Q4 2019 Earnings Call
A question during the session you want me to press Star one on your telephone please limit questions to one question only please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Sara Gubins Senior Vice President Treasury and up.
Thank you. Please go ahead.
Thanks, Lisa and good morning, everyone. Thank you for joining us to discuss Nielsen's fourth quarter and full year 2019 financial performance I'm here with our CEO, David County, and our CFO Mr. caucus.
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 did that our remarks and responses to your questions. Today may contain forward looking statements, including both about Nielsen outlook in process.
Based on Yeltsin's current expectations, our actual results in future periods may differ materially from those currently expected because the risks and uncertainties, including those identified in a risk factor section of our most recent annual report on form 10-K, and subsequent reports filed with the FCC, which are available on our website <unk>.
No obligation to update any forward looking statements, except as required by law.
On today's call will also refer to certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available in the earnings press release, which is available at the Investor Relations section of our website Acnielsen dotcom.
Acuity as always we ask you to limit yourself to one question. So that we can accommodate everyone feel free to join the queue again at a time remains we'll call on you and now to start the call I'd like to turn it over to our CEO David King.
Thank you Sarah good morning, and thank you all for joining the call I'll certainly the key topics today.
Oh cover or 29 feet accomplishments at a high level.
One of our two accomplishments with strengthening the management team and especially happy to introduce you today to two critical executives for Nielsen's next Dr., David Watson and limited the car.
David is the leader of Nielsen Global connect and he will be as CEO following the separation.
Yes, the board of director since 2017, embracing digital perspective, it's strong international background and a track record of driving.
Morning.
Linda it's the CFO, what Nielsen and should remain as CFO of Milton Global media following the separation.
Most recently served as the Deputy CFO and American Express good morning.
Second we're going to have an update on the planned separation of Nielsen Golden media and you'll figure out what color.
That all from the collaborations literature review, the fourth quarter and full year 2019 financial results as well or 2020 garden, which is consistent with the medium term growth plan discussed in November we are being prudent and our guidance reflects the discipline transaction transition.
We are on in media and cannot.
Oh, no I'll update you want our key strategic initiative and how that shakes our path forward recalling single off what's your some of his early thoughts I'm kinda.
I'm 20, Nike 2019 was a euro tremendous progress and dosing and I'm extremely proud of the way our teams executed we delivered solid results.
Achieving or beating the goals, we set out for 2019.
On your constant currency revenue broke up 1.7% wasn't ahead of our guidance with growth in both media and in Kinark Importantly connect organically for the first time since 2016 and it strongly position now if you continue that well.
Adjusted EBITDA and free cash flow were in line with our guidance adjusted EPS beat our original workout Wifi provided a year ago last February.
Our results reflect increased financial discipline and operational progress.
During 2019, we aligned our technology and operations with any segment, which drove greater end to end accountability and visibility and we began shifting our culture to nobody product driven technology organization.
Typically we develop New York product road map prioritizing the products that our clients need most.
The digitization of media streaming and the Digitization of retail for E Commerce, great new opportunities for information services to help our clients in both businesses.
We also made good progress word modernizing our architecture and retiring legacy infrastructure, it's media [laughter] each execute on their vision of operating on single global platform.
We also building stronger and more accountable sales culture, which is needed to bring innovative new products can you any existing clients in both businesses and finally in November we conclude our strategic review and announced the plan to separate Nielsen Global media and Hilton Global color.
So on that I watch all to update you on the planned separation.
Our board concluded that this is that that that's path forward to enhance strategic focus growth and to drive long term shareholder value.
We're focused on that successful separation into two strong independent company and this work is progressing well.
Since we were left with you when we reported Q3 results. We've added three new independent directors ruling on the also important to 12 and we'll be ready this cannot support for connect as we move toward the separation.
We have dedicated internal team with external experts responsible for planning and supporting the operational readiness of infrastructure of each company.
The next few months, we'll focus on several critical steps, including establishing public company capabilities and functions perkinelmer separating our financial systems, our global facilities, and our IP infrastructure, ensuring that each of our associates has an understanding of their role within each of the company and establishing a new legal entities.
Replicating benefit plan.
Cool.
We expect to complete the separation within 12 months of our initial announcement subject to legal approval and marketing and regulatory conditions.
With that let me turn the call over to London to review the financial.
Thank you Dave any good morning, everyone I'm very pleased to be here, having joined the company early to bring them on the 29 King results are solid and reflect tremendous focus by Nielsen leadership and by our global colleagues, it's a particularly exciting time to join the company with so many opportunity ahead for the media and connect businesses also.
It was like seven for fourth quarter and full year 2019 results review.
As you heard from David the company achieved or exceeded 20 lighting guidance across all key measures revenue growth was better than expected a 2.7% in the fourth quarter and 1.7% for the full year. Both on a constant currency basis. This growth includes Q4 organic revenue growth of.
2.3% and full year organic revenue growth of 1.2% both on a constant currency basis, excluding the carryover effect of onetime items in prior periods organic revenue grew 2.7% for the fourth quarter and 2% for the full year adjusted EBITDA for the fourth quarter was 400.
92 million up 1.4% constant currency adjusted EBITDA margins in the quarter were 29.1% down 37 basis points on a constant currency basis, reflecting an elevated level of investments in media in Q4 19.
Full year adjusted EBITDA was adult was 1.85 billion up 1.4% constant currency, resulting in adjusted EBITDA margins of 28.5% for the year young eight basis points on a constant currency basis, but inline with expectations.
