Q4 2020 Nielsen Holdings PLC Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year 2020, Nielsen Holdings earnings Conference call.
At this time all participants are in a listen only mode.
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I would now like to hand, the conference over to Sara Gubins Senior Vice President Investor Relations and Treasury.
Good morning, everyone. Thank you for joining us to discuss Nielsen's fourth quarter and full year 2020 financial performance.
I'm joined by our CEO, David Kenny and our CFO when does your pocket.
To grow our CLO media will also be on the call for the Q&A portion.
Slide presentation that we'll use on this call is available under the events section of our Investor Relations website.
Before we begin I'd like to remind all of you that our remarks and responses to your questions. Today may contain forward looking statements, including those relating to the proposed transaction 'twenty 'twenty, one guidance and the impact of COVID-19.
Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today February 20.
We are under no obligation to update.
Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those identified in our disclosure filings and materials such as our 10-K 10-Q, and 8-K reports and in subsequent reports filed with the SEC, including our 2020 annual report that we expect to file later today, which are.
Bailable on our website, we assume no obligation to update any forward looking statements, except as required by law.
On today's call. We will also refer to certain non-GAAP financial measures.
Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available in the earnings press release, which is available at the Investor Relations section of our website at Nielsen Dot com.
For Q&A as always we ask you to limit yourself to one question. So that we can accommodate everyone feel free to join the queue again, and if time remains we will call on you and now to start the call I'd like to turn it over to our CEO David Kenny.
Thank you for joining our fourth quarter earnings call today, we will cover our Q4 and 2020 results, but I want to spend most of my time today looking ahead at 2021.
We have an exciting year ahead with strong momentum built on solid execution in 2020.
I hope that you were all able to attend our Investor day in December where we laid out a detailed plan to maximize shareholder value for the new Nielsen.
We've referred to the new Nielsen is what our company will look like pro forma after the pending sale of connect for.
Following the sale Nielsen will be the must have data and analytics provider for the entire media ecosystem.
Let me remind you of the three key messages from Investor day.
First we are focused on driving new growth from new solutions across all of our end markets and we are doing this globally.
Second we are undergoing a cultural shift with a growth driven mindset.
And third we have a compelling financial model reflective of a leading data and analytics company.
I'm going to lead off with the last point, our compelling financial model as shown by the resiliency of our business in 2020, and our improving financial profile.
Our guidance issued today is consistent with the preliminary 2021 outlook, we provided at Investor day.
And our confidence in our ability to deliver this has only grown since December.
Linda will provide greater detail later in the call, but I want to review, our 2021 outlook at a high level.
We expect three and a half day four 5% organic revenue growth, we are laying the path to achieve our medium term goal of mid single digit organic revenue growth. We will see margin expansion of 25 to 50 basis points with 150 basis points of total margin expansion expected through 2023.
Pete.
And we expect free cash flow of $580 million to $630 million for the new Nielsen we remain focused on achieving free cash flow conversion of 50%, which will help drive free cash flow above $800 million by 'twenty 'twenty three.
And we are also forecasting adjusted EPS of $1 43 to $1 54.
And finally, our balance sheet will improve as we pay down approximately $2 billion of our debt from our agreement to sell Nielsen connect to advent international.
We received shareholder approval for the sale at our special shareholder meeting in February with 99% of the shareholders, who voted voting in favor of the transaction.
We are making good progress on the other necessary approvals and customary closing conditions and we expect this transaction to close within the next 90 days.
Our confidence in our growth forecast starts with the strong foundation, we laid in 2019 in 'twenty 'twenty, including our cultural shift to a growth driven mindset.
2020 was obviously a challenging year, given the global pandemic, but Nielsen adapted incredibly well.
I am proud of all that we accomplished and I want to thank each and every one of my Nielsen colleagues for their resilience courage and focus.
While our 2020 revenue was negatively impacted by the pandemic, we still delivered adjusted EBITDA and EPS within the pre Covid initial guidance range. We provided you at this time last year and free cash flow was above the initial range.
We achieved these results by quickly adapting and evolving throughout the organization, especially in the field are call centers and our products.
Importantly, our actions were not just temporary reactions to the Covid pandemic, we created permanent structural improvements by enacting our optimization plan mid year.
We rationalized the product portfolio with a focus on essential higher margin syndicated businesses. We also simplified the underlying technology and data science around two unique global platforms, one for audience and one for content, which will drive faster and bolder innovation in 'twenty two.
One N beyond takes.
Taking advantage of the rapid media ecosystem evolution that has only accelerated over the past year.
Finally, we strengthened our leadership team and our board of directors together, we are driving the cultural shift to a growth mindset across the entire organization led by our diverse leadership team.
I want to add that our increased focused on diversity equity and inclusion was essential to achieving our solid 'twenty 'twenty results. We focused on every member of the Nielsen team being able to feel safe and supported this year and this helped our people show up in amazing ways.
We are also focused on being an inclusive business and we see great value from existing debt all of our partners share our accountability to diversity equity and inclusion.
We've discussed our compelling financial model and our cultural transformation now.
Now, let me address the final key message from Investor Day.
The new Nielsen is driving new growth from new solutions across all of our end markets worldwide.
I'll walk you through our three essential solutions audience measurement audience outcomes and Gracenote content services.
Starting with audience measurement in December we announced the planned launch of Nielsen one our new cross media measurement solution.
Nielsen one evolves the Nielsen ratings to a single measurement solution for both streaming and broadcast consumption.
