Q2 2020 Nielsen Holdings PLC Earnings Call
Standing by and welcome to the second quarter 2020, Nielsen Holdings earnings Conference call.
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I would now like Dan the conference over to Sara Gubins, Senior Vice President Investor Relations and Treasury.
Good morning, everyone. Thank you for joining us to discuss Nielsen second quarter 2020 financial performance.
Joined by our CEO, David County, our CFO, Linda you pockets and the CEO of connect David Rollins said.
Slide presentation that will use on this call is available under the events section of our Investor Relations website.
Well, we begin I'd like to remind all of you better woodmark responses to your questions. Today may contain forward looking statements, including those about Nielsen outlook and prospects that are based on Nielsen current expectations.
Actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those identified in the 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.
We assume 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 pretty much comparable GAAP measures are available in the earnings press release, which is available at the Investor Relations section of our web site at Nielsen Dotcom.
<unk> 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 well call on you.
And now to start the call I'd like to turn it over to our CEO David Petty.
Thank you Sarah and thank you all for joining the call. This morning.
Thank you start with some comments on diversity and inclusion this has always been important to Nielsen and to me personally. It's a key reason I took on the cheap diversity officer role shortly after I joined Nielsen and I know it is equally important to David Robinson.
Recent events have made it even clear that we can and should be doing more to fight racism and social injustice with action.
At Nielsen, we stand for counting everyone, ensuring that all voices are not just counted but our hard work.
We are committed to ensuring that all of our employees have the full opportunity just succeed and are treated with the dignity and we're stuck that they deserve.
This will be and ongoing effort and we will continually strive to do better.
We give a couple of tangible examples of our robust efforts.
Last week, we launched a workshop educating all of our associates on how to address my progression in the workplace and externally we are providing assistance to small lactone businesses that need help due to the pandemic and or social in justice.
Our board is holding me, David Rawlinson and our teams accountable for expanding representation at every level of the organization and enriching every part of Nielsen Global media and Nielsen global connect through diverse voices.
Let me know addressed spiky points that I want you to take away from today's call first we delivered a solid second quarter in an unprecedented period due to colder 19, we are building a track record of consistent execution.
Second our media and connect businesses remain a central to our clients in the media consumer package goods and retail industries.
And those industries remain essential to society.
Third through our optimization plan, we've accelerated long term plans to drive permanent cost reductions that will enable us to increase margins profits and cash flow overtime.
And invest in growth initiatives.
Fourth we're refining and narrowing our guidance for Twentytwenty.
Yes, we are on track for the spin of connect in the first quarter of 2021.
I'll elaborate on these points and Linda will follow with our financial results and 2020 guidance all been coming back to discuss media and David Rawlinson overview connect.
Our Q2 results reflect solid execution.
Q2 revenue declined 5.9% constant currency, which was inline with our expectations.
Adjusted EBITDA margins were down far less than we expected and free cash flow grew year over year.
This reflects our rapid response to covert 19 and significant discipline around operating cost and capital expenditures.
We accelerated the pace of innovation out of necessity to ensure business continuity and consistency in our world class measurement and analytics offerings.
And our leveraging our learnings to permanently changed the way we operate.
I'm seeing ambition risk taking teamwork encourage across my Nielsen colleagues as we adopted a new ways of working and I want to tell you how proud I am of arching.
Second the industries, we serve media and consumer package goods are essential to society and the current environment is reinforcing the essential nature of Nielsen media and connects measurement and analytics to our clients.
Clients want to better understand changes in consumer behavior like streaming in media or E commerce and cannot given the rapidly evolving landscape and we're developing new analytic solutions to help them drives business decisions. We have high recurring revenue with approximately 70% contracted revenue which has served.
I did greater visibility during these uncertain times.
Third we have begun implementing a broad based and transformative optimization plan to drive a $250 million annual permanent run rate benefit before investments, we're prioritizing resource allocation to faster growth opportunities and were zero basing our cost structure and our capital expenditure.
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This includes exiting select noncore underperforming businesses and smaller international markets, and reducing our workforce and media and connect these actions expedite our transformation to a more efficient agile platform based organization.
These were not easy decisions.
But the transformation reflects a fundamental change in the way we work that will enable us to continue to invest in key growth initiatives, while simultaneously driving higher profits and cash generation.
We've taken a big step forward in our transformation, but we are not done we will continue to focus on bringing the right products to market to address our clients evolving needs and doing so in a scalable and syndicated way.
Fourth we are refining our 2020 guidance, including increasing our adjusted EPS range, raising our margin target and raising the low end of our free cash flow forecast, we've proven our ability to adapt in the most dynamic environment and we will continue to do so as necessary, we're well positioned.
For a range of scenarios as the global pandemic continues and the economy follows.
I'm confident that our teams will continue to execute on our 2020 goals.
We're also currently engaged in strategic planning for 2021 of the odd in both businesses, where they continued commitment to better serving clients evolving needs accelerating revenue growth and driving profit and cash flow generation.
Finally, we are on track for the separation of Nielsen Global media and Nielsen Global connect in the first quarter of 2021.