During 2019 margins benefited from productivity offset by product and related technology investments as well as higher annual incentive compensation due to better performance in 2019 versus 2018.
Adjusted EBITDA and adjusted EPS do not include the impact of a non cash pension charge of 170 million in the fourth quarter related to the settlement of two defined benefit pension plans outside of the U.S. discharge was not tax deductible.
Adjusted EPS for the fourth quarter was 41 cents compared to 51 cents in the fourth quarter of 2018, mostly due to higher depreciation amortization and taxes on slightly higher EBITDA.
Full year, adjusted EPS was $1.80 compared to $1.83 in 2018 and inline with the most recent guidance range of $1.77 to $1.83.
As compared to the prior year. The dollar 80, adjusted EPS reflects slightly higher EBITDA in tax favorability offset primarily by higher depreciation and amortization and for the full year performance was above the high end of the initial guidance range provided last February which called for an EPS range of one dollar.
63 to $1.77.
Our fourth quarter tax expense of 65 million was unusual due to discrete items adjusting for the industries and the non deductible pension settlement, our tax rate would've been 25% in the core.
The full year, the effective tax rate benefit, 39% reflects a number of discrete items, including the nondeductible impairment charge. The company took in the third quarter audit settlements and reserve releases as statutes expired and we closed open tax years, excluding the impact of these items. The full your effective tax rate would have.
Ben approximately 30%.
For the full year free cash flow was 547 million up slightly from 542 million in 2018 and in line with the guidance range of 525 to 575 million key drivers for 2019 compared to 2018 include the timing of annual incentive compensation payouts, which were low.
Lower in Q1 19 on 2018 result at a lower retail or payment and lower restructuring, partially offset by higher cost taxes and slightly higher interest payment.
The fourth quarter and full year results reflect solid performance during a busy year for Nielsen the team at media I cannot did a great job executing.
Now, let's review each segment.
Turning to slide eight Oh first talk about the media result on the left revenue for Q4 was 889 million up 2.4% year over year on a constant currency basis for the full year revenue grew 2.6% constant currency inline with the guidance range of 2% to 3%.
<unk> measurement revenue grew 1% constant currency in the fourth quarter and 3% constant currency for the full year, both inline with expectations on a sequential quarter basis. There were several drivers of slower growth, including pressure in local timing in audio and slower growth in national fall digital remains strong.
Plant optimize revenue grew 6% constant currency for the fourth quarter and 1.6% constant currency for the full year, which is in line with a 1% to 2% guidance range and 2019th we saw mid single digit growth and Grace note, our medidata and discovery platform and steady growth in outcome based solution.
Telecom crusher drug plant optimized by roughly 100 basis points and 29 team.
During the quarter Medias adjusted EBITDA was 377 million down 2.6% constant currency, resulting in adjusted EBITDA margins of 42.4% down 200 basis points in constant currency.
Q4, we did accelerate investments in media growth opportunities, which impacted the margin.
The full year adjusted EBITDA was 1.48 billion <unk>, 0.4% in constant currency.
Adjusted EBITDA margins were 42.9% down 94 basis points year over year, we're investing in media growth driver offset impart by our continuous focus on productivity initiative.
Now I'll discuss the conduct result on the right side of the page fourth quarter revenue was 800, a 2 million up 3.1% on a constant currency basis.
I show progress throughout 2019, delivering 0.7% constant currency revenue growth for the full year. This was above guidance and marked a return to growth after two years of revenue decline.
<unk> revenue grew 2.6% constant currency in the fourth quarter.
One last quarter Q4 revenue benefited from timing at some Q3 revenue shifted into Q4 for the full year measure revenue grew 1.4% constant currency on stream and retail measurement services as well above the expectation of minus 1% to plus 1%.
Full year predict activate revenue declined 0.9% constant currency revenue growth accelerated took 4.1% in the fourth quarter in 2019, we saw strength in analytics and less rock for innovation and shorter cycle consumer insights then in the prior year.
From a geographic perspective developed markets grew 4.2% constant currency for the quarter. It was <unk>, 0.8% for the year well emerging markets revenue grew 2.8% for the quarter and 2.3% for the year.
Q4, adjusted EBITDA was 125 million up 15.7% on a constant currency basis, adjusted EBITDA margins were 15.6% up 171 basis points constant currency for the full year adjusted EBITDA was 422 million upside.
<unk> constant currency adjusted EBITDA margins were 13.8% up 55 basis points year over year, driven by productivity initiatives.
Now, let's turn to the outlook at 2020 guidance on slide 10.
Today, we're providing guidance for Nielsen as a whole for 2020, well we work towards the separation of the media and cannot businesses later in the year on a total company basis, we expect constant currency revenue growth to be approximately 1.5% to 3% in relation to 1.7% growth and 2019.
This does include approximately 80 basis points of net benefit from acquisitions and divestitures completed within the last 12 month I'll go into these in more detail when I review 2020 revenue guidance for the businesses.
The guidance range for the adjusted EBITDA margin, it's 27.7% to 28.5%, which suggests margins will be flat to down slightly versus 2019, So let me explain.
So Scott on the Q3 earnings call. We are investing in media growth drivers. Our investments are focused on strengthening our panel driving digital and investments implant optimized as a result, we expect media margins to be down for 2020, but my last in the compression we saw in 2019.
