Q3 2019 Earnings Call

And your telephone in order to respect timeframe to we ask that you limit yourself to one question only and rejoin the queue for any additional questions. Please be advised to today's conference is being recorded.

Require any further assistance. Please press star zero I would now like to hand, the conference over to Sara Gubins Senior Vice President of Investor Relations. Please go ahead.

Thanks, Denise and good morning, everyone. Thank you for joining us because it's got Nielsen's third quarter financial performance and the outcome of our strategic review.

I'm joined by Chairman, Jim Atwood, our CEO data, Kenny and our CFO and COO, Dave Anderson.

Slide presentation that will use on this call is available under the events section of our Investor Relations website.

Before we begin I'd like to remind all of you that our remarks and responded to your questions. Today may contain forward looking statements, including those about in Europe and outlook and prospects that are based on your <unk> current expectations. Our actual result in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those I got it.

In a risk factor section of our most recent annual report on Form 10-K , and subsequent reports filed with the at the same which are available on our website, we assume no obligation to update any forward looking statements, except as required by law.

On today's call. We will also refer to certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to most comparable GAAP measures are available in the earnings press release, which is available at the Investor Relations section of our website at Hilton Dot com.

For acuity as always we ask you to limit yourself to one question. So that we can accommodate everyone feel free to join US. Your again at a time remains Google, California, and now to start the call I'd like to turn it over to our CEO David Kenny Thanks.

Good morning, and thank you all for joining the call today, let me walk through the key agenda items first as we've all been waiting the outcome of our strategic review following an extensive review process. The border Nielsen concluded the separating our businesses Nielsen Global media and Nielsen Global connect into two independent.

Publicly traded companies is the best.

Position each of our businesses for long term success and to maximize value.

He began that review over a year ago, both businesses have improved their product.

Our operating discipline, we're confident that by Green shoe independent company.

Separation will celebrate that improvement and allows each of these businesses to pursue their unique operational and strategic priorities.

In conjunction with a strategic review, we also reviewed our capital allocation framework and both Jim and day, we'll talk more about them and then I'll come back to talk about the path forward for Nielsen Global media and Nielsen Global come out.

After that Dave is going to review our financial opportunity for each business and then review our third quarter results, which once again reflects strong execution by our associates around the world.

I'm happy to say that both media and connect revenue were ahead of our expectation and adjusted EBITDA is on track.

We are reiterating revenue margin and free cash flow guidance, and we are raising our 20 Nineteena Johnson, yes guidance.

This solid performance is a testament to our associates around the world who focus on execution every day I want to thank all of them for their hard work dedication.

Given the strategic review, our remarks will be longer than normal today, and we will stay on he takes your question.

We believe that both media and connect will be better served by operating independently.

Let me explain.

Median connect our each essential to the marketplace.

The median advertising sector and the retail enough at the GE economies respectively.

These are fundamentally different businesses with different financial profiles different people different techniques and different end markets.

Each of the business it is undergoing a transformation, but they take a different forms and require unique investment and focus.

In media Nielsen is the leading global independent Orbitz works room, and the established trading currency across the landscape with a growing global footprint across a 600 billion dollar advertising Morgan.

These media market or changing rapidly as isn't real thing and we must continue to invest to drive our digital transformation and global adoption.

Media is a scalable largely syndicated business with a high level of recurring revenue and attractive margins.

In Canada, Neil can provide critical markets your measurement and analytics to FMCG manufacturers and retailers connect is the only provider where they truly global Brooklyn supporting $7 billion in global luxury from a cost over 100 market.

We have been investing in initiatives such as the Nielsen connect platform and retailer collaboration and those investments have strengthened our competitive position. We're also investing in backend efficiencies and automation to drive productivity speed and quality.

Operating these as two separate companies will put each team in a much stronger position to drive decision, making with velocity respond to changing market demand.

Key initiatives forward to better to their clients and accelerate the transformation.

I'm very excited about the opportunity in both businesses.

And I remain focused on both businesses after the separation all remain the CEO of the media business.

In the meantime, we'd be done a search for the connect CEO and we have some strong internal candidates as well as I can tell Canada. Meanwhile, Dave is going to focus of the old time as youre not to ensure that it's fully prepared Blitz successful then walk continuing his yeah, oh duty across the entire enterprise we.

We'll update you on other key management and governance development in due course.

I mean, I'll turn the call over to Jim on behalf of the board. So he can provide further insight into the strategic review.

Thank you David.

On behalf of the board, we've been very pleased with the Nielsen leadership team over the past year.

Under David and Dave's leadership, we've seen a strong track record of execution with improving fundamentals and increased financial operating discipline to drive greater accountability.

With the support of the leadership team and our outside advisors, we had a very active and comprehensive strategic review process, which also included an in depth analysis of our businesses strategies and market opportunity.

We evaluated a broad range of alternatives, including continuing to operate as a public independent company.

Separation of the businesses.

And the sale of the entire company.

The board unanimously concluded that separating Nielsen two businesses is the best path forward to enhance strategic focus growth and long term shareholder value.

As independent companies, both Nielsen Global media and Nielsen Global can that we'll have added flexibility and strengthen their path forward towards the new phase of growth productivity and industry leadership.

As we work on the separation, we've been developing fit for purpose capital structure targets for both companies.

The board believes that now is the right time to just the dividend.

In order to strengthen the two perspective balance sheets ahead of the separation and provide flexibility to invest for growth.

With the strategic review now concluded I'll return to my role as Chairman of Board.

As you know I'd taken on the road executive Chairman in 2000 July 2008, 2018 to oversee the strategic review and the CEO search which are now.

