Q4 2021 Nielsen Holdings PLC Earnings Call
Good morning, and wall country to Q4, 2021 Nielsen Holdings plc 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 senior.
Senior Vice President head of Investor Relations and Treasury. Please go ahead.
Morning, everyone. Thank you for joining us to discuss Nielsen's fourth quarter and full year 2021 financial performance.
I'm joined by our CEO , David Kenny and our CFO when does your pockets are.
Our CLO Karthik Rau will also be on the Q&A portion of the call.
A 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 related to our business plans in 2022 guidance.
Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today February 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 identified in our disclosure filings and materials.
Our 10-K, 10-Q, and 8-K report 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 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 Dotcom.
And now to start the call I'd like to turn it over to our CEO David Kenny.
Good morning, and thank you for joining the call today.
I'd like to start by saying that we are deeply concerned about the evolving situation in the Ukraine.
We are focused on the safety of our 107 employees and their families. There.
Mobilized the team to help them navigate through this challenging time.
Turning now to 2021 result, I am extremely proud of everyone in the Nielsen organization.
Our teams executed and delivered strong results in 2021, despite facing some on the anticipated challenges.
We successfully sold Nielsen global connect we.
Hit significant product milestones, we exceeded all of our original key 2021 guidance metrics revenue adjusted EBITDA margin and free cash flow.
The clearest measure of our success is our ability to deliver mid single digit organic revenue growth overtime.
In 2021, we delivered organic revenue growth of four 9% and we continue to expect mid single digit organic revenue growth in 2022 and beyond the drivers of our revenue growth give us confidence that we are delivering the diversification and innovation needed to accelerate.
Growth over the next few years.
Growth in the digital products is far outpacing the average in measurement and Gracenote is growing in the high single digits, both reflecting our opportunities as consumers shift to streaming.
The sixth largest U S media companies.
Our most vocal critics.
Aggregate grew faster in 2021 than in the prior few years as they added Nielsen digital solutions.
And growth outside the United States accelerated to 7% and will remain strong driven by adoption of Nielsen's digital solutions.
This morning, we announced that our board approved a $1 billion share repurchase authorization.
This reflects the board's confidence in both our short and long term growth.
And the view that our shares represent an attractive investment opportunity.
Our significantly improved balance sheet provides us with the flexibility to return more capital to shareholders.
While continuing to invest in organic growth initiatives and pursue strategic tuck in M&A, if and when it makes sense.
We recognize theres been a lot of noise recently, largely focused on our measurement of the declining U S linear TV audience.
I want to separate the noise from reality.
I'll frame my remarks around five key points I'll, then touch on impacting context before Linda reviews, the financial results and 2022 guidance.
First Nielsen one our cross media measurement solution.
Meekly aligns with the needs of advertisers and their agencies.
And they will ultimately choose the currency for AD spending.
Second media companies need to be digital or streaming first.
Keep pace with audience behavior.
Our relevance with leading digital first players is growing and we are adding increased value to traditional TV clients as they shift to streaming.
Third we are uniquely committed to measuring people not just the machines.
Fourth we are making the right investments in data method and quality.
And fifth we are executing on Nielsen one we hit all of our 2021 milestones. We're on track to deliver the full solution later this year and begin driving industry adoption.
Now expand on each of these points.
First advertisers and their agencies will ultimately choose the currency for cross media AD spending and.
And they want a solution that is trusted independent and complete.
Advertisers want to reach the people who buy their products at a frequency that builds brand image and this means more streaming for amongst advertisers.
And therefore, they want a solution that brings streaming and linear together.
The World Federation of advertisers laid out a set of requirements, which were further adapted by the association of National advertisers in the United States.
The approach is clear about big data.
Direct integration interoperability with targeting and attribution solutions.
And empirical validation with panel data.
Neil San Juan uniquely aligned with all of those requirements.
It's also worth noting that the anh is explicitly not trying to create a new currency.
Importantly, advertisers and their agencies want to transact on one foundational currency that reflects in one number as close to 100% of the media and 100% of the people watching it.
This is Nielsen one.
Which will leverage all of the many points, where we are embedded in media planning and buying systems.
Second the media industry has shifted to digital first and Nielsen is aligned with this.
Our relevance is growing with both digital first clients as well as traditional TV clients, who are shifting towards streaming.
I would remind you that every major change to expand media measurement has been met with resistance and headlines.
This dates back to adding cable to broadcast in the 1990 and the addition of delayed viewing on a DVR in 2006.
The latest move the current move to reconcile streaming and linear is perhaps the biggest change in the history of media.
Friction can be expected.
And we are seeing it.
Our gauge data shows that streaming reached an all time high in January now accounting for 38% of viewing within the 18% to 54 age demographics.
Leading streaming first platforms recognize the value of having a common metric for audiences as linear television and digital converge.
And no other third party measurement is as valued as Neil said across the digital ecosystem.
Google recently cited measurement is a key to their success in connected TV.
This year, Google is hosting Youtube brand cast their advertising showcase during the week of the Upfronts, which historically has been a TV centric week.
Google is using Nielsen data to demonstrate the strength and relevance of their platform.
Also ahead of this year's Upfronts Roku announced that they are adding nielsen's digital AD ratings as an audience guarantee making roku the first AD buying platform to launch Nielsen guarantees across streaming TV most of our top digital first clients now also by <unk>.
Our TV data a recent example of that is our renewed TV license agreement with the trade desk.
Yes, there is more noise on the traditional TV side as our clients adjust their business models from linear to streaming.
But privately the conversations we have with clients and their contracts with us show that our business with them is a much more productive than normally suggests.