This is an enormous innovation for Nielsen and for the media industry. It's a transformative move that is critical to the future of the media ecosystem.
The industry is critical need was validated by clients at our Nielsen one launch event, where industry leaders such as Unilever Mastercard N B C, Google and group M and others discussed the need for a single currency across screening and broadcast.
If you werent able to attend the virtual launch I recommend watching the replay which is available on our website.
These and other companies are also actively involved now in the advisory committees for Nielsen one.
We are starting off 2021 with clear proof points that we are advancing on our cross media vision at.
At Investor Day, we laid out the roadmap for the major components of Nielsen one through 2022, we are delivering as planned on these interim milestones toward the Nielsen when launched today and.
Clients are already using our new capabilities.
Our cross media measurement solution has three fundamental principles at its core resiliency coverage and comparability and we are making good progress across all three principles.
Let me provide you some color.
First resiliency is built through more data sources in Q4, we announced strategic data partnerships with vizio, Directv and dish to unlock addressable measurement. This builds on the existing relationships. We have in place for local measurement. The return path data, we ingest from Comcast charter dish and Directv.
Of course, there is noise and biases in big data alone, which is why our gold standard Nielsen panels are essential to clean and correct. This data.
We are strengthening our resiliency by upgrading our panel to include streaming meters and at advanced nanometer across the entire base. We recently met our initial goal of 10000 streaming meters and we expect to have three meters in 100 per cent of panelists homes as we refresh the panel over the next 24 months or so.
Second coverage, we are expanding our connected TV footprint as we said we would with the addition of Youtube Youtube TV and Vizio and will work to further. This we've also recently expanded coverage of streaming to include the viewing of movie releases that are directly available to consumers through streaming or N V. P D platform.
Forms for the first time, we released viewership data for Warner Media is H b on Max streaming platform for their blockbuster Wonder woman 1984.
The third principle comparability is enabled by all of our measurement solutions being built off a single Nielsen audience I D.
This idea was built in 2020 and successfully tested in Q4 as planned.
The idea allows us to do duplicate metrics and ensure that we have one view of reach and frequency across both broadcast and streaming signals.
In January of 'twenty, and 'twenty, one we implemented the new measurement methodology for digital AD ratings, which is our flagship digital offering.
And I'm also proud to announce that we were recently recognized by the media industry with an Emmy Award for our technology innovation to measure video viewing across a multi platform service technology, that's core to Nielsen one.
And finally I want to remind you that Nielsen one is a global vision.
Any new markets, such as last year's wins in Denmark in Saudi Arabia will be on the Nielsen one solution and we will convert the rest of our markets over the next two to three years.
Let me turn to plan optimize this is where our two other essential solutions audience outcomes and Gracenote content services our house.
Given the portfolio rationalization, we did in the 2020 optimization plan, we will now start referring to plan optimize as outcomes and content, which is more precisely descriptive of the remaining products and services.
Starting with audience outcomes, we are one of the largest outcomes measurement providers in the media ecosystem globally, helping clients to plan their cross media spend and answer questions like did the viewer visit the dealership or buy the product online.
We already do this today, but we have the opportunity to accelerate outcomes growth with new clients new syndicated products built on a single platform and connecting our cross media measurement to outcomes, which is a key only at Nielsen differentiator.
A key element of our growth strategy is further expanding in verticals beyond consumer packaged goods, which are currently the vast majority of our advertiser clients yet represent only 10 per cent of the world's ad spend.
We have recently organized our sales teams to better focus on end markets, such as financial services insurance Pharmaceuticals, automotive retail digital brands and technology and this has already driven new client wins across these verticals.
In fact at Investor Day, we mentioned success with a number of leading brands such as visa Equifax Petco, Volkswagen and L. P M H.
We've expanded with ELV MH to now include their Bulgari Division and we've added new clients, such as Spotify flip cart and others.
These wins span both the U S and international markets.
Our progress is underpinned by our technology transformation, which is helping to shorten turnaround times bring on new clients faster and accelerate product innovation.
Earlier this month, we announced our new I D resolution methodology for attribution, which enables advertisers and publishers to understand the entire consumer journey across platforms better optimize their spend.
Improve the impact of advertising, even as cookies go away.
Finally, let me turn to Gracenote content services.
As you May remember Gracenote is the market leader in entertainment metadata, we power the consumer entertainment experience on a truly global basis for example.
Gracenote provides detailed information on movies and TV shows that you see on your cable program guides or discover on your streaming services.
For isn't it also provides real time sports scores statistics for the world's top leagues events teams and players to use in their audience experience.
Recent is deployed in over 120 million cars worldwide, providing data through car entertainment systems.
And Gracenote is information on artists and songs Power's music services and consumer electronics brands.
Gracenote metadata is the de facto standard across the entertainment industry.
Virtually every consumer interacts with Gracenote metadata multiple times in any given day.
We are focused on three key growth opportunities for Gracenote content services for.
First more audiences content markets and platforms.
It means that there are more opportunities for our core Gracenote metadata services.
We're growing our substantial base by adding new platforms markets and content and increasing the capacity and speed of our ability to grow metadata. We have been building our global leadership position with key industry players such as Comcast, Samsung, Google and Liberty Global.
Second we're developing new solutions for new products across discovery marketing and insights for example, last week, we launched Gracenote inclusion analytics to accelerate diversity and content and enable clients to create more resident programming backed by our data driven.
Analytics.
And third we have a bold ambition for gracenote.