For connects we expect continued underlying margin expansion driven by revenue growth and an ongoing focus on cost management. However, you'll recall the announcement last month, our acquisition of Precima, which is a leading provider of retail analytics, well proximate contribute favorably to revenue growth. It comes with negligible EBITDA margin.
And in year, one so we expect the overall connect margins to be roughly flat for the year.
Adjusted EPS is expected to be in the range of $1.67 to $1.80 compared to the dollar 80 that we earned in 2019. This range reflects a higher level of recent investment on our platform, which is driving higher depreciation and amortization expense.
We expect free cash flow to be in the range of 530 to 580 million, which at the midpoint is up slightly versus 29 team. We're focused on continuing to improve our working capital management and we're investing in the media with higher capital expenditures I want to know that adjusted EBITDA adjusted EPS.
And free cash flow guidance ranges do not include the impact of onetime separation related costs or the incremental cost the beginning to operate as two separate publicly traded companies. We estimate cash costs of approximately 350 to 400 million in 2020, and we don't plan to included these costs and adjusted.
EBITDA for adjusted EPS.
The vast majority of these costs are onetime in nature related to execution of the separation. David described earlier the largest components of these onetime expenses or third party advisor cost tax friction and technology related to spin such a standing up data centers and network.
In addition, we will incur cost to operate is to company. The majority of which will be in the second half we will work on strategies to mitigate incremental cost. While we also rationalize structures. So that they are appropriately scaled for each business as you can imagine the separation costs can vary from quarter to quarter and we will occur.
More detail on these costs as the year progressive.
We have included additional assumptions related to this 2020 guidance in the appendix.
Turning to slide 11, I'll go into more specifics for media and Kinect for me Global media, we expect constant currency revenue growth to be approximately 1% to 2% versus 2% versus 2.6% and 29 team the divestiture of our music business in December 2019 is incorporated.
[noise] into this estimate and it lowers the constant currency growth by 70 basis points.
And then media, we expect audience measurement to grow 1.5% to 2.5% and plant optimized to be flat to up 1%, which incorporates a 250 basis point negative impact from the music divestiture.
For connect we expect constant currency revenue growth to be approximately 2.5% to 4.5%, which includes 250 basis points of growth related to that acquisition activity within can act, we expect measure revenues to be minus 1% to plus one person I predict activate to grow.
11% to 13%, which incorporates approximately 800 basis points of growth from that acquisitions largely precima.
David will provide some additional commentary around the revenue guidance for 2020 in his remarks.
Let me talk a little bit about how we see that you're playing out from a timing perspective.
First we've talked about investing in media growth initiatives, and we will start to see the increasing benefits of these investments in the second half of 2020.
Clients want new products to support streaming services as well as new outcomes measures. We're investing to provide these products to meet their needs, which will accelerate growth in the back half of the year you accelerated revenue growth will break even took wrote in the second half of the year.
Second connect we expect accelerated revenue growth in the second half versus the first half.
2020, well see the impact of a few client losses in prior periods, which are most pronounced in Q1 and David I'll speak more about this later.
These flows through to margins and so we expect margin pressure and connect in the first quarter with profit trends improving during the balance of the year as discussed last quarter in our medium term framework. We're focused on realizing identified operational efficiencies and driving continued margin expansion at connect overtime and it.
Sure. We've adjusted the low end of our guidance range to incorporate our current assessment of risks related to the Corona virus.
Quarterly free cash flow should be consistent with historic patterns, which are heavily second half weighted the first quarter 2020 free cash flow should show an improvement versus Q1, 19, driven by working capital improvements offsetting a higher incentive compensation pay off for 2019 compared to 2018.
In summary, 2020 as an important here as we redefined Nielsen as two separate company. That's about a very sound plan for this transition period, and we're making solid progress and separating the companies.
We are investing to drive faster growth in media overtime, and we expect to sustain connect improved performance I'm very excited to be part of the team driving Nelson's next important stage and now I'll turn the call back over to David.
Excellent.
Let me add some color starting with Nielsen Global media, we haven't significant opportunity to expand nielsen's roles in the media ecosystem, so that buyers and sellers can transact on the basic from one media.
To remind you that truth cover measuring the audience tracking content and making it easier to discover contract by the audience and inferring the outcomes for media investment.
Media overall, there are more players and even greater need for common standards audience content and outcomes.
Our digital transformation is our top priority and we are investing where the market is headed to deliver solutions across both audience that alco.
For example, Google continues to adopt Nielsen total AD ratings in their work with marketers to demonstrate the incremental reach of you too.
We will also began to use our national TV data in their plans suite to help advertisers guide cross platform investment across you tube and television.
Nielsen Digital AD ratings do service the currency measurement for platforms, such as Lou enrolled who as you will see industries upfront and we're partnering with NBC Peikar to help further of all their measurements in a rapidly changing AD supported video on demand Lansing.
On a content side, our role fans measurement medidata and discovery.
Evidenced in our recent total audience report <unk> capabilities, increasing work together to help drive key decisions for clients and with the explosive growth in streaming. Many of you are asking about the future of linear TV.
Linear continues to be the dominant video advertising platform offering advertisers mouth Regent brand building leaner remains an important part of our business and are currently measurement is critical to clients. We renewed every national TV contracts. It came up last year with multiyear agreements and price escalators.
Addressable linear advertising isn't other future growth driver and we're investing in a tough stack and delivering addressable wed upscale within linear broadcast.