We grew revenue with national media clients in the double digits in the fourth quarter.
And high single digits for the full year.
2021 revenue growth was driven by strong pricing.
<unk> uptake of our digital solutions and cross selling of our three essential solutions.
And in fact, our growth accelerated from what we saw pre pandemic in 2019.
We expect continued solid growth with these clients going forward.
It's worth noting that Nielsen renewed 100% of our top 10 contracts over the last three years.
100%.
Internationally accelerated growth is driven in part by the adoption of our digital offerings.
We are expanding digital and cross media in key markets around the world.
Including Mexico, Australia, Poland, Thailand, Denmark, and Hong Kong.
Third we are uniquely committed to measuring people in a way that is scaled and representatives.
We measure people not just devices because people and not machines are who watches video.
Nielsen is the only company with a high quality probability sample for measuring video and the only company that can backup our measurement with large scale empirical evidence.
Our big datasets are validated by the behaviors of over 100000 people in our panels.
Which uniquely allows us to provide persons level of measurement that is representative of all audiences.
That is validated and audited.
On validated machine data often produces inflated audience estimates.
While machines expand the population is not growing.
And neither it's time, it's still 24 hours a day.
So we uniquely measure the share of total time across total people.
Machines cannot tell you who is watching.
There are serious efficiencies in models that are not tested with empirical evidence.
Some of the industry aggregate machines into households.
And then use household averages to guesstimate viewer demographics.
Others use credit data models, which are biased towards the fluent consumers.
<unk> panels as small as 100 households, which.
Which is clearly statistically insufficient for validation.
Four we are making the right investments in data methods and quality to remain the best measure of how all people consume all media and.
And we do this at a scale and specificity greater than anyone else.
We're integrating set top box and ACR data from roughly 30 million households into our national TV measurement.
Set top box data provides valuable insight into consumption by our cable and satellite subscription.
That said nearly half of all households, no longer have a set top box, we expect cord cutting to continue.
We're focused on connected TV data, which we believe will be more resilient over time.
During 2021, we doubled the number of connected TV partners, which enable us to measure 75% of CTV media spend.
Our coverage includes Hulu, Amazon Roku, Youtube Vizio watch free and Samsung TV plus.
When we include Pcs and mobile devices, we cover 87% of total video digital fab.
We COVID-19 of the top streaming platforms, which together represent approximately 90% of streaming usage.
We also have more data scientists than the next five players combined.
And the audience measurement space.
This is 500 experts leading continued innovation.
In fact Nielsen is the clear innovation leader in media measurement in 2021, we were issued over 230 U S patents.
Keeping pace with prior years.
We also released significant contributions to over a dozen major open source projects in the cloud computing and analytics spaces.
And finally, we are executing as planned as committed on Nielsen one.
We are uniquely positioned to lead the industry into the next generation of audience measurement.
Let me review our road map that we shared at Investor Day.
In 2020.
And highlight what we accomplished in 2021.
Walking across the top we completed the transformation of our digital methodology, we rolled out our IV resolution system, including our cookie less approach.
That and we entered into a global strategic partnership with the trade desk, which scales our identity system globally.
And we became a preferred measurement partner of the trade desk.
This morning, we also announced an agreement to integrate experienced marketing data assets into our identity system in the United States.
We're integrating always on measurement into Roku AD buying platform as I mentioned before and we're focused on always on measurement with other digital platforms.
We enhanced our metering technology and expanded our partnership with extreme reach to enabled sub minute reporting for greater comparability across linear and digital.
And we announced our plan for individual commercial metrics in November .
Going across the bottom.
We have streaming meters installed in nearly half of our panel homes.
We're adding them into new panel homes as we recruit them.
We doubled our CTV partners and we increase the coverage of Mvpds and digital distributors.
We completed our rebuild a direct first party integrations with the two leading digital agile.
And just last week, we released impact data for the inclusion of big data into National TV measurement.
In alignment with client feedback will launch big data as a standalone service in September .
Parallel with the existing currency.
Clients, who are ready to transact a new more robust metrics, we'll be able to do so this fall.
We're adding addressable measurement, which is still fairly small.
We're working with addressable providers to help them scale and drive adoption.
In January we move to impression based buying in local in conjunction with the inclusion of broadband only homes into measurement.
This is an important step in moving local to the same Nielsen one measurement as digital and national.
Altogether, we accelerated our roadmap and launched Nielsen one alpha the first iteration of Nielsen one ads in January ahead of schedule.
Alpha is specific to AD campaigns and gives clients an initial look at the user interface as well as audience deduplication across all screens, adding in CTV for the first time in addition to linear television computer and mobile.
Alpha engages the trailblazing advertisers agencies and media sellers, who are shaping the cross media marketplace.
Also includes companies like Kimberly Clark Disney and Magna.
In fact every major agency holding company is now engaged with alpha.
We have received positive feedback on alpha clients like the utility and the interface of Nielsen one.
They've also given us suggestions given the growing role of first party data and our agency partners Cross media strategies, we are prioritizing the measurement of audiences beyond age and gender, including first party audiences in 2022.
Our early discussions with advertisers also highlighted the importance of tying reach and frequency to outcomes and attribution.
Accordingly, we are accelerating opportunities to integrate data from our suite of impact marketing solutions into Nielsen. One later this year.
The foundation for Nielsen one is squarely in place.
By the end of this year, we will share impact data for Nielsen, one, which will provide the industry with a two year parallel period before we fully transition to cross media metrics by the fall 2020 for it for you though.