Gracenote can help studios leveraged the gracenote content I D to attach a unique identifier to their content, which will serve to simplify and scale the distribution and discovery of content across the full range of channels and streaming services used by audiences today.
To sum up we are excited about the opportunities ahead in 2021 and beyond.
We have a compelling financial model, we are shifting our culture to that of a growth mindset and we are executing on key initiatives to drive accelerating growth through new solutions and new clients.
Building on our progress in 2020, we have confidence in our ability to deliver on the 'twenty 'twenty, one plan and to deliver our medium term targets.
We are indeed, a new Nielsen.
Strongly positioned for the future and ready to deliver enhanced value to our clients and to our shareholders.
I'm now happy to turn the call over to Linda to review the financials and provide greater detail on our 2021 guidance.
Linda.
Thank you David and good morning, everyone as day.
<unk> highlighted the fourth quarter and full year results reflect solid performance and financial resilience during an unprecedented time due to the global pandemic.
Before I review the results, let me reflect on the meaningful accomplishment in 2020.
First when it became clear that Covid was going to have a global impact on our revenue we focused on quickly adapting to ensure the continuity of our business processes and to mitigate potential impact.
We also took swift action in late Q1 to lower cost by at least $200 million in 2020, including approximately $100 million in media.
These were temporary cuts that do return this year.
Our resilient business model and highly contracted business gave us visibility into 2020, despite the uncertainty of the pandemic and we were able to continue to provide guidance and deliver strong results.
Second we began to execute the optimization plan announced in July which includes $250 million of annualized run rate permanent cost savings in the second half of 2020 and beyond.
Net roughly evenly between media and connect we've executed well and realized about half of the savings in 2020 with the balance expected in 2021.
The temporary cost cuts on the optimization plan drove strong margin expansion in the second half of 2020, but will result in tougher comps for EBITDA and margin in the second half of 2021.
Third we were active on the debt markets in 2020 successfully refinancing approximately 3 billion of debt with five to 10 year maturity.
Ended 2020 at 4.09 times net leverage in line with our expectation.
And finally, we announced the planned sell on connect and a few weeks later hosted an investor day.
On the February 11th shareholder approval of the sale, we will begin reported connect as a discontinued operation beginning with the first quarter results today in 2020 commentary will cover media and connect.
System with our prior reported.
With that backdrop for what we accomplished in a busy 2020, let me now turn to our financial results I'll start with slide six to review the fourth quarter and full year 2020.
We achieved or exceeded our revised 2020 guidance across all key measures on.
On a constant currency basis revenue declined one 8% in the fourth quarter and two 3% for the full year in line with our guidance of down for 10%.
On an organic basis revenue declined 2% in the fourth quarter and three 1% for the year Cove.
Covid continue to impact the fourth quarter, though at a slightly lesser pace than in the third quarter adjusted.
Adjusted EBITDA for the fourth quarter was $560 million and our adjusted EBITDA margin was 33, 5% up 458 basis points in constant currency.
Full year adjusted EBITDA was 1.882 billion.
Two 7% constant currency.
Adjusted EBITDA was towards the high end of the original pre Covid guidance. We provided last February at the $1.830 billion to $1.910 billion.
For the year revenue was down 208 million well costs were down $237 million, resulting in adjusted EBITDA margin of 29, 9%.
Margins were up 147 basis points on a constant currency basis and towards the high end of the 29% to 30% guidance range.
The temporary and permanent cost savings drove significant margin expansion in the second half of the year in both media and connect.
Adjusted EPS for the fourth quarter with 53.
Compared to <unk> 41 in the fourth quarter of 2019 on higher EBITDA offset in part by higher taxes for.
Full year adjusted EPS was $1 67, compared to $1 80 in 2019 above our guidance range of $1 54 to $1 62.
As compared to the prior year. The dollar 67, adjusted EPS reflects higher EBITDA lower interest expense and tax favorability, which was more than offset by higher depreciation and amortization.
Our effective tax rate was 41% in the fourth quarter and 90% for the full year, albeit on low full year pre tax income of 74 million.
R R.
Are more fixed than variable in nature and can be.
Therefore have an outsized impact on the tax rate when pre tax results are low.
Adjusting for the discrete items, our tax rate would have been approximately 33% in 2020. After also adjusted book income for the impairment charges.
We incurred 131 million and impairment charges in Q4 related to the value of connects trade name and internally developed software mostly related to connect we exclude these charges from adjusted EPS.
We ended the year with 144 million of restructuring expenses slightly below our forecast as we gained efficiencies on our restructuring plan.
Turning to free cash flow, we generated $598 million of free cash flow in 2020 up from $547 million in 2019 and above the high end of our initial pre COVID-19 guidance range of $580 million.
And our updated guidance range of $550 million.
These results included $118 million of separation related cash payments in 2020, which was lower than our prior expectation as some larger pension and tax payments shifted into 2021.
Can you drivers of the year over year free cash flow improvement include higher EBITDA, lower cash taxes, lower interest expense and lower capex, partially offset by higher restructuring and working capital.
Despite the pandemic cash collections remained solid throughout 2020.
Now, let's turn to the segment results on slide seven I'll review that media segment results starting with the Q4 results on the left.
Revenue for Q4 was 872 million down two 6% year over year on a constant currency basis are down one 8% organic while we continue to see ongoing impact from Covid performance in the quarter was ahead of our expectations.
Audience measurement revenue declined 2% constant currency and grew 2% on an organic basis.
