation, an industry research organization, since 2008; on the board of directors of InXpo, Inc., a provider of technology for virtual events, since 2005, on the board of Dynamic Signal, Inc., an Internet marketing services company since 2010; and on the board of directors of Prophet, Inc., a brand and marketing consulting company, since May 2010. Mr. Fulgoni holds a M.A. in Marketing from the University of Lancaster and a B.Sc. in Physics from the University of Manchester.
Melvin Wesley III was appointed as our Chief Financial Officer in August 2014. From January 2013 to December 2013, he served as Chief Financial Officer of Mandiant Corporation, a provider of advanced endpoint security products and security incident response management solutions. He stayed on as CFO, Global Services and Cloud Solutions at FireEye after the company acquired Mandiant in December 2013. From December 2004 to January 2013, Mr. Wesley was Senior Vice President and Chief Financial Officer of OPNET Technologies, a publicly traded company that provided application and network performance solutions. He served as Corporate Controller for OPNET from June 2004 to November 2004. Previously, Mr. Wesley served as Corporate Controller for SteelCloud, Inc. and as Assistant Controller for Learning Tree International, Inc. He

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holds a B.S. in Accounting and a MBA from George Mason University and is licensed as a Certified Public Accountant in Virginia.
Christiana L. Lin has served as our EVP, General Counsel and Chief Privacy Officer since August 2009. Prior to that, she served as our Deputy General Counsel from February 2001 until March 2003, as our Corporate Counsel and Chief Privacy Officer from March 2003 until January 2006 and as our General Counsel and Chief Privacy Officer from January 2006 until August 2009. Ms. Lin holds a J.D. from the Georgetown University Law Center and a B.A. in Political Science from Yale University.
Cameron Meierhoefer has served as our Chief Operating Officer since March 5, 2012. Previously, he held various senior positions at comScore, most recently as Executive Vice President of Custom Analytics from January 2009 to March 2012 and as Senior Vice President of Custom Analytics from January 2006 to January 2009. Prior to joining comScore in 2001, he helped build PC Data Online, a division of the market research firm PC Data Inc. Mr. Meierhoefer holds a B.S. from Columbia University and a M.S. from the Georgia Institute of Technology.
Employees
As of December 31, 2014, we had 1,292 employees. None of our employees are represented by a labor union. We have experienced no work stoppages and believe that our employee relations are good.
Geographic Areas
Our primary geographic markets are the United States, Canada, Europe, Latin America and Asia. For information with respect to our geographic markets, see Note 14 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
Company Information
We incorporated in August 1999 in Delaware. Our principal offices are located at 11950 Democracy Drive, Suite 600, Reston, Virginia 20190. Our telephone number is (703) 438-2000.
Available Information
We make our periodic and current reports along with amendments to such reports available, free of charge, on our website as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Our website address is www.comscore.com and such reports are filed under “SEC Filings” on the Investor Relations portion of our website. Information contained on our Web site is not part of this Annual Report on Form 10-K and is not incorporated in this Annual Report on Form 10-K by reference.
You can read our SEC filings, including this annual report as well as our other periodic and current reports, over the internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

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ITEM 1A.
RISK FACTORS
An investment in our common stock involves a substantial risk of loss. You should carefully consider these risk factors, together with all of the other information included herewith, before you decide to purchase shares of our common stock. The occurrence of any of the following risks could materially adversely affect our business, financial condition or operating results. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment.
Risks Related to Our Business and Our Technologies
We derive a significant portion of our revenues from sales of our subscription-based digital media analytics products. If our customers terminate or fail to renew their subscriptions, our business could suffer.
We currently derive a significant portion of our revenues from our subscription-based digital media analytics products. Subscription-based products accounted for 90%, 87%, and 87% of our revenues in the years ended December 31, 2014, 2013 and 2012, respectively. If our customers terminate their subscriptions for our products, do not renew their subscriptions, delay renewals of their subscriptions or renew on terms less favorable to us, our revenues could decline and our business could suffer.
Our customers have no obligation to renew after the expiration of their initial subscription period, which is typically one year, and we cannot be assured that current subscriptions will be renewed at the same or higher dollar amounts, if at all. Some of our customers have elected not to renew their subscription agreements with us in the past. If we experience a change of control, as defined in such agreements, some of our customers also have the right to terminate their subscriptions. Moreover, some of our major customers have the right to cancel their subscription agreements without cause at any time. Furthermore, our new subscription products, for which revenue is recognized based on impressions used, may be subject to higher fluctuations in revenue.
Given unpredictable economic conditions, our limited historical data with respect to rates of customer subscription renewals, and the usage volumes for our impression based products, we may have difficulty accurately predicting future customer renewal rates. Our customer renewal rates may decline or fluctuate as a result of a number of factors, including customer satisfaction or dissatisfaction with our products, the costs or functionality of our products, the prices or functionality of products offered by our competitors, the health of the digital advertising marketplace, mergers and acquisitions affecting our customer base, general economic conditions or reductions in our customers’ spending levels.
Our quarterly results of operations may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.
Our quarterly results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly revenues or results of operations do not meet or exceed the expectations of securities analysts or investors, the price of our common stock could decline substantially. In addition to the other risk factors set forth in this “Risk Factors” section, factors that may cause fluctuations in our quarterly revenues or results of operations include:
our ability to increase sales to existing customers and attract new customers;
the potential loss or reduction in spending by significant customers;
changes in our customers' subscription renewal behaviors and spending on projects;
the impact on our contract renewal rates, for both our subscription and project-based products, caused by our customers’ budgetary constraints, competition, customer dissatisfaction, customer corporate restructuring or change in control, or our customers’ actual or perceived lack of need for our products;
the timing of contract renewals, delivery of products and duration of contracts and the corresponding timing of revenue recognition as well as the effects of revenue derived from recently-acquired companies;
variations in the demand for our products and the implementation cycles of our products by our customers;
the challenges of persuading customers to switch from incumbent service providers;
the timing of revenue recognition for usage-based or impression-based products;
the mix of subscription-based versus project-based revenues;
the effect of revenues generated from significant one-time projects or the loss of such projects;
the timing and success of new product introductions by us or our competitors;
changes in our pricing and discounting policies or those of our competitors;
the impact of our decision to discontinue certain products;
our failure to accurately estimate or control costs — including those incurred as a result of investments, other business or product development initiatives, litigation, and the integration of acquisitions;

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the amount and timing of capital expenditures and operating costs related to the maintenance and expansion of our operations and infrastructure;
our ability to estimate revenues and cash flows associated with business operations acquired by us;
the uncertainties associated with the integration of acquired new lines of business, and operations in countries in which we may have little or no previous experience;
the cost and timing of organizational restructuring, in particular in international jurisdictions;
service outages, other technical difficulties or security breaches;
limitations relating to the capacity of our networks, systems and processes;
maintaining appropriate staffing levels and capabilities relative to projected growth, or retaining key personnel as a result of the integration of recent acquisitions;
adverse judgments or settlements in legal disputes;
the extent to which certain expenses are more or less deductible for tax purposes, such as share-based compensation that fluctuates based on the timing of vesting and our stock price;
the timing of any additional reversal of our deferred tax valuation allowance;
adoption of new accounting pronouncements; and
general economic, political, industry and market conditions and those conditions specific to Internet usage and online businesses.
We believe that our quarterly revenues and results of operations on a year-over-year and sequential quarter-over-quarter basis may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful. Investors are cautioned not to rely on the results of prior quarters as an indication of future performance.
Our business may be harmed if we deliver, or are perceived to deliver, inaccurate information to our customers, to the media or to the public generally.
If the information that we provide to our customers, to the media, or to the public is inaccurate, or perceived to be inaccurate, whether due to methodological approaches, errors, bias towards certain available data sources or partners, our brand may be harmed. The information that we collect or that is included in our databases and the statistical projections that we provide to our customers, to the media or to the public may contain or be perceived to contain inaccuracies. These projections may be viewed as an important measure for the success of certain businesses, especially those businesses with a large online presence. Any inaccuracy or perceived inaccuracy in the data reported by us about such businesses may potentially affect the market perception of such businesses and result in claims or litigation around the accuracy of our data, or the appropriateness of our methodology, may encourage aggressive action on the part of our competitors, and could harm our brand. Any dissatisfaction by our customers or the media with our digital media analytics, measurement or data collection and statistical projection methodologies, whether as a result of inaccuracies, perceived inaccuracies, or otherwise, could have an adverse effect on our ability to retain existing customers and attract new customers and could harm our brand. Additionally, we could be contractually required to pay damages, which could be substantial, to certain of our customers if the information we provide to them is found to be inaccurate. Any liability that we incur or any harm to our brand that we suffer because of actual or perceived irregularities or inaccuracies in the data we deliver to our customers could harm our business.
Material defects or errors in our data collection and analysis systems could damage our reputation, result in significant costs to us and impair our ability to sell our products.
Our data collection and analysis systems are complex and may contain material defects or errors. In addition, the large amount of data that we collect may make our data collection and analysis systems more susceptible to defects or errors. Moreover, as technology evolves across digital platforms, we may not be able to continue collection of certain data, due to technological, privacy or other reasons.
Furthermore, we may become increasingly dependent upon third-party data provided by strategic partners for key elements of our data sets. If our partners do not apply rigorous standards to their data collection methodology and actions, notwithstanding our best efforts, we may receive third-party data that is inaccurate or defective.
Our customers rely on our data collection and analysis software and systems to gain business intelligence or to gain a better understanding of their internal operations or performance. Any defect in our panelist data collection software, our census collection systems, our data collection capabilities, our enterprise focused software and systems, network systems, statistical projections or other methodologies could lead to consequences that could adversely impact operating results, including:
loss of customers;
damage to our brand;

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interruptions in the availability of our products;
sales credits, refunds or liability to our customers;
lost or delayed market acceptance and sales of our products;
diversion of development resources;
the incurrence of substantial costs to correct any material defect or error; and
increased warranty and insurance costs.
Our insurance policies may not cover any claim against us for loss of data, unauthorized use of data, improper access to data, inaccuracies in data or other indirect or consequential damages and defending a lawsuit, regardless of its merit, could be costly and divert management’s attention. Adequate insurance coverage may not be available in the future on acceptable terms, or at all. Any such developments could adversely affect our business and results of operations.
We may lose customers or be liable to certain customers if we provide poor service or if our products do not comply with our customer agreements.
Certain customers choose to purchase our services because of the client service that we provide, as well as the scope of information and functionality of the products that we provide. Our failure to meet these expectations could result in the loss of customers or a reduction in their purchase of our products. In addition, we may be liable to certain of our customers for damages they may incur resulting from these events, such as loss of business, loss of future revenues, breach of contract or loss of goodwill to their business.

If we are unable to provide cross-media analytics, or if our cross-media analytics are incomplete or inaccurate, our ability to grow or maintain our business may be harmed.
As the media and advertising industry looks to evaluate advertising campaigns across various forms of media, such as television, radio, online, and mobile, the ability to measure the combined size and composition of audiences across platforms is increasingly important and demanded.  
Because a significant proportion of advertising dollars are spent on television, access to television data is a critical component to cross-media analytics, and companies who have historically held a dominant market position measuring television: such as Nielsen in the U.S., Kantar in certain countries outside the U.S., or providers selected by joint industry committees in countries outside of the U.S., may need to be relied on to produce industry-accepted measurement across a combination of media platforms. We have entered into an agreement to acquire and to license certain Nielsen Audio panel data and technology in the U.S., which provides us with access to both television and radio data to support our cross-media services, however, if such panel data and technology is not sufficiently maintained, we may suffer a reduction in the quality of our metrics. In addition, in 2015, we entered into a strategic alliance with Kantar to collaborate on certain cross-media analystics, including television, outside the U.S. If we are unable to secure licenses to data from industry-accepted providers of television measurement outside of the U.S., our cross media analytics may be incomplete, and our ability to grow and maintain our business may be harmed.
If we are unable to accurately measure or gain access to information or technology measuring a media component or type at all or on commercially reasonable terms, our ability to meet our customers' demands and our business and financial performance may be harmed. Furthermore, even if we do have access to cross-media data, if we have insufficient technology, methodology or source materials to parse the information across such media components to avoid duplications at all or in a cost-effective manner, our products may be inferior to other offerings, and we may be unable to meet our customers' demands. In which case, our business and financial performance may be harmed. In particular as mobile devices and technology continue to proliferate, gaining cost-effective access to mobile data will become increasingly critical, and the difficulty in accessing these forms of data will continue to grow.
Our business may be harmed if we change our methodologies or the scope of information we collect.
We have in the past and may in the future change our methodologies, the methodologies of companies we acquire, or the scope of information we collect. Such changes may result from identified deficiencies in current methodologies, development of more advanced methodologies, changes in our business plans, changes in technology used by websites, browsers, applications, servers, or media we measure, integration of acquired companies or expressed or perceived needs of our customers or potential customers. Any such changes or perceived changes, or our inability to accurately or adequately communicate to our customers and the media such changes and the potential implications of such changes on the data we have published or will publish in the future, may result in customer dissatisfaction, particularly if certain information is no longer

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collected or information collected in future periods is not comparable with information collected in prior periods. As a result of future methodology changes, some of our existing customers or customers of acquired entities may refuse to participate, or participate only in a limited fashion, and other customers may become dissatisfied as a result of changes in our methodology and decide not to continue purchasing their subscriptions or may decide to discontinue providing us with their web beacon or other server-side information. Such customers may elect to publicly air their dissatisfaction with the methodological changes made by us, thereby damaging our brand and harming our reputation. Additionally, we expect that we will need to further integrate new capabilities with our existing methodologies if we develop or acquire additional products or lines of business in the future. The resulting future changes to our methodologies, the information we collect, or the strategy we implement to collect and analyze information, such as the movement away from pure panel-centric measurement to a hybrid of panel- and site-centric measurement, may cause additional customer dissatisfaction and result in loss of customers.
If we are not able to maintain panels of sufficient size and scope, or if the costs of establishing and maintaining our panels materially increase, our business could be harmed.
We believe that the quality, size and scope of our Internet, mobile and cross-media user panels are critical to our business. There can be no assurance, however, that we will be able to maintain panels of sufficient size and scope to provide the quality of marketing intelligence that our customers demand from our products. We anticipate that the cost of panel recruitment will increase with the proliferation of proprietary and secure digital media platforms (whether they be PC, mobile, tablet, or connected devices), and that the difficulty in collecting these forms of data will continue to grow which may require significant hardware and software investments, as well as increases to our panel incentive and panel management costs.
We may be required to establish new panels that are capable of providing us with information in the areas of mobile, tablets, and other emerging technologies on which people are consuming media and content. We anticipate that this may require significant hardware and software investments, and significant increases to our panel incentive and panel management costs. We have historically acquired new panels, and were able to capitalize the cost of such acquisition. If we are unable to use the same accounting approach in reporting the costs associated with establishing new panels needed, our panel costs may significantly increase our cost of revenues in the future. To the extent that such additional expenses are not accompanied by increased revenues, our operating margins may be reduced and our financial results could be adversely affected.
Moreover, if we fail to maintain our existing or newly established panels of sufficient size and scope, including coverage of international markets and users of various forms of digital platforms, customers might decline to purchase our products or renew their subscriptions, our reputation could be damaged and our business could be materially and adversely affected. We expect that our panel costs may increase and may comprise a greater portion of our cost of revenues in the future. The costs associated with maintaining and improving the quality, size and scope of our panel are dependent on many factors, many of which are beyond our control, including the participation rate of potential panel members, the turnover among existing panel members and requirements for active participation of panel members, such as completing survey questionnaires.
Concerns over privacy and the potential unauthorized disclosure of personal information, or the classification of our research software as "spyware" or "adware" may cause greater attrition within our existing research panel or may discourage potential panel members from participating in our research panels. As we seek to enforce our privacy policies, we may be required to terminate relationships with service providers whose practices we believe may not comply with our privacy policies, and have removed and may in the future remove panel members obtained through such service providers. In addition, Finally, we are currently subject to privacy and data security related claims by certain panel members in a pending class action lawsuit, and we may be so again in the future. The outcome of this litigation or the negative public reaction to the details of the litigation may make it difficult for us to attract and retain panel members.
To the extent we experience greater attrition in our panel than we have historically experienced, these costs would increase more rapidly. Such actions may result in increased costs, or make use less successful in retaining existing panel members and recruiting additional panel members.
If we fail to respond to technological developments, our products may become obsolete or less competitive.
Our future success will depend in part on our ability to modify or enhance our products to meet customer needs, to add functionality and to address technological advancements. For example, if certain handheld mobile devices become the primary mode of receiving content and conducting transactions on the Internet, and we are unable to adapt to collect information from such devices, then we would not be able to report on online activity. To remain competitive, we will need to develop new products that address these evolving technologies and standards across the universe of digital media — including television, Internet, radio and mobile usage. However, we may be unsuccessful in identifying new product opportunities or in developing or marketing new products in a timely or cost-effective manner. In addition, our product innovations may not achieve the market penetration or price levels necessary for profitability. If we are unable to develop enhancements to, and new features for, our existing methodologies or products or if we are unable to develop new products that keep pace with rapid technological