I'd like to point out that Nielsen one is more than a new currency for AD volume.
After Nielsen one ads, we will launched Nielsen one content that.
That will provide studios distributors and streaming platforms unprecedented insight into cross screen consumption and will launch Nielsen, one planning, which will empower agency and in house media buyers to effectively forecast and plan Cross media native campaigns.
Behind this Nielsen has always stood for gold standard quality.
We've taken significant steps to improve quality controls to meet the MRC accreditation standards and drive sustained quality improvements.
We identified with the MRC success criteria required for re accreditation.
And we expect to complete all necessary action items by midyear <unk>.
After which we expect the MRC members to vote on accreditation.
We have reached our goal of 41000 homes in the panel in 2021.
And we will reach our target of 41600 by the end of this quarter.
Only Nielsen has a scaled representative empirical person level panel.
And beyond to handle the quality. We are also focused on the highest standards for data quality control Tec resilience and client communications.
Let me turn to outcomes, which we rebranded as impact marketing solutions.
Our portfolio spans pre flight.
Advertising intelligent and cross platform media planning in flight audience activation and post flight advertising effectiveness measurement.
Let me cite a few examples of how we are expanding to include all media all major markets and all major advertisers.
We launched campaign measurement and 40, new markets, we strengthen our capabilities in automotive through a new partnership with pulp we broadened our advertising intelligence offering to include paid social media ad spend.
We expanded our upper funnel brand impact solutions with digital publishers like Spotify, Tictoc, Twitter and others.
We expanded coverage in our planning and optimization solution to include streaming data from connected TV.
And as a point of external validation Foresters Q1, recent marketing measurement and optimization solutions Wave report said that Nielsen quote provides advanced marketing performance insights with audience activation in a one stop shop for.
<unk> unquote.
This report is widely used by advertisers when they evaluate vendors and its further validation that we are creating value for them.
Let me turn to Gracenote, our content solutions pillar.
The Gracenote I'd is the UPC code for video sports and music content.
Gracenote is the market leader in entertainment metadata worldwide.
The greater content identifiers or greyhound Ibs are widely deployed through out the media ecosystem, enabling cross platform linkage and universal search across video content.
Content spend continues to grow rapidly and we have new opportunities to help distributors better manage their catalogs to connect with and grow their audiences.
We are leveraging audience measurement data and Gracenote metadata together with the continued build out of our analytics offerings.
This includes the recent launch of audience predict which enables data driven decision, making around content acquisition and distribution.
In 2022, we're focused on further growing grapes notes geographic footprint.
We focus on expanding the usage of the Gracenote I'd.
And launching new products to help distributors analyze benchmark and derive insights from their catalogs.
To sum up.
Nielsen delivered strong results in 2021.
Nielsen has an unmatched position delivering value to clients across our three essential solutions.
We are digital first and global <unk>.
That strategy aligned with the evolving media landscape.
We are on track to deliver Nielsen one later this year.
And we do remain positioned best positioned to lead the industry forward with cross media measurement.
With that I'll turn the call over to Linda to review the financials.
Thank you David and good morning, everyone I'm pleased to share the fourth quarter and full year results today, which reflects strong performance before I review the results, let me spend a moment on some of our key accomplishments in 2021.
First we completed the sale of our connected business in March and reclassified to discontinued operations effective as of Q1 'twenty one.
As a reminder, my remarks today focus on our results as if the connect sale took place at the beginning of 2020, which helps with the year over year comparison.
Second we paid down $2 7 billion in debt are almost one third of our debt and pushed out maturities by refinancing 125 billion of debt. We ended the year at 352 times net debt leverage.
Second consecutive quarter near the high end of our medium term targets.
Been eight years since our leverage has been this low.
Our delevering was facilitated by connect sale proceeds and operating cash flow.
Third we met or exceeded our 2021 guidance across all key metrics.
Turning to the financial results I'll start with slide eight which summarizes our revenue performance.
Revenue was $894 million in the fourth quarter and $3 5 billion for the year.
On an organic constant currency basis revenue grew four 7% in Q4, and four 9% for the year exceeding our guidance.
Organic revenue adjusts for exits related to the 2020 optimization plan. The April sale to Roku of our advanced video advertising business and the July acquisition of TVT why as.
As we guided these had a 150 basis point impact on our constant currency revenue growth.
For the year organic revenue grew four 4% in the U S.
And 7%.
In international markets.
Measurement revenue of $647 million in Q4 was up five 2% organic for the year measurement revenue of $2.545 billion was up 4% organic.
For both Q4, and the full year National and digital measurement products were areas of strength and from a client perspective in 2021, we grew in the high single digits with National media clients and had double digit growth from digital first clients.
Local posted its third quarter of modest positive growth, but coupled with a weak Q1 was roughly flat for the year.
Impacting content Q4 revenue of $247 million grew three 4% organic.
Full year revenue of $955 million grew seven 5% organic.
For 2021 impact organic revenue grew seven 3% and content grew seven 8% in line with our expectations of mid to high single digit organic growth for impact in content over the medium term.
We saw improving trends and short cycle revenue and strong growth in our sports business.
In the fourth quarter impact revenue grew in the high single digits organic while content revenue decline for <unk>.
Certain gracenote clients contract size and structures can berry, resulting in revenue recognized over time in some situations and at a point in time and others, creating some unevenness in any given quarter.
This played out in the fourth quarter, it's not something that we called out before but it was more pronounced in the fourth quarter. So we wanted to provide a bit more context.
We continue to expect strong growth from content in 2022 and beyond.
The right side of the page shows revenue for the past five quarters as well as constant currency and organic revenue growth rates.