To close I also want to thank Nielsen's leadership team and every associate around the world for their dedication and the remarkable ability to deliver during this process.

Dave will now review the separation considerations.

Good morning, Thanks, Jim, Let's turn to slide number seven so a couple headlines here relative to the separation process first of all.

We expect this transaction to be tax free the Nielsen and its shareholders for U.S. federal income tax purposes, and it will also meet UK legal requirement.

The stock distribution ratio will be term and determine at a later date.

No we expect to complete the transaction with a nine to 12 month.

Work is well underway, we're going to be transparent as possible through this process and during this time, we'll focus on positioning each business to be successful as separate companies well also working to minimize the distraction for our clients and also the Nielsen associates.

Key next steps to completion include developing Standalone financial statements for each business separating the businesses from a legal and operational standpoint, and then of course, the capital structure and governance considerations.

We've also looked at the historical commercial relationships that exists between both businesses. We can but we believe we can continue those through arm's length agreements. We believe we have the resources necessary to complete the separation successfully and stand up each company from a position of strength.

Closing conditions will include among others favorable rulings and legal opinions on tax matters. The effectiveness of the registration statement for the shares of the new company that will be distributed the Nielsen shareholders and final approval by the board of directors and Nielsen shareholders.

And as Jim mentioned, the board has decided to change our capital allocation policy, which will enable nielsen to strengthen its balance sheet and invest in growth. So we've adjusted our quarterly dividend to six cents per share accepted this December .

This is also a key component of achieving the desired leverage ratios for each business at the time of the spin.

The overtime, we see different target leverage ratios for each business with a medium term leverage goal a roughly three to three and a half for media inter partially to the two and half were connected again those are our best views at this time, we expect to refine those in more detail as we go through the separation process.

No the while they're gonna be some onetime cost to spectacle separation and spend we expect the ongoing incremental stand alone and public company costs to be manageable.

With that let me turn call back to David.

Thank you.

So I've been at Nielsen for 11 month, and I wanted to share some views on what I've learned in media and what we've accomplished and where we are going.

I'd say in media trusted data has always been and remain critical the changing dynamics incurring including growing complexity Ms trial data leakage fraud et cetera are creating an even greater need for trusted data.

And Nielsen is foundational therefore to bring trusts to the media markets.

One media truth is absolutely critical chip, creating a fair playing field in media and only Nielsen can provide that ex currency quality.

We've made significant progress in our digital transformation over the past several years, but we need to invest further and go faster clients want one measurement definition across digital and TV. They want our data to feed into planning systems that can help allocate their media spend and they're looking to understand the ROI on that then with outcome metric.

We've accomplished a lot toward that goal in 2019, we met our expectations every quarter. This year, we've aligned our technology and operations to drive end to end accountability that were organized with speed and scale, we have detailed product roadmap and a plan for true consistent digital and TV measurement.

We're also investing in our addressable TV platform, which is important to the end of three long term and we've identified the opportunity for international expansion and how to go after it.

Nielsen has an essential role in the media ecosystem.

Actions, we've taken in 2019 strengthen our position.

We've demonstrated our ability to respond to change along with the market, which includes the tremendous progress we've made toward being the digital currency.

As the market evolves clients are looking for pervasive digital measurement that aligns with linear reliable planning and optimization tools that are easy to use.

That's what we're building and we're investing to move with greater velocity.

That investment has been three strategic pillars for Nielsen must measure the total audience consumers have more viewing and listening option and media owners have more ways to monetize their assets than ever before.

We're focused on the one thing that is constant.

Got it says we're pushing forward with our digital initiatives such as true cross media products, bringing to the industry a single comprehensive volumes measure that supports multiple business model for monetization.

Our product Roadmaps are focused on delivering pervasive and consistent digital measurement, providing clients with greater transparency around monetization.

While helping Nielsen continue to drive the industry's currency.

We're leveraging our investments in breakout and Sorenson media to bring the same level of transparency and scalability to addressable television to target ads on a segment of basis.

Second we're investing to predict and measure outcome, our audience data and artificial intelligence tools, our fuel feeling planning across platform, providing transparency into a cross media plan, we're integrating those outcomes they solution, enabling clients to make performance based decisions.

A large scale way.

Our dual focus on audiences and outcomes will enable the market to transact more efficiently.

Advertisers will have greater transparency about what is working agencies can build more effective plans and publishers can better demonstrate the value of their inventory.

And third we're expanding our global presence in both existing and new markets digital is a big part of the global opportunity, but I've been include TV and audio as well we are unifying our go to market strategy and product offerings across our international markets.

These roadmaps support the future of media, ensuring our ongoing relevance and central importance as one media true.

Globally.

[noise], we have a clear roadmap in place to deliver this growth in value 2019 has been about starting to build a new foundation.

We understand the class are facing big shifts in their businesses the move to direct to consumer models and addressable are just two examples and Nielsen is investing where the market is headed this creates new opportunities for faster growth overtime and highlights the importance of these investments to drive one media true across all monetization model.

We expect these investments to deliver mid single digit revenue growth over the next several years is Nielsen becomes the true cross platform currency and drive faster growth in analytics to sum up on media, there's never been a more important time for one media trip.

My answer looking to transact in new and different ways, and we are enabling them to do this with trust.

Drives value for our clients and also for our shareholders.

Now, let me turn to Nielsen Global connect.

Another very exciting business connect is the only truly global player in a growing market with a nine decade history, serving the FMCG and retailer ecosystems.

Valving market dynamics are creating even more opportunity.