We filed the initial form 10 registration statement in early May which was a big milestone David Robinson has established a strong leadership team at Nielsen connect and we're making progress every week towards full operational separation.
We have two strong businesses and both are well positioned for their features as standalone companies, we will provide more detail and our future outlook and strategy at media and connect Investor days later this year.
With that I'll turn it over to Linda.
Thank you David and good morning, everyone I'll start with slide six to review our Q2 results as you heard from David our results reflect strong execution and I want to thank our colleagues for their commitment and focus during a period, where we continue to adjust to new operating the ones.
There were several high points in the quarter, including free cash flow, which grew year over year and better margin performance than we expected despite revenue losses associated with Coke at night.
Overall, Q2 results were inline or better than our outlook.
As expected Cobas 19 had a significant drag on both media and connect revenue overall revenue declined 8.1%, which includes an FX impact of 220 basis points.
Constant currency revenue declined, 5.9% or 7% organic inline with our expectations I.
Adjusted EBITDA was better than expected down only 51 basis points constant currency driven by significant cost management. Our Q2 revenue was down 132 million year over year, while adjusted EBITDA was down only 44 million. This illustrates our disciplined cost focus.
Adjusted EPS was 41 cents compared to 53 cents and the second quarter of 2019, due to lower adjusted EBITDA and higher depreciation and amortization offset in part by lower taxes.
Our GAAP results, including 84 million pretax restructuring charge related to the optimization plan announced in July and a 45 million pretax non cash impairment charge related to the exits of several smaller businesses and international markets. These charges resulted in a cure to pretax net.
Loss, which gave rise to a 38 million net tax benefit for the quarter.
Free cash flow of 154 million was well above our expectations and it was up considerably from 118 million in the prior year period. These results exclude 24 million of separation related cash payments in the core.
Free cash flow beat our forecasts with adjusted EBITDA above our expectations favorable working capital trends and lower cost restructuring driven by timing.
He drivers of the year over year improvement include lower cost taxes due to the character and working capital improvements, partially offset by lower EBITDA.
Cash collections were solid and although collection to like did not materialize in Q2, we continue to monitor the risks.
Turning to slide seven I'll review the segment results starting with media on the left.
Q2 revenue was 811 million down, 4.6% constant currency or 4.3% organic generally in line with our expectations audience measurement revenue declined 2.4% constant currency.
As expected, we talk cobot, 19, driven crusher in sports and AD hoc products and ongoing pressure in local television.
And optimize revenue declined 10.3% constant currency with organic revenue slightly stronger down 9.3 person, which adjusts for the Q4 19 divestiture of our music business.
As expected Cobot, 19 impacted sports Racino auto and short cycle revenue.
The telecom business remains under pressure and how to 200 basis point negative impact on plant optimize revenues.
Medias adjusted EBITDA was 346 million down 6.5% constant currency margins of 42.7% were down 87 basis points in constant currency.
Media margins were impacted by revenue pressure from cobot nitrogen and investments in growth initiatives, partially mitigated by the temporary cost actions, we put in place late in the first quarter.
Shifting to connect on the right side of the page Q2 revenue was 685 million down 7.4% constant currency with organic revenue was down 10.2%, which adjusts for the impact of Precima. The loyalty analytics provider, we acquired in January Twentytwenty.
It's 10.2% decline includes declines of 7.2 per cent per developed markets and 15.5 per cent for emerging markets developed markets are approximately 60% of total connect revenue.
Measure revenue declined 5% constant currency driven by the impact of Cobot 19 on retail measurement services in traditional trade channels.
Predict activate revenue declined 13.2% constant currency with organic revenue down, 22.7%, which adjusts for the customer acquisition.
We continue to see covert 19, crusher and cut some insights and innovation. We're work that is conducted face to face an in store services are impacted.
Next adjusted EBITDA was 91 million down 9.9% constant currency.
Adjusted EBITDA margins were 13.3% down only 37 basis points constant currency and significantly better than our expectation driven by connect aggressive cost actions overall this quarter demonstrated solid performance, despite disruption and volatility from cold at night.
Turning now to slide nine I'd like to provide some context around our cost savings actions and our continued financial strength. When it became clear that cobot 19 was going to have an impact on the global economy and on our revenue we took aggressive temporary cost actions to mitigate the impact right in 200 million a temporary.
Cost savings and Twentytwenty. Examples include hiring freezes voluntary compensation reductions for senior executives and the board and furloughs. It's called the 19 revenue pressure subside and we returned to growth. These costs will begin to ramp back up.
More importantly on July 7th we announced a broad based optimization plan, which will drive permanent and sustained cost savings in the second half of Twentytwenty and beyond.
This accelerates our business transformation and will help drive margin expansion increased cash generation and provide increased flexibility to invest in growth initiatives.
The optimization plan includes workforce optimization further leveraging technology and automation and exiting certain smaller underperforming businesses international markets.
The plan includes a global reduction enforce of approximately 3500 employees and is expected to drive approximately 250 million annual run rate savings. This estimate includes permanent cost savings from our business transformation efforts and the expense base associated with the exits that of revenue.
Which is mostly related to that says.