As noted on the Q3 earnings call Q4 faced a tougher comparison.
<unk> pressure began to subside in Q4 'twenty.
Turning to slide nine which shows our performance in relation to our guidance and quarterly performance for adjusted EBITDA and margins.
<unk> EBITDA was $1 billion $491 million for the year.
Five 4% constant currency just above the high end of the guidance range.
Fourth quarter, adjusted EBITDA was 351 million down seven 4% constant currency.
Full year margins were 42, 6% up 79 basis points on a constant currency basis and at the high end of the guidance range.
This includes fourth quarter margins of 39, 3% down 435 basis points in constant currency in line with our expectations.
We discussed this throughout the year, but I'll remind you of the factors that contributed to year over year margin expansion in the first half of the year and compression in the second half of the year.
First because our cost base is relatively fixed revenue growth drives operating leverage.
The $100 million in temporary COVID-19 related cost cut in 2020 began to return in the second quarter, but they have not yet reached the levels. We expect over time and to continue to trend up in 2022, largely due to hiring merit increases in travel and entertainment.
Third we began to implement our restructuring our optimization plan in Q3 'twenty as a result, we saw a significant year over year benefit in first half margins then started to lap the benefit in the second half.
And finally, we invested in our key growth initiatives during the year.
Fourth quarter adjusted EPS was <unk> 46, compared to 32 in Q4, 'twenty, reflecting a lower tax rate offset in part by lower EBITDA and higher depreciation and amortization.
2021, adjusted EPS was $1 81, compared to $1 45 in 2020 above the guidance range. This reflects higher adjusted EBITDA and lower depreciation and amortization interest expense and tax expense versus 2020 on a comparable basis.
The 2021 effective tax rate with nominal mostly due to discrete items.
We had a Q4 benefit of $143 million related primarily to the utilization of foreign tax credit benefits associated with closing audits and open tax years and a reduction in deferred tax liabilities.
It's really these discrete items that drove the Q4 benefit which completely offset taxes on Q4, adjusted net income and a full year rate of 23, 5%, which did benefit from lower state taxes.
Turning to free cash flow, we generated $647 million in 2021 up from $586 million in 2020 and at the high end of our guidance range.
These results exclude $185 million.
Of 2021 separation related cash payments.
Key drivers of 2021 free cash flow growth include higher EBITDA and lower interest expense, partially offset by higher cash taxes.
'twenty, one with a very strong year as evidenced by these results we continue to operate with greater discipline and to build on our track record of execution.
Now, let's turn to the outlook and 2022 guidance on slide 11.
Our guidance represents an important building block as we progress towards our medium term framework.
We expect organic revenue growth of 4% to 5% in line with our medium term outlook of mid single digit growth.
This incorporates our expectation of low to mid single digit organic revenue growth in measurement and mid to high single digit growth and impacting content.
As a reminder, measurement includes our local and audio products, which we expect to be up only slightly in 2022, we expect constant currency revenue to grow three 5% to four 5% as the 2021 business exits and acquisitions have a 50 basis point impact.
From a timing perspective, we expect revenue growth to be faster in the second half with Q1 revenue growth below the full year guidance range. This was largely due to the benefits from growth initiatives and building throughout the year.
The quarterly Unevenness I described for content will also play out in Q1 of this year with a challenging comparison for.
For the year, we expect high single digit growth in currencies, we expect adjusted EBITDA margins to be flat to up 30 basis points for a range of 42, 6% to 42, 9%.
And for margins from a timing perspective, we expect compression in the first half of the year and expansion in the second half with first quarter margin contraction of a similar magnitude to the Q4 'twenty one contraction.
There are a couple of dynamics in play here.
First is the continued retirement costs that had been temporarily reduced due to COVID-19 . This is most pronounced in the first half and second is near term investments in growth initiatives and then the panel, which had a more meaningful year over year impact in the first half of the year and third faster revenue growth.
The second half will support margin expansion.
We continue to expect to reach our medium term margin target of 43, 5% in 2023 with margin expansion accelerating on revenue growth and moderating investment adjusted EPS is expected to be in the range of $1 81 to $1 91 compared to $1 81.
In 2021.
This reflects adjusted EBITDA growth and related underlying guidance assumptions, which are in the appendix and included in.
An effective tax rate of 23% to 25% compared to 23, 5% in 2021 before discrete items.
Net interest expense of $270 million to $280 million versus $272 million in 2021 and.
And net debt leverage and our three to three five times target range, where we have been for the past couple of quarters.
We expect free cash flow to be in the range of $650 to $700 million.
Compared to $647 million in 2021.
This reflects higher EBITDA offset in part by increased Capex due to investments in Nielsen, one and the panel and.
And higher cash taxes, due to higher taxable income and fewer available tax credits.
As we look beyond 2022, and think about our medium term free cash flow targets. There are a few variables that are putting some pressure on our target of over $800 million in free cash flow and 50% conversion for 2023.
On the one hand, we expect faster EBIT growth to drive higher 2023 free cash flow.
On the other hand, there is cash taxes, which I mentioned is impacting our 2022 free cash flow forecast.
Almost a year since we closed on the connect cell and we now have a better feel for our tax profile and taxable income mix.
We also have fewer available tax credits than in the past and certain tax reform provisions will start to take effect in 2022 and also in 2023 all of this has us paying higher cash taxes.
Next is capex we.
We are focused on driving efficiency in our Capex and Opex and we expect capex as a percent of revenue to come down over time in.
In the near term, however, we see opportunities to accelerate capex to advance our roadmap and to improve and modernize our panel.