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developments or changing industry standards, our products may become obsolete, less marketable and less competitive, and our business will be harmed.
Difficulties entering into arrangements with website owners, wireless communications operators and other entities supporting server- and census-based methodologies may negatively affect our methodologies and harm our business.
We believe that our methodologies are enhanced by the ability to collect information using server-based web beacon information and other census-level approaches. There can be no assurance, however, that we will be able to maintain relationships with a sufficient number and scope of websites in order to provide the quality of marketing intelligence that our customers demand from our products. If we fail to continue to expand the scope of our server-based data collection approaches, customers might decline to purchase our products or renew their subscriptions, our reputation could be damaged and our business could be adversely affected.
If we are unable to sell additional products to our existing customers or attract new customers, our revenue growth will be adversely affected.
To increase our revenues, we believe we must sell additional products to existing customers, including existing customers of acquired businesses, and regularly add new customers. If our existing and prospective customers do not perceive our products to be of sufficient value and quality, we may not be able to increase sales to existing customers and attract new customers, or we may have difficulty retaining existing customers, and our operating results will be adversely affected.
If we are unable to effectively persuade prospective customers to buy our services in substitution for those of an incumbent service provider, our revenue growth may suffer.
Some of our newer products and initiatives require that we persuade prospective customers, or customers of our existing products, to buy our newer products in substitution for those of an incumbent service provider. In some instances, the prospective customer may have built their systems and processes around the incumbent's products. Persuading such prospective customers to switch service providers may be difficult and require longer sales cycles, which will affect our ability to increase revenue in these areas. Moreover, the incumbent service provider may have the ability to significantly discount its services or enter into long-term agreements, which would further impede our ability to increase our revenues.
We may expand through investments in, acquisitions of, or the development of new products with assistance from other companies, any of which may not be successful and may divert our management’s attention.
In recent years, we completed several strategic acquisitions. We also expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions, including acquiring complementary products, technologies or businesses. We also have entered into relationships with other businesses such as Kantar, Google, Yahoo and Acxiom, in order to expand our product offerings. These relationships or transactions could involve preferred or exclusive licenses, discount pricing or investments in other businesses to expand our sales capabilities. These transactions could be material to our financial condition and results of operations, and though these transactions may provide additional benefits, they may not be profitable immediately or in the long term. Negotiating any such transactions could be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to regulatory or other approvals and other conditions that are beyond our control. Consequently, we can make no assurances that any such transactions, investments or relationships, if undertaken and announced, would be completed.
An acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to be employed by us, and we may have difficulty retaining the customers of any acquired business due to changes in management and ownership. Acquisitions may also disrupt our ongoing business, divert our resources and require significant management attention that would otherwise be available for ongoing development of our business. Moreover, we cannot assure you that the anticipated benefits of any acquisition, investment or business relationship would be realized or that we would not be exposed to unknown liabilities. In connection with any such transaction, we may:
encounter difficulties retaining key employees of the acquired company or integrating diverse business cultures;
incur large charges or substantial liabilities, including without limitation, liabilities associated with products or technologies accused or found to infringe third party intellectual property;
issue shares of our capital stock as part of the consideration, which may be dilutive to existing stockholders;
become subject to adverse tax consequences, substantial depreciation or deferred compensation charges;
use cash that we may need in the future to operate our business;

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enter new geographic markets that subject us to different laws and regulations that may have an adverse impact on our business;
experience difficulties effectively utilizing acquired assets;
encounter difficulties integrating the information and financial reporting systems of acquired foreign businesses, particularly those that operated under accounting principles other than those generally accepted in the United States prior to the acquisition by us; and
incur debt on terms unfavorable to us or that we are unable to repay.
The impact of any one or more of these factors could adversely affect our business or results of operations or cause the price of our common stock to decline substantially.
Following an acquisition of another business, we may also be required to defer the recognition of revenue that we receive from the sale of products that we acquired, or from the sale of bundles that include products that we acquired. For instance, if we acquire a business and are not able to establish vendor specific objective evidence, or VSOE, for any undelivered elements in the arrangement, we may be required to defer substantial portions of revenue and delay recognition of those revenues. This may result in fluctuations in our operating results and may adversely affect both revenues and operating margins in a given period or periods.
In addition, we may be required to disclose audited financial statements of acquired businesses within proscribed time after the completion of the acquisition pursuant to SEC reporting requirements. If we encounter unforeseen difficulties in obtaining these audited financial statements on a timely basis and cannot obtain relief from the SEC, we may lose our eligibility to register future offerings on Form S-3, which may limit our ability to access the capital markets quickly or effectively.
Future acquisitions or dispositions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. In addition, acquisitions will generally result in us recognizing significant amounts of intangible assets. If we experience significant declines in operating results associated with past, or future, acquisitions, and the anticipated benefits of an acquisition are not expected to materialize, we may be required to perform impairment testing of our long-lived assets, and ultimately may be required to record an impairment charge.
Our financial condition and results of operations could suffer if there is an additional impairment of goodwill or other intangible assets with indefinite lives.
We are required to test intangible assets with indefinite lives, including goodwill, annually and on an interim basis if an event occurs or there is a change in circumstance that would more likely than not reduce the fair value of reporting units and intangible assets below their carrying values. When the carrying value of a reporting unit’s goodwill exceeds its implied fair value of goodwill, a charge to operations is recorded. If the carrying amount of an intangible asset with an indefinite life exceeds its fair value, a charge to operations is recognized. Either event would result in incremental expenses for that quarter, which would reduce any earnings or increase any loss for the period in which the impairment was determined to have occurred.
In connection with the preparation of our financial statements for the year ended December 31, 2014, we determined it was necessary to record a $9.7 million non-cash impairment charge related to intangible assets associated with our mobile operator business line. The impairment was based primarily on an analysis of estimated future cash flows expected to be generated from those assets, which are classified as held for sale. In determining the impairment loss, we recorded an amount equal to the excess of the assets’ carrying amount over its fair value as determined by an analysis of discounted future cash flows.
Our goodwill impairment analysis is sensitive to changes in key assumptions used in our analysis, such as expected future cash flows, the degree of volatility in equity and debt markets, and our stock price. If the assumptions used in our analysis are not realized, it is possible that an impairment charge may need to be recorded in the future. We cannot accurately predict the amount and timing of any impairment of goodwill or other intangible assets. However, any such impairment would have an adverse effect on our results of operations.
Concern over spyware, data breaches and privacy, including any violations of privacy laws, perceived misuse of personal information, or failure to adhere to the privacy commitments that we make, could cause public relations problems, regulatory scrutiny, and potential class action lawsuits and could impair our ability to recruit panelists or maintain panels of sufficient size and scope, which in turn could adversely affect our ability to provide our products.
Any perception of our practices as an invasion of privacy, whether legal or illegal, may subject us to public criticism, regulatory scrutiny, and potential class action lawsuits. Media coverage and public discourse initiated by lawmakers and

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regulators have increased the sensitivity of consumers to the collection, storage or use of personal information and online usage information, and the possibility of an unauthorized use or disclosure of this information may create negative public reaction related to our business practices. A shift in public acceptance of measurement technologies such as third party cookies may have a chilling effect on businesses that collect or use online usage information generally or substantially increase the cost of maintaining a business that collects or uses online usage information, increase regulatory scrutiny and increase the potential of class action lawsuits. In response to marketplace concerns about the usage of third party cookies and web beacons to track user behaviors, the major browsers have enabled features that allow the user to limit the collection of certain data. We actively seek to prevent the inclusion of our cookies and beacons on the lists of companies whose activities are automatically blocked without prior individual review of those cookies and beacons by the end user.
A rise in data breaches has also led to an increased awareness of data security issues and may result in an increase in legislative or regulatory requirements, which could in turn substantially increase the cost of businesses that maintain data, and increase the potential of class action lawsuits. We actively seek outside audits and reviews of our data protection policies to assure we are implementing best practices; however, these precautions may not prevent the occurrence of a data breach.
Additionally, there is continuing public concern regarding certain kinds of downloadable software known as “spyware” and “adware.” These concerns might cause users to refrain from downloading software from the Internet, including our proprietary technology, if they inaccurately believe our software is “spyware” or “adware.” This could make it difficult to recruit additional panelists or maintain a panel of sufficient size and scope to provide meaningful marketing intelligence. In response to general spyware and adware concerns in the marketplace, numerous programs are available, many of which are available for free, and that claim to identify, remove or block such software or activity. Some anti-spyware programs have in the past identified, and may in the future identify, our software as spyware or potential spyware applications. We actively seek to prevent the inclusion of our software on lists of spyware applications or potential spyware applications and apply best industry practices for obtaining appropriate consent from panelists, protect the privacy and confidentiality of our panelist data, and comply with existing privacy laws. However, to the extent that we are not successful, and anti-spyware programs classify our software as spyware, a potential spyware application, or third party service providers fail to comply with our privacy or data security requirements, our brand may be harmed and users may refrain from downloading these programs, may uninstall our software or pursue actions against us for damages.
For example, on August 23, 2011, we received notice that Mike Harris and Jeff Dunstan, individually and on behalf of a class of similarly situated individuals, filed a lawsuit against comScore in the United States District Court for the Northern District of Illinois, Eastern Division, alleging, among other things, violations by comScore of the Stored Communications Act, the Electronic Communications Privacy Act, Computer Fraud and Abuse Act and the Illinois Consumer Fraud and Deceptive Practices Act as well as unjust enrichment. The complaint sought unspecified damages, including statutory damages per violation and punitive damages, injunctive relief and reasonable attorneys’ fees of the plaintiffs. In October 2012, the plaintiffs filed an amended complaint which, among other things, removed the claim relating to alleged violations of the Illinois Consumer Fraud and Deceptive Practices Act. On April 2, 2013, the District Court issued an order certifying a class for only three of the four claims, refusing to certify a class for unjust enrichment.  On May 30, 2014, we and the plaintiffs proposed a tentative settlement subject to approval by the District Court, and on October 1, 2014, the Court issued its final approval of those terms.  comScore was required to establish a settlement fund from which class member claims, attorneys’ fees and incentive awards, costs, and administrative expenses will be paid. We and our insurers contributed $14 million to the fund.  The settlement also requires us to alter certain portions of our privacy policy and implement certain additional protocols to ensure that our privacy practices remain consistent with our disclosures to consumers. For the year ended December 31, 2014, we recorded a loss of $3.5 million related to the settlement. Any resulting reputational harm, potential claims asserted against us or decrease in the size or scope of our panel could reduce the demand for our products, increase the cost of recruiting panelists, adversely affect our ability to provide our products to our customers or result in additional costs in the form of settlement, judgments, restrictions on our business or diversion of resources to address and defend the claims. Any of these adverse effects could harm our business and our operating results.
Domestic or foreign laws, regulations or enforcement actions may limit our ability to collect and use information about Internet users or restrict or prohibit our product offerings, causing a decrease in the value of our products and an adverse impact on the sales of our products.
Our business could be adversely impacted by existing or future laws or regulations of, or actions by, domestic or foreign regulatory agencies. For example, privacy concerns could lead to legislative, judicial and regulatory limitations on our ability to collect, maintain and use information about Internet users in the United States and abroad. Various state legislatures have enacted legislation designed to protect Internet users’ privacy, for example, by prohibiting spyware. In recent years, similar legislation has been proposed in other states and at the federal level and has been enacted in foreign countries, most notably by tthe European Union, which adopted a privacy directive regulating the collection of personally identifiable information online and more recently, restricting the use of cookies without opt-in consent by the user, and preserving an individual's right to be forgotten. The U.S. Congress and regulators have expressed concern over the collection of Internet usage information, which

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started as part of a larger initiative to regulate online behavioral advertising, but which has expanded in scope to a general concern over online tracking and measurement. A similar concern has been raised by regulatory agencies in Europe. In addition, U.S. and European lawmakers and regulators have expressed concern over the use of third party cookies or web beacons to understand Internet usage. Additionally, the European Commission has issued a directive requiring the regulation of cookies throughout the European Union, which may lead to the introduction of additional regulations that may vary from country to country. Furthermore, the U.S. Federal and Trade Commission updated its regulatory interpretation related to the Children's Online Privacy Protection Act, which applies new restrictions to the online advertising market. These laws and regulations, if drafted or interpreted broadly, could be deemed to apply to the technology we use, and could restrict our information collection methods, and the collection methods of third parties from whom we may obtain data, or decrease the amount and utility of the information that we would be permitted to collect. Even if such laws and regulations are not enacted, lawmakers and regulators may publicly call into question the collection and use of Internet or mobile usage data and may affect vendors and customers’ willingness to do business with us. In addition, our ability to conduct business in certain foreign jurisdictions, such as China, is restricted by the laws, regulations and agency actions of those jurisdictions. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may prevent us from selling our products or increase the costs associated with selling our products, and may affect our ability to invest in or jointly develop products in the United States and in foreign jurisdictions.
In addition, failure to comply with these and other laws and regulations may result in, among other things, administrative enforcement actions and fines, class action lawsuits and civil and criminal liability. State attorneys general, governmental and non-governmental entities and private persons may bring legal actions asserting that our methods of collecting, using and distributing Web site visitor information are illegal or improper, which could require us to spend significant time and resources defending these claims. For example, some companies that collect, use and distribute Web site visitor information have been the subject of governmental investigations and class-action lawsuits. Any such regulatory or civil action that is brought against us, even if unsuccessful, may distract our management’s attention, divert our resources, negatively affect our public image or reputation among our panelists and customers and harm our business.
The impact of any of these current or future laws or regulations could make it more difficult or expensive to attract or maintain panelists, particularly in affected jurisdictions, and could adversely affect our business and results of operations.
Any unauthorized disclosure or theft of private information we gather could harm our business.
Unauthorized disclosure of personally identifiable information regarding Web site visitors, whether through breach of our secure network by an unauthorized party, employee theft or misuse, or otherwise, could harm our business. If there were an inadvertent disclosure of personally identifiable information, or customer confidential information, or if a third party were to gain unauthorized access to the personally identifiable or customer confidential information we possess, our operations could be seriously disrupted and we could be subject to claims or litigation arising from damages suffered by panel members or pursuant to the agreements with our customers. In addition, we could incur significant costs in complying with the multitude of state, federal and foreign laws regarding the unauthorized disclosure of personal information. Finally, any perceived or actual unauthorized disclosure of the information we collect could harm our reputation, substantially impair our ability to attract and retain panelists and have an adverse impact on our business.
The success of our business depends in large part on our ability to protect and enforce our intellectual property rights.
We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. In addition, where we determine necessary, we pursue enforcement of our intellectual property rights. Such enforcement action may cause us to incur costs, distract the attention of management, and result in unfavorable public opinion or outcomes that are not in our favor, each of which could adversely affect our brand, business and results of operations. While we have filed a number of patent applications and own approximately 80 issued patents worldwide, we cannot assure you that any additional patents will be issued with respect to any of our pending or future patent applications, nor can we assure you that any patent issued to us will provide adequate protection, or that any patents issued to us will not be challenged, invalidated, circumvented, or held to be unenforceable in actions against alleged infringers. Also, we cannot assure you that any future trademark or service mark registrations will be issued with respect to pending or future applications or that any of our registered trademarks and service marks will be enforceable or provide adequate protection of our proprietary rights. Furthermore, adequate (or any) patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our services are available.
We endeavor to enter into agreements with our employees and contractors and with parties with whom we do business in order to limit access to and disclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, third parties might

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independently develop technologies that are competitive to ours or that infringe upon our intellectual property. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet-related industries are uncertain and still evolving, both in the United States and in other countries. The protection of our intellectual property rights may depend on our legal actions against any infringers being successful. We cannot be sure any such actions will be successful, and any such action may be expensive and divert considerable attention of our management team from the normal operation of our business.
An assertion from a third party that we are infringing its intellectual property, whether such assertions are valid or not, could subject us to costly and time-consuming litigation or expensive licenses.
The Internet, mobile media, software and technology industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights, domestically or internationally. As we grow and face increasing competition, the probability that one or more third parties will make intellectual property rights claims against us increases. In such cases, our technologies may be found to infringe on the intellectual property rights of others. Additionally, many of our subscription agreements may require us to indemnify our customers for third-party intellectual property infringement claims, which would increase our costs if we have to defend such claims and may require that we pay damages and provide alternative services if there were an adverse ruling in any such claims. Intellectual property claims could harm our relationships with our customers, deter future customers from subscribing to our products or expose us to litigation, which could be expensive and divert considerable attention of our management team from the normal operation of our business. Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend against intellectual property claims by the third party in any subsequent litigation in which we are a named party. Any of these results could adversely affect our brand, business and results of operations.
With respect to any intellectual property rights claim against us or our customers, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms or at all, may significantly increase our operating expenses or may significantly restrict our business activities in one or more respects. We may also be required to develop alternative non-infringing technology, which could require significant effort and expense. Any of these outcomes could adversely affect our business and results of operations. Even if we prove successful in defending ourselves against such claims, we may incur substantial expenses and the active defense of such claims may divert considerable attention of our management team from the normal operation of our business.
The market for digital media analytics is developing, and if it does not develop further, or develops more slowly than expected, our business will be harmed.
The market for digital media analytics products is still developing, and it is uncertain whether these products will maintain high levels of demand and increased market acceptance. Our success will depend to a substantial extent on the willingness of companies to increase their use of such products and to continue use of such products on a long-term basis. Factors that may affect market acceptance include:
the reliability of digital media analytics products;
public concern regarding privacy and data security;
decisions of our customers and potential customers to develop digital media analytics internally rather than purchasing such products from third-party suppliers like us;
decisions by industry associations in the United States or in other countries that result in association-directed awards, on behalf of their members, of digital measurement contracts to one or a limited number of competitive vendors;
the ability to maintain high levels of customer satisfaction; and
the rate of growth in eCommerce, online advertising and digital media.
The market for our products may not develop further, or may develop more slowly than we expect or may even contract, all of which could adversely affect our business and operating results.
We depend on third parties for data that is critical to our business, and our business could suffer if we cannot continue to obtain data from these suppliers.
We rely on third-party data sources for information regarding certain activities such as television viewing and mobile usage, as well as for information about offline activities of and demographic information regarding our panelists. The availability and accuracy of this data is important to the continuation and development of our cross-media products, products that use server- or census-based information as part of the research methodology, and products that link online and offline