We recently launched a beta test of the new addressable platform with clients, such as CBS discovery and NBC Universal.
Finally in local TV, we transformed our measurement offering in 2019, which played a key role in our new multiyear agreement within Nexstar Media Group. This agreement covered all of Nexstar stations for the first time in 16 year.
This is a clear validation of nielsen's role in the local marketplace.
No one plan after might we see real momentum in the value of our or why measurement as clients are increasingly focused on outcome based solutions, our agency and advertising plant you see solutions to managing measure the cross media investment.
For example, nothing is partnering with the trade desk, which brings our TV human data into their platform to further enhance cross media buying capabilities.
And in international we renewed multiyear measurement contract in both Australia in Italy, and saw strong growth in additional measurement and strengthen our global protocol for it.
Oh well after that.
So how does this all add up in 2020.
When you announced the outcome of our strategic review in November We said, we expected media to grow at mid single digit revenue CAGR through 2023, including low single digit growth through 2021, and then ramping to mid single digits in 2022 and beyond this would result in a growth portfolio that is in line with a media market.
For information services here.
This expected ramp and growth is the result of the investments, we're making now in audience measurement both streaming in linear at our plan optimize portfolio continues to scale on a global basis, and I'd say, we're executing well on these initiatives.
We have a deliberate and discipline transformation.
And it highlights the importance of our investments.
Order to align were broadly media is coming from.
That said transitions are not linear and they take time, we will see our investments pay off is revenue growth accelerates later this year and then over the medium term, we're confident that we're taking the right stuff for long term growth.
You know audience measurement, we expect mid single digit declines in local in 2020 as pressure from previous renewable loads revenue plants are seeing the value of our local transformation and this business will should stabilize after 2020.
The National TV measurement, we expect low to mid single digit growth in 2020 and over the next couple of year.
Our digital volume growth remained strong and we believe independent third party measurement will become even more important to digital and Srini platform over time, we continued to see double digit growth in our digital AD ratings offerings.
The content side measurement is shrinking important, particularly with the Brooklyn screening and we're also more closely blinking measurement with Medidata tagging and discovery to deliver greater value for our clients, we're investing to drive penetration of all of our content capabilities across concerning platform.
In plant optimize where we predicting measure the outcomes of advertising and content, we expect revenue growth to accelerate in 2020 after adjusting for the divestiture of our music business in December 2019, the faster growth will be driven by actions. We took in 2019 to improve our product and our go to market strategy, we have ample runway through.
Further embed ourselves across advertisers agencies and media owners to accelerate our plan optimized Roe.
And globally, we are focused on bringing the next generation of products to more market in 2020, or we can hire a phone call Hana as the chief growth officer, and President of International underscores the role that international will play in our medium term Roe.
To sum up Nielsen has an essential role across the media ecosystem, delivering one media true across audiences outcome and content discovery.
We are the only player that can provide great currency, great solutions across the spectrum with trust and confidence around the world. The actions. We took in 2019 strengthen our position and we are now deliberately investing in our key initiatives to accelerate our transformation and deliver greater value to clients and shareholder.
Let me turn to commit.
One of my team would ultimately your steady progress in connect as we executed on our transformation and strengthened our leadership position in the global CPG and retailer ecosystem, we returned to growth for the full year 2019 for the first time in two years and expanded our margin we've increased confidence as we move toward separating connect out.
As a standalone company with David Robinson as that connects CEO before I go further David Wallace and we'd like to share a few thoughts.
Thank you David it's amounted to be here the pad.
To join this outstanding team as CEO of can that at this pivotal.
That makes money seven year your shirt.
Hi, Good morning, Nielsen was born in 2017, and I've gotten to know could that very well since then.
I'm impressed with the strong franchise global scale technology platform and its people.
Connect is the only business that can provide measurement data and analytics for millions of products across more than 100 countries global role at the center of the consumer package goods and retailer ecosystem has never been more critical.
We've been able to connect platform now deployed we have strong opportunities to grow and predictive analytics and omnichannel measured huh.
Business have stabilized that confidence that we have to wait strategy in place.
Good drive improved revenue growth and profitability.
I'm committed to delivering to next strategic plan and I look forward to sharing our progress with you as we move forward toward a separation.
Thanks, David our connect accomplishments in 2019 were in part driven by our pivot quick product driven technology company and fostering a robot sales culture and I have confidence this will continue with David Rawlinson at the helm.
In measurement.
We exceeded our full 2019 guidance are you at business improved as product investments enabled us to successfully defended and win market share we accelerated deployment of the Nielsen connect platform and were like with key players such as Coca Cola and buyers who are amongst others Nielsen connect platform is an important driver of client wins.
And renewal discussion, including recently my new global multi year partnerships with Colgate, Kimberly Clark and AB Inbev.
JNJ L'oreal and the party also recently renewed global partnerships and we had a competitive takeaway was mccormicks winning their measurement business in Europe, the Middle East Africa.
We're further building up coverage and adoption in fast growing channels that are important to our clients emerging markets E Commerce, Omnichannel and specialty retail.
E Commerce is a global priority and we are the only company that can truly provide an omnichannel view across both online and offline broadly we saw strong growth in client adoption in revenue and we secured new data partnerships in countries, such as Russia, Ukraine, and Turkey, and launched a new ecommerce measurement solution in India and stuff.
LT channels, we recently entered into an exclusive long term analytic relationship with pet supplies well.
Predicts activate also came in ahead of our expectations in 2019, largely driven by strength in global analytics and a return to growth innovation.
