Q3 2021 Nielsen Holdings PLC Earnings Call
Good morning, My name is Julie and I will be your conference operator today.
At this time I would like to welcome everyone to Q3, 2021 Nielsen Holdings earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time press star followed by the number one on your telephone keypad.
If you'd like to withdraw your question Press Star one again. Thank you Sara Gubins you may begin your conference.
Good morning, everyone. Thank you for joining us to discuss Nielsen's third quarter 2021 financial performance.
I'm joined by our CEO, David Kenny and our CFO when does your pockets or C. O L. Karthik Rau well also be on for the Q&A portion of the call.
The 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 our business plans in 2020, one guidance and the impact of COVID-19.
Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today October 28, 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 defined in our disclosure filings and materials.
Our 10-K, 10-Q, and 8-K reports and in subsequent reports filed with the SEC, which are available on our website, we assume no obligation to update any forward looking statements, except as required by law on.
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.
And now to start the call I'd like to turn it over to our CEO David Kenny.
Good morning, Thank you for joining our third quarter earnings call before we dive into our strong Q3 results I want to start by taking a step back to provide context around what is happening in the media industry and why Nielsen is becoming even more relevant and viewing habits continue to excel.
The rate towards streaming.
The media industry is going through unprecedented change only accelerated by the pandemic with an audience that is watching programming whenever wherever and on whatever device she chooses.
An industry built on linear television programming supported by ads is evolving to an industry that is moving to streaming content supported by subscriber and ads.
According to our September 2021 release of the Nielsen Gage data just over 50% of viewing took place ever broadcasting cable while streaming alone grew to 37% in the 18 to 54 demographic.
This compares to 2016 when more than 75% of viewing was on broadcast or cable the evolution of our solution mirrored. This massive shift in this context is important to keep in mind as you read the news. It is evident that media measurement will be dramatically different five years from now and we are.
Leading the industry's evolution despite the recent headlines as.
As the media ecosystem into audience viewing becomes more fragmented having a single independent cross media measurement solution across streaming broadcast and cable is essential to the industry.
Both the World Federation of advertisers, which represents advertisers globally and the U S. Based association of National advertisers have put forth principles around measurement integrity and standards Nielsen one which is focused on the future of measurement aligns with these principles.
We have laid out a clear timeline, leading up to the Q4 2022 launch of Nielsen one and we are looking at opportunities to accelerate this Nielsen alone is uniquely positioned to provide the industry with a currency grade cross platform measurement solution.
Let me walk you through some facts about our unique market position.
Our approach to Nielsen one is big data validated by panel overtime, we have built partnerships with a wide variety of industry participants that now give us visibility into hundreds of millions of big data endpoints on television for return path data and billions of impressions on connected TV.
Computers, and mobile devices that we combined with robust opt in and audited panels to correct for biases and other limitations of big data.
This uniquely allows us to provide persons level of measurement that is representative of the entire U S population.
<unk> tools derived on big data alone cannot do this.
Potential competitors do you want to optimize T. D may claim that they can use individual level information from other big data sources.
Big data has flaws and biases.
Rich detail about who the people are worried underrepresented diverse populations and certain age groups.
Big data alone might work for targeting and optimization, but it does not work for currency grade measurement.
Second advertisers want independent measurement as evidenced in recent public statements by leading advertisers such as PNG and Anheuser Busch walled gardens are complex and they cannot provide the independent holistic view of the market that Nielsen does.
Stitching together data sources from multiple sources using different methodology would only further add to the complexity.
Third Nielsen is deeply embedded in the media ecosystem across buying platforms, such as media Ocean and with advertisers and publishers, who want to transact on a common fact base.
And finally Nielsen is the trusted leader in the industry with a proven history of building alignment across the ecosystem of media buyers and sellers.
I also wanted to specifically address our accreditation status for traditional broadcast TV in the U S with the media rating council or MRC.
As discussed on previous calls during the height of the Covid pandemic, we had limited in home field work.
As the pandemic continued we made changes to adapt operationally, including changes to our maintenance procedures, we disclose those changes and the impact on estimates and had been to address the outstanding maintenance related issues.
This was obviously a fluid and unprecedented time for all of us.
We followed MRC protocols around logging changes, but we except the constructive criticism that we could have better communicated changes and their impact to clients.
As a result of all these factors MRC members voted to suspend accreditation of our national and local TV services in August.
We believe an accreditation and fully support the audit process. In fact, we continue to be the only service audited across our products.
We are in continuous dialogue with the MRC and we've also engaged an external firm to support our efforts toward Remediated outstanding issues.
It's a methodical process any focus work plan all of which are in line with the MRC feedback.
Our panel recovery efforts are well underway and we're already back to more than 40000 homes.
Are on track to reach 41600 homes by Q1 of 2022, which is our target and we will continue to expand beyond that.
The Nielsen panel remains a key differentiator.
I remind you that no other provider has a representative empirical person level panel.
We will have more to share in the coming months, but I can assure you they're getting re accredited as soon as possible is a top priority.
I would add that two day Nielsen remains the de facto oddity currency across the board broadcast digital first audio agency and advertiser clients continue to use our currency ratings every day to drive critical business.
As they did in this year's media upfront.
We have not been perfect, but we believe in the integrity of our ratings and our high quality panels that are foundational to measuring audiences.