We are the sole measurement provider in the majority of our emerging markets, where we also benefit from strong macro trends.

Fiji and retail clients are seeking more data driven solutions to help them compete and Nielsen has the accurate actionable data and decision, making tool to help them innovate and grow our ability to do so increases as we further deployment Nielsen connect platform, which is the only truly open cloud.

Native measurement and analytics platform and this enabled plans to work with one data truths that across their entire global organization.

The Nielsen connect platform has opened its up to work with strategic partners across the landscape. This open platform is a key competitive differentiator Nielsen uniquely has data partnerships with leading retailers across brick and mortar Andy commerce and the Nielsen connect platform allows us to work with more than 65 data and analytics.

Companies in our connect partner network, we have strong technology partners that support and provide a solid foundation for Nielsen connects backend.

All of these partnerships allow us to build deploy and scale innovative solutions with the velocity required to stay ahead of our client needs in an open interoperable ecosystem.

[noise], what's next for Nielsen connect we have four strategic pillars, we're investing against first we're focusing on a broad and accelerating deployment of the Nielsen connect platform. This includes recent launches that you went up by the Premier food wholesaler in North America, and Coca Cola.

These and other clients view, our data and cloud based technology as important leverage that benefit their businesses. This is an important driver of renewal discussions and client wins. For example, we recently renewed with PNG in the United States as well as a global partnership with General Mills.

Second we're broadening our coverage and granularity to measure the total consumer. This includes a fast growing emerging markets and includes e-commerce specialty channels such as Pat.

Extending our omni channel coverage is a key priority.

Third Nielsen is strengthening and expanding our retail partnerships, our retail collaboration programs enable efficiency for manufacturers and growth for retailers as well as interest in a broad range of our capabilities retailers are increasingly looking for real time analytics in areas like pricing promotion and personalization.

Analytics that connect platform enables us to deliver scale always on analytics, which address their needs.

And finally, the transformation of our connect business has a big operational cost reduction opportunity as we drive automation and closed down legacy systems.

Some of on connect we have a strong foundation unique global reach and scale, we have initiatives in place to improve our performance and achieved greater potential for shareholders and clients.

With that I'll turn the call back to Dave for the financial discussion.

So what I'd like to do is take you through a summary financial view of two the businesses before going into greater detail on the third quarter performance and our updated thus 19 outlook.

So turning to slide number 18, let's start with media on the left side of the page is just a snapshot of our 2018 media financial profile and our 2019 forecast.

The 2018 numbers are consistent with our current reporting they don't include any the cause of operating as a standalone business.

The media has of course delivered low single digit organic growth over the last several years and its continued its strong profit generation.

On the Whiteside have shown medium term targets for the business at a summary level.

2023, as a result of investments, we're making and the key initiatives that David referenced we expect near mid single digit organic compound average growth rate.

This would result in a growth profile that is in line with the media market and the information services peers.

We're investing in product roadmap that line, where the market is headed our growth investments will build over time, we're anticipating low single digit revenue growth through 2021 with revenue ramping to mid single digit growth in 22 and beyond as the investments in digital dancing TV measurement.

Addressable predicting measuring outcomes.

And driving international growth faster.

The media business has attractive margins were going to best to drive accelerated growth over time as well continue to drive productivity.

Now over the last several years, turning now to slide 19, the connect business has been challenged largely in the US which is roughly a quarter of the total global connect revenues.

We're intensely focused on improving the trajectory of the us business and driving improved operational performance across the business globally.

We've gotten to make progress it's showing up in our results organic revenue growth. Excluding one timers was negative in 2017 18 that has turned around we expect comparable revenue to grow with margin expansion in 2019.

On the right side of the page regarding medium term targets, we expect connect revenue growth to improve.

As the U.S. turns around we also expect steady trends.

In other developed markets and accelerating growth in emerging markets helped by our improvement in China. This should yield a low single digit organic CAGR through 2023.

And improving top line, along with productivity and operational efficiency initiatives should drive significant margin expansion importantly, we're on course with a number of key initiatives, including throughput at our Super hubs automating field operations and delivering scaled product offer.

Things via the Nielsen connect platform.

We're targeting adjusted EBITDA margins in the high teens over the next several years, excluding any standalone costs following the separation.

So that summary perspective, let's now go to slide 21.

Talk about the third quarter and the rest of 2019.

First we're obviously pleased with results for the third quarter, which were ahead of our expectations.

Total company revenues, you can see increased 2.4% on a constant currency basis, which compares to our expectation, but being up slightly we saw solid trends and median connecting the third quarter with media growing you connect flat year over year on a constant currency basis revenue increased 1.9.

Percent on an organic constant currency basis, if you exclude kerrobert the carryover effect of some onetime items in prior periods organic revenue grew 2.4%.

For the third quarter adjusted EBITDA was 476 million up 1.7% constant currency net adjusted EBITDA margins were 29.5% up two basis points reported down 20 basis points on constant currency basis. This is slightly better than our expectation.

Margins in the third quarter now these margins benefited from positive performance on productivity, partially offset by investments and new products and technology as well as investments in our people.

The GAAP third quarter tax rate was well below our prior forecast last quarter. You may recall that I mentioned, we were anticipating the conclusion of several tax audits.

In the second half in the third quarter, we resolved a number of these audits, resulting in the closure of various statutes of limitation.

Consequently, we released approximately 409 million of tax contingencies in after you adjust for this or 18.6% book tax rate in the third quarter includes other discrete tax items.

Adjusted EPS was 51 cents compared to 45 cents in the third quarter of 18, reflecting a higher EBITDA and also the tax favorability I mentioned, partially offset by higher depreciation and amortization year over year.