Expenses on the revenue from the exits are essentially an offset since these are very low margin businesses. So the 250 million really comes from our actions to drive sustained cost takeout.
This number is a potential benefit to EBITDA before any reinvestment and growth initiatives.
The plan is designed for full year benefit and 2021 and beyond at about half of the savings are coming and Twentytwenty. The total savings are split roughly evenly across media Internet.
As mentioned the optimization plan includes some business and international market access all of which had negligible margin for perspective. These businesses in markets, where a drag of about 20 basis points on 20 night to revenue growth.
At about 40 basis points on 2019 margins. We're also lowering our 2020 capex forecast by 10 million to incorporate yet.
We expect the exit to be complete by early 2021, and I have a 50 basis point impact on revenue and Twentytwenty, an additional 150 basis point impact in 2021.
The revenue loss from the impact is more heavily weighted towards.
But the 2020 impact is roughly evenly split across media until that given the timing of the exits.
We will break the exits out of organic revenue growth. When they are complete so that you can understand the underlying growth trends.
We now estimate 150 to 170 million in restructuring expense in Twentytwenty, including the 84 million dollar second quarter charge restructuring in the second half in here will be more modest at 55 to 75 million, mostly in the third quarter.
The optimization plan improves our financial stream increases operating discipline and gives us flexibility to incrementally invest in higher margin essential services, we will aggressively monitor our restructuring to ensure that associated cost savings are achieved and sustained overtime.
We expect the level of ongoing quarterly restructuring to moderate significantly.
We continue to have robust liquidity on a strong financial profile across a range of scenarios in June we refinanced 1 billion of debt pushing out maturities and fully retiring our October 2020 bonds.
Debt markets, where receptive and we upsized the refinancing by 25% to also reduce Twentytwenty. One maturities, we were pleased with the execution, which reinforce our solid position with debt holders.
Turning to slide 10, I'll discuss our 2020 outlook, we're refining our 2020 guidance, which continues to anticipate a second half recovery from the cobot 19 pandemic.
We expect constant currency revenue declines of 4% to 2%.
We lowered the top end of this range to incorporate the roughly 50 basis point impact associated with the exit which were not previously on the guidance.
The revenue forecast also includes approximately 100 basis points of net benefit from acquisitions and divestitures completed within the last 12 months for media, we expect a constant currency revenue decline of 3% to 2%. This now incorporates exits which fall into both audience measurement and clear.
An optimized.
The music divestiture and December 20 night team is also incorporated into this estimate and lowers the constant currency revenue growth rate by 50 basis points for connect we expect a constant currency revenue decline of 4% to 2% the underlying outlook is a bit better than our previous forecast.
Offset impart by the inclusion of exits.
This range includes 280 basis points of growth related to net acquisition activity largely related to the January 2020 customer acquisition.
The guidance range for adjusted EBITDA margin is 29% to 30% up slightly from our previous forecast to reflect the margin benefit from the exit and solid performance in the second quarter.
We're also raising the low end of adjusted EBITDA guidance, which is now 1.8 billion to 1.6 billion.
We forecast adjusted EPS of $1.50 to $1.62, which reflects Q2 results.
30 million in higher depreciation and amortization, driven mostly by the timing of capabilities coming into market and the acceleration of depreciation and amortization related to certain assets and 5 million in lower interest expense given the favorable interest rate environment. These and other underlying assumptions are unclear.
Got it in the appendix.
Despite higher restructuring costs and Twentytwenty, we're narrowing our free cash flow range raising the low end of the range by 20 million for revised range of 480 to 530 million.
As a reminder, adjusted EBITDA adjusted EPS and free cash flow guidance ranges do not include the impact of onetime separation related costs for any incremental costs are beginning to operate as two separate publicly traded company.
We remain diligent in managing separation related expenditures these cash cost or 25 million year to date and will increase as we approach separation.
Now I'll discuss how we see the second half of the you're playing out we continue to incorporate a gradual recovery from the cobot 19 pandemic. We have now incorporated the planned exits into our forecast this impacts revenue, but not EBITDA.
And media, we expect cobot 19 revenue declines to improve compared to the second quarter with exit partially offsetting this improvement.
And connect we expect improving trends versus the second quarter as markets open end demand improves, especially in the shorter cycle businesses.
Our optimization plan will begin to have a meaningful impact in the third quarter and an even more significant impact on before and we forecast margin expansion in the second half for both media and connect.
Our full year guidance for free cash flow suggest that the second half will be down year over year, primarily driven by higher restructuring versus the second half of 29 team.
To wrap up we're confident in the for your plan. We continue to closely monitor the impact of the pandemic and the last several months have reinforced our ability to adapt in the face of uncertainty and to take rapid and decisive action to manage the business. We look forward to updating you on our continued progress as we go.
I'll now turn the call back to David Tennant fourth business update on the media side.
[noise], Thanks, Linda let me turn to slide 12.
Also in global media husband essential role in the rapidly changing global media ecosystem.
We have a significant opportunity to expand our rule, enabling buyers and sellers to continue to transact with confidence as the landscape evolves by measuring audiences tracking in making content easier to discover and measuring in predicting outcomes for media investments.