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activity. We may be required to enter into vendor relationships, strategic alliances, or even joint ventures with some third-parties in order to obtain access to the data sources that we need. If this information is not available to us at commercially reasonable terms, or is found to be inaccurate, it could harm our reputation, business and financial performance.
If the digitally-based or cross-platform focused advertising and eCommerce markets develop more slowly than we expect, our business will suffer.
Our future success will depend on continued growth in the use of digital advertising, a cross-platform focus to buying advertising campaigns, a continued increase in eCommerce spending and the proliferation of the Internet across platforms, including mobile and connected devices, for a wide variety of consumer activities. These markets are evolving rapidly, and it is not certain that their current growth trends will continue.
The adoption of advertising across digital platforms, particularly by advertisers that have historically relied on traditional offline media, requires the acceptance of new approaches to conducting business and a willingness to invest in such new approaches. Moreover the decision to adopt a cross-platform approach to buying advertisement campaigns, requires a change to buying approaches and a willingness to adopt new data analytics to assist in evaluating such approaches, by advertisement buyers who traditionally focus on buying advertising campaigns through one medium. Advertisers may perceive such new approaches to advertising or understanding advertising to be less effective than traditional methods for marketing their products. They may also be unwilling to pay premium rates for advertising that is targeted at specific segments of validated users based on their demographic profile or Internet behavior across digital media platforms. The digital media advertising and eCommerce markets may also be adversely affected by privacy issues relating to such targeted advertising, including advertising that makes use of personalized information or online behavioral information. Furthermore, merchants using new digital media platforms may not be able to establish digital commerce models that are cost effective and may not learn how to effectively compete with other established websites or offline merchants. In addition, consumers may not continue to shift their spending on goods and services from offline outlets to other forms of digital media. As a result, growth in the use of digital media for eCommerce may not continue at a rapid rate, or digital media may not be adopted as a medium of commerce by a broad base of customers or companies worldwide. Because of the foregoing factors, among others, the market for cross-platform-focused digital media advertising and eCommerce, may not continue to grow at significant rates. If these markets do not continue to develop, or if they develop more slowly than expected, our business may suffer.
Because our long-term success depends, in part, on our ability to expand the sales of our products to customers located outside of the United States, our business will become increasingly susceptible to risks associated with international operations.
In recent years, we acquired various businesses with substantial presence or clientele in multiple Latin American, European, Asian and Middle Eastern countries. Prior to these acquisitions, we otherwise had limited experience operating in markets outside of the United States. Our inexperience in operating our business outside of the United States may increase the risk that the international expansion efforts in which we are engaged will not be successful. In addition, conducting international operations subjects us to risks that we have not generally faced in the United States. These risks include:
recruitment and maintenance of a sufficiently large and representative panel both globally and in certain countries;
difficulties and expenses associated with tailoring our products to local markets as may be required by local customers and joint industry committees or similar industry organizations;
difficulties in expanding the adoption of our server- or census-based web beacon data collection in international countries or obtaining access to other necessary data sources;
differences in customer buying behaviors;
the burdens and expense of complying with a wide variety of foreign laws and regulations;
difficulties in staffing and managing international operations — including complex and costly hiring, disciplinary, and termination requirements;
the complexities of foreign value-added taxes and restrictions on the repatriation of earnings;
reduced or varied protection for intellectual property rights in some countries; and
political, social and economic instability abroad, terrorist attacks and security concerns.
fluctuations in currency exchange rates; and
increased accounting and reporting burdens and complexities;
Additionally, operating in international market requires significant management attention and financial resources. We cannot be certain that the investments and additional resources required to establish and maintain operations in other countries will hold their value or produce desired levels of revenues or profitability. We cannot be certain that we will be able to maintain and increase the size of the Internet user panel that we currently have in various countries, that we will be able to recruit a

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representative sample for our audience measurement products, or that we will be able to enter into arrangements with a sufficient number of website owners to allow us to collect server-based information for inclusion in our digital media analytics products. In addition, there can be no assurance that Internet usage and eCommerce will continue to grow in international markets. In addition, governmental authorities in various countries have different views regarding regulatory oversight of the Internet.
The impact of any one or more of these risks could negatively affect or delay our plans to expand our international business and, consequently, our future operating results.
Our growth depends upon our ability to retain existing large customers and add new large customers; however, to the extent we are not successful in doing so, our ability to maintain profitability and positive cash flow may be impaired.
Our success depends in part on our ability to sell our products to large customers and on the renewal of the subscriptions of those customers in subsequent years. For the years ended December 31, 2014, 2013 and 2012, we derived approximately 21%, 21% and 22%, respectively, of our total revenues from our top 10 customers. Uncertain economic conditions or other factors, such as the failure or consolidation of large customer companies, or internal reorganization or changes in focus, may cause certain large customers to terminate or reduce their subscriptions. Moreover, certain recently acquired companies, have revenues highly concentrated in a few large customers. The loss of any one or more of those customers could decrease our revenues and harm our current and future operating results. The addition of new large customers or increases in sales to existing large customers may require particularly long implementation periods and other significant upfront costs, which may adversely affect our profitability. To compete effectively, we have in the past been, and may in the future be, forced to offer significant discounts to maintain existing customers or acquire other large customers. In addition, we may be forced to reduce or withdraw from our relationships with certain existing customers or refrain from acquiring certain new customers in order to acquire or maintain relationships with important large customers. As a result, new large customers or increased usage of our products by large customers may cause our profits to decline and our ability to sell our products to other customers could be adversely affected.
As our international operations grow, changes in foreign currencies could have an increased effect on our operating results.
We operate in several countries in South America, including Brazil, Chile and Argentina as well as countries in Europe and the United Kingdom. As such, a portion of our revenues and expenses from business operations in foreign countries are derived from transactions denominated in currencies other than the functional currency of our operations in those countries. As such, we have exposure to adverse changes in exchange rates associated with revenues and operating expenses of our foreign operations, but we do not currently enter into any hedging instruments that hedge foreign currency exchange rate risk. As we grow our international operations, and acquire companies with established business in international regions, our exposure to foreign currency risk could become more significant. For example, at the beginning of 2014, the U.S. Dollar to euro exchange rate was approximately $1.00 to €0.73. However, during 2014, the U.S. Dollar to euro exchange rate dropped as low as $1.00 to €0.72 and rose as high as $1.00 to €0.82. During the year ended December 31, 2014, the average U.S. Dollar to euro exchange rate was approximately $1.00 to €0.75. There can be no guarantee that exchange rates will remain constant over the long-term. In addition to the impact from the U.S. Dollar to euro exchange rate movements, we are also impacted by movements in the exchange rates between the U.S. Dollar and various South American currencies as well as the Pound Sterling. In addition, cash held overseas would be subject to income tax withholding payments if it was repatriated to the United States. As of December 31, 2014, $14.5 million of the $43.0 million in cash on hand is held by foreign subsidiaries that would be subject to income tax withholding payments if it was repatriated to the United States. If we were to repatriate these funds to the United States, they would be subject to income tax payments ranging from 5% to 45% of the amount repatriated.
The market for digital marketing products is highly competitive, and if we cannot compete effectively, our revenues will decline and our business will be harmed.
The market for digital marketing products is highly competitive and is evolving rapidly. We compete primarily with providers of digital media intelligence and related analytical products and services. We also compete with providers of marketing services and solutions, with full-service survey providers and with internal solutions developed by customers and potential customers. Our principal competitors include:
online advertising companies that provide measurement of online ad effectiveness and ad delivery used for billing purposes, including Nielsen, DoubleClick (owned by Google), Atlas (owned by Facebook), and certain divisions and products within Kantar (owned by WPP);
full-service market research firms and survey providers that may measure online behavior and attitudes, including Harris Interactive, Ipsos, Synnovate, GFK, certain divisions and products within Kantar (owned by WPP) and Nielsen;
companies that provide advertising technology point solutions, including DoubleVerify, Integral Ad Science, MOAT, and WhiteOps;

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companies that provide behavioral, attitudinal and qualitative advertising effectiveness, including Toluna/Nurago, DataLogix (being acquired by Oracle), Context Web's Aperture, Ipsos OTX, Dynamic Logic, Insight Express and Marketing Evolution;
companies that provide audience ratings for TV, radio and other media that have extended or may extend their current services, particularly in certain international markets, to the measurement of digital media, including Nielsen, Arbitron (owned by Nielsen), certain divisions and products within Kantar, Rentrak and Taylor Nelson Sofres (owned by WPP);
large and small companies that create proprietary data and analysis of consumers' online behavior, including Nielsen, Effective Measures, Gemius, Compete Inc. (owned by WPP), Google, Inc., Hitwise (owned by Experian), Quantcast, and Visible Measures;
analytical services companies that provide customers with detailed information of behavior on their own data, content, or web traffic, including Omniture (owned by Adobe), Coremetrics (owned by IBM), and WebTrends; and systems providers including Accenture, HP, Pivotal, HortonWorks, Cloudera and Terradata; and
specialty information providers for certain industries that we serve, including Manhattan Research (healthcare) and The Now Factory (telecommunications).
Some of our current competitors have longer operating histories, access to larger customer bases and substantially greater resources than we do. As a result, these competitors may be able to devote greater resources to marketing and promotional campaigns, panel retention, panel development or development of systems and technologies than we can. In addition, some of our competitors may adopt more aggressive pricing policies or have started to provide some services at no cost. Furthermore, large software companies, Internet portals and database management companies may enter our market or enhance their current offerings, either by developing competing services or by acquiring our competitors, and could leverage their significant resources and pre-existing relationships with our current and potential customers. Finally, consolidation of our competitors could make it difficult for us to compete effectively.
If we are unable to compete successfully against our current and future competitors, we may not be able to retain and acquire customers, and we may consequently experience a decline in revenues, reduced operating margins, loss of market share and diminished value from our products.
We may encounter difficulties managing our growth and costs, which could adversely affect our results of operations.
We have experienced significant growth over the past several years in the U.S. and internationally. We have substantially expanded our overall business, customer base, headcount, data collection and processing infrastructure and operating procedures as our business has grown through both organic growth and acquisitions. From time to time, as a result of acquisition integration initiatives, or through efforts to streamline our operational performance, we may reduce the workforce or reassign personnel. Such actions may expose us to disruption by dissatisfied employees or employee-related claims, including without limitation, claims by terminated employees that believe they are owed more compensation than we believe these employees are due under our compensation and benefit plans, or claims maintained internationally in jurisdictions whose laws and procedures differ from those in the United States. .
We believe that we will need to continue to effectively manage and expand our organization, operations and facilities in order to accommodate potential future growth or acquisitions and to successfully integrate acquired businesses. If we continue to grow, either organically or through acquired businesses, our current systems and facilities may not be adequate. Our need to effectively manage our operations and cost structure requires that we continue to assess and improve our operational, financial and management controls, reporting systems and procedures. For example, we may be required to enter into leases for additional facilities or commit to significant investments in the build out of current or new facilities to support our growth. If we are unable to effectively forecast our facilities needs or if we are unable to sublease or terminate leases for unused space, we may experience increased unexpected costs. If we are not able to efficiently and effectively manage our cost structure or are unable to find appropriate space to support our needs, our business may be impaired.
Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.
Increasing our customer base and achieving broader market acceptance of our products will depend to a significant extent on our ability to expand our sales and marketing operations. We expect to continue to rely on our direct sales force to obtain new customers. We may expand or enhance our direct sales force both domestically and internationally. We believe that there is significant competition for direct sales personnel with the sales skills and technical knowledge that we require. Our ability to achieve significant growth in revenues in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of direct sales personnel, and our ability to cross train our existing sales force with the sales forces of acquired businesses so that the sales personnel have the necessary information and ability to sell or develop sales prospects for both our products and the products of recently-acquired companies. In general, new hires require significant training and

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substantial experience before becoming productive. Our recent hires and planned hires may not become as productive as we require, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we currently operate or where we seek to conduct business. Our business will be seriously harmed if the efforts to expand our sales and marketing capabilities are not successful or if they do not generate a sufficient increase in revenues.
If we fail to develop our brand, our business may suffer.
We believe that building and maintaining awareness of comScore and our portfolio of products in a cost-effective manner is critical to achieving widespread acceptance of our current and future products and is an important element in attracting new customers. We will also need to carefully manage the brands used by recently acquired businesses as we integrate such businesses into our own. We rely on our relationships with the media and the exposure we receive from numerous citations of our data by media outlets to build brand awareness and credibility among our customers and the marketplace. Furthermore, we believe that brand recognition will become more important for us as competition in our market increases. Our brand’s success will depend on the effectiveness of our marketing efforts and on our ability to provide reliable and valuable products to our customers at competitive prices. Our brand marketing activities may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses we incur in attempting to build our brand. If we fail to successfully market our brand, we may fail to attract new customers, retain existing customers or attract media coverage to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.
We have a history of significant net losses, may incur significant net losses in the future and may not achieve profitability.
We incurred net losses of $9.9 million, $2.3 million, and $11.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. As such we cannot assure you that we will be able to achieve, sustain or increase profitability in the future, particularly if we engage in additional acquisition activity as we did in 2014, 2011 and 2010. As of December 31, 2014, we had an accumulated deficit of $93.1 million. Because a large portion of our costs are fixed, we may not be able to reduce our expenses in response to any decrease in our revenues, which would adversely affect our operating results. In addition, we expect operating expenses to increase as we implement certain growth initiatives, which include, among other things, the development of new products, expansion of our infrastructure, plans for international expansion and general and administrative expenses associated with being a public company. If our revenues do not increase to offset these expected increases in costs and operating expenses, our operating results would be materially and adversely affected. If we continue to incur significant net losses, we may not be able to realize certain deferred tax assets associated with our net operating loss carryforwards. As of December 31, 2014, we estimate our federal and state net operating loss carryforwards for tax purposes are approximately $27.8 million and $34.1 million, respectively. You should not consider our revenue growth in recent periods as indicative of our future performance, as our operating results for future periods are subject to numerous uncertainties.
We have limited experience with respect to our pricing model, and if the fees we charge for our products are unacceptable to our customers, our revenues and operating results will be harmed.
We have limited experience in determining the fees that our existing and potential customers will find acceptable for our products, the products of companies that we recently acquired, and any potential products that are developed as a result of the integration of our company with acquired companies. The majority of our customers purchase specifically tailored subscription packages that are priced in the aggregate. Due to the level of customization of such subscription packages, the pricing of contracts or individual product components of such packages may not be readily comparable across customers or periods. Existing and potential customers may have difficulty assessing the value of our products and services when comparing it to competing products and services. As the market for our products matures, or as new competitors introduce new products or services that compete with ours, we may be unable to renew our agreements with existing customers or attract new customers with the fees we have historically charged. As a result, it is possible that future competitive dynamics in our market as well as global economic pressures may require us to reduce our fees, which could have an adverse effect on our revenues, profitability and operating results.
System failures or delays in the operation of our computer and communications systems may harm our business.
Our success depends on the efficient and uninterrupted operation of our computer and communications systems and the third-party data centers we use. Our ability to collect and report accurate data may be interrupted by a number of factors, including our inability to access the Internet, the failure of our network or software systems, computer viruses, security breaches or variability in user traffic on customer Web sites. A failure of our network or data gathering procedures could impede the processing of data, cause the corruption or loss of data or prevent the timely delivery of our products.
In the future, we may need to expand our network and systems at a more rapid pace than we have in the past. Our network or systems may not be capable of meeting the demand for increased capacity, or we may incur additional unanticipated expenses to accommodate these capacity demands. In addition, we may lose valuable data, be unable to obtain or provide data

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on a timely basis or our network may temporarily shut down if we fail to adequately expand or maintain our network capabilities to meet future requirements. Any lapse in our ability to collect or transmit data may decrease the value of our products and prevent us from providing the data requested by our customers. Any disruption in our network processing or loss of Internet user data may damage our reputation and result in the loss of customers, and our business and results of operations could be adversely affected.
We rely on a small number of third-party service providers to host and deliver our products, and any interruptions or delays in services from these third parties could impair the delivery of our products and harm our business.
We host our products and serve all of our customers from data center facilities located throughout the United States and Europe. While we operate our equipment inside these facilities, we do not control the operation of these facilities, and, depending on service level requirements, we may not continue to operate or maintain redundant data center facilities for all of our products or for all of our data, which could increase our vulnerability. These facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, power loss, telecommunications failures and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. A natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in availability of our products. We may also encounter capacity limitations at our third-party data centers. Additionally, our data center facility agreements are of limited durations, and our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, if at all. Our agreements for our various data center facilities expire at various dates through September 2018. We believe that we have good relationships with our data center facility vendors and believe that we will be able to renew, or find alternative data center facilities, at commercially reasonable terms. Although we are not substantially dependent on our data center facilities because of planned redundancies, and although we currently are able to migrate to alternative data centers, such a migration may result in an interruption or delay in service. If we are unable to renew our agreements with the owners of the facilities on commercially reasonable terms, or if we migrate to a new data center, we may experience delays in delivering our products until an agreement with another data center facility can be arranged or the migration to a new facility is completed.
If we or the third-party data centers that we use were to experience a major power outage, we would have to rely on back-up generators, which may not function properly, and their supply may be inadequate. Such a power outage could result in the disruption of our business. Additionally, if our current facilities fail to have sufficient cooling capacity or availability of electrical power, we would need to find alternative facilities.
We currently leverage a large content delivery network, or CDN, to provide services that allow us to offer a more efficient tagging methodology for certain subscription based measurement and analytics product offerings. If that service faced unplanned outage or the service became immediately unavailable, an alternate CDN provider or additional capacity in our data centers would need to be established to support the large volume of tag requests that we currently manage which would either require additional investments in equipment and facilities or a transition plan. This could unexpectedly raise the costs and could contribute to delays or losses in tag data that could affect the quality and reputation of our Media Metrix, vCE, and other data products that involve the measurement of a large amount of digitally transmitted activity across multiple providers.
Further, we depend on access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason, we could experience disruption in the delivery of our products or be required to retain the services of a replacement bandwidth provider. It may be difficult for us to replace any lost bandwidth on commercially reasonable terms, or at all, due to the large amount of bandwidth our operations require.
Any errors, defects, disruptions or other performance problems with our products caused by third parties could harm our reputation and may damage our business. Interruptions in the availability of our products may reduce our revenues due to increased turnaround time to complete projects, cause us to issue credits to customers, cause customers to terminate their subscription and project agreements or adversely affect our renewal rates. Our business would be harmed if our customers or potential customers believe our products are unreliable.
Laws related to the regulation of the Internet could adversely affect our business.
Laws and regulations that apply to communications and commerce over the Internet are becoming more prevalent. In particular, the growth and development of the market for eCommerce has prompted calls for more stringent tax, consumer protection and privacy laws in the United States and abroad that may impose additional burdens on companies conducting business online. The adoption, modification or interpretation of laws or regulations relating to the Internet or our customers’ digital operations could negatively affect the businesses of our customers and reduce their demand for our products. Even if such laws and regulations are not enacted, lawmakers and regulators may publicly call into question the collection and use of Internet or mobile usage data and may affect vendors and customers’ willingness to do business with us.