Provide clients in every region of the world with data driven insights from for the performance, including Kohl's, Bergen, Denmark, Amazon and Tata Motors in India, Coca Cola in Argentina, Mando leads in China innovation clients, such as Mcdonalds or can we didn't open for health and accelerating and improving their processes and success rates Neil.
Also in is the only company with this global scale and finally, we made significant progress in 2019 automating operation across three pillars field selection consolidation into super hubs and platform convergence.
Turning to connect outlook for 2020.
November we laid out our key initiatives, which include continuing to deploy the Nielsen connect platform do you getting our coverage to measure the total consumer strengthening retailer relationships and driving operational cost efficiencies through automation and platform convergence, we've been intensely focused on improving the trajectory of the U.S. business.
And driving improved operational performance across the business globally, we've begun to make progress and it is showing up in our results. We say, we expect to the low single digit organic revenue CAGR through 2023, and this is what we expect to deliver in Twentys funny.
Let me add some color for measure we expect revenue to be flat year over year at the midpoint of our guide we are working through the impact of some 2018 competitive losses largely in the U.S. and their roll off is impacting 2020 that said, we want to all of our major client renewal in the United States in 2019, well.
Really change in 2019 is that clients are truly excited about our transformation, but to connect platform and their multiyear renewals reflected that.
We'll further broaden our different points of the Nielsen connect platform in the U.S. and begin to deploy internationally.
Predict activate we expect to see accelerating growth driven by our investments in analytics and ongoing momentum in innovation as well as the press. The my acquisition in January 2020. This important to acquisition of an industry, leading SaaS based retail analytics provider enables us to accelerate our retail product roadmap and positions us to win but.
Retailers.
Before I close I want to spend a moment on China, which is about 6% of connect revenues or about 3% of total company revenue as you know China has been a big focus and we've made progress in turning it around we have a strong leader in place and the team is driving expanded coverage better execution and improving revenue trends.
Well, we head into 2020 from group position in China, We are monitoring the Corona virus closely.
On that our main concern is the safety of our employees and we've taken precautions to minimize their risks in impacted areas.
Our initial focus was on China, but we're monitoring the situation very closely around the globe.
We've incorporated known risk around the Corona vibert into the guidance provided today, but of course. This is a fluid situation and we'll keep you updated as there could be unknown risks from front of iris affecting our clients and Nielsen.
To sum up on connect we have a strong foundation unique global regions sale. This business has consistently delivered in 2019, our strategy is clear and we had a strong team in place committed to executing on our goal connect is well positioned for success as a Standalone company later this year.
With that I'll turn it back to Sarah for QNX, Frank Thanks, David.
Lisa can you open up the line for Keybanc. Please.
Certainly thank you as a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press, the pound or hash key and as a reminder, please limit questions to one question only our first question comes from the line of Andrew Steinerman from JP Morgan Your line is open.
Hi, David you know your talk about one media truth with Nielsen Media do you personally think theres a distinction between media measurement data and media planning platform slash data so with that in mind do you think Nielsen is as well positioned being planned optimized as it is an audience measurement.
Thank you Andrew I do because what we're finding and plan to optimize is that it needs to connect back to the measurement. What we can uniquely do when when helping folks plan is managed yield management across the total audience and ended the content space, which is a growing space the medidata on one side.
And the content ratings on the other increasingly becoming one service and that's unique to Nielsen to be able to actually understand where your content going in to help strike new content deals. The distribution of content is going to have a lot of new innovation over the next couple of years.
And our next question comes from the line of Bill Warmington from Wells Fargo. Your line is open.
Thank you good morning, everyone and congratulations and welcome to David and Linda.
Would you for my question, but would you. Please talk about what you're doing to stabilize the local media business and also share your thoughts on why national will not be the next week.
Yes, so I would say in local we did complete the local transformations that that has been a big investment. We finally got finish in 2019 to to strengthen the panel and to strengthen the methodologies that make that happen.
I'm very excited to see Nexstar come back after 16 years that really does cement our position in currency.
And I would say.
We're feeling very good about the renewals from here and we've got a strong they've been local I feel quite good about where we are competitively on that on national I would say, we're moving in front of it but certainly some of what you're seeing this year in term of the heavy investment load is to make sure. We can we get in front of this and make sure our panel moves as.
National and becomes increasingly both linear and streaming for virtually all of our national customers.
Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.
Thank you.
You mentioned Corona virus and yeah in the 10-K talked about.
Just some curtailment of business activities, particularly in China, I guess could you talk about how much is included in guidance doesn't impact from it and just what activities are being curtailed and.
I guess based on what you know today, what could be the impacts outside of China as well. Thank you.
Yes, so listen we've incorporated about a half a point of revenue on the connect side from known risk in the connect forecasts and what that largely represents is the work of connect that requires you to be in the field certainly have it anywhere around the world is employees feel on paper, we feel there and they were encouraging them to work from home much of a.
It can be done that way, but some field operations.
Can be done and of course, some client negotiations have to be done by video conference versus face to face. So thats, where we are and I feel like we've got a good handle on it.
We're going to continue to monitor it depending on where else it expands but we're certainly never going to have an employee out in the field and then on say physician is less of an impact on media because most of media is actually measured remotely. So while there is some field operations are far less that said, we're still encouraging people to watch their travel and were.
The flexible letting people work from wherever they feel sick.