We have a strong media business model, including revenue that is 80% contracted.
I want to start with our tech in data platform, which is foundational to executing our growth strategy, increasing our velocity and driving capital efficiency.
As the media landscape grows increasingly complex, we're simplifying our technology structure moving to a single media platform, which enables us to scale services globally on one backend across all measurement and LCOS.
We're making great progress in this journey, including in the second quarter, we've built a media data like bringing all of our media data together in a single repository. This allows us to operate with speed and scale leveraging our data assets across products and services in a consistent and privacy centric matter.
As an example of the impact we've recently completed the integration of digital AD ratings for connected TV, which was built entirely on or new platform in substantially reduce time cost and complexity.
In audience measurement, combining our television and digital data assets onto a single platform will enable us to provide holistic cross media measurement across all premium video more efficiently.
This is becoming increasingly important to both publishers and advertisers.
Last month, we announced our next Gen methodology for our flagship digital measurement products, which will allow us to continue to instill confidence the liberal comparability and expand coverage in a cookie lives future.
Owning our checks the backend infrastructure and data sources enables us to move more swiftly to launch new products, while allowing for continuity of measurement and flexibility to adapt to ongoing changes in technology and the privacy landscape.
Our panels remain a key competitive advantage, providing the most robust understanding of audience and consumer behavior in a privacy complaint where.
We have maintained the quality of our TV panels in the U.S. and internationally during the pendency.
Finding innovative solutions to remotely manage our panels and deliver currency ratings, we are leveraging our learnings over the past three to four months to begin self installed trials of nano and streaming meters. The self installs will enable us to increase our streaming panel by nearly 10 full by the end of this year we.
Also pulling forward efforts automate handle operations and drive sustainable cost improvement.
During the quarter. The MRC continued accreditation of Nielsen's local TV services, including the enhancements from our local transformation initiative and continued accreditation of our National TV Service Nielsen remains the only company accredited for both national and local TV ratings.
Services.
Our gold standard TV ratings are the foundation for comparable and de duplicated Cross media measurement.
As we look at additional viewing such a streaming and connected Tvs into the currency, we're working closely with the industry to gold alignment between media buyers and sellers.
International remains core to our media growth strategy.
We recently won a five year cross media measurement contract in Denmark, which was a competitive take away for both streaming and linear view it.
Turning to plan optimized we didnt see a greater impact from coping Nike.
We've had strong sales execution working closely with clients to ensure that they're leveraging yeltsin's analytics, we're focused on delivering high margin scalable solution that can be built on our platform to drive accelerated growth. This focus helped drive the difficult decision to exit some businesses that are not core.
Through our mission.
We're also expanding our global reach in play an optimized for example, if rates don't recently expanded their agreement with Google as their preferred partner of TV and movie Medidata. This is a global deal with Google licensing our portfolio of video products for use across 22 countries.
To sum up nielsen's ability to understand media behaviors is unparalleled.
We are well positioned to expand our role in the global media marketplace.
Our investments will enable us to better serve our clients and drive faster growth and profitability for our shareholders overtime.
With that I'll turn the call over to David Wallace.
Thank you David Good morning, everyone I've been CEO with built in global demand for about six months and we have already restructured to a leaner more product focused organization with the newly named leadership team that is energized about the finding the future and considering the measure.
We're making rapid progress towards becoming a standalone company with a new ambition and a direct path to better financial performance.
And the second quarter, we faced significant cobot 19, driven operation Nolan end market hurdles and dismayed the business performed substantially below what I would expect under normal circumstances.
Looking ahead, we're more confident about the third quarter as compared to the second quarter.
And further as a result, the transformation we have executed when combined with the speaking that's in the resiliency of the business model, we should see significantly improved trends on the other side of current 19.
Despite constant currency revenue declines of just over 7% the second quarter, Alright, EBITDA margin was down only 37 basis points and we expect margin expansion on a year over year basis, beginning in the third quarter. This performance is partly attributable to our transformation, which we use.
Back to drive margin expansion, and becoming month and meaningful Internet EBITDA improvement over the next 18 months.
Linda noted approximately half of the 250 million in annualized net benefit to EBITDA comes from can that.
For a business that generated 420 million of segment profit and 29 team. This is meaningful the majority of these prominent cost actions executed.
Well on their way to completion, we have reset the cost structure of the business.
As we approach separation, we look forward to sharing more about a great. Okay.
Ultimately connect will be successful as we build world class measurement solutions and scalable analytics offerings for our customers that will allow us to green with them.
We have streamlined don't organization to increase agility and drop focus and grape areas, including E Commerce analytics growing in new questioner, yeah, and market segments and strengthening our core retail measurement service.
It's basically will be carried out by new executive team with diverse international and deep industry experience. We are thrilled that Chandler Bigelow has joined the team as CFO. He brings close to three decades of proven success at public and private companies. Most recently he was CFO.
Tribune Media company, where he helped manage the spin off Butanes newspaper publishing business.
His expertise has already been incredibly helpful. As we move connect to being a Standalone company.
Now Wallcover second quarter business highlights.
As the impact of corporate 19, whats called globally, we acted rapidly to deliver and the continuity event measurement and analytics.