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Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.
We do not collect sales and use, value added and similar taxes in all jurisdictions in which we have sales. Sales and use, value added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties and interest or future requirements may adversely affect the results of our operations.
If we fail to respond to evolving industry standards, our products may become obsolete or less competitive.
The market for our products is characterized by rapid technological advances, changes in customer requirements, changes in protocols and evolving industry standards. For example, industry associations such as the Advertising Research Foundation, the Council of American Survey Research Organizations, the Internet Advertising Bureau, or IAB, and the Media Rating Council have independently initiated efforts to either review online market research methodologies or to develop minimum standards for online market research. In April 2011, comScore Direct was accredited by the Media Rating Council. Any standards adopted by U.S or internationally based industry associations may lead to costly changes to our procedures and methodologies. As a result, the cost of developing our digital media analytics products could increase. If we do not adhere to standards prescribed by the IAB or other industry associations, our customers could choose to purchase products from competing companies that meet such standards. Furthermore, industry associations based in countries outside of the United States often endorse certain vendors or methodologies. If our methodologies fail to receive an endorsement from an important industry association located in a foreign country, advertising agencies, media companies and advertisers in that country may not purchase our products. As a result, our efforts to further expand internationally could be adversely affected.
The success of our business depends on the continued growth of the Internet as a medium for commerce, content, advertising and communications.
Expansion in the sales of our products depends on the continued acceptance of the digital media as a platform for commerce, content, advertising and communications. The use of the digital media as a medium for commerce, content, advertising and communications could be adversely impacted by delays in the development or adoption of new standards and protocols to handle increased demands of digital media activity, security, reliability, cost, ease-of-use, accessibility and quality-of-service. The performance of the Internet and its acceptance as a medium for commerce, content, advertising and communications has been harmed by viruses, worms, and similar malicious programs, and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If for any reason digital media does not remain a medium for widespread commerce, content, advertising and communications, the demand for our products would be significantly reduced, which would harm our business.
We rely on our management team and may need additional personnel to grow our business; the loss of one or more key employees or the inability to attract and retain qualified personnel could harm our business.
Our success and future growth depends to a significant degree on the skills and continued services of our management team. Our future success also depends on our ability to retain, attract and motivate highly skilled technical, managerial, marketing and customer service personnel, including members of our management team. All of our employees work for us on an at-will basis. We plan to hire additional personnel in all areas of our business, particularly for our sales, marketing and technology development areas, both domestically and internationally, which will likely increase our recruiting and hiring costs. Competition for these types of personnel is intense, particularly in the Internet and software industries. As a result, we may be unable to successfully attract or retain qualified personnel. Our inability to retain and attract the necessary personnel could adversely affect our business.
Investors could lose confidence in our financial reports, and our business and stock price may be adversely affected, if our internal control over financial reporting is found by management or by our independent registered public accounting firm not to be adequate or if we disclose significant deficiencies or material weaknesses in those controls.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include a report on our internal control over financial reporting in our Annual Report on Form 10-K. That report includes management’s assessment of the effectiveness of our internal control over financial reporting as of the end the fiscal year. Additionally, our independent registered public accounting firm is required to issue a report on their evaluation of the operating effectiveness of our internal control over financial reporting.
We continue to evaluate our existing internal controls against the standards adopted by the Public Company Accounting Oversight Board, or PCAOB. During the course of our ongoing evaluation of our internal controls, we have in the past

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identified, and may in the future identify, areas requiring improvement, and may have to design enhanced processes and controls to address issues identified through this review. Remedying any significant deficiencies or material weaknesses that we or our independent registered public accounting firm may identify could require us to incur significant costs and expend significant time and management resources. We cannot assure you that any of the measures we may implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies. Further, if we are not able to complete the assessment under Section 404 in a timely manner or to remedy any identified material weaknesses, we and our independent registered public accounting firm would be unable to conclude that our internal control over financial reporting is effective at the required reporting deadlines. If our internal control over financial reporting is found by management or by our independent registered public accountant to not be adequate or if we disclose significant existing or potential deficiencies or material weaknesses in those controls, investors could lose confidence in our financial reports, we could be subject to sanctions or investigations by The NASDAQ Global Market, the Securities and Exchange Commission or other regulatory authorities and our stock price could be adversely affected.
In future periods, we may upgrade our financial reporting systems and implement new information technology systems to better manage our business, streamline our financial reporting and enhance our existing internal controls. We may experience difficulties if we transition to new or upgraded systems, including loss of data and decreases in productivity as our personnel become familiar with new systems. In addition, we expect that our existing management information systems may require modification and refinement as we grow and our business needs change. Any modifications could prolong difficulties we experience with systems transitions, and we may not always employ the most efficient or effective systems for our purposes. If upgrades cost more or take longer than we anticipate, our operating results could be adversely affected. Moreover, if we experience difficulties in implementing new or upgraded information systems or experience system failures, or if we are unable to successfully modify our management information systems to respond to changes in our business needs, our ability to timely and effectively process analyze and prepare financial statements could be adversely affected.
A determination that there is a significant deficiency or material weakness in the effectiveness of our internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures to comply with applicable requirements.
Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
We have previously experienced “changes in control” that have triggered the limitations of Section 382 of the Internal Revenue Code on a portion of our net operating loss carryforwards. As a result, we may be limited in the amount of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. Federal income tax purposes.
As of December 31, 2014, we estimate our federal and state net operating loss carryforwards for tax purposes are approximately $27.8 million and $34.1 million, respectively. These net operating loss carryforwards will begin to expire in 2023 for federal income tax reporting purposes and in 2015 for state income tax reporting purposes.
In addition, at December 31, 2014 we estimate our aggregate net operating loss carryforwards for tax purposes related to our foreign subsidiaries are $15.0 million, which will begin to expire in 2017.
We apply a valuation allowance to certain deferred tax assets when management does not believe that it is more-likely-than-not that they will be realized. In assessing the need for any valuation allowances, we consider the reversal of existing temporary differences associated with deferred tax assets and liabilities, future taxable income, tax planning strategies and historical and future pre-tax book income (as adjusted for permanent differences between financial and tax accounting items) in order to determine if it is more likely than not that the deferred tax asset will be realized. For example, we have had several recent years of pre-tax losses, and further losses may present evidence that our net operating loss carryforwards may not be realized in future periods.
As of December 31, 2014, we had a valuation allowance related to the deferred tax assets (primarily net operating loss carryforwards) of our foreign subsidiary in Spain that is a loss company, the deferred tax asset related to our U.S. capital loss carryforwards, and the deferred tax asset related to certain state net operating loss carryforwards. Management will continue to evaluate the deferred tax position of our U.S. and foreign companies to determine the appropriate level of valuation allowance required against our deferred tax assets.
Restrictive covenants in the agreements governing our current and future indebtedness could restrict our operating flexibility.
The agreements governing our existing debt, and debt we may incur in the future, contain, or may contain, affirmative and negative covenants that materially limit our ability to take certain actions, including our ability to incur debt, pay dividends

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and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, and encumber and dispose of assets. Credit market turmoil, adverse events affecting our business or industry, the tightening of lending standards or other factors could negatively impact our ability to obtain future financing or to refinance our outstanding indebtedness on terms acceptable to us or at all.
We may require additional capital to support business growth, and this capital may not be available on acceptable terms or at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new products or enhance our existing products, enhance our operating infrastructure and acquire complementary businesses and technologies.
Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited. In addition, the terms of any additional equity or debt issuances may adversely affect the value and price of our common stock.
Risks Related to the Securities Market and Ownership of our Common Stock
The trading price of our common stock may be subject to significant fluctuations and volatility, and our new stockholders may be unable to resell their shares at a profit.
The stock markets, in general, and the markets for technology stocks in particular, have experienced high levels of volatility. The market for technology stocks has been extremely volatile and frequently reaches levels that bear no relationship to the past or present operating performance of those companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the trading price of our common stock has been subject to significant fluctuations and may continue to fluctuate or decline.
The price of our common stock in the market may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be related to our operating performance. It is possible that, in future quarters, our operating results may be below the expectations of analysts or investors. As a result of these and other factors, the price of our common stock may decline, possibly materially. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:
price and volume fluctuations in the overall stock market from time to time;
volatility in the market price and trading volume of technology companies and of companies in our industry;
actual or anticipated changes or fluctuations in our operating results;
actual or anticipated changes in expectations regarding our performance by investors or securities analysts;
the failure of securities analysts to cover our common stock or changes in financial estimates by analysts;
actual or anticipated developments in our competitors’ businesses or the competitive landscape;
actual or perceived inaccuracies in, or dissatisfaction with, information we provide to our customers or the media;
litigation involving us, our industry or both;
regulatory developments;
privacy and security concerns, including public perception of our practices as an invasion of privacy;
general economic conditions and trends;
major catastrophic events;
sales of large blocks of our stock;
the timing and success of new product introductions or upgrades by us or our competitors;
changes in our pricing policies or payment terms or those of our competitors;
concerns relating to the security of our network and systems;

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our ability to expand our operations, domestically and internationally, and the amount and timing of expenditures related to this expansion; or
departures of key personnel.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation, which could result in substantial costs and divert our management’s attention and resources from our business. In addition, volatility, lack of positive performance in our stock price or changes to our overall compensation program, including our equity incentive program, may adversely affect our ability to retain key employees.
If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We have incurred and will continue to incur increased costs and demands upon management as a result of complying with the laws and regulations affecting a public company, which could adversely affect our operating results.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we would not otherwise incur if we were a private company. In addition, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules implemented by the Securities and Exchange Commission and The NASDAQ Stock Market, requires certain corporate governance practices for public companies. Our management and other personnel devote a substantial amount of time to public reporting requirements and corporate governance. These rules and regulations have significantly increased our legal and financial compliance costs and made some activities more time-consuming and costly. We also have incurred additional costs associated with our public company reporting requirements. If these costs do not continue to be offset by increased revenues and improved financial performance, our operating results would be adversely affected. These rules and regulations also make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage if these costs continue to rise. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors or as executive officers.
Provisions in our certificate of incorporation and bylaws and under Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:
provide for a classified board of directors so that not all members of our board of directors are elected at one time;
authorize “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;
prohibit stockholder action by written consent, which means that all stockholder actions must be taken at a meeting of our stockholders;
prohibit stockholders from calling a special meeting of our stockholders;
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
provide for advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or prevent a change of control of our company.
 

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ITEM  1B.
UNRESOLVED STAFF COMMENTS
None.
 
ITEM  2.
PROPERTIES
Our corporate headquarters and executive offices are located in Reston, Virginia, where we occupy approximately 96,000 square feet of office space under a lease that initially expires in 2022, although we have an option to extend until 2032, subject to certain conditions. We also lease space in various locations throughout the United States, North America, South America, Europe, and Asia for sales and other personnel. If we require additional space, we believe that we would be able to obtain such space on commercially reasonable terms.
 
ITEM  3.
LEGAL PROCEEDINGS
In addition to the following matter, we are, and may become, a party to a variety of legal proceedings that arise in the normal course of our business. While the results of such legal proceedings cannot be predicted with certainty, management believes that, based on current knowledge, the final outcome of the current pending matters will not have a material adverse effect on our financial position, results of operations or cash flows. We are otherwise not presently a party to any pending legal proceedings the outcome of which we believe, if determined adversely to us, would individually or in the aggregate have a material adverse impact on our consolidated results of operations, cash flows or financial position. Regardless of the outcome, legal proceedings can have an adverse effect on us because of defense costs, diversion of management resources and other factors.
Privacy Class Action Litigation
On August 23, 2011, we received notice that Mike Harris and Jeff Dunstan, individually and on behalf of a class of similarly situated individuals, filed a lawsuit against us in the United States District Court for the Northern District of Illinois, Eastern Division, alleging, among other things, violations by us of the Stored Communications Act, the Electronic Communications Privacy Act, Computer Fraud and Abuse Act and the Illinois Consumer Fraud and Deceptive Practices Act as well as unjust enrichment. The complaint seeks unspecified damages, including statutory damages per violation and punitive damages, injunctive relief and reasonable attorneys’ fees of the plaintiffs. In October 2012, the plaintiffs filed an amended complaint which, among other things, removed the claim relating to alleged violations of the Illinois Consumer Fraud and Deceptive Practices Act.  On April 2, 2013, the District Court issued an order certifying a class for only three of the four claims, refusing to certify a class for unjust enrichment.  On May 30, 2014, we and the plaintiffs proposed a tentative settlement subject to approval by the District Court, and on October 1, 2014, the Court issued its final approval of those terms.  We were required to establish a $14 million settlement fund from which class member claims, attorneys’ fees and incentive awards, costs, and administrative expenses will be paid. We and our insurers contributed to the fund, of which our share was $3.5 million.  The settlement also requires us to alter certain portions of our privacy policy and implement certain additional protocols to ensure that our privacy practices remain consistent with its disclosures to consumers. For additional details, see Footnote 9 of the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
 
ITEM  4.
MINE SAFETY DISCLOSURES
Not applicable.

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PART II
 
ITEM  5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the NASDAQ Global Market under the symbol “SCOR” since our initial public offering in June 2007. The following table sets forth the high and low sales prices of our common stock for each period indicated and are as reported by the NASDAQ Global Market.
 
 
 
2014
 
2013
Fiscal Period
 
High
 
Low
 
High
 
Low
First Quarter
 
$
33.62

 
$
26.58

 
$
17.44

 
$
13.98

Second Quarter
 
$
35.96

 
$
28.02

 
$
24.39

 
$
15.67

Third Quarter
 
$
39.43

 
$
36.19

 
$
29.79

 
$
24.63

Fourth Quarter
 
$
47.60

 
$
35.66

 
$
29.09

 
$
25.83

HOLDERS
As of February 19, 2015 there were 80 stockholders of record of our common stock, although we believe that there may be a significantly larger number of beneficial owners of our common stock. We derived the number of stockholders by reviewing the listing of outstanding common stock recorded by our transfer agent as of February 19, 2015. 
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on our common stock between December 31, 2009 and December 31, 2014 to the cumulative total returns of the NASDAQ Composite Index and NASDAQ Computer Index over the same period. This graph assumes the investment of $100 at the closing price of the markets on December 31, 2009 in our common stock, the NASDAQ Composite Index and the NASDAQ Computer Index, and assumes the reinvestment of dividends, if any. We have never paid dividends on our common stock and have no present plans to do so.
The comparisons shown in the following graph are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

COMPARISON OF CUMULATIVE TOTAL RETURN*
among comScore, Inc., The NASDAQ Composite Index
and The NASDAQ Computer Index

 
 _________________
*
$100 invested upon market close of the NASDAQ Global Market on December 31, 2009, including reinvestment of dividends.

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The preceding Stock Performance Graph is not deemed filed with the Securities and Exchange Commission and shall not be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
DIVIDEND POLICY
Since our inception, we have not declared or paid any cash dividends. We currently expect to retain cash generated from operations for use in the operation and expansion of our business and therefore do not anticipate paying any cash dividends in the foreseeable future. There is no restriction against paying dividends under our current credit agreement.
EQUITY COMPENSATION PLANS
The information required by this item regarding equity compensation plans is set forth in Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Unregistered Sales of Equity Securities during the Three Months Ended December 31, 2014
None.
(b) Use of Proceeds from Sale of Registered Equity Securities
None.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
During the three months ended December 31, 2014, we repurchased the following shares of common stock:
 
 
 
Total Number  of
Shares (or Units)
Purchased (1)
 
Average  Price
 Paid Per
Share (or Unit)
 
Total
Number of
Shares (or
Units)
Purchased as
Part
of Publicly
Announced
Plans or
Programs (2)
 
Maximum
Number (or
Approximate
Dollar
Value) of
Shares (or
Units) that
May
Yet Be
Purchased
Under the
Plans or
Programs
October 1 - October 31, 2014
 
23,806

 
$
31.13

 
7,765

 
49.1

November 1 - November 30, 2014
 
19,200

 
$
41.62

 

 
49.1

December 1 - December 31, 2014
 

 
$

 

 
49.1

Total
 
43,006

 
 
 
7,765

 
49.1


(1) The shares included in the table above were repurchased either in connection with (i) our exercise of the repurchase right afforded to us in connection with certain employee restricted stock awards (ii) the forfeiture of shares by an employee as payment of the minimum statutory withholding taxes due upon the vesting of certain employee restricted stock and restricted stock unit awards or (iii) pursuant to our share repurchase programs described in further detail in footnote (2) to this table.