Free cash flow in the quarter was 301 million compared to 266 million in 18, reflecting strong collections in the quarter, that's hats off really to the team who put a lot of focus on this in the quarter. They did a terrific job year over year, we also had lower restructuring higher tax.

Is due to onetime payments, but also lower capex.

So overall the third quarter results reflect continued solid execution execution and tremendous work across both media and connect now let's just go through the highlights of each segment, starting with media on slide 22.

Revenue for the third quarter for media was 870 million up 4.6% on a constant currency basis media outperformed our expectations, partly driven by higher than expected growth in digital and lower than expected declines with local audience measurement was up 4.7% constant.

Currency plan optimize was up 4.2% constant currency medias adjusted EBITDA was 381 million up 1.6% constant currency and the margins for the business were 43.8% down 128 basis points and constant currency and again in line.

And with our internal expectations, we're investing in media's core franchise in growth drivers, but also getting the benefit of productivity.

Let's go to slide 23, but connect third quarter connect revenue 400, 746 million flat with last year on a constant currency basis measure was down 0.4% constant currency predict activate was up 0.9% I'd note that the third quarter measure revenue within.

Factored by timing, if some revenue expected in the third quarter shifted into the fourth quarter.

Developed markets for connect were up 3% constant currency emerging markets revenue was up 5% in the third quarter connect adjusted EBITDA was 109 million up 1.9% year over year constant currency and EBITDA margins were 14 point.

6% up 27 basis points constant currency driven by productivity initiatives.

Next let me touch on the noncash impairment charge, we took in the third quarter related to connect as part of the strategic review during the quarter. We performed an updated assessment of connect reporting unit, which led to a noncash goodwill impairment of 1 billion in the third quarter or $2.82 a share. This has resulted.

It in an updated carrying value for the business of 2.6 billion approximately including cash.

Let's now turn to our outlook for 19 on slide 24 were maintaining our 2019 guidance for revenue adjusted EBITDA and free cash flow and we're increasing our adjusted EPS. Our guidance includes total company constant currency revenue of approximately flat to up 1.5%.

We continue to expect to be at or above the midpoint of the 28% to 29% adjusted EBITDA on margin range for the full year margins going to be driven by significant productivity again, partially offset by reinvestment in the businesses.

We're increasing our adjusted EPS guide for the year from $1.70 dollars 80 range previously to $1.77 to $1.83. This includes a four Q2 tax rate assumption of roughly 40% before discrete items as we expect some discrete items in the quarter.

We've lowered our restructuring guidance from previously 145 to 155 million for the year to now 80 to 100, we've achieved our productivity targets on more restructuring this year and we expect restructuring spend to ramp although we expect.

Restructuring this ramp somewhat in the fourth quarter, the full year should be below our previous expectations.

And lastly, we continue to expect free cash flow to be in the range of 525 million to 575 million.

As we discussed crude key drivers compared to 2018 include lower incentive compensation payouts and also more retail premium retailer payments offset in part by higher net cash interest and cash taxes. So.

So before going into more detail in the segment outlook. Let me just make a few summary points about our fourth quarter expectations, we expect to fourth quarter constant currency year over year revenue growth to be lower than the third quarter for the fourth quarter, we expect margins to be flat to up slightly year over year, and we continue to see the benefit of productivity, which provide.

Support for investment in growth initiatives, we expect fourth quarter cash flow to be down year over year against a particularly tough comp in the fourth quarter VP EBITDA cash conversion remains a focus and obviously a significant opportunity for the company, we're going to continue to focus on improving contractual terms collect.

And practices as we go forward.

And then finally, let's turn to slide 25, the segment outlook first media, we continue to expect audience measurement to be at the high end of the 2% to 3% range growth range and plan to optimize to be at the low end of the 1% to 2% range.

Note that the telecom business has surprises to the downside this year. So it could put incremental pressure on plan optimized.

Audience measurement, our full year guidance suggests slower growth in the fourth quarter versus the third quarter due in part to greater pressure in local then audio that helped third quarter, but doesn't repeat in the fourth quarter and the anticipated slower growth in national.

In connect we continue to expect measure to be at the high end of the.

Minus one.

Plus 1% range for the year it predict activate to be in the previously provided minus four to minus 2% range for the year I'd mentioned, some timing shifts I mentioned that earlier from Threeq to Fourq, you, which will help the growth rate in measurement in the fourth quarter.

So in summary, we're confident in our plan, we have a strong commitment to deliver on all fronts. We're obviously seeing tremendous commitment and execution by our management team and associates globally. We look forward to updating us on our continued progress as we go forward and with that let me turn it back.

David.

Thank you with an eye I know there are thousands of my Nielsen colleagues listening this around the world.

And we really want to thank each and every one of them.

The fact that the company rallied got operating discipline delivered its numbers delivers clean quarter gave us all a lot more confidence and looking at our option and I think the board really appreciated that because while we looked at a number of options.

The board concluded unanimously that separating Nielsen global media in Nielsen Global connect into two independent strong publicly traded companies is the best path to enhance strategic and financial success to drive long term value. The separation is going to unlock value of two strong global franchises.

Nielsen connect and Nielsen media, each has a clear plan and key initiatives in place to improve revenue profit and free cash flow as independent companies overtime.

This separation is going to allow focus and faster decision, making which allows us to accelerate our transformation.

We are targeting completion of the separation within nine to 12 month and with that I'll turn it back to Sir.

Thank you David.

And these were now ready to open up the line given a.