We are using new data collection methods in traditional trade markets and leveraging new solutions to support short cycle revenue projects.
And measure.
There has been key initiatives like the Milton connect platform coverage enhancements and retailer initiatives.
The breadth and depth about market coverage as well as our investments in modernizing our technology and service teams were key drivers if I recently renewed global partnership with my belief.
We continue to deploy the Nielsen connect platform across manufacturers and retailers and are seeing clients increasingly lean into our cloud based platform. We have seen unique weekly users double since December 2019.
Ecommerce is critical to our clients as well we have seen strong demands and clients all over the world for greater E Commerce insights as they seek to understand the new normal driven by couldn't get my team and we are better organized to meet this demand.
Turning to predict activate today. This business is skewed toward AD hoc in person work, which has been challenged independent. We've recently moved the majority of our face to face survey and mini basin businesses online, enabling us to continue to deliver services to clients in spite of independent.
And positioning us for scalable growth in the future.
Our analytic solutions remain a bright spot in the second quarter with solid great.
We have also been pleased with the acquisition of Precima, which strengthens our retail product roadmap and is driving productive discussions with global retailers around loyalty programs personalization customer centric merchandising solutions and supplier collaboration.
We're also pleased that OXXO Mexico.
Second largest retailer in Mexico has chosen Nielsen to be it loyalty provider.
As we scale our capabilities of markets open up we see a strong growth trajectory for predict activate.
We're Neal Neal century Nielsen Global connect has led this industry with integrity.
Turning our reputation as the best source or true for consumer package goods manufacturers and retailers. Despite navigating the challenges of kindred. My team. We are now pivoting to build on that heritage with a strong new team a leaner and more agile organization and determine focus on grade by building great promise.
It's in solutions that help our clients excel, we're confident in our path forward as a standalone company and we are well positioned for improved long term financial performance.
That I'll turn the call back to Sarah acumen <unk>.
Thanks, David Operator can you open up the line.
Certainly [laughter] reminder, if he would like to ask a question. Please press star and the number one on your telephone keypad.
We do after you limit yourself to one question and re queue for additional question.
Our first question comes from Toni Kaplan from Morgan Stanley. Please go ahead.
Thanks, very much I was hoping you could give some additional color on the progression of the businesses throughout the quarter you could just give us a sense has maybe the trough versus where you ended up in the two segments that would be helpful and related do things have to improve significantly from June or July levels in order.
To hit the guidance or just improved from sort of the twoq average level. Thank you.
Thank you for the question Tony do you get into Jeff I think I'll answer for media and I'll, Let David Robinson answer Proconnect, because we're both in those businesses day to day.
On the and the media side I would say.
A quarter ago would've been for talking there was some uncertainty in the media space and I think that's stabilized I wouldn't say has rebounded, but I think there is more confidence in clarity as to the AD market sports, which was down for part of the quarter is starting to come back so things are.
Our strengthening so.
I would say at this point.
Going into the second half of the year, we've got a high degree of confidence in a in the guidance, we've given and I would.
I'd also say again things have a little stronger throughout the quarter. So we're starting from a stronger base and we've got good confidence in the and the guidance we've given.
David do you want to talk about connect.
Yes. Thank you David I would echo what you said I'd say, we have increased levels of confidence third quarter and connect we had some cope it impacts on both the supply and demand side. What we are seeing as the markets are opening we're able to get back in the markets Western Europe's is a good example, where we're operating more normally.
Now, we see some momentum in China and that word markets are reopening we are seeing demand improving and we are also seeing improvement and short cycle revenue.
Did I revenues reflected and predict inactivate. We've also made some operational changes that.
We've moved the majority of our in person customized and start they businesses online now which helped to deal with the current pandemic final thing I'd. Just noted on our end markets are grocery retailers consumer staples. Those continue to look solid with many I'm doing.
Actively well and on premises, which has been I think more impacted by the pandemic, we're starting to feel a little bit better about that as well so we.
We feel more confident.
In the third quarter emerging from second.
21 last thing I I just wanted to make sure you know is the impact of the exits. So we didnt make some decision on some smaller businesses to exit which will affect topline as those on wine I don't think they are impacting EBITDA and cash flow much because these are businesses that oh.
We ended in the Capex were not you know not.
Not particularly impactful for the bottom line, but you do need to accommodate the existential modeling.
Our next question comes from Judah Sokel from JP Morgan. Please go ahead.
Hi, good morning.
We like that the company has continued and good morning, we'd like to become the company has been investing during this time using the savings from cost initiatives to mitigate cokemaking impact some of those moves definitely seen born out of necessity like the self install meters.
Moving to certainly been saw mining connect but obviously the company has also been investing for the longer term unrelated to the Pandemics I was hoping you could tell us more specifically about the media product innovation plans, especially around streaming metrics and when those will be syndicated thank you.
Yeah. So we continued to make good progress and screening as you said and part of the advantage of self serve meters is those those new nanometers also connecting screening meters.
So as I said, we're we're investing going out to get a 10 fold increase in the spring meter that was one of the big investments we flagged at the beginning of the year and we have protected it obviously when we look at what's happening with our clients screaming continues to scale and they need to be able to to measure both the content.