These won't represent a permanent step up in capex, but are likely to push out reaching that seven 5% target for capex as a percent of revenue by roughly a year.
And finally share buybacks could impact interest expense, but will also result in higher free cash flow per share with the lower share count as David mentioned, our board has approved a share repurchase authorization, we see significant value in our shares.
The impact of share repurchases will vary based on timing and pace and the guidance, we're providing today does not factor in any impact from the repurchases.
In closing I'm very proud of Nielsen's employees and our results in 2021.
We remain confident in our path forward and our ability to drive growth and increase shareholder value.
And now back to Sara for Q&A.
Thanks, Linda with that let's turn to Q&A operator can you open up the line. 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.
Your first question comes from Andrew Steinman from Jpmorgan. Please go ahead.
Hi, I just wanted to know if when you look at <unk>.
I'd number five if you feel about the road map is really within your own control or do you feel like.
This is what youre laying out and really the gating factor will be the timing when buyers and sellers.
Great and then also when you look at the Alpha product that you showed them already does this include both the smart TV data and set top box data or just a subset of those two big data partners.
Thank you Andrew I appreciate the question first of all.
The roadmap, we laid out is absolutely within our control.
Those are the modules we are delivering we are delivering those on time and people are using them.
I would say there is a factor of adoption, which is why last year was laying a foundation. This year is much more about engagement.
As folks transition of course.
To use Nielsen currency today, but we are making more modules available. So the smart buyers and sellers can can move forward more quickly.
So I would say, but we have to watch is the.
On the other end when can we actually shut down the legacy systems and only have one and we will work with the industry on that I don't think were going to have the industry in a position that can operate I would say most of the buyers are quite eager to move on.
They've all been clearly they wanted to see this done some of them are speaking directly to the MRC to make sure. It gets a credit in some of the sellers arent ready and so we'll work with them.
But quite honestly I think the buyers are going to demand it sooner versus later.
Secondly in Alpha of course, we're showing good data, which includes smart TV data and set top box data.
And we.
We are going to move forward to actually having that in the market.
By this fall for everybody outside of Alpha because theres been such a demand for the robustness that comes with including net and measurement.
Okay. Thank you.
Your next question comes from Dan Salmon from BMO capital markets. Please go ahead.
Okay, great good morning, everyone.
David I had.
Two questions to follow up on a couple of your prepared remarks. The first was once again, you said pretty clearly that you think that both brands and agencies at the back side have a strong preference for a single currency.
And yet we do see test of alternative currencies, gaining some traction on the buy side, we can see comments from that group.
Industry conferences estimating percentages.
The upfront.
Be transacted on alternative currencies. So can you help us close that gap on what youre seeing versus some of the green shoots of activity that suggests the alternative currencies are being tested by the buy side.
And then the second one was your comments on the feedback that you're getting from that group about wanting to.
A better measure and better integrate first party data, we'd love to hear just a little bit more about that and whether thats a potential area, where M&A could help accelerate based on that feedback.
Good. Thank you Dan for both questions I'm going to take the first and I'm going to let karthik handle the second because he has got a lot of very recent data.
And also can update to you what we're doing with first party data. So first of all there has always been a secondary guarantees.
It's been useful for brands and agencies to to look beyond basic reach and frequency for things beyond that once the price on our core currency that hasnt changed and I think experimentation is useful we learn from it.
So I.
I think you just have to listen very carefully to what.
Folks are saying, but of course people are going to experiment that surge.
Yes.
Really talked to investment managers in the hands of agencies and most of the big advertisers.
Here's what they start with they certainly theres a lot of enthusiasm about connected TV. There is a lot of enthusiasm about technology for these guys and spent a lot of money on new content for their streaming platform. Here's about hasnt changed there are still 320 million Americans, that's only growing $4.
<unk>, 4% a year.
That's getting older is getting more diverse.
Secondly, curious what Hasnt changed Theres, only 24 hours a day people need to sleep people need to work it seems that media consumption kind of tapped out at around.
10 hours or plus or minus per day, therefore, our fiduciary responsibility to our clients is to make sure we invest to maximize that.
If we have metrics that can't reconcile back to a fixed population in a fixed time.
There is a risk of double counting there is a risk of not getting full value and quite honestly I think there is a frustration with paying more for less and some of the shifts our linear business, which the agencies have been clearer about so theyre looking for that leverage.
And so that's why I believe there is still going to one single base case of what's going on in the market.
That doesn't mean that they won't add secondary guarantees that they won't have to think that add value beyond that but just lie blind without one validated audited.
Data science rigorous approach I think is dangerous when you get to.
Big scale billions of dollars investment. So this is why I think the idea of multiple currencies, while people might like to comment and I think we've always got to learn.
Not seeing that folks really think they can fulfill their fiduciary responsibility.
Pick your own measurement.
So.
That's why I have that that conclusion.
Totally believe thats going to play out in this and every other upfront from here.
And then going to the second question on first party data.
Yes, Dan Thanks for that.
First we have been providing advanced audience is first party.
<unk> four times even today.
Really talking about is the amazing feedback we got around how do we like that up within Alpha, which ultimately is Nielsen one ads.
And so we are prioritizing that so that agencies and other players with first party data can view audience measurement not only against the total population, but also against the audiences that matter to a brand or a buy.
So we are incorporating that into the road map for later this year.
Pretty excited it also signifies the kinds of conversations we're having and the feedback we've been getting on alpha and all of the use cases that we've won ultimately to power through Nielsen.
So it signifies a big opportunity for us and we will obviously.