We continue to see pressure in local TV and COVID-19 related pressure in sports and AD hoc products.
Plan optimize revenue declined eight 1% constant currency in the fourth quarter with organic revenue down six 5%. This adjusts for exits and the Q for 19 divestiture of our music business.
Covid continued to impact sports Gracenote auto and short cycle revenue.
Despite the revenue decline Media's Q4, adjusted EBITDA was $393 million up 4% constant currency.
Adjusted EBITDA margins of 45, 1% were up 284 basis points in constant currency.
Moving to the right side of the page full year revenue was down two 3% constant currency in line with the guidance range of down 3% to 2% organic revenue was down one 7%.
<unk> measurement revenue declined 5% with organic revenue down 3%.
Plant optimize revenue declined six 7% constant currency for the full year with organic revenue down five two per cent.
For the full year adjusted EBITDA was $1.474 billion, which is roughly flat on a constant currency basis compared to 2019.
And EBITDA margins were 43, 9% up 94 basis points year over year supported by the temporary and permanent cost savings initiatives, we discussed offset in part by investments in growth initiatives.
Turning to slide eight I'll discuss high level results for the connect segment, starting with Q4 results on the left side of the page.
Fourth quarter revenue was $800 million down <unk>, 9% on a constant currency basis.
Organic revenue was down two 3% Q.
Q4, adjusted EBITDA of 176 million was up 41, 9% on a constant currency basis margins of 22% were up an impressive 663 basis points constant currency.
Moving to the right side of the page full year revenue was down two 4% constant currency in line with the guidance range of down for 2% organic revenue was down four 7%.
Adjusted EBITDA was 454 million up 12, 9% constant currency margins were 15, 5% up 210 basis points year over year.
Now, let's turn to the outlook and 2021 guidance on slide 10.
As David discussed we provided a preliminary outlook for 2021 at our Investor Day in December the day, we are updating the 'twenty 'twenty pro forma for the new Nielsen and reiterating the key elements of the preliminary outlook with 2021 Guy.
As I mentioned with shareholder approval of the cell connecting moves into discontinued operation. So the guidance I will discuss reflects the need for Nielsen as we characterized it at our Investor day.
We continue to expect a return to organic revenue growth in 2021 compared to a decline of one 7% for organic revenue in 2020, we forecast three and a half to four 5% organic revenue growth with significant improvement in both audience match.
For months and outcomes and content, which is how well refer to plan optimize on a go forward basis as David mentioned.
We forecast constant currency revenue growth of 2% to 3% improving from a decline of two 3% in 2020.
Organic revenue growth adjusted for the impact of the business and market exits, we announced with our 2020 optimization plan. These are expected to have on approximately 150 basis point impact on 2021 revenue growth.
We forecast adjusted EBITDA of $1.460 billion to $1.480 billion as compared to pro forma 2020, adjusted EBITDA of $1.411 billion.
This represents margin of $42, two 5% to 42, 5% or 25 to 50 basis points of expansion from 2020 pro forma standalone margin of 42%.
As we discussed at Investor Day. This reflects the $60 million benefit of the optimization plan to 2021, EBITDA and the underlying efficiency of the business, partially offset by the return in 2021 on approximately 100 million a COVID-19 temporary cost cuts made.
In 2020, as well as incremental growth investments.
Adjusted EPS is expected to be in the range of $1 43 to $1 54 compared to $1 67, we earned in 2020 for the company as a whole.
We will provide a reconciliation of adjusted EPS for 2020 after the discontinued operations accounting is finalized and the sale has closed.
We have included related underlying guidance assumptions in the appendix as well as adjusted EBITDA and adjusted EPS reconciliation, which should help with modeling 2021.
There are number of items that are significantly positive for the new Nielsen for example, we forecast an estimated tax rate of 26% to 28% excluding discrete items with a greater geographic exposure to the U S.
We also forecast restructuring expenses of $25 million to $35 million, which is significantly lower than historical Nielsen level.
We expect to continue to Delever with net debt leverage of three seven to three eight times by the end of 2021.
This will lower our net interest expense to a forecasted $295 million to $305 million in 2021 versus $369 million in 2020.
And finally, our 2020 pro forma free cash flow was $555 million. While this remains preliminary and subject to change as we finalize discontinued operations treatment, it's a strong outcome $25 million higher than our Investor day estimate.
We continue to expect free cash flow of $580 million to $630 million in 2021, excluding separation related costs and the impact of connect through the close.
As discussed at Investor Day, we are focused on achieving 50% cash conversion in 2023 and double digit compound annual free cash flow growth over the next three years.
This free cash flow guidance does not include the impact of connect which typically experiences negative free cash flow in the first quarter of each year.
As a reminder, adjusted EBITDA adjusted EPS and free cash flow guidance ranges do not include the impact of onetime separation related costs, which Nielsen bear under the connect style agreement. These costs will generally be included in discontinued operations effective with our Q1 reporting.
And 2021 is the last year of meaningful separation related costs.
As I mentioned earlier certain separation related costs planned for 2020 were deferred into early 2021, so on.
Estimate for such cost in 2021 is now a range of $220 million to $240 million.
There is some interplay between these costs and the net proceeds on the sale of connect and it's worth noting that the removal of the related liabilities strengthens the balance sheet of the new Nelson.
So that's our overall 2021 guidance and now I want to give you some context on how we see the year playing out from a timing perspective, we.
We expect revenue growth to be faster in the second half of 2021 than in the first half with trends below our annual growth rate in the first quarter recall that we began to see more significant impacts of COVID-19 beginning in the second quarter of 2020.