Ladies and gentlemen to ask a question. Please press star one on your telephone keypad. As a reminder, we ask you to limit yourself to one question and then turn the key for any additional questions. Your first question comes from Andrew Steinerman with Jpmorgan. Your line is open.

Good morning.

I wanted to I first thank you for sharing all of your plans and insights on two basis really great to hear out your views I wanted to get a little sense on the margin outlook from each of the media connect business do you feel like the level of reinvestment ahead, a really will need to come.

Gross margins to go lower before heading towards the longer term margin targets that you laid out on slide 18 and 19.

Okay.

It does it really this is Dave this is a really good question. Obviously, we're working real time through all of that we were very focus we've been very focused obviously on the.

The culmination the completion of the strategic review.

And really setting the stage as David said for too.

Businesses to be very successful, we're now working through our 2020 and 2021 numbers. It's very much a work in process. So we will be back to you in terms of providing more insights in terms of in terms of that question.

Okay. Thank you.

Your next question comes from Bill Warmington with Wells Fargo. Your line is open.

Good morning, everyone.

So a question for you on the connect side.

They're back at the last Investor day, There're a lot.

It's a pretty significant cost saving opportunities that had been laid out at that point and I was hoping that you could talk a little bit about what you think those cost saving opportunities is still there and how they fit into your.

Comments about seeing potential for organic growth and margin expansion connect next year.

If you want me to dividends, maybe just to start that.

You can add I think.

First of all our our focus you'll recall, we do to refresh as we prepared the 2019 plan.

Very very much focused on both labor and non labor productivity.

We're absolutely on track with those numbers, we've created significant process discipline in the organization. We've really benefited from that again, it's you'll recall the 370 basis points of growth gross productivity that we targeted so we're executing against that we put in.

Please.

Activities disciplines tracking within the organization that really gives us confidence we again, we'll update as we do the as we do the 2020 outlook in more detail at the beginning of the year, we'll give you updates in terms of how that looks than on a go.

Forward basis, as well as a longer term perspective on that but right now the thing I would say, it's just really encouraging is the fact that we've got so much that's in flight and is showing up in terms of our performance David anything you'd want to asset.

Yeah, I wasn't here for the Investor day, you're talking about.

Need a new one next year on this business I think it.

But what I would say is impressive about connect is that we're focused on what I would call sustainable productivity.

I think there were some cost reduction actions, but what we're doing now and I've seen as when we roll out new technology, when we combine thing into Super hubs. When we automate the way we collect data we're actually able to use technology to have productivity that is sustainable as opposed to just.

Reducing head count and asking people to work hard so I feel like we got a real sustainable renewal ball.

Subscription based approach to productivity now more like that and information services business should be so it's it's much more sustainable.

Thank you Sir your next question comes from Toni Kaplan with Morgan Stanley . Your line is open.

Thank you.

Disconnect spins off could you talk about how we should think about.

Synergies.

Two.

The company.

I'm sure there's going to I.

I guess shared real estate or overhead.

To give a number but could you just help us think about what the pieces of the synergies.

Yes.

Sure Yes.

Mentioned.

Tony there's going to be obviously, some onetime costs.

Surely provided specific number of on that.

But regarding your question on the dis synergies in the Standalone.

We worked earlier this year significantly under Davids leadership and direction.

To align the businesses and in so the separation work now it's going to be really largely focused on back offices.

Tech platforms and also real estate.

In addition, there'll be some incremental costs, which includes a public company costs key et cetera. If indeed, we anticipate these are going to be relatively small on an ongoing basis. So I think that's part of its a good question and it's part of the math in terms of looking at.

This strategy and it's supported this strategy that we think those are those are quite manageable on a go forward basis.

Thank you.

Your next your next question comes from Todd you here with Sanford Bernstein. Your line is open.

Hi, Good morning, I thought to one thing that stood out to me that I'd love to hear more about is.

Thank you cited several times, an opportunity and the media side international in terms of the growth opportunity and I guess I'm somewhat surprised to hear that for a couple of reasons.

First.

I don't think you have a lot of the assets internationally.

Especially the panels.

That gave you the position that you have in the states and so I Wonder if you believe you can.

Provida solution without those assets or do we need to build those things and then secondly, as you know the the way the market works in lot of countries is very different with these joint industry commissions and stuff and so it's just a tougher market it seems and a lot of ways. So love to hear why if you could share a little more about how maybe specifically you see some of that out.

For Trinity and what.

The investment requirements given some of the factors that I put out there may or may be I need to be educated on on them.

The markets, maybe they are different than what I think thanks.

Yes so.

It's a good question Todd Here's what I think is happening.

Total audience is a combination of of linear and digital as you know that digital platform and we partner with digital partners.

Platform are more global businesses and that just including the panel component of digital AD ratings can go for so I think I think it doesnt always have to go linear digital and then total it can actually go digital partner with linear and then get to tell us whether there's a different route to go on the measurement.

Side.

And I would say, we're increasing finding ways to partner, including within Jack and as you mentioned in some of the markets in order to cover that we are the digital currency today in 39 markets that looks like you to use in those markets. So we're establishing the currency digital first I would also say if you look at the trend digital is becoming the leading.

Way that content is distributed so as we bring in I think really superior technology on independent digital measurement, we bringing superior technology on screaming measurement. This is going to be important on a global basis. Then the second layer I talked about was how we get to outcome.

I think having the medidata platform of breaks out which is a global business having much of our analytics business work globally is also helping us. So we've got a good chunk of business working globally. Today, we can double down into that I would say as we've looked at each market. We've built a path to get to that total audience vision, it's not exactly the same happy holidays.