And the advertising for the for the screen that is Avon, So and that continues to happen and we could you put those metrics out in terms of syndicating them into currency were having those discussions with the market right now we need the buyers and sellers to agree on that but we're we're certainly going to push and we're closely.
With the market to make sure that were we're getting to a point that we've got cross media currency across streaming and broadcast signals.
We think it's inevitable that's the way the market goes.
Our next question comes from Dan Salmon from BMO capital.
Please go ahead.
Hi, good morning, everyone.
Thanks for taking the question.
David You announced a new digital methodology recently, which isn't a surprise I guess, considering some of the changes that's going on with cookies and mobile I.D.'s lately. So I guess I had a two part question just first high level, how Nielsen set up the play in a world, where where apple and Google or making changes to their to their browsers and operating systems and isnt.
Actually sort of rewiring the way that that supported Internet works and then second a bit more specifically in the in the digital ecosystem, we hear a lot about I'd solutions to address these now I'm pretty sure that Nielsen broadly plays an identity solutions, but do you think the company needs to be.
Sort of competing more directly more explicitly after the type of business that companies like live ramp or building Oh or is that something that ultimately maybe is a bit more open source.
As like the trade desk seems to be leading along the <unk>.
So would love to hear about that too. Thanks.
Yeah. So the number of points in your question, but back to the investment that's the other places we've been investing is in the Nielsen audience I'd because it is it is important that we have a and I'd platform run by Nielsen specifically for the media industry.
To to make sure that we can do duplicate and scale and we've been on this for awhile.
The reason the changes are being made that you described our because of privacy and I think you know we want to make sure that we are resilient and.
Fully compliant.
We've probably seen any privacy solution.
And that is part of the reason we announced some further changes to the methodology last quarter. Our model is now decentralized uses our own independent proprietary backbone.
Got it also makes it easy threats to accommodate a lot of other frameworks from our from our clients end to end to work with open source solutions like the trade desk. So that we've got the best answer for the specific purpose in the media industry and we and we believe we've we've got that now in place and Ah you know for the mature.
We already have to be industry. We've got the ability to also work behind their firewall in a way that we can reconcile without sharing personal information, which which helps us with the number players and for the you know.
For other players that don't have that capability. Our I'd platform continues to prove you know quite resilient an accurate to make sure that we're measuring everybody everybody consistently.
And your entered into your other question I don't see us competing.
Hi directly in a standalone IB I'm going to the way you mentioned like ramp does I I think I'd is important for for purpose, which is by we're working on the opens or exciting and we're getting make sure. We've got an answer that is a decentralized and using as many sources as possible for this specific purpose of media measure.
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Our next question comes from Ryan Leonard from Barclays. Please go ahead.
Good morning, Thanks for taking my question, Yeah, if I could kind of step back and think about what happened in the quarter Im in a lot of people were at home ordering food and consuming media, which presumably would kinda give.
Good benefit to your end markets.
So I was wondering if you could just kinda talk about how we think about the end markets in relation to the revenue in the pieces of your business and I guess, specifically you know the Olympics being canceled I would've thought that that would have a bigger impact on your business. So just was curious if there's anything to call out on that.
Then if I could sneak it on the connects piece is there risk that if people are if your clients are putting off some of the more AD hoc projects. They they don't come back once things normalize as we've kinda seamless zero based budgeting in that kind of it back.
Yeah. So let me take the first part of a down and then I'll have David talked specifically about the AD hoc and connect.
[music].
So in terms of the end markets in.
Media Yeah of course, there has been an impact I mean, our revenue that's not what we originally hopefully you know I don't like having.
Any decline in revenue so much of our business and media is contracted and those contracts. It continued to be honored and those contracts continue to be quite important to the way our clients operate even during this pandemics I feel very good about our stability, but there has been.
Projects like <unk> efforts around the Olympics and some of the other sports efforts, which obviously were were deferred [laughter] until her back and sports and you know in Olympics deferred until Tokyo actually close those games. So there you know these things will come back as the market comes back <unk> Auto factory for also.
On the hate isn't that impacted some of Grace note as we said before so and the AD market is it saw because you know the economy, a soft and so some of the AD hoc about advertising was obviously put off as well so I I I feel like you know what we're gonna see Indian markets, we've seen I would say.
By the end markets are very resilient companies, they're all working on two strategies and again, we're helping them as they rebuild we'll rebuild so I'm I'm quite optimistic about us.
Getting back to growth.
That's things stabilize and as the.
Tony improves when exactly that happens I don't know.
And on the you know on the connect side I mean, let David talk a little bit about both the the end markets and the AD hoc work.
Yeah, there is great.
Thank you David I commented a bit on that the end markets. I think we've continued to see some dispersion and results in our end markets, but most of our end markets.
Arent performing very well during the pandemic, we have a core in markets that have proven to be essential and then on the outside work I would say a lot of that work is essential to our clients as well, especially as it.
Dresses understanding a much more dynamic mark good often shifting because of changing consumer patterns and and E. Commerce I'd say, what we've seen is that where we can.