In addition, we expect the benefit of new growth initiatives to ramp as the year progresses.
On the new Nielsen basis, we expect year over year margin expansion in the first half of the year with particularly strong margin expansion in Q1, the second half based on some more challenging comparison, and we expect year over year margin contraction in the second half.
We began to implement the optimization plan in the third quarter of 2020, so the incremental year over year benefit is more pronounced in the first half versus the second half and we will see temporary cost return in April and later months of 2021.
In the appendix to our materials. We've included a quarterly reconciliation of operating income to adjusted EBITDA on a pro forma new Nielsen basis for 2020.
To wrap up I'm very proud of the team's work during a difficult 2020 reacting and adapting to the pandemic. In 2021, we are laser focused on the new Nielsen growth story, we have confidence in our path forward and are optimistic about the future of the new Nielsen.
And with that I'll turn it back to Sarah for the Q&A session.
Thanks, Linda with that let's turn to Q&A, operator can you open up the lines.
As a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
We do ask that you limit yourself to one question and re queue for additional questions.
Our first question comes from Toni Kaplan from Morgan Stanley. Please go ahead.
Thank you for.
Following the Investor day, the question I've been thinking about the most is how outcomes and content get to mid to high single digits. Just given you know what we've seen out of plan optimize over the last few years and I understand the drivers of expanding beyond CPG and launching new products and you may.
And a number of new client wins outside of the CPG area, which is great, but maybe it would be helpful to hear more about the go to market strategy. Within these new markets is the sales strategy very different versus going after a CPG client do you need to ramp up the sales force to reach these new industries and the small advertise.
For a market or are you able to do this effectively with technology and your existing sales force. Thank you.
Thank you Tony it's a it's a great set of questions and you know we did build this bottom up so.
Let me take the two parts separately in outcomes, yes, we absolutely are taking a more vertical approach. So we've got a team solely focused on advertisers.
And I think they've done a great job building those vertical teams with vertical understanding. We've also brought in a new head of marketing and communications and Jamie's building her team to make sure. We're doing good lead generation into that team I do think overtime. Some of what we do in outcomes can be bought directly online it won't take.
A big sales effort to be clear, we're not done with that yet, but we're also looking at sort of channel expansion.
I don't you know.
I don't think we're going to have a big investment in sales beyond what we've already forecasted, but we are certainly investing to make sure. We can cover the market on that side on the.
The content side.
Again, I said, we've got a big ambition around the studios and so we've got an added effort for those as well inclusion analytics was a good launch I think it was a.
Instead of analysis that clients need right now and we're getting good take rate on that it's also getting us to a lot of new discussions with a broader set of the whole sort of content supply chain. So yeah, we're absolutely expanding our our sales coverage, but but not anything that's outside of what's in the forecast.
Our next question comes from Jeff Mueller from Baird. Please go ahead.
Yeah. Thank you good morning, So I guess on the surface level revenue growth should be better, but you're also comping against some foregone revenue due to COVID-19 that is getting less bad, but there's obviously a lot going on beneath the surface. So.
I guess just would love some additional commentary on the underlying improvement. So what core revenue streams are you seeing trend improvement and beyond the foregone revenue Covid comp, maybe some more details on which new capabilities are gaining traction or where pipe looks particularly.
Good for the the build that you expect to revenue into the second half from the product specs.
Yeah, and some of that Jeff I think it's also a product improvement. So let me talk about demand and other matters like Karthik talk a little bit about some of the additional product enhancements that come through the year, which also gives us greater confidence as we're accelerating listen you're totally right.
2000, Twenty's and isn't odd comp and I think Linda did her best to kind of explain the ins and outs on that I would say on audience measurement. It's very solid we are seeing more demand from the digital side and I think more digital players are wanting to purchase a paid in AR and the big ecosystem. So I think that.
Digital AD ratings, having relaunched on a new on.
Nielsen idea has been very reassuring. So we're seeing good demand there and from some of our traditional clients, we're seeing them expand the relationships as digital becomes a bigger part of their business as well.
So very fun and and as you know, we're 80% contracted going into the year on audience measurement is a little higher than that so a very steady base on the outcome side as I just answered a Tony we are seeing them on a lot of demand.
Across various advertising categories and I think it's been good to be out in the market on that I think everybody's expecting privacy laws will continue to rollout that will cause cookies to get deprecated folks are looking for new answers in our ability to resolve identity and do better outcomes measurement.
Is really helping people do targeting at scale, so I get it.
That's important to a lot of different advertising categories, and then on the content side I would say the early.
Early days, but we're building good relationships with the studios on the other side the platforms all want to improve their experience and the metadata. We provide really does help the consumer Wade through just unbelievable.
<unk> is a content to find what she's interested in so it's a you know it's got a growing demand because I think the move to streaming has just raised the game for people wanting to do good user experience isn't good recommendation engines Karthik. If you want to comment a little bit on a couple of the key product milestones that are also driving demand that'd be helpful.
Thanks.
Alright, Thanks, David just a couple of things one just to remind everyone that we did.
Loans, our digital measurement on time, as we said in Investor day.
So that continues to ramp globally again. So this is digital ad ratings.
We've got a whole bunch of connected TV measurement capabilities launching towards the end of the first half and that had that create a day.
<unk> again going into the second half of beer.
As you've seen we've launched.
Identity is the underpinning for the new attribution capability. So there's a lot. There's a lot of things that are getting on to the Nielsen platform as we execute but more importantly, they're also monetize doable.