I am incredibly proud of the way our teams have executed over the past 18 months, demonstrating resilience and courage every day as we adapted to new ways of working during the global pandemic.
And I want to thank you all for your dedication.
You'll hear more from Linda in a few minutes, but I'd also like to touch on our third quarter financial results. We reported another strong quarter building on our track record of execution and demonstrating continued progress on our strategic growth plan.
Revenue grew six 6% on an organic basis, including four 4% growth in audience measurement and 12, 5% growth in outcomes and content.
Adjusted EBITDA grew one 9% on a constant currency basis, our margins remained strong at 43, 3% in the third quarter.
As expected these were down year over year at some COVID-19 temporary cost return.
Adjusted EPS of <unk> 45 increase from 42 in the prior year and free cash flow year to date is $514 million up from $383 million a year ago on a comparable basis.
Our strong performance year to date, we are raising our 2021 revenue and EPS guidance and we are raising the low end of our ranges for adjusted EBITDA and free cash flow.
Let's turn to business highlights in audience measurement, we made good progress on product milestones ahead of the Q4 2022 launch of Nielsen one let.
Let me start with some recent examples using coverage comparability and resiliency as a framework.
Starting with coverage our objective is full coverage across all audio and video media and we already have the broadest coverage in the industry, we have full coverage and national and local broadcast and audio in a leading position in digital which includes streaming services across both ads.
And content.
In digital AD ratings, we have the ability to measure 75% of connected TV media spend and approximately 90% of total video digital spend.
Computer mobile and connected television.
We've expanded our coverage of streaming content, which we measure at both the platform and individual program level.
Platform measurement is enabled by our streaming meter since launching in January 2021, we've tripled the sample size of streaming meter homes and are now at 18000 homes. We've increased the number of platforms covered $2 17 from 10 earlier this year and we now cover around 85% of the entire streaming mark.
Kate.
Our expanded sample size will allow us to attract newly introduced services faster with greater stability.
We're using big data validated by panels to enhance our coverage at the program level, which includes the recently completed integration on the Roku platform. This adds to the program data collected through our household panels and we've increased the number of programs measured by 30% year to date.
And we are continually improving our methodology, we recently rolled out our new portable people meter wearables to better measure media consumption outside of the hull.
Next comparability.
The ultimate measure of comparability is being able to measure all content and ads and a common methodology, whether it's linear or streaming.
This means making TV measurement more like digital.
A clear proof point is our move to a common sample as we include broadband only homes in the local panel in January 2022. This will enable the industry's transition to trading on impressions based measurement and result in more complete precise and representative measurement.
Media sellers and buyers such as Nexstar Hertz and magnetic level.
All voice support of these initiatives.
In National we are incorporating big data into the measurement, which will be validated by our panels and we're on track to share impact data with clients in January the <unk>.
Big data integration will enable addressable advertising it'll increased stability and support long tail channel measurement in the currency ratings.
As a first step we've already shared initial evaluation data with the MRC and their TV Committee.
The final point is resiliency or consistency I discussed earlier, the importance of our panel and ensuring big data is validated and fully inclusive and representative having a robust opt in panel is even more important to ensure that our measurement solutions are durable and can adapt to evolving changes in the <unk>.
<unk> and privacy landscape.
Clients see the value in our enhanced and expanded audience measurement products and it is driving strong performance growth in the U S was led by National media clients and digital first clients and we saw particular strength in digital products from our National media client base.
Streaming is becoming increasingly important to our clients.
And the simplification of our streaming solutions makes these products more accessible we've.
We've had key wins with both media sellers and buyers.
Vivo a global video hosting service recently expanded their agreement with an emphasis on our digital AD ratings connected TV capabilities and Apple added streaming platform ratings in.
In addition to their current usage of content and National TV ratings.
On the buyer side group M recently leveraged our platform ratings and a thought leadership piece for global marketers and in fact 14 top agencies are using nielsen's content ratings.
The shift to streaming is creating a greater need for cross media measurement globally.
Sweden is the latest example, they are Nielsen has recently been endorsed as their full service provider of cross media measurement.
In the U S. The enhanced value and belief in the Nielsen one roadmap continues to drive strong renewals. This year, we've renewed important contracts across national local audio digital and agency clients.
Both Meredith Corporation, and White Hart, a broadcast and digital media agency recently renewed in local TV.
Turning to outcomes and content, which grew 12, 5% year over year on an organic basis.
And audience outcomes, we help clients across the marketing cycle plan analyzed and maximize their marketing investments.
As in audience measurement advertisers are looking for common metrics to help drive decision, making in a complex environment.
We are focused on driving growth through market and vertical expansion and we are demonstrating success, we're connecting our cross media measurement to outcomes, which only Nielsen can do.
Going with market expansion, we're pleased with our July acquisition of TVT, why a leading television attribution provider and we're focused on leveraging Nielsen synergies to sign up new clients in the U S and Europe, we are expanding our industry coverage of our predictive ROI tools, which are used by advertisers agencies and media owners.
And now cover more than 75 countries globally.
We are deepening our penetration with advertisers across a broad range of industries. We further grew our relationship with Microsoft and in the retailer vertical we are working with petco to help fuel their media investment decisions.
In Europe, we're working with Ria money transfer in the financial services sector and in Asia Pacific, We want Abbott in healthcare, <unk> and wellness and Centurion spirits.