(i) For the three months ended December 31, 2014, the shares repurchased in connection with our exercise of the repurchase right afforded to us upon the cessation of employment consisted of the following:
 
 
Total Number  of
Shares Purchased
 
Average  Price
Per Share
October 1 - October 31, 2014
 
4,145

 
$

November 1 - November 30, 2014
 
680

 
$

December 1 - December 31, 2014
 

 
$

Total
 
4,825

 


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(ii) The shares we repurchased in connection with the payment of minimum statutory withholding taxes due upon the vesting of certain restricted stock and restricted stock unit awards were repurchased at the then current fair market value of the shares. For the three months ended December 31, 2014, these shares consisted of the following:
 
 
 
Total Number  of
Shares Purchased
 
Average Price
Per Share
October 1 - October 31, 2014
 
11,896

 
$
38.33

November 1 - November 30, 2014
 
18,520

 
$
43.15

December 1 - December 31, 2014
 

 
$

Total
 
30,416

 

 
(2) During the three months ended December 31, 2014, we conducted one share repurchase program and during the year ended December 31, 2014, we conducted two share repurchase programs.
June 2013 Share Repurchase Program
On June 3, 2013 we announced that our board of directors had approved the repurchase of up to $50.0 million of our common stock. This repurchase program concluded on May 29, 2014 and resulted in the repurchase of $49.4 million of shares (as measured at the time of repurchase).
As part of this share repurchase program, shares were purchased in open market transactions or pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act. The timing, manner, price and amount of any repurchases were determined at our discretion. Shares repurchased were classified as Treasury Stock. Details of the share repurchases during the year ended December 31, 2014 under the June 2013 share repurchase program were as follows:

 
 
Year Ended December 31, 2014
(Amounts in millions, except share and per share data)
 
 
Total number of shares repurchased
 
1,237,572
Average price paid per share
 
$29.33
Total value of shares repurchased (as measured at time of repurchase)
 
$36.3
June 2014 Share Repurchase Program
On June 5, 2014 we announced that our board of directors had approved the repurchase of up to an additional $50.0 million of our common stock. Such repurchases may be made from time to time subject to pre-determined price and volume guidelines established by our board of directors and commenced on June 6, 2014. As of December 31, 2014, there is $49.1 million remaining under the share repurchase program.
As part of the share repurchase program, shares may be purchased in open market transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act. The timing, manner, price and amount of any repurchases will be determined at our discretion, and the share repurchase program may be suspended, terminated or modified at any time for any reason. Shares repurchased are classified as Treasury Stock. Details of the share repurchases during the year ended December 31, 2014 under the June 2014 share repurchase program were as follows:
 
 
Year Ended December 31, 2014
(Amounts in millions, except share and per share data)
 
 
Total number of shares repurchased
 
23,865
Average price paid per share
 
$37.71
Total value of shares repurchased (as measured at time of repurchase)
 
$0.9


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ITEM 6.
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report. The selected data in this section is not intended to replace the consolidated financial statements.
The consolidated statements of operations data and the consolidated statements of cash flows data for each of the three years ended December 31, 2014, 2013 and 2012 as well as the consolidated balance sheet data as of December 31, 2014 and 2013 are derived from and should be read together with our audited consolidated financial statements and related notes appearing in this report. The consolidated statements of operations data and the consolidated statements of cash flows data for the years ended December 31, 2011 and 2010 as well as the consolidated balance sheet data as of December 31, 2012, 2011 and 2010 are derived from our audited consolidated financial statements not included in this report. Our historical results are not necessarily indicative of results to be expected for future periods.
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
 
 
(In thousands, except share and per share data)
 
 
Consolidated Statement of
Operations Data:
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
329,151

 
$
286,860

 
$
255,193

 
$
232,392

 
$
174,999

Cost of revenues (1)
 
97,467

 
89,963

 
86,379

 
75,103

 
51,953

Selling and marketing (1)
 
103,525

 
99,947

 
91,849

 
78,289

 
59,641

Research and development (1)
 
60,364

 
41,025

 
33,994

 
34,050

 
26,377

General and administrative (1)
 
62,923

 
46,449

 
38,134

 
48,514

 
33,953

Amortization of intangible assets
 
7,230

 
7,957

 
9,289

 
9,301

 
4,534

Impairment of intangible assets
 
9,722

 

 
3,349

 

 

Gain on asset disposition
 

 
(214
)
 

 

 

Settlement of litigation
 
2,700

 
(1,360
)
 

 
5,175

 

Total expenses from operations
 
343,931

 
283,767

 
262,994

 
250,432

 
176,458

Income (loss) from operations
 
(14,780
)
 
3,093

 
(7,801
)
 
(18,040
)
 
(1,459
)
Interest and other (expense) income, net
 
(1,247
)
 
(938
)
 
(870
)
 
(525
)
 
53

Gain (loss) from foreign currency transactions
 
809

 
(62
)
 
(744
)
 
(410
)
 
(347
)
Gain on sale of marketable securities
 

 

 

 
211

 

(Loss) income before income taxes
 
(15,218
)
 
2,093

 
(9,415
)
 
(18,764
)
 
(1,753
)
Benefit (provision) for income taxes
 
5,315

 
(4,426
)
 
(2,374
)
 
2,974

 
177

Net loss
 
$
(9,903
)
 
$
(2,333
)
 
$
(11,789
)
 
$
(15,790
)
 
$
(1,576
)
Net loss per common share:
 
 
 

 
 
 
 
 
 
Basic
 
$
(0.29
)
 
$
(0.07
)
 
$
(0.35
)
 
$
(0.49
)
 
$
(0.05
)
Diluted
 
$
(0.29
)
 
$
(0.07
)
 
$
(0.35
)
 
$
(0.49
)
 
$
(0.05
)
Weighted-average number of shares used in per share calculations:
 
 
 

 
 
 
 
 
 
Basic
 
33,689,660

 
34,443,126

 
33,244,798

 
32,289,877

 
31,070,018

Diluted
 
33,689,660

 
34,443,126

 
33,244,798

 
32,289,877

 
31,070,018

 
(1)    Amortization of stock-based compensation is included in the line items above as follows
Cost of revenues
 
$
4,007

 
$
3,346

 
$
2,481

 
$
1,976

 
$
1,494

Selling and marketing
 
$
10,778

 
$
11,062

 
$
12,283

 
$
8,512

 
$
6,217

Research and development
 
$
4,610

 
$
3,021

 
$
1,919

 
$
1,988

 
$
1,868

General and administrative
 
$
22,578

 
$
9,606

 
$
8,213

 
$
8,784

 
$
8,195


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December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
(In thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term investments
 
$
43,015

 
$
67,795

 
$
61,764

 
$
38,071

 
$
33,736

Total current assets
 
$
178,883

 
$
178,799

 
$
148,929

 
$
126,509

 
$
103,097

Total assets
 
$
353,952

 
$
363,413

 
$
336,485

 
$
320,057

 
$
283,079

Total current liabilities
 
$
151,610

 
$
134,973

 
$
121,306

 
$
112,390

 
$
97,228

Equipment loan and capital lease obligations, long-term
 
$
13,072

 
$
13,330

 
$
6,478

 
$
6,676

 
$
7,959

Stockholders’ equity
 
$
175,265

 
$
198,802

 
$
195,643

 
$
190,567

 
$
165,832

 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
(In thousands)
Consolidated Statement of Cash Flows Data:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
49,497

 
$
44,574

 
$
44,872

 
$
26,750

 
$
25,410

Depreciation and amortization
 
$
25,213

 
$
24,734

 
$
23,448

 
$
22,653

 
$
12,956

Capital expenditures
 
$
7,649

 
$
4,597

 
$
7,590

 
$
7,235

 
$
5,119

Please see “Critical Accounting Policies and Estimates” under Part II, Item 7 of this Annual Report on Form 10-K for further discussion of key accounting changes which occurred during the years covered in the above table. Additional information regarding business combinations and dispositions for the relevant periods above may be found in the notes accompanying our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.


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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 those statements included elsewhere in Part II Item 8 of this Annual Report on Form 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 may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. See also “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this Form 10-K.
Overview
We provide trusted, independent data, metrics, products and services to clients in the media, advertising, and marketing industries. We deliver digital media analytics that help content owners and advertisers understand--and thus properly value--the composition of consumer media audiences, and we help marketers understand the performance and effectiveness of advertising targeted at these audiences.
We are a technology-driven company that measures what people do as they navigate the digital world across multiple technology platforms and devices including smartphones, tablets, televisions, and desktop computers. Our technology measures consumer interactions with digital media, including Web sites, apps, video programming and advertising.
    
We combine proprietary comScore data with our clients’ own data and data from partners, to provide uniquely valuable digital media analytics. We deliver on-demand and real-time products and services through a scalable Software-as-Service delivery model which supports both comScore branded products and also partner products integrating comScore data and services. During the year ended December 31, 2014, we provided service to approximately 2,550 customers worldwide with our broad geographic base of employees located in 32 locations in 24 countries.

Our company was founded in August 1999, and we have been publicly traded since our initial public offering in 2007.  As we have grown as a public company, we have continued to evolve. For example, from 2008 to 2011, we completed targeted acquisitions of several businesses with complementary research and analytics capabilities and businesses with an established presence in Europe and Latin America to expand our global footprint. Our revenues and expenses grew through this period, driven primarily by growth in our product offerings, increased sales to existing customers, and the resulting expansion of our customer base outside the United States following our acquisitions and increased international sales efforts. Since 2010, we have increasingly focused our technology, research, and data science assets and expertise on developing new products and services that report on advertising performance and effectiveness, most notably our flagship Validated Campaign Essentials product. We have also made large investments in multi-platform and cross-media solutions measuring digital content consumption across smartphone, tablet and desktop platforms, and also linking digital video consumption with metrics measuring traditional linear television viewing. In recent years, our strategy has also involved a series of strategic partnerships along two dimensions: Product development and product distribution. Product development has been enhanced through partnerships which provide us with large volumes of consumer demographics and segmentation data which improves the accuracy and granularity of our products and services. Product distribution has been significantly widened through partnerships which integrate our metrics and services into the third party platforms used by clients. We believe these investments in advertising measurement and multi-platform/cross-media measurement are poised to converge and offer significant revenue potential in the years ahead as we pursue our mission of making audiences and advertising more valuable.


Key Metrics

 
Year ended December,
 
2014
 
2013
 
2012
 
(In thousands)
Revenue(1)(2)
$
325,150

 
$
274,922

 
$
239,578

Adjusted EBITDA*(1)(2)
$
75,858

 
$
61,252

 
$
50,179

Adjusted EBITDA Margin*
23
%
 
22
%
 
21
%

*
Adjusted EBITDA is not calculated in accordance with generally accepted accounting principles, or GAAP. A reconciliation of this non-GAAP measure to the most directly comparable GAAP-based measure along with a summary of the definition and its material limitation are included in the section titled “-Non-GAAP Financial Measures.”
(1) We divested our Non-Health Copy Testing and Configuration Manager products in March 2013. Amounts for the year ended December 31, 2013 and December 31, 2012 include adjustments to exclude Non-Health Copy Testing and Configuration Manager products and are based on management’s estimates of the revenue and results of

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operations of such products.
(2) comScore classified its mobile operator analytics division CSWS as held for sale in the fourth quarter of 2014. 2014, 2013 and 2012 amounts include adjustments to exclude the mobile operator analytics division and are based on management’s estimates of the revenue and results of operations of the division.

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

Non-GAAP Financial Measures

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

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

We define adjusted EBITDA as net income (loss) plus; amortization of intangible assets, impairment of intangible assets, stock-based compensation, costs related to acquisitions, restructuring and other infrequently occurring items, settlement of litigation, gain on ARS disposition, pro-forma adjustment to exclude the non-Health Copy-Testing and Configuration Manager products and deferred tax provision, current cash tax provision, depreciation, and interest expense (income), net. Adjusted EBITDA margin is the quotient of Adjusted EBITDA divided by total revenue.

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

although depreciation and amortization are non-cash charges, the assets being depreciated may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
adjusted EBITDA does not consider the impact of equity-based compensation;
adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and
other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

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

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

 
Year ended December,
 
2014
 
2013
 
2012
 
(dollars in thousands)
Net loss
$
(9,903
)
 
$
(2,333
)
 
$
(11,789
)
Amortization of intangible assets
7,230

 
7,957

 
9,289

Impairment of intangible assets
9,722

 

 
3,349

Stock-based compensation
41,973

 
27,035

 
24,896

Costs related to acquisitions, restructuring and other non-recurring items
5,584

 
7,015

 
1,437

Settlement of litigation
2,700

 
(1,360
)
 

Gain on asset disposition

 
(214
)
 

Adjustment to exclude non-Health Copy-Testing and Configuration Manager products

 
(170
)
 
(1,572
)
Adjustment to exclude Mobile Operator Analytics Division
4,637

 
1,181

 
7,378

Non-cash portion of current tax provision related to excess tax benefits from stock based compensation (2)
5,757

 

 
 
Deferred tax (benefit) provision
(13,064
)
 
2,381

 
896

Current cash tax provision(2)
1,992

 
2,045

 
1,478

Depreciation
17,983

 
16,777

 
14,159

Interest and other expense, net
1,247

 
938

 
658

Adjusted EBITDA (1)
$
75,858

 
$
61,252

 
$
50,179

Adjusted EBITDA margin(1)
23
%
 
22
%
 
21
%

(1)
Management estimates pro forma revenues of $4,001, $11,938 and $15,615 in 2014, 2013 and 2012, respectively, and total pro forma expenses of $8,638, $12,949 and $21,421 in 2014, 2013 and 2012, respectively, related to the non-Health Copy-Testing and Configuration Manager products, which we disposed of in March 2013 and the Mobile Operator Analytics Division, which we have classified as held for sale as of December 31, 2014, in 2014, 2013 and 2012, respectively. Calculating based on revenues excluding those amounts, adjusted EBITDA margin would have been 23%, 22% and 21% during the years ended December 31, 2014, 2013 and 2012, respectively.
(2)
Included in the tax provision for the year ended December 31, 2014 was $5.8 million of non-cash current tax expense related to excess tax benefits from stock based compensation.
Our Revenues
We derive our revenues primarily from the fees that we charge for subscription-based products, customized projects, and software licenses. We define subscription-based revenues as revenues that we generate from products that we deliver to a customer on a recurring basis, as well as arrangements where a customer is committing up-front to purchase a series of deliverables over time, which includes revenue from software licenses as further discussed below. We define project revenues as revenues that we generate from customized projects that are performed for a specific customer on an infrequently occurring basis. A significant characteristic of our SaaS-based business model is our large percentage of subscription-based contracts. Subscription-based revenues accounted for 90%, 87% and 85% of total revenues in the years ended December 31, 2014, 2013, and 2012, respectively. Many of our customers who initially purchased a customized project have subsequently purchased one of our subscription-based products. Similarly, many of our subscription-based customers have subsequently purchased additional customized projects.
Historically, we have generated most of our revenues from the sale and delivery of our products to companies and organizations located within the United States. We will continue to expand our international revenues by selling our products and deploying our direct sales force model in additional international markets in the future. For the year ended December 31, 2014, our international revenues were $97.1 million, an increase of $13.0 million, or 15% over international revenues of $84.1 million for the year ended December 31, 2013. International revenues comprised approximately 29%, 29% and 28% of our total revenues for the fiscal years ended December 31, 2014, 2013 and 2012, respectively.

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We anticipate that revenues from our U.S. customers will continue to constitute a substantial portion of our revenues in future periods, but we expect that revenues from customers outside of the U.S. will increase as a percentage of total revenues as we build greater international recognition of our brand and expand our sales operations globally.
Subscription Revenues
We generate a significant portion of our subscription-based revenues from our Media Metrix ® product suite. Products within the Media Metrix ® suite include: Video Metrix , Mobile Metrix , Plan Metrix , Ad Metrix and Media Metrix ® Multi-Platform (MMX MP). These product offerings provide subscribers with intelligence on digital media usage, audience characteristics, audience demographics and online and offline purchasing behavior. Customers who subscribe to our Media Metrix products are provided with login IDs to our web site, have access to our database and can generate reports at any time.
In recent years, we began generating additional subscription revenues from our flagship advertising service, Validated Campaign Essentials (vCE). In January 2014, we entered into a partnership agreement with Google to integrate vCE directly into the DoubleClick ad management platform, allowing DoubleClick customers to add vCE to their ad campaigns with a single click. While vCE provides key analytics about advertising campaigns to ad buyers, we also offer Validated Media Essentials (vME) to advertising sellers, allowing them to evaluate their advertising inventory and optimize their monetization strategy with metrics comparable to those used by ad buyers. As of December 31, 2014, our strategic partnerships with Google and Yahoo were live and generating revenues.
We also generate subscription-based revenues from certain reports and analyses provided through our customer research product, if that work is procured by customers on a recurring basis. Through our customer research products, we deliver digital media analytics relating to specific industries, such as automotive, consumer packaged goods, entertainment, financial services, media, pharmaceutical, retail, technology, telecommunications and travel. This marketing intelligence leverages our global consumer panel and extensive database to deliver information unique to a particular customer’s needs on a recurring schedule, as well as on a continual-access basis. Our Marketing Solutions customer agreements typically include a fixed fee with an initial term of at least one year. We also provide these products on a non-subscription basis as described under “Project Revenues”.
In addition, we generate subscription-based revenues from survey products that we sell to our customers. In conducting our surveys, we generally use our global Internet user panel. After questionnaires are distributed to the panel members and completed, we compile their responses and then deliver our findings to the customer, who also has ongoing access to the survey response data as they are compiled and updated over time. This data include responses and information collected from the actual survey questionnaires and can also include behavioral information that we passively collect from our panelists. If a customer has a history of purchasing survey products in each of the last four quarters, then we believe this indicates the surveys are being conducted on a recurring basis, and we classify the revenues generated from such survey products as subscription-based revenues. Our contracts for survey services typically include a fixed fee with terms that range from two months to one year.
Our acquisition of Nedstat resulted in additional revenue sources, including software subscriptions, server calls, and professional services. Our arrangements generally contain multiple elements, consisting of the various service offerings. For these revenue streams, revenue is recognized on a usage basis when the impression is delivered and reported via the AdXpose service portal.
Project Revenues
We generate project revenues by providing customized reports to our customers on a nonrecurring basis through comScore Marketing Solutions. For example, a customer in the media industry might request a custom report that profiles the behavior of the customer’s active online users and contrasts their market share and loyalty with similar metrics for a competitor’s online user base. If this customer continues to request the report beyond an initial project term of at least nine months and enters into an agreement to purchase the report on a recurring basis, we begin to classify these future revenues as subscription-based.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

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While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 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.
Revenue Recognition
We recognize revenues when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or the services have been rendered, (iii) the fee is fixed or determinable, and (iv) collection of the resulting receivable is reasonably assured.
We generate revenues by providing access to our online database or delivering information obtained from our database, usually in the form of periodic reports. Revenues are typically recognized on a straight-line basis over the period in which access to data or reports is provided, which generally ranges from three to twenty four months. Sales taxes remitted to government authorities are recorded on a net basis.
We also generate revenues through survey services under contracts ranging in term from two months to one year. Our survey services consist of survey and questionnaire design with subsequent data collection, analysis and reporting. At the outset of an arrangement, we allocate total arrangement consideration between the development of the survey questionnaire and subsequent data collection, analysis and reporting services based on relative selling price. We recognize revenue allocated to the survey questionnaire when it is delivered and we recognize revenue allocated to the data collection, analysis and reporting services on a straight-line basis over the estimated data collection period once the survey or questionnaire design has been delivered. Any change in the estimated data collection period results in an adjustment to revenues recognized in future periods.
Certain of our arrangements contain multiple elements, consisting of the various services we offer. Multiple element arrangements typically consist of either subscriptions to multiple online product solutions or a subscription to our online database combined with customized services. We recognize revenue under these arrangements in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-13, Multiple Deliverable Revenue Arrangements, which requires us to allocate arrangement consideration at the inception of an arrangement to all deliverables, if they represent a separate unit of accounting, based on their relative selling prices. The guidance establishes a hierarchy to determine the selling price to be used for allocating arrangement consideration to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) if VSOE is not available, or (iii) an estimated selling price (“ESP”) if neither VSOE nor TPE are available. VSOE generally exists only when we sell the deliverable separately and is the price actually charged by us for that deliverable on a stand-alone basis. ESP reflects our estimate of what the selling price of a deliverable would be if it was sold regularly on a stand-alone basis.
We have concluded that we do not have VSOE, for these types of arrangements, and TPE is generally not available because our service offerings are highly differentiated and we are unable to obtain reliable information on the products and pricing practices of our competitors. As such, ESP is used to allocate the total arrangement consideration at the arrangement inception based on each element’s relative selling price.
Our process for determining ESP involves management’s judgments based on multiple factors that may vary depending upon the unique facts and circumstances related to each product suite and deliverable. We determine ESP by considering several external and internal factors including, but not limited to, current pricing practices, pricing concentrations (such as industry, channel, customer class or geography), internal costs and market penetration of a product or service. The total arrangement consideration is allocated to each of the elements based on the relative selling price. If the ESP is determined as a range of selling prices, the mid-point of the range is used in the relative-selling-price method. Once the total arrangement consideration has been allocated to each deliverable based on the relative allocation of the arrangement fee, we commence revenue recognition for each deliverable on a stand-alone basis as the data or service is delivered. In the future, as our pricing strategies and market conditions change, modifications may occur in the determination of ESP to reflect these changes. As a result, the future revenue recognized for these arrangements could differ from the results in the current period.
Generally, our contracts are non-refundable and non-cancelable. In the event a portion of a contract is refundable, revenue recognition is delayed until the refund provisions lapse. A limited number of customers have the right to cancel their contracts by providing us with written notice of cancellation. In the event that a customer cancels its contract, it is not entitled to a refund for prior services, and it will be charged for costs incurred plus services performed up to the cancellation date.
In connection with our acquisition of Nexius, Inc., we acquired additional revenue sources, including software licenses, professional services (including software customization implementation, training and consulting services), and maintenance and technical support contracts. Our arrangements generally contain multiple elements, consisting of the various service offerings. We recognize software license arrangements that include significant modification and customization of the software in accordance with ASC 985-605, Software Recognition and ASC 605-35, Revenue Recognition-Construction-Type and Certain