And therefore connected to our revenue plans and the pacing of the revenue plan. So a lot of exciting stuff coming up obviously not just since the January launch, but also throughout the year on every quarter, but we've got a series of capabilities that are all monetize well.
As we build up towards Nielsen, one outcomes and the great taste of competence solutions Division.
Thank you.
Our next question comes from Andrew Steinman from Jpmorgan. Please go ahead, hi, it's Andrew I actually have two questions first one is how much of your Opex and Capex for the new Nielsen is now being spent on the R&D of new products or existing on new products and how does that compare to the past and David.
Mentioned that Nielsen one is now being used by some clients now I thought the Nielsen one product was going to be fully available in 22 fully transitioned by for a 24, so with the clients that are using Nielsen. One now can we expect guarantees this spring upfront based on Nielsen one.
Good I'll come back on the second question Linda should answer the first.
Sure Yeah. So thanks Andrew.
As we think about Capex and how we prioritize those investments to ensure we're focused on growth.
Would estimate that it's about 40% in 2021 and that was arrived at after we went through a different process. This past year and we ensure that we were prioritizing for the benefit of growth initiatives and so as we looked at how we were giving up the pie that.
Increased about 25 per cent in 2020 as a result of a more rigorous process that we went through Oh.
Over time, we do expect capex to moderate but the the amount that we are directing to growth initiatives. In 2021 is 40% and again up about 25 per cent from what the like amount would have been in 2020.
And coming back to the first question.
Appreciate you wanting clarity on.
All of the modules of Nielsen, one do rollout over 'twenty, one and 'twenty, two and that roadmap has been.
Clear and it's certainly I think it's 22 before you get to the point that.
It's gonna be a full and simple currency.
So I think in terms of of writing upfront contracts.
You know that.
That may be at 22 versus 21, however components are going to be used in <unk>.
Now in Q1, and certainly in May as people kind of make commitments for.
For the next year on when when I said, they're using the capabilities.
I'd say as Karthik, just said, they're clearly using the new generation of digital AD ratings and that being on the Nielsen I D. Does allow some reconciliation there also clearly using some of the reporting to be able to better understand behavior across broadcast and streaming together.
Streaming video ratings are out and people are using those in connected TV and addressable is being used and continuing to get deployed amongst more folks. So the components are there and people are using you know those components. There is more components to come in the second half, including mobile including more bid.
Data and National television.
Including sub minute, which is really important so.
We will continue to report every quarter as the modules rollout and they get adoption.
But in terms of a full currency swap I think that's something that will start in 'twenty two when all the components are are coming on live.
Our next question comes from George Tong from Goldman Sachs. Please go ahead.
Hi, Thanks, good morning organic growth in audience measurement improved in the quarter. Despite local TV pressure in Covid impact can you discuss how client conversations in audience measurement have evolved since the start of the year.
Had to take that George So I think the good news is that everybody felt audience measurement was as important or more important as they were working through COVID-19. So.
Certainly everybody was looking at their cost structure. We you know we had discussions but I think the other day the value of the Nielsen data to operating businesses.
<unk> remained where it was and certainly pricing remains as it was escalators.
And we've been in negotiations last year continued so I think really solid I think there has been a growing enthusiasm.
Around the roadmap on Nielsen, one and getting really tangible book, what's available when keep in mind right now, we're signing msas that might be for several years into the future and that the discussion has been more forward looking about how our claims business models are evolving and how our measurement is evolving.
With them soon.
For me on the on the demand side on the advertisers and agencies I think theres been a lot of focus across the economy on being more effective and more efficient and there I think there's certainly also enthusiasm for a more simple and scalable approach to measurement, but having the audience measurement connect to the outcomes measurement off.
From a shared Nielsen I D getting to a single platform.
Has really generated a lot of energy for the.
The subscriptions will see on the buying side of the Ed market as well.
Thanks for the question.
Our next question comes from Tim Nolan from Macquarie. Please go ahead.
Oh, Thanks, good timing because my question was about the idea that you've been talking about a couple of times now.
My question is do you have an announcement from yesterday talking about this I think system and I was wondering if you could explain a little bit more.
I'd functions how it.
Speaks to the other ideas that are out there such as the trade desk unified I'd like to point out which is much more on industry effort now and just to be clear that these are all things.
Think of all these are all compatible.
And that your I'd is fully fungible with clients' workflows.
Thank you Tim what a great question and it's why we have karthik on the call. So karthik.
Karthik.
Yeah, So a couple of things.
First is our IV basketball on these exclusively for the purposes of measurement targeting and there is a difference between those strength because.
I was getting at is about scale.
For measurement, it's about getting the personal persistency and consistency of the demos because we can have different campaigns with different outcomes around agent gender as an example, so our IV system. It exclusively built for that the leverage is obviously the Nielsen panel and the validation is on a really good.
And so the key for US is what we are.
Trying to connect everything ultimately from an exposure perspective to a person and so if you eliminate the role of cookies, we work directly with the things essentially where you can then collect advertiser inflammation and then plug that back into our it platform. So again connecting back to.
A person so the tricky on cookies collect we used to collect a whole bunch of different attributes where only collecting the attributes that help.
A person do this.
And take the takeaway for the devices against that and so it all built it back to a person.
Just sort of starting point with real privacy safe.
Attributes for that person and then you can break it down for whatever device underpinned that debt that user.