Our next question comes from the line of taught you incur from Sanford Bernstein. Your line is open.
Hi, good morning, Thanks for taking the question like <unk>.
I'd like to go back it's if you don't mind too.
National Media and just thinking about the investments in transformation and growth plan. There is there anything you could point, it's too David as outsiders trying to follow this progression because it looks like the revenue as your per your guidance is is to come later next year and then.
Out years is there anything you can point to that we could look for in terms of operational milestones client progress or sign ups.
To give us confidence and how that is progressing other than your continued reassurance and waiting for that revenue to to show up later that'd be great. Thanks.
Yeah listen I.
I think what you need to look for in National is how we're adding new services that help our national appliance as they expand so again, what I want to be clear up on National is we did renew all of our major clients in 2019 and those renewals did include annual price escalators in line with historical levels that said around out there.
Their services, where there are some shifts as clients move more to the additional services that help them launch their threem businesses, whether they be just DTC businesses direct to consumer businesses or whether they be partnerships with other platform.
And I would say as we add in the streaming metrics.
In a broader way and if we had any additional services. That's how we grow with those national plants in the way they grow I think because you're not only following that you're following our client one of them markers. You can look to is where our clients growing and how is Nielsen helping them in those new areas. We will continue to.
Launch product and as we launch products.
That will be the other thing you'll see too I think have more confident that we're investing in the places that will pay off because we're helping our national clients grow.
Our next question comes from the line of Jeff Miller from Baird. Your line is open.
Yes. Thank you I guess, maybe a deferred variation of the structural media question. So just I.
I guess the concern seems to be hey, you're replacing this previous position of strength with new on where you're generating revenue, but maybe there is less value add so would love your perspective, both on as far the and I guess AD supported digital video or video on demand.
Just as Nielsen have the same value.
As the world transitions to those forms of media delivery.
From the standpoint that if there is less AD supported or if AD supported is increasingly digital and more natively generating data instead of valuing nielsen's proprietary data aggregation capability does Nielsen just have a less valuable role would monetize less as you.
As the world transitions to those forms of digital media to ordinary takes.
Yeah listen I think you're getting to the drew a broad question about media audience measurement. So let me on topic a little.
Hey, Judy clear there still is a strong and growing linear measurement business and that under our new opportunities above it so I don't want to be.
Yes, we should think we're replacing something we're building on top of it if I on how good.
What I would say is.
On digital we do continue to see double digit growth in our AD ratings product and as I mentioned on who wrote crew and BCP talked in the Avon based.
In the ads contract base, we had a really important role to play.
Outside on the AD fraud side, and then actually on both sides. Then you get to the second question of content and there I would say we have to really strong foundations, the great sell foundation, which helps them with.
Hacking their content and helping it be discoverable and the measurement of that content, which I think it's still pretty early in terms of the way those content deals with the platforms will be truck, but increasingly the EPS pod players, including folks like Netflix or using Nielsen According to Nielsen publicly and using it to help establish the new marketplace in concert.
So I believe.
We have a really important role to play in both the AD space and the content space and it is growing quite nicely, what's offsetting that or the other component from national as I said, it's continuing to grow at a slower rate in 2019 as some of.
Just wondering 2020 relative to 2019.
As we work through some rules and people be content and some things in our re adding it in over the course of the year as they had in the new thing thing. The local does remain negative in 2020, Buddy will stabilize over time, because we've made the right investments for those innovations.
And for example, I'd say the NBC Telemundo on stations are innovating their local AD sales and they're using the Nielsen tools as evidenced by the NBC spot on launch so as local innovates. They use it there as well and then audio and flat to slightly up so you've got to break apart the components to to see the full effect.
But we are moving through the transition and I do believe we have a really important role as Vod and Avon mature.
Our next question comes from the line of Manav Patnaik from Barclays. Your line is open.
Thank you good morning, I just had a quick question around how you guys think about pricing annual revenue model you talked about some price escalators in some of the new contracts you had unit in the past. It was always this element of strong pricing power Nielsen I was hoping you'd just give us an update there.
Yeah listen I think we certainly we do have strong pricing power. We also are making sure that we continue to be a good return on investment to our clients.
So I would say where where we've established the currency. We certainly as I said are renewing those contracts they continue to have price escalators.
Sales in the end markets that are a little more challenge local TV in particular.
We we are certainly pricing and make sure we sustain that youre going to have them exactly the same pricing pressure in that in a declining segment, that's not our innovations.
Our investments in things that help new services in loads will give us new ways to add on just as they do a national so in short I would say.
We continue to injury price escalators on like for as that market matures.
But I think we're also getting the pricing on the new innovations as we established new currency.
To be really clear that all adds up to the same roadmap that we gave you in November which is a medium term view of middle single digit revenue growth in media.
Our next question comes from the line of Dan Salmon from BMO capital markets. Your line is open.
Yeah.
Hi, Good morning, everyone. Thanks for taking my questions I'm, David Google added to the continued pressure on third party cookies and its January announcement about some changes are coming in chrome could you, maybe just tell us a little bit more about businesses within Nielsen that might be impacted by that I know a few of them have already been impacted by GDPR, but maybe just remind us what specific exposure.
As you rooms, but maybe more importantly at a high level. How do you think major digital platform changes from companies like Google or Apple in particular, how is that creating maybe new opportunities for Nielsen to help us clients and maybe just a quick one down that just at a high level Oh, sorry go ahead.
Yes finish your question.