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Production-Type Contracts, using either the percentage-of-completion or the completed-contract method. Under the percentage-of-completion method, we use the input method to measure progress, which is based on the ratio of costs incurred to date to total estimated costs at completion. The percentage-of-completion method is used when reliable estimates of progress and completion under the contract can be made. Under the completed-contract method, billings and costs (to the extent they are recoverable) are accumulated on the balance sheet, but no profit or income is recorded before user acceptance of the software license. The completed-contract method is used when reliable estimates cannot be made or other terms under the contract require it. To the extent estimated costs are expected to exceed revenue, we accrue for costs immediately. completed contract method. During the quarter ended June 30, 2011, we established VSOE of fair value for post contract support services for a group of certain Nexius customers. For these specific arrangements, we allocate the total consideration to the various elements in the arrangement based on VSOE of fair value and recognize revenue when the fundamental revenue recognition criteria above are met. For the remainder of the Nexius customers, we currently do not have VSOE for the multiple deliverables and account for all elements in these arrangements as a single unit of accounting, recognizing the entire arrangement fee as revenue over the service period of the last delivered element.
We account for nonmonetary transactions under ASC 845, Nonmonetary Transactions. Nonmonetary transactions with commercial substance are recorded at the estimated fair value of assets surrendered including cash, if cash is less than 25% of the fair value of the overall exchange, unless the fair value of the assets received is more clearly evident, in which case the fair value of the asset received is used to estimate fair value for the exchange.
In 2013, the Company entered into an agreement to exchange certain data assets with a corporation. A member of the Company's Board of Directors also serves as a member of the board of directors of that corporation and therefore, the Company has considered the corporation to be a related party. Such member of the Company's Board of Directors does not hold a control position with the counterparty. The transaction was considered to have commercial substance under the guidance in ASC 845 and we estimated the fair value of the services delivered based on similar monetary transactions with third parties. No cash was exchanged in this transaction. We also considered the guidance in ASC 850, Related Party Disclosures.
During the year ended December 31, 2014, the Company recognized $16.3 million in revenue related to nonmonetary transactions of which $10.7 million is attributable to this related party transaction. Due to timing differences in the delivery and receipt of the respective nonmonetary assets exchanged, the expense recognized in each period is different from the amount of revenue recognized. As a result, during the year ended December 31, 2014, we recognized $16.3 million in expense related to nonmonetary transactions of which $14.3 million is attributable to the related party transaction.
Business Combinations
On August 4, 2014, we completed the acquisition of M.Labs, Inc. ("MdotLabs"), a company that provides a SaaS security platform designed to combat invalid activity in web and mobile advertising, such as non-human traffic. The aggregate amount of the consideration paid by the Company upon the closing of the transaction was $4.5 million, which was comprised entirely of cash. See "Note 3" in our accompanying consolidated financial statements for additional information on the MdotLabs acquisition.
We recognize all of the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Generally, restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. All subsequent changes to an income tax valuation allowance or uncertain tax position that relate to the acquired company and existed at the acquisition date that occur both within the measurement period and as a result of facts and circumstances that existed at the acquisition date are recognized as an adjustment to goodwill. All other changes in income tax valuation allowances are recognized as a reduction or increase to income tax expense or as a direct adjustment to additional paid-in capital as required. Acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life.
Goodwill and Intangible Assets
We record goodwill and intangible assets when we acquire other businesses. The allocation of the purchase price to intangible assets and goodwill involves the extensive use of management’s estimates and assumptions, and the result of the allocation process can have a significant impact on our future operating results. We estimate the fair value of identifiable intangible assets acquired using several different valuation approaches, including relief from royalty method, and income and market approaches. The relief from royalty method assumes that if we did not own the intangible asset or intellectual property, we would be willing to pay a royalty for its use. We generally use the relief from royalty method for estimating the value of acquired technology/methodology assets. The income approach converts the anticipated economic benefits that we assume will be realized from a given asset into value. Under this approach, value is measured as the present worth of anticipated future net cash flows generated by an asset. We generally use the income approach to value customer relationship assets and non-compete

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agreements. The market approach compares the acquired asset to similar assets that have been sold. We generally use the income approach to value trademarks and brand assets.
Intangible assets with finite lives are amortized over their useful lives while goodwill and indefinite lived assets are not amortized, but rather are periodically tested for impairment. An impairment review generally requires developing assumptions and projections regarding our operating performance. We have determined that all of our goodwill is associated with one reporting unit as we do not operate separate lines of business with respect to our services. Accordingly, on an annual basis we perform the impairment assessment for goodwill at the enterprise level by comparing the fair value of our reporting unit to its carrying value including goodwill recorded by the reporting unit. If the carrying value exceeds the fair value, impairment is measured by comparing the implied fair value of the goodwill to its carrying value and any impairment determined is recorded in the current period. If our estimates or the related assumptions change in the future, we may be required to record impairment charges to reduce the carrying value of these assets, which could be material. There were no impairment charges to goodwill recognized during the years ended December 31, 2014, 2013 or 2012.
During the year ended December 31, 2014, the Company received several letters of intent from unrelated third-parties to purchase its mobile operator analytics division "CSWS". As of December 31, 2014, the Company determined that it had met the held for sale criteria as defined in Accounting Standard Codification 360: Property, Plant, and Equipment. As such, the Company presents assets and liabilities held for sale related to CSWS on its Consolidated Balance Sheet. However, CSWS does not qualify for discontinued operations financial presentation, as it expects to have continuing involvement with CSWS by providing certain services to the buyer. The Company recorded a $9.7 million impairment charge during the year ended December 31, 2014, which reduced the carrying amount of CSWS intangible assets to zero and was calculated as the difference between the letters of intent that the Company has received and the carrying value of CSWS.

During the three months ended June 30, 2012, the Company noted a significant decline in revenues from ARSgroup (“ARS”), which the Company acquired in February 2010. As a result, the Company performed an impairment test of the long-lived assets of ARS. The long-lived assets of ARS consist of customer relationships and acquired methodologies and technology. The first step in testing the long-lived assets of ARS for impairment was to compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of ARS to the carrying value of ARS’s long-lived assets. Based on this analysis, the Company determined as of June 30, 2012 that the sum of the expected undiscounted cash flows to be generated from ARS was less than the carrying value of the ARS intangible assets. As such, the Company concluded that the ARS intangible assets were impaired as of June 30, 2012. To measure the amount of the impairment, the Company then estimated the fair value of the intangible assets as of June 30, 2012. In determining the fair value of the intangible assets, the Company prepared a discounted cash flow (“DCF”) analysis for each intangible asset. In preparing the DCF analysis, the Company used a combination of income approaches including the relief from royalty approach and the excess earnings approach. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, terminal growth rates, royalty rates and the amount and timing of expected future cash flows. The cash flows employed in the DCF analysis were based on the Company’s most recent budgets, forecasts and business plans as well as growth rate assumptions for years beyond the current business plan period. Significant assumptions used include a discount rate of 18.5%, which is based on an assessment of the risk inherent in the future revenue streams and cash flows of ARS, as well as a royalty rate of 3.0%, which is based on an analysis of royalty rates in similar, market transactions. Based on the DCF analysis, the Company estimated the fair value of the intangible assets of ARS to be $2.5 million as of June 30, 2012, which resulted in an impairment charge of $3.3 million during the year ended December 31, 2012. The impairment charge had a negative impact on net loss of $3.3 million and an impact on earnings per share of $0.10 per share during the year ended December 31, 2012. In addition, these intangible assets are being amortized over a remaining estimated useful life of eighteen months, beginning July 1, 2012. There were no impairment charges to intangible assets recognized during the year ended December 31, 2013.

Long-lived assets
Our long-lived assets primarily consist of property and equipment and intangible assets. We evaluate the recoverability of 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 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. Although we believe that the carrying values of our long-lived assets are appropriately stated, changes in strategy or market conditions or significant technological developments could significantly impact these judgments and require adjustments to recorded asset balances. Other than the impairment charge for

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CSWS and ARS discussed above, there were no impairment charges recognized during the years ended December 31, 2014, 2013 or 2012.
Allowance for Doubtful Accounts
We manage credit risk on accounts receivable by performing credit evaluations of our customers for existing customers coming up for renewal as well as all prospective new customers, by reviewing our accounts and contracts and by providing appropriate allowances for uncollectible amounts. Allowances are based on management’s judgment, which considers historical experience and specific knowledge of accounts that may not be collectible. We make provisions based on our historical bad debt experience, a specific review of all significant outstanding invoices and an assessment of general economic conditions. If the financial condition of a customer deteriorates, resulting in an impairment of its ability to make payments, additional allowances may be required.
Income Taxes
We account for income taxes using the asset and liability method. We estimate our tax liability through calculations we perform for the determination of our current tax liability, together with assessing temporary differences resulting from the different treatment of items for income tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are recorded on our balance sheets. We then assess the likelihood that deferred tax assets will be recovered in future periods. In assessing the need for a valuation allowance against the deferred tax assets, we consider factors such as future reversals of existing taxable temporary differences, taxable income in prior carryback years, if carryback is permitted under the tax law, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. In evaluating projections of future taxable income, we consider our history of profitability, the competitive environment, the overall outlook for the online marketing industry and general economic conditions. In addition, we consider the time frame over which it would take to utilize the deferred tax assets prior to their expiration. To the extent we cannot conclude that it is more-likely-than-not that the benefit of such assets will be realized, we establish a valuation allowance to adjust the carrying value of such assets.
As of December 31, 2014 and 2013, we recorded valuation allowances against certain deferred tax assets of $0.9 million and $1.2 million, respectively. At December 31, 2014, the valuation allowance was related to the deferred tax assets (primarily net operating loss carryforwards) of our foreign subsidiary in Spain that is a loss company, the deferred tax asset related to the U.S. capital loss carryforwards, and the deferred tax asset related to certain state net operating loss carryforwards. At December 31, 2013, the valuation allowance was related to the deferred tax assets (primarily net operating loss carryforwards) of the foreign subsidiaries that are either loss companies or are in their start-up phases, including entities in Spain and the Czech Republic, the deferred tax asset related to the U.S. capital loss carryforwards and the deferred tax asset related to certain state net operating loss carryforwards.
As of December 31, 2013, we concluded that it was not more-likely-than-not that a substantial portion of our deferred tax assets related to certain state and foreign net operating losses would be realized and that an increase to the valuation allowance of $0.1 million was necessary. We also concluded that it was more-likely-than-not that a substantial portion of our deferred tax assets in certain other foreign jurisdictions, primarily the Netherlands, would be realized and determined that it was appropriate to release the valuation allowance of $2.9 million In making that determination, we considered the income generated in these foreign jurisdictions during 2013, the guaranteed profit margins in place for these entities as a result of our transfer pricing model, the tax impact of the restructuring that is currently being implemented, the current overall economic environment, and the projected income of these entities in future years. In addition, during 2013, we wrote-off certain deferred tax assets related to net operating losses that will never be realized. As these deferred tax assets had a full valuation allowance recorded against them, the associated valuation allowance of $0.1 million was released.
As of December 31, 2014, we estimate our federal and state net operating loss carryforwards for tax purposes are approximately $27.8 million and $34.1 million, respectively. These net operating loss carryforwards will begin to expire in 2023 for federal income tax purposes and in 2015 for state income tax purposes. In addition, at December 31, 2014, we estimate our aggregate net operating loss carryforwards for tax purposes related to our foreign subsidiaries is $15.0 million, which begins to expire in 2017.
The exercise of certain stock options and the vesting of certain restricted stock awards during the years ended December 31, 2014 and 2013 generated income tax deductions equal to the excess of the fair market value over the exercise price or grant date fair value, as applicable. A deferred tax asset cannot be recognized for the excess of tax over book stock compensation deductions until the tax deductions reduce current income taxes payable. Since we have not historically paid income taxes in jurisdictions where these excess tax deductions arise, a deferred tax asset related to the additional net operating losses generated from the windfall tax deductions associated with the exercise of stock options and the vesting of restricted

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stock awards has not been recorded in the accompanying consolidated financial statements. As of December 31, 2014 and 2013, the cumulative amount of net operating losses relating to such option exercises and vesting events that have been included in the gross net operating loss carryforwards above is $24.1 million and $32.5 million, respectively. As we utilize these net operating losses to reduce current income taxes payable, the tax benefit will be recorded as an increase in additional paid-in capital. During the years ended December 31, 2014 and 2013, we recognized windfall tax benefits of approximately $5.8 million and $0.1 million, respectively, which were recorded as an increase to additional paid-in capital.
During the year ended December 31, 2013, certain stock options were exercised and certain shares related to restricted stock awards vested at times when our stock price was substantially lower than the fair value of those shares at the time of grant. As a result, the income tax deduction related to such shares is less than the expense previously recognized for book purposes. Such shortfalls reduce additional paid-in capital to the extent windfall tax benefits have been previously recognized. As described above, we recognized a portion of the windfall tax benefits in 2013 and recorded an increase to additional paid-in capital. Therefore, $0.1 million of shortfalls was not included in income tax expense but reduced additional paid-in capital for the year ended December 31, 2013. The remaining impact of the shortfalls totaling $0.9 million was included in income tax expense. Looking forward we cannot predict the stock compensation shortfall impact because of dependency upon future market price performance of our stock.
For uncertain tax positions, we use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefits determined on a cumulative probability basis, which are more-likely-than-not to be realized upon ultimate settlement in the financial statements. As of December 31, 2014, 2013 and 2012, we had unrecognized tax benefits of $1.4 million on a tax-effected basis. It is our policy to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2014 and 2013, the amount of accrued interest and penalties on unrecognized tax benefits was $0.6 million and $0.7 million, respectively. We or one of our subsidiaries files income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. For income tax returns filed by us, we are no longer subject to U.S. Federal examinations by tax authorities for years before 2011 or state and local tax examinations by tax authorities for years before 2010, although tax attribute carryforwards generated prior to these years may still be adjusted upon examination by tax authorities.
Stock-Based Compensation
We estimate the fair value of share-based awards on the date of grant. The fair value of stock options is determined using the Black-Scholes option-pricing model. The fair value of market-based stock options and restricted stock units is determined using a Monte Carlo simulation embedded in a lattice model. The fair value of restricted stock awards is based on the closing price of our common stock on the date of grant. The determination of the fair value of stock option awards and restricted stock awards is based on a variety of factors including, but not limited to, the our common stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior. Additionally we estimate forfeitures for share-based awards at the dates of grant based on historical experience, adjusted for future expectation. The forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates.
We issue restricted stock awards whose restrictions lapse upon either the passage of time (service vesting), achieving performance targets, or some combination of these restrictions. For those restricted stock awards with only service conditions, we recognize compensation cost on a straight-line basis over the explicit service period. For awards with both performance and service conditions, we start recognizing compensation cost over the remaining service period when it is probable the performance condition will be met. Stock awards that contain performance or market vesting conditions, are excluded from diluted earnings per share computations until the contingency is met as of the end of that reporting period. If factors change and we employ different assumptions in future periods, the compensation expense we record may differ significantly from what we have previously recorded.
At December 31, 2014, total estimated unrecognized compensation expense related to unvested stock-based awards granted prior to that date was $27.2 million, which is expected to be recognized over a weighted-average period of 0.90 years.
The actual amount of stock-based compensation expense we record in any fiscal period will depend on a number of factors, including the number of shares subject to restricted stock and/or stock options issued, the fair value of our common stock at the time of issuance and the expected volatility of our stock price over time. In addition, changes to our incentive compensation plan that heavily favor stock-based compensation are expected to cause stock-based compensation expense to increase in absolute dollars. If factors change and we employ different assumptions in future period, the compensation expense we record may differ significantly from what we have previously recorded.

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Seasonality
Historically, a higher percentage of our customers have renewed their subscription products with us during the fourth quarter.
Results of Operations
The following table sets forth selected consolidated statements of operations data as a percentage of total revenues for each of the periods indicated.
 