In sports, we see continued stronger partnerships around critical sports intelligence, we expanded our relationship with FIFA to help them enhance their commercial strategy and we worked with <unk> on their 2021 Olympics investment.
Earlier this week, we announced a new offering that uses proprietary Nielsen data to help college sports teams demonstrate the marketing value of their athletic program.
With Duke men's basketball signing on as the first client.
Our global capabilities uniquely make us a strong partner for global platforms.
We recently entered into an agreement with Spotify, who is using our media planning software in 18 markets to help them understand the incremental reach on their platform.
And we're also working with Tic toc in various markets around the globe to help them demonstrate the effectiveness of their platform.
On the product side, we launched new formats of total media residents are upward funnel offering that leaks that advertisers media plan to brand metrics with a faster solution for advertisers and a new offering for media owners. We also went live with our cloud native multi touch attribution offering.
Turning to great tail content services, we are the market leader in meta data and we are building on our global leadership position with geographic expansion and new solutions beyond the core meta data business.
In the U S. Great note is now contracted with all of the top 10, mvpds as measured by subscribers, having acquired two additional providers earlier this year.
And our top European markets, our market share is just under 20%, which provides a strong runway for growth because the remainder of the market is highly fragmented internal or point solutions.
We've continued to win new business and we are poised to accelerate our market share as we migrate new clients in 2022.
Extending the incremental geographies and increase our customer coverage in the markets in which we already operate.
The U S and Europe, our largest markets, but we also have particular strength in Australia, Brazil and Mexico.
And several other big markets are in development.
Ahead of the 2022, Beijing Winter Olympics, we published the Gracenote virtual metal table forecasting, which countries will take home metals, enabling clients to deliver Olympic focused stories across digital and broadcast properties.
On client wins, we renewed our relationship with LG, adding services to help them expand their global service coverage and enhance the quality of their service.
We are focused on the Gracenote I'd, becoming the universal solution for discovering content and its content spend continues to grow this creates opportunities to help content distributors better represent their programs in search and better understand and manage their catalogs.
The ultimate goal is for the Gracenote I'd to serve as a unifier across all content similar to a UPC code in the retail industry to help clients to answer key questions around licensing and distribution.
Let me sum up I opened the call discussing the massive shift in audiences and its impact on all of our clients, which is creating opportunity for Nielsen and.
In audience measurement, we are solving for a critical need in the industry with the development of Nielsen one.
In outcomes and content, we are helping clients maximize their investments in advertising and drive their content strategies.
As you May have seen we recently unveiled our new brand identity, which reflects the ongoing transformation of our culture and redefined strategy.
And Youll see us continue to sharpen the narrative around the core strengths that differentiate Nielsen in the marketplace.
Our purpose is to power a better immediate future for all people.
We are well positioned to do so as the information services market leader for the media ecosystem.
Forward to keeping you updated on our continued progress.
I'll now turn the call over to Linda to review the financials.
Thank you David and good morning, everyone.
Similar to the last few quarters I'd like to provide a relevant backdrop to the strong Q3 results that I am pleased to share with you today.
My remarks today focus on our results as if the connect sale. We completed earlier this year in March and the resulting $2 $3 billion debt Paydown took place at the beginning of 2020, which helps with the year over year comparisons second I want to remind you of the strengths of our business.
With 80% contracted revenue headed into any given year.
And that accreditation is not a requirement of our contracts that being said as David noted regaining accreditation is a top priority.
I'll start with slide seven which summarizes our third quarter revenue performance revenue for Q3 was $882 million.
Up five 1% year over year on a constant currency basis or up six 6% organic which adjusts for exits related to the 2020 optimization plan.
April sale of our advanced video advertising business to Roku and the recent acquisition of TVT Y in July reported.
Reported revenue grew five 5%, which includes an FX benefit of 40 basis points.
Revenue growth accelerated in the U S and remains solid and international markets.
Of note this quarter represents a high watermark for Q3 revenues in spite of revenue loss as a part of business exits over the past year. The return of Covid impacted revenue also contributed to stronger revenue growth.
Audience measurement revenue of $637 million was.
It was up three 7% constant currency and four 4% organic national and digital measurement products were areas of strength and from a client perspective, we had high single digit growth with national media clients and double digit growth from digital first clients.
Local posted another quarter of positive growth, but coupled with a weak Q1, we still expect local to be roughly flat for the year.
Outcomes and content revenue of $245 million grew eight 9% constant currency with organic revenue up 12, 5%. We continue to see some improving trends and short cycle revenue and strong growth in our sports business. We also continued to drive solid growth.
Content.
The right side of the page shows revenue for the past five quarters as well as constant currency and organic revenue growth rate as you can see the growth trend continued to improve in the third quarter.
Turning now to slide eight adjusted EBITDA was $382 million.
Up two 1% year over year on a reported basis or up one 9% constant currency following strong margin expansion in the first half of the year, we reported adjusted EBITDA margins of 43, 3% during the quarter down 143 basis points reported our 100 <unk>.
39 basis points constant currency year over year. This contraction was in line with our expectations.
As we have discussed in prior quarters. There are several factors impacting our margins in 2021 that explains our year over year margin expansion in the first half of the year and compression in the second half of the year.
Because our cost base is relatively fixed revenue growth drive operating leverage.
Second in early 2020, we reduced temporary costs by approximately $100 million.