In the USA.

Or Australia, or copper markets, where we've gone that sort of linear out.

But we're getting to the same endpoint and getting to that over the next few years.

Our next alphas into becoming.

Go ahead.

Your next question comes from Tim Nolan with Macquarie. Your line is open.

Hi, Thanks, and I'll Echo the the thanks on the thorough and concise presentation.

The question I have is it's also one dis synergies, but it's not so much about real estate costs or whatever.

Nielsen and what used to be AC Nielsen have been together and apart and together and now apart again.

Just a couple of times over the last couple of decades or whatever.

My question is in terms of the operations I mean, it seemed when the two companies recombine. Many years ago. There was an argument that they belong together because there were lots of things they can work together on and comparing media and.

Exposure with with product purchase decisions et cetera develop this marketing effectiveness tool, which was very successful for some time. So my question is in terms of operations what would the dis synergies now be separating I clearly you think it's probably not such a bad thing, but I just wonder if you can give us a bit more color on on what you could still do together even accept.

The company's or what you might lose being separated thanks, yes. So thanks, Kevin yes.

I've watched outside the company, having worked with both sides of it exactly what is driving let me let me just the direct on that.

Starting with client value and you mentioned marketing effectiveness.

There there was a great thesis that if you measure years ago. If you measure what people watching you measure what people buy you could correlate them and belief about our model. So that would work if we measured everything people buy but the connect business measure CPG.

Maybe decades ago that was the majority of advertising today. The CPG industry is 9% of the AD revenue in media. So it is equally important that we provide marketing effectiveness in the auto industry in the pharmaceutical industry in the.

Okay insurance pension three in the credit card industry, everybody who's advertising needs actually build the correlation and so by separating the two it allows the media business to focus on all industries and not over index on CTG number one I think secondly, as we focused on a number of those other industries, we're beginning to.

Gold good data partnerships with other information services firm to mixing connect in order to be able to provide those outcome measure. We will continue to have a preferred relationship between Nielsen connect in Nielsen media to serve the FMCG companies than we sorted that out so that those clients to use both for the we'll get that so I would say that.

The product going to continue to work fine for CPG, but more importantly, the the media business is going to focus I think much more aggressively on serving all industries, which give that a real growth opportunity on the outcome side of the media business. So thats, one and then I think secondly, if you talk about cost synergies.

And operation.

I actually think there was just economies of scale when I arrived when we tried to do too much at the common back then.

Part of what we learned in the strategic review would it very different to run an operation that support the rating service than the operation that support.

MPG by by separating the two operations, which I did when I first got here part of the reason we've enjoyed solid performance part of the reason, we're hitting our numbers part of the reason that we're able to raise our guidance again. This quarter is because we actually broke them apart having clear line of sight between the front end product and the back end.

Operation is more important than putting them together, so I actually think sometimes when you combine things you make them work and I think that was the case here separate operations working much better.

Great. Thanks, Thats, great I'd like to add to that I do I was just had to that quickly just also the benefit just to reinforce what.

We showed earlier and what we've discussed is.

You can see it showing up in the numbers.

You can see then the results.

You can see it in terms of the ownership of the piano by the business leaders and increasingly also the balance sheet and cash flow. So all of that I think is working together.

Thank you again.

Your next question comes from Manav Patnaik with Barclays. Your line is open.

Thank you good morning, so broadly the plan that you've made us media and connect sound. They submitted what these loaded posture and they've been under prior management. So I guess I'm just curious what is it about the spin that makes it more executable because it just feels like you're adding an extra in the noise.

And with that probably makes it even higher so just curious for your thoughts there.

Yes.

Thank you May now then listen I.

I do think that was largely about execution versus versus sort of nude ranking strategy here, here's what I think is different having the connect business stand on its own owning its entire PML end to end helped make better decisions I think the tradeoff between what things, we automate what things we do.

With that humans is important I think the way we were Super hubs is is right. The way we Relet technology is right for having that all end to end it got much faster reiteration to move to that endpoint I think secondly, there is a big difference in actually having lost the connected system, having an open platform that is.

Truly differentiated clients, who have done head to head comparisons with alternatives are 100% using that connect some.

Because for many reasons, but part of it is because it's open and they can connect with their other tool. So I think there's real product differentiation that helps us as well. So I think that connect business is actually just going to fly at a much higher velocity of standing alone.

Similarly, I think on the media business, having the ability to really focus on the investments to stay relevant as key that the changes in the dividend the changes in our capital allocation the willingness to invest in our future I think is a really important decision. We've made with our board. There are few investments that are necessary to pull this off we're going out.

Those very deliberately very very disciplined way and we're not drilling caution the wind, but I think actually making sure we deliver the technology. The operational process. The endemic accountability and thereby talent is different so I would say I had arguing in different strategy I'm, arguing far better far clear execution.

That will only be enhanced by being two company.

Your next question comes from Jeff Mueller with Baird. Your line is open.

Hi, Tim Polygon for Josh Thanks for taking my question.

We should be the clarity you get around the leverage levels for medium connector standalone businesses.

But I'm wondering if you can provide some clarity on sort of cash flow profile of each and then kind of when you expect to get those leverage targets.

Sure.

Again, what we said.

Those were medium term.

Numbers kind of rough guide I think in terms the cash flow profile as you know we published report.

EBITDA for both and we also in our filings have capex for both businesses. So it's sort of simple math, but that's a way to look at it in terms of their respective cash characteristics.

Thats.

As you've seen we've continued to get better Justin executed executing operationally thats, particularly evident on the connect side of the business.

Yeah.