Get back into the field and we get field operations up and running again, we see demand for our AD hoc services recovering and so we don't view it as a permanent loss. We view most of this revenue disruption as as temporary and part of the reason we view it as simple.
Larry is because the insights that come from that work is still core to doing things like understanding a share shift to making decisions around pricing and promotion introducing and innovating around new questions.
Where we have seen a shifts that we think our permanent you've been either in terms of markets or in terms of products that we don't think or as suited to the new world. We have done some limited rationalizations and obviously that's been a part of our transformation. The last thing I'd say is we are moving.
To a more syndicated model the connect platform allows us to scale a lot of our analytics and when we increasingly allow us to do or some of the work that was previously AD hoc on top of the platform and so overtime that will help us as well.
Our next question comes from George Tong from Goldman Sachs. Please go ahead.
Hi, Thanks, Good morning, David you talked about some of your media investments such as creating a single media Tech platform building a data lake in automating panels. You also touched on streaming meters, but can you talk a little bit more about your product investment initiatives that can drive specifically an improvement in your longer term revenue growth outlook.
Well, certainly and those investments are part of it I think.
A lot of the reengineering pin common platform here does improve the resiliency of measurement and make sure that we maintain a currency across everything that is consumed on all platforms.
As opposed to the prior approach, which we have a lot of silos that we added up and it's a it's a very different approach to be able to do that yes, that's more cost effective but it also.
It's much more agile to launch additional analytics on top of it because I think all of our clients are finding more Norway's too.
Managed so many different AD platforms managed so many different content distribution approaches.
And I think our revenue grows as our clients revenue grows.
And as they adopt the new platforms number one I think secondly, those openness.
Up to two more markets in more you know more customers. So we we added.
Any additional customers in the digital ecosystem.
As the market comes together and I think I as as we scale will be able to do that on the measurement side. I've also got off a lot of whole I should say I bought a confidence in the added services on the content side Grayson isn't very good platform with the Medidata, but I I would say is that content.
You should be.
Ecosystem also becomes more robots, there's many more ways to get your contract out to the audience.
Providing more and more services and we'll continue to invest to provide more services to content distribution and then both content and audience measurement have analytics on top and you know I see that than.
New platform allows us to do our analytics in a much more syndicated way versus being so dependent on humans doing analysis and I think that's only going to help of scale. Both the top end the bottom line.
Our next question comes from Ashish Sabadra from Deutsche Bank. Please go ahead.
Hi, Thanks for taking my question. So two part question on connect if I can one was on the connect platform. Thanks for providing some color around user adoption I was just wondering if you can also talk about.
The conversation that other retailers on adopting the clock fall. So that's one and then second one of you saw things like impact and the merchant market and I believe a lot effect is because of the manual processes, David you've talked about automation I was wondering if you can talk about automation, particularly the budget pocket if they infrastructure allows sac.
And can get Naples that and they religion market. Thanks.
David Rawlinson I think Thats for you.
Yes, it as I think Oh, thank you for the thank you for the question.
In terms of to connect platform, we've seen very strong reaction from our core clients in and we're increasingly getting making progress with relatively large deployments across manufacturers and retailers and we're bringing the increasing 60.
Actually.
The number of large clients who were on the on the platform. The platform to connect platform has been a key differentiator on driving renewals renewal discussions even in the current environment and we'd have a very strong pipeline of active and committed end to end deployments in the U.S. as I mean.
Incident in my opening comments, we've seen unique weekly users doubled since December 2019. So that gives you some sense of the momentum that we have in be and the platform. The other thing, it's really helping with retailers is precima with their loyalty solution we've seen.
Same that's opened up a series of a very new conversation with retailers.
Who I think see a lot of value and the richness of that solution and that experience for them and so that's accelerated our conversations around our retail it solutions and our retail or retail relationships are all of this has been helped in some ways I'm by how did.
NAMIC the market is and how things like Precima and the connect platform I can get people to insights more quickly so that they understand what's going on and the world around them and so we feel good about the level of momentum we have on the platform and the retailer ecosystem.
I think your second question was around emerging markets that I've been impressed by the level of innovation, that's gone on the especially around data collection and emerging markets markets. Our alternative data collection methods have done much better then and held together better than we are.
Expected when we.
First put them in.
As well as doing a lot more online data collection and some of our more customized businesses. We've shown the ability to adapt word in this current environment. We're obviously monitoring developments related to the pen did make very closely but I would say.
So far we've been able to largely produce most of our products. We haven't gone dark in any of the roughly 100 markets. We served although there have been a service disruption to specific to specific problems and specific.
Markets the alternative methodologies, which have included everything from self audits by store managers to downloading data on terminals.
That are collected those methodologies are enhancements, but they're also accelerations of plans, we had to make our traditional trade.
Measurement more automated and we're now looking at every possible opportunity to radically accelerate the automation of our traditional trade a measurement. So we think this will help us be better in the future and we think it's given us the right level of concentration on making sure we digitizing.
Automate a bad experience, it's a really core dataset for our customers and so we need to be able to can continue to provide it in all circumstances.
Our next question comes from Tim Nolan from Macquarie. Please go ahead.