These temporary costs began to return in Q2, though at a lesser pace than initially expected with the prolonged pandemic and while they continue to increase in Q3. They have not reached the levels. We expect when the pandemic is fully behind us. So we expect these costs to continue to trend up in Q4 and into two.
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Third we began to implement our restructuring our optimization plan in Q3 'twenty as a result, we saw significant year over year benefit in first half margins, but the third quarter margin did not see the same kind of benefit on a year over year basis, and we will continue to see this play out in the fourth quarter due to the.
Timing of the optimization initiatives that phased in during the second half of 2020.
On the right side of the page, we show adjusted EBITDA and margins over the last five quarters as if the sale of connect took place at the beginning of 2020.
Adjusted EPS was <unk> 45 in the third quarter up from 42 in Q3 'twenty.
This was driven by higher EBITDA and lower depreciation and amortization.
Our effective tax rate on a GAAP basis was 22% in the quarter. This included $8 million in discrete benefits primarily related to audit settlements and state refunds. When we adjust for this our normalized third quarter effective tax rate was approximately 27% which is in line with the normalized effective.
Tax rate on a year to date basis, our year to date free cash flow is $514 million as compared to $383 million in the prior year period key drivers of the year over year improvement include higher EBITDA and lower interest payments. These improvements were partially offset by higher.
Our tax payments.
And now I'll discuss our updated 2021 guidance on slide 10.
Today, we are increasing elements of our full year guidance to reflect our solid Q3 results and our confidence in the balance of the year, we are raising our revenue and adjusted EPS guidance and raising the low end of our adjusted EBITDA and free cash flow guidance ranges, let me take you through each of these.
For revenue, we are raising the range to four 5% to 475% for organic growth and to three to $3 two 5% for constant currency growth. This is above the guidance range of three five to four 5% organic revenue growth for.
For the year that we communicated back in February demonstrating our ability to successfully manage through the COVID-19 recovery.
Our updated guidance reflects the year to date strength and growth outlook for the fourth quarter, which faces a tougher comparison versus Q3 as COVID-19 pressures on revenue began to subside in the fourth quarter of 2020.
We remain optimistic about driving mid single digit organic revenue growth next year and beyond in line with our medium term targets.
For adjusted EBITDA, we are now guiding $1 $480 million to $1 $490 million and maintaining our margin outlook of 42, 3% to 42, 6%. This compares to 2020 adjusted EBITDA margins of 42% at <unk>.
Sale of connect took place at the beginning of 2020.
Our 2021 EBITDA guidance reflects the benefit of the optimization plan underlying efficiency of the business and improved cost discipline, partially offset by the return of Covid temporary cost cuts made last year and incremental investments and initiatives to drive growth overtime I would remind you.
That COVID-19 temporary costs have been coming back at a slower pace than initially expected and we have been using some of that favorability to invest in the business this year, including investing in our panel and in growth initiatives. When we consider the dynamics that will lead to fourth quarter margin compression. They are similar.
<unk> to those impacting the third quarter and included the return of Covid temporary cost growth investments and less of a year over year benefit from the optimization plan began in July of 2020.
We are raising and tightening our adjusted EPS guidance to $1 65 to $1 70 versus a comparable dollar 45% in 2020. This higher adjusted EPS range is driven by the tighter adjusted EBIT guidance range and lower depreciation and amortization.
And finally, we are raising the low end of our free cash flow guidance by $10 million to a range of $630 million to $650 million on solid year to date performance as a reminder, adjusted EBITDA adjusted EPS and free cash flow guidance ranges do not include the.
Pact of onetime separation related costs, which Nielsen bears under the connect sale agreement. We now expect approximately 200 million for the full year versus our prior forecast of $200 million to $220 million with 179 million paid in the first nine months of the year.
The vast majority of these costs are included in discontinued operations and this is the last year of any meaningful separation related cash costs.
We've made terrific progress during the year strengthening our balance sheet. We ended Q3 with 351 times net debt leverage on a pro forma basis, well on the path towards our medium term target range of three to three five times.
As we approach the target we will be well positioned to think more broadly about deploying capital to wrap up we are very pleased with our third quarter financial results and we are confident in our ability to execute on our growth plan and with that I'll turn it back to Sara for Q&A.
Thanks with that with that let's turn to Q&A operator can you open up the lines. Please.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment compile the Q&A roster.
And your first question comes from Tim <unk> with Macquarie. Please go ahead.
Oh, great. Thanks.
David I'd like to pick up on something you were talking about here and you've talked about before which is the actual big data that Nielsen actually does use one.
One of the criticisms of Nielsen has always been that you.
To exaggerate the point people say that you.
To find the media industry terms based on the small household panel, which you extrapolate, but you do have access to a lot of big data that you then run through the panel. So my question is can you talk a little bit more about how this setup compares with some of the other competitors out there.
In terms of the scope the size the availability of the access to that data that you have thanks.
Certainly thank you for the question Tim.
Let me start with linear the best Big data. They are for TV is return path data.
Which of course, we have from our partnerships with the satellite folks in cable on the local side.
<unk>.
On the audio side that would come from connected cars, which is something we are in discussion with the auto manufacturers on.
It's the same RPT data for other models. So I think the difference between our approach and.
Others, who use our PD data is that we then validate that data with the panel.
Because there are errors in it there are places where the set top box might be on in the TV is off.