The global nature of that business.

It really lends itself to focus and discipline in terms of particularly cash collections, we saw improvement again in the quarter in terms of.

DSO improvement.

We've seen that aggressively.

Over the course of year and so we're going to continue to look at opportunities to just to improve the cash generation for each but particularly the upside exists on a relative basis. The upside exists on the connect side with margin expansion over time, but.

And also some of the working capital improvements that we're on track to deliver and we'll continue to deliver and then also a lower profile in terms of Capex over time for the connect business. So all of those augur well for for getting to those leverage targets.

I talked about in terms of mid term medium term targets.

Great. Thanks.

Your next question comes from George Tong with Goldman Sachs. Your line is open.

Hi, Thanks. Good morning, you lead up medium term targets for media to grow at a mid single digit Cagar through 2023, and you had said that the path won't necessarily be linear can you help flush that out specifically, how do you plan to layer in your growth initiatives and what external factors could perhaps prevent you from reaching growth.

Thats in line with the broader media markets.

Yes, I think there the way we're pacing. It has said is to make sure we have adequate messaging in the category they talked about for drilling investments to make sure we deliver media measurement across.

And Omnichannel plan, where we do that pretty well today, they're complacent, we modified the gap as the on the outcome side. We've got a number of pieces things. We've acquired overtime that will be got invest to integrate using our common platform and as I discussed earlier, there to investments to make sure we're actually putting them bigger markers more aggressively on it.

International market. So in some cases some of the investments a little ahead of the revenue, we certainly making sure we've lined up the market before we do that there was not.

Huge investment waiting for them to come but we're we're pacing through that transition internal or external factors. When we always have the economy, which affects median everything that I think part of what we're doing here with Delevering is to make sure that we can withstand anything that goes on with the economy.

I would think.

On the client demand side.

Our client needs are changing I spent a lot of I'm with our clients in media, but I would characterize our leaning into US right now because of this strategy and their belief that we're going to be really important for all the way they make money in the future and not be completely.

Focused on linear so I would say.

Certainly our client business models are going to change and we're going to change with.

Got it thank you.

Your next question comes from Dan Salmon with BMO capital markets. Your line is open.

Hey, good morning, everyone I apologize I've been back and forth between a couple of calls, but I just want to follow up to the dividend I believe would stay with with Nielsen media and that Nielsen connect I think with spinoff without an established dividend policy. If I could just clarify that first and then maybe the bigger picture one.

For David Kenny.

As you look at Nielsen media.

Where do you think your priorities are for your free cash flow and in particular your appetite for M&A no doubt theres a lot of internal investment in development you want to do.

But how much do you think the M&A market could potentially help thanks.

So then I'll take that that first part this is Dave.

Yes, you're correct I mean, given given the cash flow profile conductance unlikely that we paid dividends of really should thing in practical terms about that as being part of media going forward and David you want to protect us so listen I and the free cash flow certainly I want to pay down.

Debt so.

I think delevering going to be important to being able to do more things as you said and I think we having very clear path of what we're building organically, we will always look at alternative.

If there is something that has been built by another company, we could acquire it and it could speed things up to achieve our roadmap, we'll certainly do that.

I do think we're more deliberate than we might have been in the past to make sure anything we acquire integrate to a platform and some of what I am I think fixing our can prior smart acquisitions that weren't as integrated as they need to be so certainly we have a very clear plan around being one media truth, both for audience measurement and for outcome.

On a global basis and will be acquiring if we were to make M&A move they would be to to filling things we were going to build because we could do it faster I'd also say a related question is I believe that were increasing easier to work with as a partner there are other solutions for clients that we may not need to only the Nielsen, but we need to work more interoperability with.

So that would help that's the media question you Didnt ask on connect but I would just that.

On the connect side. There is also a very clear roadmap and there are opportunities for them to accelerate.

Their progress as well in selected tuck in acquisitions, both companies I think have very clear direction now and we'll look at.

Tuck in acquisitions, when they accelerate the roadmap.

Okay, great. Thank you book.

Your next question comes from Matthew starting with Suntrust. Your line is open.

Hey, good morning, Thanks for taking my question, maybe maybe one for David and one for Dave.

David can you give us maybe the latest lay of the land on cross platform.

When you're talking to buyers sellers, including the big digital first players what's the feedback like right now that the buy in right now and whats the timeline to getting.

The right kind of approved product in Mark I'd Love to hear just maybe earlier latest thinking there and related Lee just the datasets are there either datasets you feel like.

You need to acquire a build to include in that measurement. Obviously, you have some sensors level data set top box data there hasn't been as far as I know integrated yet into the syndicated product.

But again would just love kind about both the latest thoughts there.

And then just what real quick one for Dave Dave just curious if you'd update us on your on your plans post post the spin great. Thanks.

Okay. So.

First of all I think the demand from cross platform is very strong.

On the demand or advertiser site hurt so I would say the agencies and the advertiser are all wanting a simpler way to buy media and to have to apples to apples comparison, and they're all really wanting more than ever right now independent verified third party data they want another people not Boston want to make sure that.

They are.

Measuring things rigorously they rely on Nielsen and so I'd say the demand side from advertisers agencies in the association represent them have been very deep with us on that design and would certainly working with us to get things adopted as the currency now I mean, we're beginning that process now in a number of markets around the world.

Because of that and because things are trending I would say.

The sell side, our publisher clients. The Digital's I certainly believe in digital AD ratings I think we've seen continued adoption and endorsement of what we're building, but the more of that can actually be consistent with other media, particularly intermediates, helping so they're pushing I think as there's been the launch.