And so the trick for us CRE the more pervasive did get in the industry and that's why we partnered with a few players here.
That helps ease of use.
And it really accelerates the industry to live without cookies going into the next chapter of digital So we're super excited about based on obviously super excited that more of our capabilities are getting on to using the IV not just reach and frequency, which is audience measurement, but also moving towards outcomes through yesterday's attribution announced.
Okay.
Yeah.
Our next question comes from Dan Salmon from BMO capital markets. Please go ahead.
[laughter].
Good morning, everyone.
So David I think this is ultimately kind of a question about.
You know how you sell your products products. These days, but also how your products are evolving at the same time and maybe apart for you and maybe a part for Kartik, but what I really wanted to ask is about sort of the next three to six months.
Usually the upfront new front season was typically a time, where Nielsen was educating the market on product iterations I know if I go back and look at your product roadmap from the Investor day, It still looks like we've got some things.
Coming in that sort of period, specifically and you highlighted mobile a moment ago.
At the same time.
The importance of the upfront is changing and evolving and other issues like for example, what Apple is going to share the rollout here in March and and how that may affect <unk>.
Some of the changes in your products and the <unk>.
Evolution of the products or for example.
What's going on with chrome and the privacy sandbox. So again, what I'm kind of asking about is how you sell and also how you adjust to what Youre learning about how the ecosystem is evolving at the same time.
But listen Dan Thanks for that and to be clear I think.
Everything being geared around upfronts.
<unk> is probably going to shift I think are both both buyers and sellers I think are having more constant conversations I think there are still points at which people will make commitments and will support that but we certainly have already adapted to for them and always on.
Engagement process here to to help folks move forward.
So in terms of the next three to six months and certainly throughout 'twenty one.
I would say, we're starting with real clear product roadmaps that new capabilities are needed and they are coming to the market and I think that's had a.
Very increased level of engagement with individual advertisers individual agencies individual platforms and individual networks, but also collectively with the industry as a whole. So you know certainly worked for me the MRC on you know how.
We're gonna have a credit all of that and make sure there's audit trails, which is important and which need to be rethought, because you're measuring more things and you're doing you're using new methods.
But also with the World Federation of advertisers the association national advertisers on their measurement teams in them joining the Nielsen one team engaging with the agencies through the for Ace ER and his counterparts around the world and it's certainly sort of engaging with other publishers and platforms and I think as the whole market.
Is adapting to.
It's a very different.
Audience behavior, and incidentally, the audience's discovered lots of new ways to access content during the pandemic and that was gonna stick. So I think our.
Helping everybody see what were seeing see the total market not just their own platforms is helping folks make bigger decisions. So that you know that increases our value. We're engaged with those and that also opens new selling opportunities.
Because we are finding needs that we people didn't even know that we could solve particularly on the outcome side I think the demand is growing as folks are really looking at how they're going to adapt to a world where you may not have all the same data as you said you mentioned apple, but on any problems or any mobile device, you're not going to necessarily have the.
Same day to you ahead before having Nielsen be able to federate and sync up all those Ids really helps them maintain control of their businesses.
The short answer for selling on we're selling with more conversations and then that's opening the door to more opportunities and more value.
Our next question comes from Matthew Thornton from Suntrust.
Please go ahead.
Hey, good morning, everybody. Thanks for taking the questions I wanted to hit on and maybe this is for you David I wanted to hit on kind of two areas that we don't talk a lot about actually not a local ad.
An audio so if you think about the medium term outlook, maybe just starting with with local.
It's been under pressure should we think of that as you know a pocket of revenue that's in decline being offset elsewhere and within there. Maybe you could also just help us think about.
One of your competitors, obviously just brought in some some new capital from new partners. They tend to be going on for that market fairly aggressively I'm just kind of again, maybe you could size and just tell us how you're thinking about that.
That business and then similarly on on audio.
Again, if you can size it just help us how to think about that in that medium term outlook again does that.
Decline or do you have plans to address.
Digital and.
Or podcasts in a more aggressive way any color there would be great. Thanks, so much.
Yeah, So listen if I go back to Investor day, we.
We specifically broke out local and in a local TV and local radio so they're they're they're both local businesses. Obviously on auto audio there is a growing screaming component as well and I think the local tell.
TV side is also finding sort of the digital extension of their brands and we're helping them with that in the core as a as we said I think on Investor day local is returning to flat and we've you know the reason we see it returning to flat is that we have seen price stability.
<unk> seen continued adoption and quite honestly I think we've seen validation that you know while there are other ways to measure local they're not all the credit is theyre not all rigorous they're not using on the.
Rating system.
And the same panel validation, which is I think differential and so in larger D. M as where the money is I think that the Nielsen and value proposition is super strong and the same for audio and even though audience certainly had to deal with the pandemic and the fact that people were not in their cars as much.
I think they all found that Nielsen was pretty important to protecting their values. So you know.
That said I would model it flat.
Certainly not growing at the rate of the rest of the business and within that there's also gives and takes stronger players that have more ambitious agendas around digital are using Nielsen more. We're also seeing folks begin to use us on the attribution side.
In terms of being able to show the return on investment we've done that with a sort of market analysis and audio for a while one of the recent wins for Spotify and I think Spotify figuring out how to actually do more attribution office platform is indicative of where all debt.
New streaming audio players need to be so there's certainly opportunity but.
I do want to just be transparent, but in aggregate, we think that that part of our business will be flat in 'twenty, one and probably 'twenty two as well.