Look at M&A as a continued way for us to increase our capability and we will comment more on that whenever we're ready, but we're super excited with the feedback on Nielsen one alpine how it is going to do about even in 2022.
Yes.
Okay, great and so just to be clear David you would expect a 100% of the upfront to include Nielsen data in some form or another.
I would but that doesn't mean that there won't be there wont be secondary guarantees.
100, again, well somebody try something I'm not going to say that there can be some minor exception I don't I don't see anything widespread I think it's going to be really hard to go back to your client.
That is not audited.
And we are the most inspected most audited service out there and I think to value price people are going to need to total to 100% of audience time, and nobody can do that but Nielsen.
Great. Thank you both.
No.
Okay.
Yes.
Your next question comes from Doug Arthur from Huber Research. Please go ahead.
Yeah. Thanks, So just wanted to shift a focus for a second to impact current content I guess this is now called.
What.
Lindsay you called out the timing on contract renewals and content you did have a fairly easy comp I guess I guess the.
Relevant question is do you longer term is a 6% to 10% organic growth range for both of those impacted and content is that still.
In the ballpark.
Yes, I can take that one Doug. Thanks for the question. So you are right about the time and if we look at 2021 impact grew seven 3% content grew seven 8%.
But Q4, if you look at Q4 the impact on content organic revenue growth was down it was three 4%, but it's a little bit of talent to study the impact revenue grew in the high single digits and content declined and it is really what I talked about.
In my prepared remarks for some of our Gracenote clients.
The structure of the contract both size and structure can vary and that just presents some uneven.
And we saw that in the fourth quarter and we will see that also in the first quarter.
At this point in time, we're not really calling it beyond that so I think the overall characterization that you described is right. We do continue to expect mid to high single digit organic revenue growth for impacting content on a go forward basis.
Okay. Thank you very much.
Okay.
Your next question comes from Ashish Sabedra from RBC capital markets. Please go ahead.
Hi, Thanks for taking my question, maybe just a quick question on the EBITDA.
And your confidence of getting to 150 basis points of margin expansion by fiscal year 'twenty three despite some of the headwinds we are seeing in fiscal year 'twenty. Two wondering if you could comment on that one.
Yes, so we do still feel confident about the overall medium term target that you are referencing which we put out there at investor day and.
It really stems first from growth from an overall EBITDA perspective, and that's important and you see it in the guidance that we gave today that we're still feeling good about revenue growth.
We are investing in the business and nothing has really changed there, but those investments we do think our smart investments and they will drive revenue growth. We're also expanding the panel and those investments will start to moderate over time and then we are there.
Having other efficiencies, we're re platforming our ERP within the company right now which covers all our financials.
Our people globally.
So I'm, taking a fresh look at real estate and the World has changed a lot. We we have the pleasure of being in the office today, but it's the first time, we have done earnings in our headquarter offices.
April .
2020 so.
World has changed quite a lot in that has us looking at our overall real estate portfolio, but stepping back from it all we do feel good about the 43, 5% margins in 2023 and in line with what we put out there at Investor day.
That's very helpful color and maybe if I can just ask a question on the revenue growth trajectory.
Talked about the content headwinds, particularly in the first quarter, but I was just wondering are there anything else that we need to be cognizant off which is being on the revenue growth in the first quarter.
But potentially driving an improvement to the rest of the year.
So I think it's probably just important to focus on the full year guide that we gave and then I gave you a little bit of first half second half color, but beyond that there's really nothing other than what.
What I referenced in Q1 aside from that I think.
In line with the 4% to 5% guide that I gave.
Thanks Linda.
Okay.
Your next question comes from Matthew Harrison from tourists Securities. Please go ahead.
Hey, good morning, everyone.
Maybe two questions. If I could second was more of a housekeeping question first I guess.
Can you remind us maybe talk a little bit about as we think about exiting 'twenty, one and into 'twenty. Two how we should think about any type of impact youre seeing from supply chain disruption, obviously, there's been some disruption whether it's the auto vertical CPG consumer electronics, a few others I'm curious if that's impacted any of your short cycle business.
Similarly, as we get to the back half of the year, maybe you could remind us how political kind of plays into that.
Short cycle business as well so that's the first question and then secondly, a housekeeping Linda should we think about any separation related.
Cost still kind of carrying over into 2022 or is that kind of all behind us now. Thanks. So much.
Yes.
Yes.
Thanks, Matthew I'll just hit on.
The supply chain I think there's two components to that one is the internal which is just us being able to manage the headwinds from supply chain.
Particularly in our meter space in 2021, so we had an amazing team that we've put together that manage through the entire year ordering in advance. So that we can meet all of our meter in final plans in general hardware means.
So it's an area, we're going to continue to keep a very close eye on.
Obviously ordering in advance is a huge component of the strategy, but there's other things like changing vendors reengineering meters and stuff like that from.
From a topline perspective, there has been no particularly.
Noteworthy impact.
Any of the short cycle revenues.
It's an area we continue to watch, but as you saw your play out in 2021, it was fairly consistent to how we expected it to so nothing material there.
Second one Linda you wanted to.
The second one you are right.
Most of what you'll end up seeing Matthew and as far as separation related costs is 185 million that I broke out this year, you won't see us breaking out separation related costs going forward, because theyre, just theyre going to be virtually nonexistent.
Alright, that's helpful. And then I guess just coming back to the point on political can you remind us does that tend to have a little bit of a lift on the short cycle business as we get into the back half of this year or is that again more of a non event.
No.
This is baked into typically our revenue flow not to every year.
There are different kinds of events, whether it's sporting political.