More direct to consumer businesses as there then I think sort of an explosion of connected TV is out there are even our historic linear customers are now believing there growth is also they are so they're pushing for the same thing and it's a big part of the renewal discussions we've had this year as possible timing on 10 Nielsen So I would say it's very much.

In motion I think the market would like us to move as fast as possible. This simplification of the organization will help with that I think some of the capital allocation decisions. We've made will help with that so we're going to run hard at that and I.

I think happening.

Real time, and a big way in terms of data that.

I would say as I said before on the outcome Fi.

Part of the advantage of actually being two companies that we use the youth and we told will use a lot the Nielsen connect dataset for the CPG advertiser, but in all the other categories. The work, we do a JD power around auto some of them work, we're doing that some of that other financial services providers around financial service advertising beginning to add more and more cash.

I agree this key I do not think we need to acquire those dataset I think we can do that through partnership lastly, I think all as if this is becoming more digital need the true set on a constant itself breaking out was a brilliant acquisition that core medidata is highly differentiated for the way we're measuring in the future and getting that more integrated is going to help there is nothing else.

Like hey, great stuff, but I want to take rates continue to expand globally and continue to be b.

One medidata truth underneath all of that.

I'll, let Dave talked about plan.

Thank you so obviously.

We're very very focused you could say, maybe preoccupied with ensuring the successful separation and then ultimately spin of the connect business and there's so many dimensions of that that.

Both focus on the connect business as well as support for the media businesses really standing up successfully both of those businesses as as public independent entities. So theres a tremendous amount of work.

That's going to be required to do that we're going to be able to.

Yes. It was a company now for about 14 month, we're going to be able to leverage all of that learning and apply that to that successful outcome and then as we've said we'll come back.

With more on leadership plants for the organization as a whole overtime. So that'll that'll include.

My role in the organization as well so right now there are so theres, just a tremendous amount to be done.

With the job at hand.

Okay.

Your next question comes from Ashish Sabadra.

What's your bank your line is open.

Hi, Thanks for taking my question so.

There are several high profile streaming service lunch is not just think shockey can you just comment on your conversations with the media company and.

Expanding about its finding it offering.

You broke up a little bit was expanding the offerings had to streaming and DTC.

Yes, I was just.

Sure.

Hi profile streaming services and started launching shortly and so how your conversations with media companies anymore.

All right I'll, just lunches Jonathan its a.

I see us longstanding odd high profile streaming services companies have also been mentioning Nielsen lately and talking to me I think at the DTC market become has more offer.

They're all looking at market share and I think the market share is not subscriber count the market share the actual usage and viewing as we've always been in television so our investment in three meters our ability to measure accurately.

How much time people are spending on these DTC services and what they're watching is really helpful and that becomes the basis of trading not just for advertising, which only applies to the by part of that but also for the way the content makers work with.

Company and the way the company's measure their market share in their consumer marketing. So I think the value of one media true.

Even more important in those DTC businesses, and we're certainly seeing all of them.

Why not use Nelson to better understand.

What consumers are preferring and how they can better since our consumer.

Your next question comes from Kevin Mcveigh with Credit Suisse. Your line is open.

Great. Thanks, Hey out with the shift in the dividend, which frees up a lot of cash.

And just any thoughts on that incremental if we have right feels like it's about 400 million does that initially go towards restructuring or how should we think about the use of that cash going forward.

Well I think it's a really sleep the priority.

As David mentioned, it's really de leveraging its really just pay down I mean, what we're really all about your.

As we've said is to create.

Discuss possible conditions for each business.

And this is a key part of that really helps will help us facilitates setting the stage.

For the launch of both.

Independent public companies. So that's really at the end was a day, that's where the focus is thats what the priority us.

Your last question comes from Aaron Watts with Deutsche Bank. Your line is open.

Hi, everyone. Thanks for.

Fitting me in here, Dan maybe just as an add on to the last question, but you did indicate that the main and main driver reducing the dividend.

Due to desire to him.

The balance sheet ahead in the separation are you able to give us any sense or where you see leverage our you'd like leverage to be nine to 12 months from now relative to the kind of 4.4 times currently and I guess on a related note to that you spoke to the medium term leverage targets for each of the business as would you would you be able to give us a sense of.

Leverage you envision for the median connect businesses out of the gains as they kind of start the march towards those targets. Thank you very much.

Yes, we would we would anticipate for can.

We would be in let's call it two and half times range start.

Conduct we'll be taking.

Less than pro rata portion.

Of the existing debt. So obviously media is going to be a little higher.

The current assuming that outcome.

You would be the low higher than in the current leverage ratios.

It's going to its going to take a few years, we're going to get too.

Target range, it's obviously going to be also dependent on as David pointed pointed out other investment opportunities media is obviously, a very attractive systems.

With very attractive cash profile.

So we've got we've got things that we can do.

But I think that gives you a pretty good indication of where we still more.

Okay, great. Thank you.

Yes, thanks for the question.

With the.

Go ahead.

I'd now like to turn the call back over to David Kenny for closing remarks.

Our average of getting preempt that you've got a big day ahead listen thank you for joining the call I appreciate the such and questions and I'm actually excited about this new day for Nielsen when we're going to focus entirely on building the value and the strategic review will now be closed.

This is a great day for all of Us and I understand so excited about our future. We will work hard to complete the separation in the nine to 12 month timeframe. The same time, we're going to continue to drive operational excellence and product excellence in each of our two businesses and we're going to be as transparent as possible through this process and update you as we can.

Thank you very much have again.

This concludes today's conference call you may now disconnect.

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