 
 
Year Ended
December  31,
 
 
2014
 
2013
 
2012
Revenues
 
100.0
 %
 
100.0
 %
 
100.0
 %
Cost of Revenues
 
29.6

 
31.3

 
33.9

Selling and marketing expenses
 
31.5

 
34.8

 
36.0

Research and development
 
18.3

 
14.3

 
13.3

General and administrative
 
19.1

 
16.2

 
14.9

Amortization of intangible assets
 
2.2

 
2.8

 
3.7

Impairment of intangible assets
 
3.0

 

 
1.3

Settlement of litigation
 
0.8

 
(0.5
)
 

Total expenses from operations
 
104.5

 
98.9

 
103.1

Income (loss) from operations
 
(4.5
)
 
1.1

 
(3.1
)
Interest and other expense, net
 
(0.4
)
 
(0.4
)
 
(0.3
)
Gain (loss) from foreign currency transactions
 
0.2

 

 
(0.3
)
(Loss) income before income tax benefit (provision)
 
(4.6
)
 
0.7

 
(3.7
)
Income tax benefit (provision)
 
1.6

 
(1.5
)
 
(0.9
)
Net loss attributable to common stockholders
 
(3.0
)%
 
(0.8
)%
 
(4.6
)%
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues 
 
 
Year Ended
December  31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
(In thousands)
Revenues
 
$
329,151

 
$
286,860

 
$
42,291

 
14.7
%
Total revenues increased by approximately $42.3 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. We attribute the revenue growth to increased sales to our existing customer base and continued growth of our customer base during the period. Revenue from existing customers increased $44.4 million from $257.3 million for the year ended December 31, 2013 to $301.7 million for the year ended December 31, 2014, while revenue from new customers decreased $2.1 million from $29.5 million for the year ended December 31, 2013 to $27.4 million for the year ended December 31, 2014. Revenue from existing customers increased due to an increased focus on the selling of new products, especially vCE, to our existing customer base. Revenue from new customers decreased due to high levels of penetration in our mature markets and lower introductory price points for new clients in less mature markets.
We experienced continued revenue growth in subscription revenues, which increased by approximately $48.0 million during the year ended December 31, 2014, from $249.8 million in the prior year period. We experienced a decrease in revenue from our project-based revenues which decreased by approximately $5.6 million during the year ended December 31, 2014, from $37.0 million in the prior year period.
Revenues from U.S. customers were $232.1 million for the year ended December 31, 2014, or approximately 71% of total revenues, while revenues from customers outside of the U.S. were $97.1 million for the year ended December 31, 2014, or approximately 29% of total revenues. Our focus on organic growth efforts in international markets resulted in increased international revenues of $13.0 million, comprised of increases of $7.3 million in Europe, $2.9 million in Asia and $2.9 million in Latin America, $0.9 million in Canada, offset by a decrease of $1.0 million in the Middle East during the year ended December 31, 2014 as compared to the prior year period.

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Operating Expenses
The majority of our operating expenses consist of employee salaries and related benefits, stock compensation expense, professional fees, rent and other facility related costs, depreciation expense, amortization, impairment of acquired intangible assets and litigation-related expenses. Our single largest operating expense relates to our people. In order to effectively motivate our employees and to provide them with proper long-term incentives, we pay the vast majority of our annual bonus arrangements using our common stock. In addition, two of our senior executives have agreed to receive shares of our stock instead of a cash salary.
Our total operating expenses increased by approximately $60.2 million, or approximately 21%, during the year ended December 31, 2014 as compared to the year ended December 31, 2013. This increase is primarily attributable to increased stock compensation of $14.9 million, increased expenditures for third-party data costs to support the enhancement of new products of $14.5 million, increased impairment of intangible assets of $9.7 million, increased expenditures for employee salaries and related benefits of $9.2 million associated with our increased headcount, increased data and bandwidth costs of $5.4 million and increased expenditures for litigation settlements of $4.1 million.
Cost of Revenues
 
 
 
Year Ended
December  31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
(In thousands)
Cost of revenues
 
$
97,467

 
$
89,963

 
$
7,504

 
8.3
%
As a percentage of revenues
 
29.6
%
 
31.3
%
 
 
 
 
Cost of revenues consists primarily of expenses related to operating our network infrastructure, producing our products, and the recruitment, maintenance and support of our consumer panels. Expenses associated with these areas include the salaries, benefits, stock-based compensation, and related personnel expenses of network operations, survey operations, custom analytics and technical support, all of which are expensed as they are incurred. Cost of revenues also includes data collection costs for our products, operational costs associated with our data centers, including depreciation expense associated with computer equipment that supports our panel and systems, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software.
Cost of revenues increased by $7.5 million during the year ended December 31, 2014 compared to the year ended December 31, 2013. This increase is primarily attributable to third-party data and bandwidth costs of $5.4 million associated with our data collection efforts, increased employee salaries, benefits and related benefits of $3.3 million and increased stock compensation expense of $1.2 million. These increases were offset by a decrease of $1.6 million associated with reduced usage of third-party customer service providers and a decrease of $1.2 million associated with a higher level of products that qualify for capitalization.
Cost of revenues decreased as a percentage of revenues during the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to increased operating leverage and the reallocation of certain operating resources to research and development activities.
Selling and Marketing Expenses
 
 
 
Year Ended
December  31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
(In thousands)
Selling and marketing
 
$
103,525

 
$
99,947

 
$
3,578

 
3.6
%
As a percentage of revenues
 
31.5
%
 
34.8
%
 
 
 
 
Selling and marketing expenses consist primarily of salaries, benefits, commissions, bonuses, and stock-based compensation paid to our direct sales force and industry analysts, as well as costs related to online and offline advertising, industry conferences, promotional materials, public relations, other sales and marketing programs, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software. All selling and marketing costs are expensed as they are incurred. Commission plans are developed for our account managers with criteria and size of sales quotas that vary depending upon the individual's role. Commissions are expensed as

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selling and marketing costs when a sales contract is executed by both the customer and us. Selling and marketing expenses have increased because we hired additional salespeople in order to support international growth, especially in our Digital Analytix and vCE product offerings.
Selling and marketing expenses increased by $3.6 million during the year ended December 31, 2014 compared to the year ended December 31, 2013. This increase is primarily attributable to increased employee salaries and related benefits of $2.0 million, increased professional fees paid to resellers of $1.1 million and increased commissions and sales incentives of $0.9 million. These increases were offset by a decrease in employee severance costs of $0.4 million.
Selling and marketing expenses decreased as a percentage of revenues during the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to revenue growth.
Research and Development Expenses
 
 
 
Year Ended
December 31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
 
 
(In thousands)
 
 
 
 
Research and development
 
$
60,364

 
$
41,025

 
$
19,339

 
47.1
%
As a percentage of revenues
 
18.3
%
 
14.3
%
 
 
 
 
Research and development expenses include new product development costs, consisting primarily of salaries, benefits, stock-based compensation and related costs for personnel associated with research and development activities, fees paid to third parties to develop new products and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software.
Research and development expenses increased by $19.3 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. This increase is primarily attributable to increased expenditures for third-party data costs to support the enhancement of existing products of $14.5 million associated with non-cash expenditures on data that we plan to incorporate into our product offerings in 2015, increased employee salaries and related benefits of $2.6 million associated with activities to support the development and implementation of new products, and increased stock compensation expense of $1.1 million and increased rent, other facility related costs and depreciation of $1.3 million.
Research and development expenses increased as a percentage of revenues for the year ended December 31, 2014 compared to the year ended December 31, 2013 due to significant third-party data expenditures for research and development activities and the reallocation of human and data resources to research and development activities.
General and Administrative Expenses
 
 
 
Year Ended
December  31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
 
 
(In thousands)
 
 
General and administrative
 
$
62,923

 
$
46,449

 
$
16,474

 
35.5
%
As a percentage of revenues
 
19.1
%
 
16.2
%
 
 
 
 
General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and related expenses for executive management, finance, accounting, human capital, legal and other administrative functions, as well as professional fees, overhead, including allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software, and expenses incurred for other general corporate purposes.
General and administrative expenses increased by $16.5 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013. This increase is primarily attributable to increased stock compensation of $12.9 million associated with market-based grants issued in November 2014 and high levels of achievement pertaining to our 2014 management performance compensation plans, increased employee salaries, benefits and related costs of $1.3 million associated with our increased headcount, increased bad debt expense of $1.3 million due to longer collection cycles related to some of our newer products and increased travel costs of $0.5 million associated with increased travel activity by key members of management.

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General and administrative expenses increased as a percentage of revenues during the year ended December 31, 2014 as compared to the year ended December 31, 2013, due to the market-based grants issued in November 2014 and increased headcount.
Amortization Expense
 
 
 
Year Ended December 31,
 
Change
 
 
2014
 
2013
 
$
 
%
 
 
 
 
(In thousands)
 
 
 
 
Amortization expense
 
$
7,230

 
$
7,957

 
$
(727
)
 
(9.1
)%
As a percentage of revenues
 
2.2
%
 
2.8
%
 
 
 
 
Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions.
Amortization expense decreased by $0.7 million during the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to the impact of impairment charges recognized during 2014.
Impairment of Intangible Assets
During the year ended December 31, 2014, the Company received several letters of intent from unrelated third-parties to purchase its mobile operator analytics division "CSWS". As of December 31, 2014, the Company determined that it had met the held for sale criteria as defined in Accounting Standard Codification 360: Property, Plant, and Equipment. As such, the Company presents assets and liabilities held for sale related to CSWS on its Consolidated Balance Sheet. However, CSWS does not qualify for discontinued operations financial presentation, as it expects to have continuing involvement with CSWS by providing certain services to the buyer. The Company recorded a $9.7 million impairment charge during the year ended December 31, 2014, which reduced the carrying amount of CSWS intangible assets to zero and was calculated as the difference between the letters of intent that the Company has received and the carrying value of CSWS.
Interest and Other Expense, Net
Interest and other income/expense, net, consists of interest income, interest expense and gains or losses on disposals of fixed assets.
Interest income consists of interest earned from our cash and cash equivalent balances. Interest expense is incurred due to capital leases pursuant to several equipment loan and security agreements to finance the lease of various hardware and other equipment purchases and our revolving credit facility. Our capital lease obligations are secured by a senior security interest in eligible equipment.
Interest and other expense, net, increased by approximately $0.3 million, as compared to the year ended December 31, 2014. This increase pertains to increasing principal balances for our assets financed through the use of capital leases.
Settlement of litigation, Net
Settlement of litigation, net consists of losses from the settlement related to our privacy class-action litigation offset by gains from our patent litigation settlements. The loss is net of insurance proceeds.
Settlement of litigation, net for the year ended December 31, 2014 resulted in a net loss of $2.7 million compared to a $1.4 million net gain for the year ended December 31, 2013. The net loss was due to expenditures for the settlement of certain privacy litigation lawsuits, net of insurance recoveries, and reduced by gains related to the settlements of certain patent litigation lawsuits for a net increase of $4.1 million.
Gain (loss) From Foreign Currency
The functional currency of our foreign subsidiaries is the local currency. All assets and liabilities are translated at the current exchange rates as of the end of the period, and revenues and expenses are translated at average rates in effect during the period. The gain or loss resulting from the process of translating the foreign currency financial statements into U.S. dollars is included as a component of other comprehensive (loss) income.
We recorded a transaction gain of $0.8 million for the year ended December 31, 2014 as compared to a transaction loss of $0.1 million during the year ended December 31, 2013. This increase is associated with a strengthening US dollar against our most commonly used foreign currencies, such as the euro.

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Provision for Income Taxes
As of December 31, 2014, we had federal and state net operating loss carryforwards for tax purposes of approximately $27.8 million and $34.1 million, respectively. These net operating loss carryforwards begin to expire in 2023 for federal income tax purposes and begin to expire in 2015 for state income tax purposes. In the future, we intend to utilize any carryforwards available to us to reduce our tax payments. A portion of our net operating loss carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. We do not expect that this limitation will impact our ability to utilize all of our net operating losses prior to their expiration. We recognized an income tax benefit of approximately $5.3 million during the year ended December 31, 2014, which is comprised of current tax expense of $6.0 million related to and state income tax liabilities, $1.7 million of foreign income tax expense, and a deferred tax benefit of approximately $13.1 million related to temporary differences between the tax treatment and financial reporting treatment for certain items. Included within the total current tax expense of $7.7 million is $5.8 million of non-cash tax expense related to excess tax benefits from stock based compensation. Also, included within the total deferred tax benefit of $13.1 million is a $3.5 million deferred tax benefit related to the establishment of a deferred tax asset for the outside basis difference of our investment in CSWS as we expect to realize the asset in the foreseeable future due to the assets being held for sale.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Revenues
 
 
 
Year Ended
December  31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
(In thousands)
Revenues
 
$
286,860

 
$
255,193

 
$
31,667

 
12.4
%
Total revenues increased by approximately $31.7 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. We attribute the revenue growth to increased sales to our existing customer base and continued growth of our customer base during the period. Revenue from existing customers increased $29.3 million from $228.0 million for the year ended December 31, 2012 to $257.3 million for the year ended December 31, 2013, while revenue from new customers increased $2.3 million from $27.2 million for the year ended December 31, 2012 to $29.5 million for the year ended December 31, 2013.
We experienced continued revenue growth in subscription revenues, which increased by approximately $33.8 million during the year ended December 31, 2013, from $216.0 million in the prior year period. We experienced a decrease in revenue from our project-based revenues which decreased by approximately $2.2 million during the year ended December 31, 2013, from $39.2 million in the prior year period.
Revenues from U.S. customers were $202.7 million for the year ended December 31, 2013, or approximately 71% of total revenues, while revenues from customers outside of the U.S. were $84.1 million for the year ended December 31, 2013, or approximately 29% of total revenues. Our focus on organic growth efforts in international markets resulted in increased international revenues of $12.3 million, comprised of increases of $6.0 million in Europe, $3.2 million in Asia, $2.7 million in Latin America and $1.0 million in Canada, offset by a decrease of $0.6 million in the Middle East and Africa during the year ended December 31, 2013 as compared to the prior year period.
Operating Expenses
The majority of our operating expenses consist of employee salaries and related benefits, stock compensation expense, professional fees, rent and other facility related costs, depreciation expense, and amortization and impairment of acquired intangible assets. Our single largest operating expense relates to our people. In order to effectively motivate our employees and to provide them with proper long-term incentives, we pay the vast majority of our annual bonus arrangements using our common stock. In addition, two of our senior executives have agreed to receive shares of our common stock instead of a cash salary.
Our total operating expenses increased by approximately $20.8 million, or approximately 8%, during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This increase is primarily attributable to increased expenditures for employee salaries and related benefits of $11.0 million associated with our increased headcount, increased commissions and sales incentives of $5.4 million related to compensating our employees and strategic partners to continually garner new clients and better serve our existing clients with our expanding suite of products, increased use of professional services firms in the amount of $4.2 million associated with obtaining accounting and legal services to support our rapidly

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growing global business and for certain ongoing litigation, increased rent and other facilities related costs and depreciation expense of $2.6 million. These increases were partially offset by proceeds from the settlements of litigation in the amount of $1.4 million and decreased amortization expense of $1.3 million.
Cost of Revenues
 
 
 
Year Ended
December  31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
(In thousands)
Cost of revenues
 
$
89,963

 
$
86,379

 
$
3,584

 
4.1
%
As a percentage of revenues
 
31.3
%
 
33.9
%
 
 
 
 
Cost of revenues consists primarily of expenses related to operating our network infrastructure, producing our products, and the recruitment, maintenance and support of our consumer panels. Expenses associated with these areas include the salaries, stock-based compensation, and related personnel expenses of network operations, survey operations, custom analytics and technical support, all of which are expensed as they are incurred. Cost of revenues also includes data collection costs for our products, operational costs associated with our data centers, including depreciation expense associated with computer equipment that supports our panel and systems, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software.
Cost of revenues increased by $3.6 million during the year ended December 31, 2013 compared to the year ended December 31, 2012. This increase is primarily attributable to third-party data costs of $2.6 million associated with our data collection efforts, increased depreciation expense of $1.2 million, and employee salaries and related benefits of $1.0 million. These increases were offset by a decrease of $1.2 million associated with reduced usage of third-party customer service providers.
Cost of revenues decreased as a percentage of revenues during the year ended December 31, 2013 as compared to the year ended December 31, 2012 due to increased operating leverage and the reallocation of certain operating resources to research and development activities.
Selling and Marketing Expenses
 
 
 
Year Ended
December  31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
(In thousands)
Selling and marketing
 
$
99,947

 
$
91,849

 
$
8,098

 
8.8
%
As a percentage of revenues
 
34.8
%
 
36.0
%
 
 
 
 
Selling and marketing expenses consist primarily of salaries, benefits, commissions, bonuses, and stock-based compensation paid to our direct sales force and industry analysts, as well as costs related to online and offline advertising, industry conferences, promotional materials, public relations, other sales and marketing programs, and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software. All selling and marketing costs are expensed as they are incurred. Commission plans are developed for our account managers with criteria and size of sales quotas that vary depending upon the individual's role. Commissions are expensed as selling and marketing costs when a sales contract is executed by both the customer and us. Selling and marketing expenses have increased because we hired additional salespeople in order to support international growth, especially in our Digital Analytix and vCE product offerings.
Selling and marketing expenses increased by $8.1 million during the year ended December 31, 2013 compared to the year ended December 31, 2012. This increase is primarily attributable to increased commissions and sales incentives of $5.4 million related to compensating our employees and strategic partners to continually garner new clients and better serve our existing clients with our expanding suite of products and increased revenues coupled with an increase in employee salaries and related benefits of $4.0 million. These costs were offset by a decrease in stock-based compensation of $1.3 million associated with a change in our sales incentive plans that took effect in 2013.
Selling and marketing expenses decreased as a percentage of revenues during the year ended December 31, 2013 as compared to the year ended December 31, 2012 due to faster than expected revenue growth.