Nothing noteworthy there that's separate from what's been called out the window in the guidance.
Great. Thanks, everyone.
Thank you.
Yes.
And your next question comes from George Tong from Goldman Sachs. Please go ahead.
Hi, Thanks. Good morning, you mentioned Youll complete all MRC actions by the Middle of this year can you elaborate on what outstanding items remain for local and national ratings and also discuss how your accreditation process for digital ratings is progressing.
Yes, Thanks George.
Again with digital.
They are complete.
Audit of all components of the digital product.
As you know we rebuilt it from scratch.
And so its mobile desktop, it's adding it's auditing all of the components availability the CTV enhancements identity. So it's pretty comprehensive we expect the first comprehensive audits for digital to be in.
In March which is obviously in this week and the rest of the month. So we feel really good about the progress on that front.
As regards to TV measurement as.
As we've laid out very transparently, we started publishing are tracking against all of the accreditation items required and I look this isn't just about it Craig issue, it's about raising the bar on quality more broadly so we've got a series of projects there or beyond.
What would be called accreditation criteria.
So our expectation is we get all of these projects not just the execution, but even the audits.
Done by midyear, and we're tracking really well to that and publishing to the industry, where we stand on a fairly frequent basis. So we feel really good about how we've executed going into Q4 as well as beginning of 2022.
Enjoy your question leads to a second point around upfront, which was asked earlier I just want to clarify something because youre right to go to the digital ratings I think the thing that we're going to see different in the upfront. This year is the digital players showing up.
Google's out there, which is the biggest streaming platform.
This AD sponsored there Arthur with a blog caused very clearly exciting Nielsen ratings continuing to go forward, though as I mentioned on the call Roku being always under the ratings I think it's really important when people are looking at the industry. They realize the industry is digital first and so as Nielsen and.
And as we approach all of this it is the belief that we'll credit the pieces because I think.
We need to Resourcing trusting confidence and I really respect the MRP process.
Right behind that will be cross media.
But this upfront is going to be for the first time I think in upfront with a lot of commitments to the streaming side also and those are all going forward with Nielsen.
Got it that's helpful.
Do you expect organic revenue growth to be back half weighted in 2022, despite easier comps in the first half of the year.
Library, specifically on expectations for growth in the audience measurement business, including puts and takes that might impact growth in the first half.
Yes.
Yeah, So I can take that range of large.
I think as we think about audience measurement, we are consistent with the way that we've.
Signal that in the past.
And that for audience measurement that we pretty much see it as mid single digit.
Is the way that we're thinking of it low to mid.
Depending on any particular.
Mix of renewals that play out.
David talked about the strength of our renewals and 100% have renewed so we felt good about the overall low to mid <unk> in line with what we put out there an investor day.
As far as the timing is concerned we are investing in the business as I previously mentioned.
And the initiatives.
There is oftentimes the case have us investing in the first half and then we see the benefits play out in the latter half of the year and that's fairly consistent with the way you're seeing the business play out over the past few years and that's what you see in the numbers for this year, so nothing really beyond that to call out.
Okay.
Got it very helpful. Thank you.
Your next question comes from Toni Kaplan from Morgan Stanley . Please go ahead.
Thanks, so much.
Can you talk about what you're seeing with regard to labor inflation and how much of an impact included in the EBITDA guidance and related if you could talk about any changes or initiatives you have taken with regard to recruiting and retaining employees is hiring spin a little bit more challenging in the current environment. Thank you.
Certainly listen we have an extraordinary team as I said on the call. We've got more data scientist in the next five contenders combined.
They are in hot demand and we make sure that we reward them. We've got an incredibly strong tech team really great product leaders and of course, good commercial leaders.
We have to stay competitive we are watching.
Yes.
People's competitive offers and what's going on in the market generally and are investing in the value proposition for our people.
And that is reflected in the.
The targets, we gave which is maybe some constraint on margin expansion.
But I think we've got a great proposition and people really do like working here.
Coming in I think of course, it's not all top there's also real investments in training there is investments in <unk>.
Collaboration people come here, because they want to learn the future I think you are very excited.
About the convergence of digital and linear which no. One else is tackling like we are excited to learn that because I think it's really going to help their careers hopefully at Nielsen for a long time and even when they go elsewhere, our alumni do quite well and are in hot demand.
No.
Those are all the things we're focused on I would say it's job one.
We do have a.
That's something we call smart work, which is the way we work we've given people a lot of flexibility to balance work from home with the office is the offices reopen that's also I think.
Been very well received the burden of courses on our managers to make sure that we're including everybody whether we see them in the office that we worked with them remotely during the week and so there's a lot of we're covering our managers manage and take advantage of the flexibility the tech enabled our people.
Great.
So ask about internationally you talked about the 7% growth in 2021 can you just talk about where you're seeing the most traction there whether it be by country or which types of solutions are getting the most uptake and international thanks.
Yeah.
I would say Tony for international.
It's a really good story and that it's diversified and distributed so theres really nothing in particular that.
<unk> is driving that.
A more pronounced way than than others.
There is in any given quarter, there could be some strength, but it's in all regions is in all markets.
And so nothing really rises to the level to strike out from.
As being a real stand out, but the better story is the diversification that we have across all of international.
But I also want to add because this confirms the thesis we laid out at Investor day in the fall.
Yes, It was December 2020.
It's happening that around the world.
Yes.
Basically the agencies and the advertisers are demanding cross media and.
I cited some examples but in Mexico, where.
Dave asked disclaimer screen measurement lab panel, which we've done which is helping to build during measurement, Australia has a big project called Vos.