I I might just a quick one for one there was just I'd love to hear just some high level thoughts on your most important two or three priorities for the CFO role.
Yes.
Great listen thanks for the question.
Okay first of all on ER and the Google from policy update and what's happening across the system. Our measurement has always been decided designed with consumer privacy in mind.
We're happy to see the changes while this does impact how we measure some of the digital ecosystem isn't a surprise and the industry, including Google has invested interest in Nielsen measurement and I really working with us to make sure methodologies support their businesses in the new system throughout the digital ratings, we'd be glad deep relationships.
With the publishers and platforms the instrument in enabler measurement and give us unique access to data and the ability to work within secure walled garden environment.
I do think there's an opportunity as the industry migrates away from cookies.
We've got a really important private and one of the investments is de duplication methods that don't rely on could be which are going to be more important and and then being able to model those within secure privacy engineered environments. We're also investing in the evolution of the panels in order to have direct opt in relationships with consumers globally panels.
Very very [laughter] consumer friendly privacy friendly way to inform precise noncoverage models the visibility on how consumers are behaving.
I would say there is good opportunity here I also think we need to continue to engineer it which is why did you see us investing right now just stay ahead of these changes.
And Oh lean inherit a little bit Dan. Thanks for the question. It's it's really a pleasure to be here you know early days I'm I'm going week, four but I've been very impressed by the colleagues that I've, Matt and the focus and discipline within the company as far as what I have on my priority list as I see it right now.
Clearly, it's extremely important to execute on the separation and on that common hand in hand, with making sure that we remain focused on the business, we've really got to deliver on the guidance that we put in front of you today.
I think more about the function of finance, there's some terrific processes in place and I think we just need to continue to drive rigor and the underlying analysis to really help position the business to achieve the guidance that we put out there today and I think a lot of that was summed up nicely on back in the Q3 calls with the medium term.
From a growth plan and we just really need to be executing on that because that's really what's going to drive future value margin expansion as we think thats not the business on a go forward basis.
Our next question comes from the line up Asheesh separate jobs from Deutsche Bank. Your line is open.
[noise] attacks. My question is one of the connects side, maybe you can just for quite some more color on this client losses, but also the new wins.
Any color on what led to those losses in pretty 18, but also the Mccormick when and how do you think about the pipeline going forward for Newport instrument. Thanks.
Yeah listen.
We have heard there wasn't here in 2018, but we learned a lot and I've spoken of client I would say at that point in time. The connect platform wasn't fully ready I think they found a different product solution.
And I think some other retailer integration wasn't as strong either we've we focus on both in 2019 again all the renewal.
Stayed with us in 2019 Mccormick win back was fundamentally in addition to that we've got some real advantages in a few categories, particularly E commerce and I would say continuing to build with retailers is making a big difference.
I think that advantage continues to strengthen with the addition of Precima, which gives us even more strength into the retail segment, because we've got both sides working.
Our next question comes from the line of Matthew Thornton from Suntrust. Your line is open.
Hey, good morning, everyone. Thanks for taking the question maybe a one on media and one on connected by could on other media side David.
Can you maybe just update us on what's changing or what will change. The next couple of years here as you think about.
The dataset, you're using the syndicated Prague, obviously, we all understand that the panel side of things, but when we think about what's being incorporated in the syndicated product Grace note set top box data smart TV data national versus local just in any update on kind of where that because the data assets are going here and then on the can connect side just.
In an update on just when you think about a connected platform. How penetrated are we you know maybe what inning are we in regionally and where you are.
Penetrate what are you seeing is it a better retention is it a share gain or share recapture from from competitor is just any any update on on that I would be helpful. As well thanks, everyone.
Sure. Thank you for the question on on media and we are starting already.
I would say first of all in audience measurement were already to a point that we have a lot of big data, which is then being corrected and improved by the panels. So this is not a panel only answer anymore. The data sciences really evolved here and I think the partnerships, we have with set top box data.
Some of that things were learning in the addressable posts or give us new datasets to help improve that I would say on the on the content side Greeks out there really important that it is the reference data for content.
And that's only helps with discovery, but as Weve improved our ability to met to measure streaming content and know what people are actually watching the grayson that data has been important to add into that and I would say we are increasing working with.
Our partner to license degrade some data to also make sure we have data back.
That helps us improve content measurement, which helps both buyers and sellers of content expands out and lastly on outcomes were making a lot of progress and further be architecture of the media platform.
Which is really being built more and micro services is the ability to sort of compose that with other services and for the for the earlier question about you know do we have the strengthen plan optimize that we had in measurement I would say when plant optimized connects to measurement is where Nielsen has an advantage of connecting all that third party data, which we have access to end.
Our clients actually bringing themselves into their own model allows people to build better outcome inference model on top of the measurement. So that the whole thing can work in a smarter way.
New data is going to continue to come from places the more the media systems are digitize the more data comes out of that and we're increasingly finding it easy way to ingest that and enhance our model.
Similarly on connect first of all to be really clear that connect system has largely been penetrated in the United States. Today, we are beginning to deploy components internationally and get to one global platform, but we're in very early innings of connect which is why we see continued growth of that platform over time.
It is certainly help with retention when folks are looking at renewal, they're testing the new system and the roadmap against others and choosing to stay with US which is great. I'd also say is becoming sticky or is the only platform that's truly cloud based.
And I think opened with Apiay connecting the services again that makes it easy for people to connect the connected system to the other data services and the other analytic services that they are subscribing to so that they can build one system for managing their business and that's really helping us in some fundamental ways.