There are certainly no ability to append that back to actual people without a statistical panel to put people on the overlay. So I would say we add to it with the panel I think we make it better as a result.
Then just using it in a raw form.
On the streaming side.
Important to have ACR data and I would say streaming it's important even.
The streaming approach in the ACR approaches even important for linear today keep in mind that four out of 10 households, no longer have a cable subscription. So by definition. There is no set top box.
So <unk> got to get that through signals audio signals that come off the TV and we're unique and pulling that together and then if it goes through its streaming platform like Roku of course with that deal announced earlier this year.
<unk> added value they are.
There are other players who also use ACR data a lot of that IP came from Gracenote, We certainly have real leadership in the technology and I think we do it exceptionally well.
And again, we can validate all of that with empirical evidence from the panel. So lastly, I think that's a great question. So sorry to go along with the last thing I'd want to say about being the only party that has empirical evidence with a panel that is a proven technique throughout data science today I can't in Nielsen.
After a decade in machine learning and artificial intelligence couple of relevant examples that might be useful to you. One is vaccines. So hey, I was used to get to a COVID-19 vaccine much faster than ever before big data certainly helped but it was really important to have empirical panel of clinical.
Trials, so that real people were tested and those models were improved and it absolutely would have been a disaster without taking the time for empirical data.
Similarly, AI has vastly improved weather forecasting, but when its really important like a hurricane you still get empirical data by flying hurricane hunters into storms to take real world evidence and you still validate those models everyday with weather balloons and satellite so.
We can go on and on but I would just say no body.
<unk>.
He has a big data advantage on us and nobody has our advantage with empirical evidence to validate that data.
Thanks for the question.
Your next question comes from Andrew <unk> with JMP. Please go ahead.
Hi, Linda I wanted to talk about the fourth quarter implied organic guide so right at four five to $4 75 organic revenue growth for the year I believe that implies 3% to 4% organic constant currency revenue growth for the fourth quarter. So I'm looking at slide seven and I still see an easy.
Comp in the year ago quarter fourth quarter of 2020.
And I'm just wondering if there was anything about the strong organic revenue growth of the third quarter was six 6% that might have pulled forward revenue from the fourth quarter and just verify that my calculation of 3% to 4% for the fourth quarter is right for organic constant currency revenue growth.
Great. Thanks for the question Andrew Good to hear from you.
I guess, what I would say is that we really look at things on an annual perspective.
Sharpen the pencil of course.
As we grow as we move into the fourth quarter of the year, but to your point things can always shift around a little bit from one quarter to another but there's really not anything in particular that I would call out.
If you just reflect on 2020 versus 2021, we do face tougher comparisons even in Q4 versus Q3, because COVID-19 was most impactful to us in Q2 and Q3 of last year.
More broadly there is still uncertainty around the pandemic and I would say that some global supply chain challenges are out there and that.
To raise questions about how this might impact short term spending and the balance of the year.
It could be.
A favorable or it could be an unfavorable but with the pandemic still looming.
We are just being very smart about the way that we're setting our guidance again full year guidance, but as you backed into the fourth quarter I would say to that overall, we've been pleased with our renewals this year and it's for that reason that we do still feel optimistic about our medium term guide on mid single digit or.
<unk> revenues, so I would say overall.
Biggest factor is definitely the tougher comparison.
The varying of what's in Q3 versus Q4 always a little bit of shifting but overall, we're very we feel very good about the outlook. Okay. Thank you very much.
Thank you.
And your next question comes from Dan Salmon with BMO capital markets. Please go ahead.
Good morning, everyone.
David I wanted to circle back on a couple of things in your prepared remarks, you mentioned that Nielsen is embedded with media Ocean and I know many of US know what mediation isn't does but can you expand on that and how being embedded with their buy side software is.
So Nielsen.
And then second maybe I'm over reading it a little bit but it seemed like you were speaking to the specific number of houses in various panels a bit more today.
You talked.
More publicly about efforts to communicate with the ecosystem a little bit more regularly.
The type of thing that we should expect more often.
Those are both good questions and they deal to the operations of audience measurement I'm going to turn that over to karthik, because he's driving that day to day and I think can give you. The detailed answers on both how we work in the ecosystem and.
Yes.
Better quality metrics disclosed on a more regular basis to the industry.
Nick.
Thanks, David.
On the first question.
The ecosystem itself.
<unk> bin.
Currency is to actually facilitate.
<unk> buyers and sellers. So there's a lot of ecosystem players that play a very important role.
And so our data obviously fueling these buying and selling system. So that it can operate an effective clearing house contact between buyers and sellers.
We're very close to all of these players because there is a good interdependency.
And that actually make things easier and more more fluid or the industry to operate efficiently. So that's the role WP ecosystem players play and we're embedded with many of them and we called out a couple of obviously, but that becomes particularly important even as we transform all of our products because all of these ecosystem players.
Need to revamp how they use our data in the role that <unk> performed for the industry.
The second question, Yes, I think part of David called out as well as the feedback that we have taken to heart is being much more explicit in our communication of what we're actually doing panels again, we don't want to dominate all the conversation about our innovation just with analysts mcdonalds continue to be important we will communicate.
Indicate more broadly with our clients and the industry.
Progress in making especially around getting Reacquainted panel sizes. It themselves have a role to play in the Ria creation process.
And so yes. This is the way we want to continue to operate to.