Our next question comes from Doug Arthur from Huber Research. Please go ahead.
Thanks Linda.
Provided some pretty helpful schedules in the back.
The appendix I'm just looking at page 22, which is the new Nielsen pro forma I'm, just looking at sort of your fourth quarter breakdown.
Versus the breakdown on on page 20, so.
I guess the assumption is page 20 as old co page 22 is newco and is that a fully loaded.
EBITDA number with the revised.
Pro forma corporate <unk> for.
For the new company and on page 22.
It is yeah, you got it right.
It's what we're referring to as the new Nielsen, which we started.
Putting that presentation out there on a full year basis at Investor Day, and this is the quarterly representation.
That we thought would be helpful to you. All you guys. As you think about modeling out 2021 with the backdrop of.
2020, with a very interesting here not only because of COVID-19, but also because of our optimization plan and our temporary cost saves. So it makes for a bit more of a challenging year from a comp perspective, and so that's why we also tried to give some color on that recognizing our.
Guided the full year guide.
Our next question comes from Surinder <unk> from Jefferies. Please go ahead.
Thank you.
Just a big picture question on on the addressable TV. Obviously this past year. There's a number of beta testing that was done can you provide us with a status update in terms of where we are in that journey in terms of adoption in 2021, and maybe what needs to happen from here to.
Uh huh.
A bit more formally adopted.
Yeah, and there has been good progress.
We've been involved with and measuring a lot of the different betas and as you heard earlier with vizio and direct and dish coming on it's been a you know if.
It's been an exciting moment, so we certainly see volume building on that.
Perfect I make on your comment a little bit on sort of the milestones we've seen in the last couple of quarters on what we're expecting in the next couple of quarters in 'twenty. One we certainly see this scaling up surrender.
Our next question comes from Todd Juenger from Sanford Bernstein. Please go ahead.
Hello, Good morning, everybody.
I'd like to go back if I could two discussion that was underway a little bit earlier kind of on the timing of Nielsen one are really in two different ways Karthik I was hoping maybe from you listen we're all been conditioned to live in sort of a instant gratification world when us on investors think about timelines out to 'twenty two.
And 'twenty for them.
You know it sort of begs the question that seems like a lot of years and so we know there's a lot going on and what you need to deliver and a lot that your customers need in terms of seeing the data in and seen concurrent history of data. So they can make guarantees on it.
I wonder if there's anything you're contemplating that could do some of that in parallel or speed up that timeline, which gets to the other part of the question maybe more for David Arcaro thick, which is there.
For the world isn't going to stop in the meantime, so what's the risk that publishers and advertisers between now and then just find a way.
To do their business and that.
It's ingrained and by the time Nielsen one gets there are people who have moved on any thoughts I appreciate it. Thanks.
Perfect why don't you start.
Is that the market starts to understand what it is to look to look at our currency that used to be ads and content. Just did one thing we're gonna start to slip that I'll get people comfortable with the with the granularity so that as we keep building towards you know.
Driving consistency across metrics people are familiar the biggest change is obviously going to be in in the linear side right like that's no surprise because it's the sort of the oldest metric on the table. So putting data out that separates out ads from content and also what is the granularity look like how does that affect the mattress.
That will really help the market understand so when we start putting all the pieces together.
At the end of sort of 2022, so that the market can start to see it everyone's sort of familiar with what to expect.
Ramp here, but there's again monetize other components built with a consistency on the vision towards this.
This comparable cross media a set of set of metrics ultimately so that's that's the plant on.
Our next question comes from Richard Kramer from her research. Please go ahead.
Thanks very much.
Just a quick one for David I mean, as you see the market moving more and more in App.
And you think about mobile as a larger portion and indeed sitting largely behind a series of walled gardens. What do you think the challenges are to having Nielsen better measure of that activity.
It seems to be rising and then a quick one for Linda could you just let us know what the impairment was in Q4, whether that was on connect or the media side. Thanks.
Sure.
On the mobile question.
Everybody is.
Is trying to figure out I think for us.
Getting in front of it with with the walled gardens as well as with the publishers on to help understand yet how our identity platform for measurement not for targeting can be used in a privacy friendly way I think is helping I think also you know our panel is extraordinarily valuable and having.
The panelists agreed to ways, we can measure through SDK on mobile makes a difference in.
Your question is kind of a U S question I would say in certain parts of the world like India. It's we're already largely mobile so I think were absolutely finding ways to do measurement and again, that's not the same as due is is doing precise targeting on and I think we're able to satisfy everybody that we can do that in a safe and.
Audience friendly way and I think it's going to be more important than ever to have our measurement. When some of the other things are not going to work the way they did when perhaps things for more open around I D. Then theyre going to be in the future.
Linda you want to take the impairment question.
Sure Yeah, Richard It was about $130 million and mostly related to the connect trade name and then beyond that there was also some software development impairment that we took also mostly related to connect I think a little bit immediate in that as well, but total just north of 131.
The total on it.
This concludes for Q&A portion of our call on I would like to turn it back to David Kenny for closing remarks.
Thanks, everybody for joining the call this morning.
As I'm sure you're hearing it's an exciting time for the new Nielsen and we are Super thrilled about the next chapter as a media focused growth company.
We've got a great team, we've got a clear strategy in place we've got execution to focus on but and we are and we believe that will allow us to deliver our growth for our clients and also enhance value for our shareholders.
Again I really appreciate your continued support and I look forward to sharing our progress all year with you.
Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you once again for participating and you may now disconnect.
Okay.
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