First hand, how easy it was to integrate precima with connect.
As a result of the new platform.
Our next question comes from the line of surrender themes from Jefferies. Your line is open.
Good morning.
David you spoke about a stronger sales culture can you provide some additional color on the changes you've made to the sales organization in terms of maybe discuss the size of the sales force maybe turnover involuntarily versus voluntary than maybe there's been any changes have been piece versus variable compensation.
Yeah. So.
Let me, let me cover that cover a couple of things and I needed separate media and connect.
So.
Further when you've got these strong subscription businesses that there's a lot of culture around client service I think what we've really done is that made sure that in addition to that we're adding new targets for additional sales and building better account plans largely to understand where our clients are going and make sure that they know where we are relevant in their new services.
I would say last year, we piloted with a few people the top of the organization, we've gone down into the organization to actually have more of a commission based difficult to retail growth plan to make sure people are actually incentives.
To drive growth and that we're we're measuring that quite precisely so that's helping I would say oh, that's the job becomes a little more sales range is there there has been some turnover.
Obviously, you got to make sure people can deliver a sales and some people are choosing to opt out of that.
In a natural way, so and I think that culture continues to move in 2020, we have gotten smarter about a matrix between.
Product specialists and and clients to make sure that all products are as strongly represented as possible into that client accounts. So I do think that will help our client better take advantage of the full portfolio of Nelson.
Similarly on the connect side there wasn't changes in incentives I think thats part of why we delivered growth last year for the first time I think there's also been just a lot of process improvements cadence coal, making sure we're actually tracking things through the system and making sure we have a wont lose mentality. So I've been pleased by that.
Shifting to connect side as well and I think Dave is going to push even harder on both clarity around product revenue targets as well as overall client revenue targets that were helping both our manufacturing retail clients take full advantage of the full Nielsen portfolio.
And our next question comes from the line of Richard Kramer from Arete Research. Your line is open.
Thank you very much.
A few calls ago I asked a question about measurement and whether that was something Nielsen would need to put more effort into and indeed, how you would get access to that maybe without potentially making acquisitions. How do you intend to address that mobile in app space, especially as it increasingly effects TV screens.
And then maybe a quick question.
For further into for the new CFO I mean, we've now seen a third successive year, where gross margins for the group have declined.
How do you think about reversing that slide from a gross margin perspective, given the very tough competitive.
Pricing environment that you're facing with with many adept competitors of both sides and and maybe could you pledged to give us a bit more visibility is within the split between some of the functions as today R&D et cetera that we would tend to see with other tech companies. Thanks.
Yep.
Going to come back on Linda's question too because I've been working align gross margins all year and cash conversion I think those targets remain very much front and center for both of US and were a team here.
But I'm going to the first question quickly we doing that measurement today, we certainly have the ability to HDR technology to understand I think you've seen what's being watched.
Even as it gets or through an out.
And I think if we were investing to make that work on a broader base.
We're investing to make.
Your integration.
But I think were very good on the large screens and increasingly when it comes in media consumption, we're picking up on all screen.
The technology, we have so.
This goes back to Grace note and why we thought the AC our technology as a component of it but we continue to do that today and I think.
Having good solid base there.
Let me turn it over to lend on margin yeah. So on margins, we're really looking at the overall margin and considering all of the underlying drivers to that certainly revenue growth is critical to us and I think you heard the commitments on certainly of Dave It and you have my commitment as well that continuing to drive revenue growth.
Something that we're really going to focus on as a part of the separation we will be looking at the structure of the two separate companies media and connect and making sure that those structures our scale appropriately for those businesses on a gold for basis, So it's something that that.
Both David and I will be looking at very closely and as we said four for 2020. It it doesn't investment you're in media as was 29 team the level of investment this year will be slightly less than what it was last year and we'll start to see the benefits of that and margin expansion.
Later in the year and connect well you know the margins are going to be similar to what we saw last year with expansion and sustaining that will be very very important but it's a combination of factors that really drive that overall margin and I can assure you that both David and I are looking at it at the top from what's the over all right.
Actual results, but importantly, what are the underlying drivers of that and looking to manage that was for margin expansion. Yeah. So just to add on it philosophically.
I'm really focused on the conversion of revenue to EBITDA and then the conversion of EBITDA cash and we've been doing a lot to make that happen I I know it doesn't always feel that way in in this outlook for 2020 as we're working through those investments the investments, we're making certainly dry products, which have.
With revenue growth.
Which we've covered but somebody investments are also automating processes and if we ought to make those processes, we realize that productivity gain by having less concentrated do less labor cost to deliver all the functions were going to continue to work on that I think what I am careful about now is not just having sort of discrete productivity numbers out there, but really committing.
[laughter] revenue EBITDA cash conversion, because we want to make sure it's decks.
End to end on the total system ultimately the only thing it really matters due to the growth of the company is the cash flow generating from the business and we want to make sure we pulled up through its a real discipline here.
We have no further questions at this time I'll turn the call back to our CEO, David Kenny for closing remarks.
Thank you all for joining I know, we're a couple of minutes past the hour I I'm excited about this journey I think the combination that some really committed colleagues who linear for many years and some new colleagues to help us with fresh ideas are really moving things along quickly.
We are very committed to completing the transformation and we'll keep you posted over the course of the year on that and of course on the transformation, who will talk to you again at the end of the first quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].