Great transparency and clarity for what we're working on.
Those.
Great. Thank you Kartik.
And your next question comes from George Tong with Goldman Sachs. Please go ahead.
Hi, Thanks, Good morning, I wanted to go back to your revenue outlook you increased your revenue guidance for the full year can you discuss which parts of the business are tracking above your initial expectations and how your <unk> outlook, specifically has evolved over the past quarter.
Yeah. So we.
As I mentioned, the Andrew we give annual guidance.
And so we don't really provide deeper insights on a quarterly basis aside from that but there were definitely some some bright spots in our Q3 performance that contribute to the overall optimism that we're feeling broadly and.
As the year progresses, and you get closer to the end of the year.
You feel good about the overall revenue guidance level and.
I would say that we've had strong top line performance during the course of the year.
And we've held back a little bit on that.
As we thought about EBIT just to give us some financial flexibility during the course of the year, but as I think about.
Q4, and as I reflect on our performance in Q3, we saw really nice strength in national and digital measurement products and local was also slightly positive and we really consider that also be encouraging so.
It's more macro just our sense of the overall business performance and.
The impact that we're getting out of some of our investments during the course of the year and growth initiatives and it just has us feeling optimistic about the fourth quarter.
Got it that makes sense and as it relates to Nielsen. One can you talk about key milestones and data post that you've achieved in the quarter and what your near term target.
Sure Karthik why don't you take that.
Thanks, David.
I'll just reinforce the transformation of the product.
It's fairly broad and began pretty much beginning of this year.
Transforming our digital product.
Do you have an actual identity backbone that we built in 2022. So that's sort of think of that as first step to building all of digital measurement, which will also affect anything delivered over IP.
So that that entire body of work has gone really well continues to go well and so the next big thing is increasing our coverage and.
<unk> seen a whole lot of announcements around our expansion to measure connected Tvs, David called out a few metrics, but that program continues to go really well our capabilities now help us cover pretty much 75% of CTV that's out there and we will continue to expand that.
Then comes the actual work on the traditional ratings, which is what we would call linear and broadcast and the big move there is incorporating big data to drive.
Much more breadth depth granularity.
By also leveraging the panels there. So that's on track January 'twenty. Two is when you start to put out there in the marketplace at scale.
For the market to start to play around with it and get a feel for it it will have a pretty much of your priority of your data. So that people can use the loan from the change in the <unk> methodology and the scale of the product.
And then continuing to expand the rollout of meters.
So the panel like we said the panel is an important component.
To make sure the meters captured things sub minute.
Which is important ultimately to the vision of driving de duplicated across media currency, which by putting it all together is our.
Timeline for end of 2022, so everything is progressing like we have wanted.
And I'll just also go out and say, we're looking at every opportunity to accelerate because that's what clients are asking us for.
But we feel very optimistic and are excited not just by the progress we need but also the milestones that we will hit as we have so far in the last 18 months. Thank you.
And George wrapping up what Lyndon Karthik said.
Underneath your question, there's a couple of clients who've been vocal and had headlines and that was referred to earlier to contrast that I would just remind you what I said, which is audience measurement did grow organically four 4% I was in terms of things that are performing exceptionally well as I said digital first clients in the digital components of the national.
Clients has been great growth in our national clients have continued to grow quite nicely. So.
There is one thing what youre reading in the press Theres another thing about whats actually happening in the business.
Very helpful. Thank you.
And your next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.
Hey, This is Greg Harrison on for Tony Thanks for taking our question.
Linda I wanted to talk about the EBITDA margin guide I know you sort of addressed but hoping you could help bridge a little bit more how you called out return of Covid costs, but.
The compression.
Pretty robust in the fourth quarter. So I'm wondering if there maybe there's something else that we're missing anything else to call out I think.
So you've talked about bonuses, maybe those are pretty significant given your performance has been so strong many.
Many of them to help us bridge there. Thanks.
Sure Greg Thanks for the question.
So a little bit like revenue there are a lot of moving parts on margin as well and maybe I'll just kind of take you back to last year.
First on revenue, we had the most pronounced COVID-19 loss in Q2, and Q3 of 2020 and those declines start started to lessen as we move into Q4 last year and then to your point, we did take actions early in 2020 really to protect our.
Margins at that time, and we cut a lot of temporary cost and that had a range of different underlying levers as you referenced from executive salaries, a four O N K contributions we have furloughs and.
Of course <unk> is every company that's been faced by this pandemic had and so that was about $100 million of temporary costs and those costs started to come back in early 2021, but they've come back at a slower pace and.
That has given us some flexibility to continue to invest in the business and it gave us the flexibility to invest in both growth initiatives and our panel restoration activities.
So we felt really really good about the additional flexibility that that gave us, but we do expect those costs to continue to return that temporary costs into Q4, and if I just use <unk> as a directional example, we're pretty much seeing those costs. They are at a very low level.
Record low level, but we're pretty much seeing those cost double each quarter, and so I think thats, probably a pretty good indication of how slowly but surely we are recovering from this pandemic. The other thing that I think is important to mention Greg is the optimization plan that we implemented.
<unk> last year and again as I referenced earlier, we implemented that plan really to protect our margins last year and we've got the margins laid out in our deck on page eight but if you actually saw the Q2 twin teen margins.
They were considerably lower at 48% and so when we implemented that plan. It gave us a really nice lift on the margins and the balance of 2020, but most of the initiatives played out in the second half of 2020 and and they were phased in.