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Research and Development Expenses
 
 
 
Year Ended
December 31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
 
 
(In thousands)
 
 
 
 
Research and development
 
$
41,025

 
$
33,994

 
$
7,031

 
20.7
%
As a percentage of revenues
 
14.3
%
 
13.3
%
 
 
 
 
Research and development expenses include new product development costs, consisting primarily of salaries, benefits, stock-based compensation and related costs for personnel associated with research and development activities, fees paid to third parties to develop new products and allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software.
Research and development expenses increased by $7.0 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This increase is primarily attributable to employee salaries and related benefits of $4.9 million associated with activities to support the development and implementation of new products, and increased stock compensation expense of $1.1 million and increased rent, other facility related costs and depreciation of $0.7 million.
Research and development expenses increased as a percentage of revenues for the year ended December 31, 2013 compared to the year ended December 31, 2012 due to the reallocation of human resources to research and development activities.
General and Administrative Expenses
 
 
 
Year Ended
December  31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
 
 
(In thousands)
 
 
General and administrative
 
$
46,449

 
$
38,134

 
$
8,315

 
21.8
%
As a percentage of revenues
 
16.2
%
 
14.9
%
 
 
 
 
General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and related expenses for executive management, finance, accounting, human capital, legal and other administrative functions, as well as professional fees, overhead, including allocated overhead, which is comprised of rent and other facilities related costs, and depreciation expense related to general purpose equipment and software, and expenses incurred for other general corporate purposes.
General and administrative expenses increased by $8.3 million during the year ended December 31, 2013 as compared to the year ended December 31, 2012. This increase is primarily attributable to the use of professional services firms in the amount of $4.2 million associated with obtaining accounting and legal services to support our rapidly growing global business and for certain ongoing litigation, increased stock compensation of $1.4 million associated with high levels of achievement pertaining to our 2013 management performance compensation plans, increased employee salaries, benefits and related costs of $1.2 million associated with our increased headcount. These costs were partially offset by a decrease in bad debt expense of $1.0 million associated with more effective collections practices in 2013.
General and administrative expenses increased as a percentage of revenues during the year ended December 31, 2013 as compared to the year ended December 31, 2012, due to increased headcount, professional services fees, ongoing litigation and an increase in our stock compensation.
Amortization Expense
 
 
 
Year Ended December 31,
 
Change
 
 
2013
 
2012
 
$
 
%
 
 
 
 
(In thousands)
 
 
 
 
Amortization expense
 
$
7,957

 
$
9,289

 
$
(1,332
)
 
(14.3
)%
As a percentage of revenues
 
2.8
%
 
3.7
%
 
 
 
 

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Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions.
Amortization expense decreased by $1.3 million during the year ended December 31, 2013, as compared to the year ended December 31, 2012, due to the impact of the disposition of the ARS Non-Health-Copy-Testing and Equity Tracking business.
Impairment of Intangible Assets
During the three months ended June 30, 2012, we noted a significant decline in revenues from ARS, which we acquired in February 2010. As a result, we performed an impairment test of the long-lived assets of ARS. The long-lived assets of ARS consist of customer relationships and acquired methodologies and technology. The first step in testing the long-lived assets of ARS for impairment was to compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of ARS to the carrying value of ARS's long-lived assets. Based on this analysis, we determined as of June 30, 2012 that the sum of the expected undiscounted cash flows to be generated from ARS was less than the carrying value of the ARS intangible assets. As such, we concluded that the intangible assets of ARS were impaired. To measure the amount of the impairment, we then estimated the fair value of the ARS intangible assets as of June 30, 2012. In determining the fair value of the intangible assets, we prepared a discounted cash flow (“DCF”) analysis for each intangible asset. In preparing the DCF analysis, we used a combination of income approaches, including the relief from royalty approach and the excess earnings approach. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, terminal growth rates, royalty rates and the amount and timing of expected future cash flows. The cash flows employed in the DCF analysis are based on our most recent budgets, forecasts and business plans as well as growth rate assumptions for years beyond the current business plan period. Significant assumptions used include a discount rate of 18.5%, which is based on an assessment of the risk inherent in the future revenue streams and cash flows of ARS, as well as a royalty rate of 3.0%, which is based on an analysis of royalty rates in similar, market transactions. Based on the DCF analysis, we have estimated the fair value of the intangible assets of ARS to be $2.5 million as of June 30, 2012, which resulted in an impairment charge of $3.3 million during the year ended December 31, 2012. In addition, these intangible assets will be amortized over a remaining estimated useful life of eighteen months, beginning July 1, 2012.
During the three months ended March 31, 2013, we completed the sale of certain assets related to our ARS Non-Health Copy-Testing and Equity Tracking business. In connection with the disposition, we received total proceeds of $1.0 million. In addition, we entered into a license agreement in which we will retain the right to use the necessary intellectual property to continue to provide the ARS Copy-Testing and Equity Tracking services to our Health related customers and recorded an intangible asset of $1.2 million based on the estimated fair value of the licensed intellectual property. In determining the fair value of the intangible asset, the Company prepared a discounted cash flow (“DCF”) analysis using a combination of income approaches including the relief from royalty approach and the excess earnings approach. The cash flows employed in the DCF analysis were based on the Company’s most recent budgets, forecasts and business plans as well as growth rate assumptions for years beyond the current business plan period. Significant assumptions used include a discount rate of 18.5%, which is based on an assessment of the risk inherent in the future revenue streams and cash flows associated with the health related customers of ARS, as well as a royalty rate of 3.0%, which is based on an analysis of royalty rates in similar, market transactions. This intangible asset will be amortized on a straight-line basis over its estimated useful life of 3 years beginning April 1, 2013. The assets disposed of included computer equipment, furniture and fixtures, intellectual property and the intangible assets associated with the ARSgroup. Due to the fact that we will continue to provide the ARS Copy-Testing and Equity Tracking services to its Health related customers and have therefore not eliminated the operations and cash flows of the ARSgroup, we have concluded that the disposition does not qualify for presentation as discontinued operations. In connection with this transaction we recorded a gain on the disposition of $0.2 million.
Interest and Other Expense, Net
Interest and other income/expense, net, consists of interest income, interest expense and gains or losses on disposals of fixed assets.
Interest income consists of interest earned from our cash and cash equivalent balances. Interest expense is incurred due to capital leases pursuant to several equipment loan and security agreements to finance the lease of various hardware and other equipment purchases and our revolving credit facility. Our capital lease obligations are secured by a senior security interest in eligible equipment.
Interest and other expense, net remained relatively constant for the years ended December 31, 2013 and December 31, 2012 with a net expense of $0.9 million.

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Loss From Foreign Currency
The functional currency of our foreign subsidiaries is the local currency. All assets and liabilities are translated at the current exchange rates as of the end of the period, and revenues and expenses are translated at average rates in effect during the period. The gain or loss resulting from the process of translating the foreign currency financial statements into U.S. dollars is included as a component of other comprehensive (loss) income.
We recorded a transaction loss of $0.1 million for the year ended December 31, 2013 as compared to a transaction loss of $0.7 million during the year ended December 31, 2012.
Provision for Income Taxes
As of December 31, 2013, we had federal and state net operating loss carryforwards for tax purposes of approximately $37.2 million and $38.3 million, respectively. These net operating loss carryforwards begin to expire in 2022 for federal income tax purposes and begin to expire in 2014 for state income tax purposes. In the future, we intend to utilize any carryforwards available to us to reduce our tax payments. A portion of our net operating loss carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. We do not expect that this limitation will impact our ability to utilize all of our net operating losses prior to their expiration. We recognized income tax expense of approximately $4.4 million during the year ended December 31, 2013, which is comprised of current tax expense of $0.5 million related to federal alternative minimum tax and state income tax liabilities, $1.5 million of foreign income tax expense, and deferred tax expense of approximately $2.4 million related to temporary differences between the tax treatment and financial reporting treatment for certain items. Included within the total deferred tax expense of $2.4 million is $2.3 million of deferred tax expense related to the establishment of a deferred tax liability for Subpart F income that will be recognized in a future year and $2.9 million of deferred tax benefit related to the release of valuation allowances in certain foreign jurisdictions.

Liquidity and Capital Resources
The following table summarizes our cash flows:
 
 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
 
(In thousands)
Consolidated Cash Flow Data
 
 
 
 
 
 
Net cash provided by operating activities
 
$
49,497

 
$
44,574

 
$
44,872

Net cash used in investing activities
 
(11,545
)
 
(4,437
)
 
(7,590
)
Net cash used in financing activities
 
(59,099
)
 
(32,885
)
 
(14,285
)
Effect of exchange rate changes on cash
 
(3,633
)
 
(1,221
)
 
696

Net (decrease) increase in cash and equivalents
 
(24,780
)
 
6,031

 
23,693

Our principal uses of cash historically have consisted of cash paid for stock repurchases, business acquisitions, payroll and other operating expenses and payments related to the investments in equipment primarily to support our consumer panel and technical infrastructure required to support our customer base. As of December 31, 2014, our principal sources of liquidity consisted of $43.0 million in cash, the majority of which represents cash generated from operating activities. As of December 31, 2014, $14.5 million of the $43.0 million in cash on hand was held by foreign subsidiaries that would be subject to tax withholding payments if it is repatriated to the U.S. It is management's current intention that all foreign earnings will be indefinitely reinvested in these foreign countries and will not be repatriated to the U.S. However, if management were to repatriate these funds to the U.S., they would be subject to income tax payments ranging from 5% to 15% of the amount repatriated.
On September 26, 2013, we entered into a Credit Agreement (the “Credit Agreement”) with several banks (the "Lenders") with Bank of America, N.A. (“Bank of America”) as administrative agent and lead lender. The Credit Agreement provides for a five-year revolving credit facility of $100.0 million, which includes a $10.0 million sublimit for issuance of standby letters of credit, a $10.0 million sublimit for swing line loans and a $10.0 million sublimit for alternative currency lending. The maturity date of the Credit Agreement is September 26, 2018.  The Credit Agreement also contains an expansion option permitting the Company to request an increase of the credit facility up to an aggregate additional $50 million, subject to certain conditions. Borrowings under the Revolving Credit Facility shall be used towards working capital and other general corporate purposes as well as for the issuance of letters of credit. On June 23, 2014, the Company executed the First Amendment to the Credit Agreement. This amendment reset the equity repurchase limit to $50.0 million and permits the Company to repurchase equity interests in the Company outside the $50.0 million limit during the remainder of the five-year revolver term, provided that certain financial thresholds are met.

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Base rate loans and swing line loans will bear interest at the Base rate plus the Applicable Rate, as such terms are defined in the Credit Agreement and summarized below. The Base Rate is the highest rate of the following: (a) the Federal Funds rate plus 0.50%, (b) the publicly announced Bank of America prime rate, and (c) the Eurocurrency rate as defined in the Credit Agreement plus 1.0%. The Applicable Rate for base rate loans and swing line loans is 0.50% to 1.50% depending on the Company's funded debt-to-EBITDA ratio at the end of each fiscal quarter. Amounts supporting letters of credit bear interest at the Applicable Rate for revolving loans. Each Eurocurrency rate loan will bear interest at the Eurocurrency Rate (as defined in the Credit Agreement) plus the Applicable Rate ranging from 1.50% to 2.50% depending on our funded debt-to-EBITDA ratio at the end of each fiscal quarter. Beginning September 26, 2013 through the five-year revolver term, we are obligated to pay a fee, payable quarterly in arrears, based on the average unused portion of the available amounts under the Credit Agreement at a rate of 0.20% to 0.35% per annum depending on the Company's funded debt-to-EBITDA ratio at the end of each fiscal quarter.
Under the terms of the Credit Agreement, we are subject to various usual and customary covenants, including, but not limited to: financial covenants requiring maximum funded debt-to-EBITDA ratio, cash flow-to-fixed charge ratios and a minimum liquidity during equity repurchase periods as well as covenants relating to the Company's ability to dispose of assets, make certain acquisitions, be acquired, incur indebtedness, grant liens and make certain investments. As of December 31, 2014, we were in full compliance with all covenants contained in the Credit Agreement.
As of December 31, 2014, there were no amounts outstanding under our Credit Agreement.
We maintain letters of credit in lieu of security deposits with respect to certain office leases. As of December 31, 2014, $3.6 million in letters of credit were outstanding, leaving $6.4 million available for additional letters of credit. These letters of credit may be reduced periodically provided that we meet the conditional criteria of each related lease agreement.
Operating Activities
Our cash flows from operating activities are significantly influenced by our investments in personnel and infrastructure to support the anticipated growth in our business, increases in the number of customers using our products and the amount and timing of payments made by these customers.
We generated approximately $49.5 million of net cash from operating activities during the year ended December 31, 2014. Our cash flows from operations were driven by our net loss of $9.9 million offset by $65.1 million in non-cash items such as depreciation, impairment of intangible assets, amortization, provision for bad debts, stock-based compensation, and a non-cash deferred tax provision. In addition, our operating cash flows were positively impacted by a $9.1 million increase in deferred revenue related to increased transaction volume and the collection of cash in advance of revenue recognition, and a $5.0 million increase in accounts payable. Cash flows from operations were negatively impacted by a $16.7 million increase in accounts receivable associated with our increased revenues, especially during the fourth quarter, and a $3.1 million increase in prepaid expenses and other current assets.
We generated approximately $44.6 million of net cash from operating activities during the year ended December 31, 2013. Our cash flows from operations were driven by our net loss of $2.3 million, offset by $54.8 million in non-cash items such as depreciation, impairment of intangible assets, amortization, provision for bad debts, stock-based compensation, and a non-cash deferred tax provision. In addition, our operating cash flows were positively impacted by a $7.4 million increase in deferred revenue related to increased sales and the collection of cash in advance of revenue recognition, a $5.7 million increase in accounts payable, and a $2.4 million increase in deferred rent due to tenant allowances related to our leases. Cash flows from operations were negatively impacted by a $22.6 million increase in accounts receivable associated with our increased revenues, especially during the fourth quarter, and a $0.7 million increase in prepaid expenses and other current assets.
We generated approximately $44.9 million of net cash from operating activities during the year ended December 31, 2012. Our cash flows from operations were driven by our net loss of $11.8 million, offset by $55.1 million in non-cash items such as depreciation, impairment of intangible assets, amortization, provision for bad debts, stock-based compensation, and a non-cash deferred tax provision. In addition, our operating cash flows were positively impacted by a $11.6 million increase in deferred revenue and amounts collected from customers in advance of when we recognize revenue, a $1.3 million increase in deferred rent due to tenant allowances related to our leases and a $1.5 million decrease in prepaid expenses and other current assets. Cash flows from operations were negatively impacted by a $7.8 million decrease in accounts payable, accrued expense and other liabilities associated with the timing of payments associated with annual bonuses paid in the first quarter of the year and professional fees accrued as of December 31, 2011, and a $4.9 million increase in accounts receivable associated with our increased revenues.
Investing Activities
Our primary regularly recurring investing activities have consisted of purchases of computer network equipment to support our Internet user panel and maintenance of our database, furniture and equipment to support our operations, purchases

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and sales of marketable securities, and payments related to the acquisition of several companies. As our customer base continues to expand, we expect purchases of technical infrastructure equipment to grow in absolute dollars. The extent of these investments will be affected by our ability to expand relationships with existing customers, grow our customer base, introduce new digital formats and increase our international presence.
We used $11.5 million of net cash in investing activities during the year ended December 31, 2014, associated with the purchase of property and equipment to maintain and expand our technology infrastructure.
 We used $4.4 million of net cash in investing activities during the year ended December 31, 2013, associated with the purchase of property and equipment to maintain and expand our technology infrastructure.
 We used $7.6 million of net cash in investing activities during the year ended December 31, 2012, associated with the purchase of property and equipment to maintain and expand our technology infrastructure.
We expect to achieve greater economies of scale and operating leverage as we expand our customer base and utilize our Internet user panel and technical infrastructure more efficiently. While we anticipate that it will be necessary for us to continue to invest in our Internet user panel, technical infrastructure and technical personnel to support the combination of an increased customer base, new products, international expansion and new digital market intelligence formats, we believe that these investment requirements will be less than the revenue growth generated by these actions. This should result in a lower rate of growth in our capital expenditures to support our technical infrastructure. In any given period, the timing of our incremental capital expenditure requirements could impact our cost of revenues, both in absolute dollars and as a percentage of revenues.
Financing Activities
We used $59.1 million of cash during the year ended December 31, 2014 for financing activities. This included $15.7 million for shares repurchased by us pursuant to the exercise by stock incentive plan participants of their right to elect to use common stock to satisfy their tax withholding obligations. We also used $37.2 million to repurchase shares under our share repurchase program. In addition we used $12.1 million to make payments on our capital lease obligations offset by $0.1 million in proceeds from the exercise of our common stock options. These cash outflows were partially offset by $5.8 million of excess tax benefits from stock-based compensation.
We used $32.9 million of cash during the year ended December 31, 2013 for financing activities. This included $9.3 million for shares repurchased by us pursuant to the exercise by stock incentive plan participants of their right to elect to use common stock to satisfy their tax withholding obligations. We also used $13.1 million to repurchase shares under our share repurchase program. In addition we used $10.2 million to make payments on our capital lease obligations offset by $0.2 million in proceeds from the exercise of our common stock options. Also, during the year ended December 31, 2013, we received $4.0 million related to borrowings under our revolving credit facility and repaid this amount during 2013.
We used $14.3 million of cash during the year ended December 31, 2012 for financing activities. This included $7.4 million for shares repurchased by us pursuant to the exercise by stock incentive plan participants of their right to elect to use common stock to satisfy their tax withholding obligations. In addition we used $7.0 million to make payments on our capital lease obligations offset by $0.2 million in proceeds from the exercise of our common stock options. Also, during the year ended December 31, 2012, we received $4.1 million related to borrowings under our revolving credit facility. The total amount borrowed, which was denominated in euros, was repaid prior to December 31, 2012 and translated to $4.3 million.
Contractual Obligations and Known Future Cash Requirements
Set forth below is information concerning our known contractual obligations as of December 31, 2014 that are fixed and determinable.
 
 
 
Total
 
Less Than
1 Year
 
1-3 Years
 
3-5
Years
 
More
Than 5
Years
 
 
 
 
 
 
(In thousands)
 
 
 
 
Capital lease obligations, including interest
 
27,840

 
14,398

 
13,448

 
85

 

Operating lease obligations
 
66,033

 
10,316

 
18,672

 
15,863

 
21,182

Total
 
93,873

 
24,714

 
32,120

 
15,948

 
21,182

Our principal lease commitments consist of obligations under leases for office space and computer and telecommunications equipment. In current and prior years, we financed the purchase of some of our computer equipment under

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capital lease arrangements over a period of either 36 or 42 months. Our purchase obligations relate to outstanding orders to purchase computer hardware and software, are typically small and they do not materially impact our overall liquidity.
We have a lease financing arrangement with Banc of America Leasing & Capital, LLC in the amount of $12.5 million, of which the Company can utilize approximately $7.4 million as of December 31, 2014, for future capital leases. This arrangement has been established to allow us to finance the purchase of new software, hardware and other computer equipment as we expand our technology infrastructure in support of our business growth. During the year ended December 31, 2014 we incurred $9.7 million of additional borrowings under this financing arrangement. Some of the amounts the Company has utilized to date under this arrangement have not lowered the amount available for future capital leases, because those amounts have been assigned by Banc of America Leasing & Capital, LLC under separate third-party arrangements. As of