Tom There has really stepped up to make sure they deliver cross media, which they.
Chose Nielsen is the only company that could do it.
In a place like Thailand, again, working with <unk> across both the buyers and the sellers to get them to cross media. So.
There's a huge demand for this and the digital capabilities of Nielsen really our unparalleled. It has the most value digital currency out there so even in places where there are other.
Traditional Jackson measurement companies.
I'll need us on the digital side so.
Thats really helping in that the audience measurement part.
But Nielsen internationally and is a big part of why we're growing faster in international than we have in years and.
And we expect that to continue.
Terrific. Thanks.
Okay.
Your next question comes from Jeff Mueller from Baird. Please go ahead.
Yeah. Thank you I was hoping you could comment on I guess buyback execution plans or consideration that such a big headline figure and I understand the guidance assumption of not include.
Including it but just given the percentage of market cap in a year and a half of free cash flow like what are you <unk>.
<unk> in terms of timeline for executing at or how aggressive you would be or is it dependent upon M&A pipeline.
So our conversion anything like that thank you.
Yeah, Hey, Jeff.
I'll take that one.
No.
Yes, there are a lot of variables and we haven't provided any specific timeline, but stepping back the great news is that we were able to make so much progress. This past year with regard to our leverage where we do now have the flexibility to evaluate tradeoffs investing in the business considering tuck in M&A.
<unk> or.
Executing on share repurchases, all the while continuing the dividend.
And so we're not going to signal exactly when we're going to be in the market and there are always some limitations on the amount of trading you can do in a buyback program anyway.
To say that we think the shares are at very attractive levels.
Currently and we are as you pointed out we're going to continue to generate significant capital flexibility overtime. So it just is very well positioned and we couldnt be more pleased to know that the board sees the long term value in the company and did the authorization. So.
We will circle back in due course, but at this point in time no specific timeframe.
Okay.
And then I guess this ties to your.
Your views on intrinsic versus market price and probably the way the markets assessing the terminal value you gave us a lot of good points, David on separating noise from reality, both operational and the financial markers.
Just addressed the question on contract duration or length as you.
Renew through the.
The Nielsen one rollout I know you've always had long term contracts but are are.
Are they lengthening as clients embrace Nielsen one is there any sort of pause as they're going through the Nielsen one adoption process, just any update on contract length.
Well first of all I would remind you in the script I said, 100% of our top 10 clients renewed in the last few years and they all renewed with similar escalators and Timeframes as we've had historically so no changes, but I also pointed out is that last year, our national clients and some of them have been pretty vocal about us.
At the same time, they all grew with us faster than they were growing pre pandemic because they are also moving to digital and they need yet so.
I would say very much on track in these same types of contracts and certainly what when people have an audience measurement contract with us we would.
We bite them so that it can roll through the Nielsen one methods as both methods come out and it shouldnt be incremental for Nielsen one, it's just a better way to measure the audience to measure them all on one methodology.
In terms of the length, but what I also pointed out is that we've got a number of digital players who sign up with us those contracts tend to be a little longer both companies are quite confident in their futures with digital first players. So yes.
Yes, I would.
Say that marginally is extending the average length and I believe as.
As all media companies settle into this new streaming first world and they realize the value of Nielsen provides.
Really help those agencies meet their fiduciary responsibility.
We will be able to help longer discussion. So it hasnt gotten shorter I would certainly like it to be longer going forward.
Got it thank you.
Okay.
And your next question comes from Jason Bazinet from Citi. Please go ahead.
I just had a quick question on free cash conversion I think in your prepared remarks, you said hitting that 50% of EBITDA converting to free cash in 'twenty three would be difficult because cash taxes were higher in capex would be higher but the capex step up with sort of a temporary.
I guess it sort of implies that the cash taxes are higher cash taxes will be permanent.
Is there any way you could sort of frame what you think a reasonable free cash conversion will be longer term for the firm.
What I would say Jason is we haven't even hit the one year Mark.
Having closed on the sale of the connect business.
And the profit mix of the connect business versus.
The media portion of the business is very different connect having been a much more global business and media being largely domestic with really nice growth outside of the U S.
Sure it's complicated and certainly during the course of 2021, there are a lot of dynamics in play with selling to enact and the tax treatment associated with that and how that impacted our ability to utilize tax credits during the course of the year.
And so we are not giving a rate at this point in time. The good news is EBITDA is higher and that translates into higher cash taxes, but it really is based on where our profitability is in various jurisdictions and in the U S. In various states and all of that factors in.
Two what will impact our cash taxes, our goal is still to get to the 50% cash conversion over time.
And share repurchases may bear some relevance to that because the interest expense would that to the extent it is.
Impact the pacing of that continuing to Delever would.
Impact interest expense not huge amounts, but nevertheless, cash interest and so there are a handful of dynamics that are in play but at this point in time not in a position to really be able to give that Pasha rage, which is a unique concept anyway, we're comfortable though with the way that we've guided the effective tax rate.
23% to 25% range and I'll remind you that if you remove the noise out of the current year, our effective tax rate would have been 23, 5%. So just an important data point and we will continue to be transparent on cash taxes on a go forward basis.
Great. Thank you.
Okay.
At this time for today, so I will turn the call back over to David Kenny for closing remarks.
Listen I want to thank you all for joining the call. This morning everyday we all get up here to power a better media future for all people. We are not distracted from that mission and we're very confident in the path ahead.
We're very excited and proud of the progress we've made and now we've got a lot more to do so we look forward to updating you again in April .
This concludes today's conference call you may now disconnect.
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