And so will we saw the most benefit of that optimization plan in Q4 last year and of course in the second half here, we're lapping that program.
We are continuing to make investments and.
Feel good overall about where things stand, but as a result of all of this we do anticipate that the margin compression will be greater in Q4 than in Q3 I would note that we raised the low end of our 2021 EBIT guidance and we maintained our full year margin forecast, which is.
The $42 three to the 42, six but as a point of reference that compares to a pro forma margin of 42% in 2020, so still very very strong margins overall.
Great. Thank you.
Thank you Brad.
Your next question comes from Doug Harter with Huber Research. Please go ahead.
Yes. Thank you on the <unk>. This is for David or of course, it but two questions one.
What are kind of the main friction points on raising the household.
Panel a number I mean.
Coming out of Covid I'm, just wondering if you could discuss that and then secondly, I mean, obviously you made reference to NBC. You has made a lot of headlines I'm wondering if you can sort of put the Nielsen NBC relationship in some kind of a historical context and any comments you could add in terms of what's going on there.
Thanks.
I'm going to let Karthik takes the panel question on I'll come back on.
And the second one around <unk> and others actually.
Thanks.
Thanks, David.
Okay.
We're working on is getting the panel back too.
The housing wells, you've had prior to Covid and we feel very good about the work plan that we're executing against.
If you ask anyone in the world.
What should the values of Mcdonald's.
<unk> landscape as big as you can make it but that's not how we view the world We view the world as a combination of data sources that is our strategy. So when David talks about the role of big data.
It's all about how you get the best of each of these capabilities into the product ultimately for strength resiliency coverage.
So we are very confident in the product strategy and the role that the panel and its components play in that.
But what we're working on immediately is just to get the remediation plan executed.
Was sort of call out is the cause for the.
The accreditation challenges that we've had so that's the way we're thinking about it again lapping I'll just point out is.
The different components of our panel augment the overall capability.
So when you think about the role of streaming platforms and being able to provide robust data there.
Where things like the streaming meter make a huge difference and there is nothing else out there in the marketplace that provide that level of breadth.
Breath accuracy and granularity. So there is many components to it but right now what we're focused on is the overall product strategy to get the Nielsen one.
Back to you David.
Yes listen.
I don't necessarily need to go deeper in any client but.
I would say NBC.
NBC and first of all is a good client we have a good relationship there are a number of folks I respect theyre, starting with their CEO, who I consider a friend.
And.
And quite honestly I think.
Their research people are really solid and we learn from each other so.
To start with that and.
Bringing together everybody across optimization analytics and measurement.
He is a good thing so yes, we were.
Glad to participate in that process and.
We get called out specifically as being an important player to help with the evolution. So.
<unk>.
I wanted to say theres, good intent beyond that though what I would say is.
Where it started today's remarks with the change in industry.
It's dramatic I mean, the fact that over five years, a third of the total time spent on linear has gone away. The fact that we now have four out of 10.
No longer having a cable subscription that fundamentally means no matter what I do the ratings for the cable channels were close to zero.
The linear side and it causes everyone to compete for the other half which is dominantly streaming that's going to change measurement, that's going to cause people to <unk>.
Really want to step up.
Explain those answers and I would say at other at other transition points like the introduction of cable channels than the introduction of the VCR.
The early growth.
On.
Not only is streaming with digital broadly there's always noise about the measurement until people settle down. So I do think there is some noise now and I think there are some constructive criticism around COVID-19 that we're taking seriously and improving but I also think the noise will die down as things settle into a new state.
And that say it is going to be predominantly driven by streaming.
Most content I think live events continue to have a role.
In broadcast and so you end up with a live event world dominated by sports and Entertainment World.
Driven by streaming we're going to measure both we're going to make them comparable and as we do that we're going to serve the industry and people will move on.
Okay, great. Thank you.
Your next question comes from Jeff Mueller with Baird. Please go ahead.
Yes. Thank you good morning.
As I calculate the organic constant currency two year CAGR. This quarter I think you are in the one 5% range and Linda you said you feel confident in mid single digit for next year. So help us understand the categories that bridge that acceleration I hear a lot of goodness as it relates to innovation and client adoption and contract renew.
<unk> in your prepared remarks, so maybe it's the timing of those factors, but does Nielsen one rollout also play into it as they are incremental COVID-19 recovery. If you could just help me bridge the categories and then if I could squeeze in a second.
You are fast approaching essentially there on your leverage target in the prepared remarks, you said.
The outcome space with regard to what kind of spend we might see in the near term by our clients in that space David reference as did I. The how pleased we are with with growth in National and then our digital first clients are also showing really strong growth.
And I would point out too that we're seeing growth around the world certainly seeing strong growth in it accelerated in the U S and we're seeing very solid growth in our international markets as well you know on a reported bases, Jeff I wouldn't.
Just to remind you that there were some businesses that we also exited as a part of our optimization plan and so you still see that revenue on a reported basis in the prior year and they were lower growth businesses generally speaking and you know I think we're <unk>, we're starting to see the benefit.
Of our growth initiatives and where we feel good also about renewals that we've done during the course of the year. So it's a combination of all of those that cause us to feel really good about the outlook from a revenue perspective.
