Coverage: ComScore replaces CEO and CFO amid accounting issues

ComScore, which tracks media consumption, announced Wednesday that its chief executive officer was being replaced due to problems the California-based company found.

Miriam Gottfried of The Wall Street Journal had the news:

The media-measurement firm said Wednesday it was replacing Chief Executive Serge Matta with co-founder and chairman emeritus Gian Fulgoni and swapping out its chief financial officer Mel Wesley with a newcomer who joined the company as part of an acquisition earlier this year. And it added a former Procter & Gamble executive to lead the board, replacing the former executive chairman, who quit several weeks ago.

Those changes came after comScore’s audit committee found “certain potential areas of concern” in its accounting practices. ComScore said Wednesday the accounting issue was mainly related to certain “nonmonetary” transactions, and it hasn’t determined whether those transactions were incorrectly recorded. As a result, it said, its second-quarter securities filing would be delayed.

The shakeup, which comes nearly a year after The Wall Street Journal first called attention to the company’s controversial practiceof reporting nonmonetary revenue, offers investors reason for hope. It demotes the two executives who presided over the company as this revenue, which comes from data exchanges with other companies and has no cash attached, grew to become a significant contributor to overall revenue and growth. ComScore’s shares are down 49% since the Journal story. They rose Wednesday morning.

Paul Barbagallo and Gerry Smith of Bloomberg News noted that the stock fell in March after the investigation started:

Shares of ComScore gained as much a 5.8 percent to $27.55. ComScore plunged in March after disclosing that its audit committee received a message regarding the company’s accounting. That disclosure came just weeks after ComScore acquired Rentrak in a stock-swap valued at more than $800 million. It’s still down almost 34 percent this year.

The company began a review of the matter, delayed filing the year-end financial results and canceled an investor event in March. Two weeks ago, Executive Chairman Magid Abraham resigned from the Reston, Virginia-based company without giving a reason.

The accounting probe has hurt sales this year, executives said during a conference call Wednesday to discuss the personnel changes. ComScore now expects to report $214 million to $218 million in revenue for the first half of this year, trailing analysts’ average estimate of $236 million.

The company won’t provide additional earnings forecasts until its audit committee completes the review and reports findings to the board, they said.

Sarah Sluis of Ad Exchanger focused on how the investigation has distracted the company:

The accounting investigation has taken resources away from the integration of the comSore and Rentrak products.

The uncertainty is also affecting sales. The company also saw misses in its sales pipeline because of mergers and acquisitions in the local TV and digital space, Chemerow said, which led clients to “freeze or push out timing.”

ComScore also acknowledged that its mobile measurement panel isn’t scaling up fast enough. Especially in some non-US markets, consumers skipped desktop and went straight to mobile, making it important to develop large mobile panels. “Data [is] flowing in slower than expected,” Chemerow said.

From there, comScore focused on the positives in the business. It sees momentum in its advertising measurement business, which tracks the effectiveness of advertising. Agency holding company WPP, for example, is both a shareholder and a big proponent of the company’s merger.