Hi, Thanks, a lot question for you David Kenny wanted to follow up on the position of Nielsen in the TV measurement Universe, you know you've always had this very very central role in.
Basically guiding decisions on TV.
AD sales and now there's been so much cheaper so many different data sources.
And so different ways of watching TV, especially in connected devices. So I was just wondering you have grace note, which is one of the premier HCR methodologies and the question is how how competitive is that with other methodology is out there and how important is it to TV buyers and sellers to have a unified cross mess.
And system as opposed to just picking on bits and pieces and using graceland versus using something else and using Nielsen linear ratings and so forth how important is it really.
Important as Grayson out to the ecosystem and how important is it to tie everything together. Thanks.
Thank you Tim let me answer the questions in reverse order I think it's very important to tie things together and it's more important now than ever.
Because you put yourself in this use of the you know a seller.
What are your running your you bring total revenue for a media company you need to practice yield management you need for every.
Part of that inventory, you've got to make sure you've got the best price and quite honestly I would say on the buyer side.
They need some way to add it all up at the end today. The buyers are trying to manage reach frequency and outcomes and being able to look at the total is the only way to figure that out to just do it in a fragmented way you end up with if it's a challenge managing pricing yield as the southern you added.
With a complexity the other way and I would say to get to reach frequency and outcomes deduplication is essential and you can only do that with a single source that's pulling that together, which is why yeah honestly since I got here, we've been putting so much investment into making sure that we.
We can measure everything and make sure it off the same platform, which is picking up some rework of I've nothing but we've done a lot of that work and we accelerate a lot in both last quarter.
Great No is an important component of that than HCR technology.
Is really well developed it is the gold standard, which which is why companies like Google using in 22 countries. The gold standard across all professional content.
And it continues to build so I get it helps with the experience. It helps people find their content that it also helps with the measurement because it's another way to not only know what platform people are on that exactly what they're watching engaging with and as a as both a streaming and that's really becomes more competitive is gonna be more important to be able to.
Program and know what people are watching on all platforms on so I again, I think that this gives us growth on that content distribution side. In addition to the AD market.
Our next question comes from Richard Kramer from Barrington Research. Please go ahead.
Thanks very much.
David Nielsen historically had escalation clauses in its audience measurement contracts, which would allow it annual price rises.
Couldn't help notice in the language of some of the renewals you've you've announced.
So far this year that you're including a rising number of products and deals for example, local Scarborough added telegraphic et cetera, given the pressures on your media customers are you still able to get annual escalation clauses in deals and are you now needing to bundle bore in the deals to secure them and then maybe.
A quick housekeeping one for Linda we couldn't help notice that certainly youve controlled or or or or limited working capital. This quarter. How much of your free cash flow growth assumption comes from working better working capital management between now and the ended the year. Thanks.
So lender wanting to answer the second question first its finish [laughter] a lot of collection that David and I'll come back on the escalators.
Okay, Yeah on free cash flow growth you know I would what I would say Richard is that most of our view on the outlook is largely just an updated view on what we thought would be more pressure on cash collections in the second quarter and.
That really did not materialize now you know this is a very unique pandemic that we're in and I think the pressure on our portfolio customers ranging from you know large investment grade clients to smaller you know SMB type businesses.
I think it's too early to call victory on it but we really feel good about what we saw a play out in the second quarter and you know to kind of use Tony's analogy from earlier in the questioning we its second quarter was what we're calling a trough right now and we do expect grab.
Joel recovery in the second half and that's really the way that we modeled our scenarios that we went through last quarter that we shared with everyone and we're still calling it that that second half recovery, but free cash flow is definitely a bright spot for us in the quarter and we feel more confident.
About the guidance range, which definitely enabled us to.
Narrow that range, some and its really across all different levers, but feeling good about it going into the third quarter here.
Yeah and on the first question, Yeah, I mean, I could we want to continue to add value to our clients over time. So when we sign these long term agreements.
There is there is priced that increases over time, which is related to increased in value.
And I would say is.
Working the clients on that value there are other dark services that they they used to achieve that so I don't think there's any bundling here, but we are yeah, I think trying to be clear, but all the services are that our clients who are using and how those continue to be relevant individually and collectively.
But you know in aggregate and then we continued to make progress.
Past quarter, Incent contracts that renewing going forward and I would say our contract terms are similar to what we've seen in the past the needs are certainly changing and I think you know our product roadmap is very aligned with what our clients anticipate their future needs to be.
Thanks.
[noise] I can tell just last question.
It is I'll turn it back team Mr. Kennedy <unk> Mr. Kenny for closing remarks.
Thank you very much and thank you all for joining the call. This morning listen I just want to once again. Thank my colleagues at Nielsen for the hard work and perseverance that has enabled us to deliver a strong quarter in eight unprecedented and challenging environment.
It does remain uncertain I know, we have a strong resilient business model and we have financial flexibility that position us well, we provide for over 100 years in spite of numerous global issues and changes and today, both connect and media remain as critical as ever to our clients.
I believe we are well positioned and prepared to go to revert to continue to drive continued strong performance. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you once more for participating you may now disconnect.
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