With regard to leverage we are so pleased to be approaching the high end of what we've guided as our medium term range having ended the quarter at 3.51 time net debt as far as deploying capital we feel like we now have a range of options in front of.
But we're gonna be very thoughtful about it and we're definitely going to look at what can give us the highest return on our capital we work hard to grow that capital and we want to make sure that we're deploying it in a very smart way and we are in the midst right now of our.
Annual planning cycle, and where an ongoing dialogue with the board about ways in which to deploy that capital we like investing in the business right now and you've seen some of that play out during the course of the year, we will consider tuck in M&A as we've described in the past and then certainly returned.
Capital shareholders as an option and it's just really nice to be having the level of flexibility, where we can start thinking in earnest about that range of options and we're very excited about that.
Thank you very much.
Thank you.
Yeah next question comes from.
<unk> capital markets. Please go ahead.
Hi, This is John filling in for a huge because the media like stolen truck to complete my creation by your heads maybe you could touch on the part of the pipeline that we built on the data like thank you.
Perfect weather you take that one.
Yeah, Thanks for that.
Our platform is operational all of the new integration, but we are called out even in Q3.
All being billed on view background. So we're very excited about the leverage that's given us be Christian C. M speed. So yes, our technology roadmap has gone effectively flawlessly over the last 18 months and that's B R Y were so optimistic.
Around everything we're doing the wrong product transformation, leading us do the the notion of coverage coffee no comparability resiliency. It all depends on being able to do things off of the platform and it's gone really well.
Okay. Thank you.
And your next question comes from matches with.
Triste Securities. Please go ahead.
Hey, good morning, everybody, maybe just a quick side or I think the increased disclosures around panel and and the use of big data is extremely helpful. So I appreciate that two two quick ones if I could David when you think about the delivery.
Or build up to Nielsen one next year I'm curious how you think that how that goes is that a very iterative process of a back and forth process with your key stakeholders throughout the year.
So it'll be a lot of feedback or is this we deliver this by <unk> next year and hope that everyone rallies around it or or worst case officers. There's there's a lot of your pushback. So curious your thoughts as to how that kind of plays out and what you would do to kind of control that that process and then just secondly could you remind us but.
But the revenue split when we think about your by cyber sell side kind of what the revenue split is currently and where you envision that going.
If you're successful with your kind of medium term term outlook. Thanks, everyone.
Great. So just to be clear there are.
Clients were engaging with today agencies digital platforms advertisers.
And of course publishers and networks because it affects everybody so.
We are certainly getting feedback today not just on the estimates, which we produce but also improving the workflow and his karthik talked about earlier the ecosystem really matters because we're.
Nielsen is so uniquely and deeply embedded into the transactional systems the <unk>.
Seeing in payment systems.
If you will and reconciliation that we need to make sure that all evolves with us and so that's that's happening.
And we will continue to hit key milestones on big data. So some of that we're sharing right now and we started with the MRC and we shared it with clients. So they can see as big data is in the national measurement, what that looks like and and how it feels more stable and robust. So we'll continue to share it and we will continue to be.
Iterative and this is why you know earlier, we talked about 24.
We hope to have everything we really plan to have everything operational by Q4 of next year It will come throughout the year.
At once that happens then people will be able to use it and there will also have the legacy system to compare so that they can manage but our hope is to move everything to the new system and not maintain an old and a new version as of next year I think the other thing that we're engaging with the industry on is getting everybody to a common data set that.
Actually will help.
That was a big lift for the local.
Market to make sure that we could add all the broadband only homes in there those are homes that have neither a cable subscription nor an antenna so.
It's not producing a lot of local volume, but it needed to be there to be able to measure everything off the same system and quite honestly in order to move to impressions for local so we're we're getting there across the board and I think that announcement was indicative of where it will be in the future. When we announced we had two of the big station owners and two of the big agencies endorse it.
And we're going to continue to work that way more arm in arm with the industry.
In the rollout of Nielsen one throughout next year. So that's.
Part one in terms of the mix remind you.
There, we were an investor day, and it hasn't changed much in that 49% of our revenue was from global media companies and that includes the digital pure place another.
I guess, 26% was from the local players audio and video so that.
That would add up to about three quarters of the revenue coming from the supply side, where the publisher side. However, and I think this is important for people to remember that's the revenue, but that's not the leverage in the system to be clear advertisers decide what currency they want to transact on you've seen people put out press releases.
That they've got some new measurement system that you can now use.
That can be done, but what really matters is what measurement system. The buyer chooses to use so I would say our focus is a company is focused on adding value to the industry would be best measurement.
And the advertisers and agencies have an enormous role in our economics, because they're the ones who are demanding the currency that best serves their purposes and quite honestly the urgency that best gives them the answer they need so we have to continue to work with both sides on an equal basis.
Thanks for the question, Matt very insightful.
This is all the time definitely at today's questions I will tend to call back over to David Kenny for closing remarks.
Listen I want to thank all of you for joining us. This morning, I hope you'll see that our goal is to be as transparent as possible and I really hope we answered all your questions. Today I Hope you also hear the enthusiasm and confidence that Linda Karthik and I and the rest of our team have in what we're doing here at Nielsen.
We're very excited we're not getting distracted by external noise, we're constantly focus on delivering the best product to the market and we totally believe that will continue to deliver for our clients for the industry and for you as our shareholders. So thank you see your next quarter.
This concludes to just conference call you may now disconnect.
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