Nielsen N.V. Ordinary Shares

Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year 2020 Nielsen Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. We ask that you limit yourself to one question and re-queue for any additional questions. please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Sarah Gibbons, Senior Vice President, Investor Relations and Treasury.

Good morning, everyone. Thank you for joining us to discuss Nielsen's fourth quarter and full year 2020 financial performance. I'm joined by our CEO, David Kenney, and our CFO, Linda Zoukakis. Karthik Rao, our COO of Media, will also be on the call for the Q&A portion. 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 relating to the proposed transaction, 2021 guidance, and the impact of COVID-19. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, February 25th, and we are under no obligation to update. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those identified in our disclosure filings and materials, such as our 10-Q and 8-K reports. and in subsequent reports filed with the SEC, including our 2020 annual report that we expect to file later today, which are 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 bielson.com. For Q&A, as always, we ask you to limit yourself to one question so that we can accommodate everyone. Feel free to join the queue again, and if time remains, we will call on you. And now to start the call, I'd like to turn it over to our CEO, David Kenney.

Thank you for joining our fourth quarter earnings call today. We'll cover our Q4 and 2020 results, but I want to spend most of my time today looking ahead at 2021. We have an exciting year ahead, with strong momentum built off solid execution in 2020. I hope that you are all able to attend our Investor Day in December, where we laid out a detailed plan to maximize shareholder value for the new Nielsen. We refer to the new Nielsen as what our company will look like pro forma after the pending sale of Connect. Following the sale, Nielsen will be the must-have data and analytics provider for the entire media ecosystem. Let me remind you of the three key messages from Investor Day. First, we are focused on driving new growth from new solutions across all of our end markets, and we are doing this globally. Second, we are undergoing a cultural shift with a growth-driven mindset And third, we have a compelling financial model reflective of a leading data and analytics company. I'm going to lead off with the last point, our compelling financial model as shown by the resiliency of our business in 2020 and our improving financial profile. Our guidance issued today is consistent with the preliminary 2021 outlook we provided at Investor Day and our confidence in our ability to deliver this has only grown since December. Linda will provide greater detail later in the call, but I want to review our 2021 outlook at a high level. We expect 3.5% to 4.5% organic revenue growth. We are laying the path to achieve our medium-term goal of mid-single-digit organic revenue growth. We'll see margin expansion of 25 to 50 basis points, with 150 basis points of total margin expansion expected through 2023. And we expect free cash flow of 580 to 630 million for the new Nielsen. We remain focused on achieving free cash flow conversion of 50%, which will help drive free cash flow above $800 million by 2023. And we are also forecasting adjusted EPS of $1.43 to $1.54. And finally, our balance sheet will improve as we pay down approximately $2 billion of our debt from our agreement to sell Nielsen Connect to Advent International. We received shareholder approval for the sale at our special shareholder meeting in February, with 99% of the shareholders who voted voting in favor of the transaction. We are making good progress on the other necessary approvals and customary closing conditions and we expect this transaction to close within the next 90 days. Our confidence in our growth forecast starts with the strong foundation we laid in 2019 and 2020, including our cultural shift to a growth-driven mindset. 2020 was obviously a challenging year given the global pandemic, but Nielsen adapted incredibly well. I am proud of all that we accomplished, and I want to thank each and every one of my Nielsen colleagues for their resilience, courage, and focus. While our 2020 revenue was negatively impacted by the pandemic, we still delivered adjusted EBITDA and EPS within the pre-COVID initial guidance range we provided you at this time last year, and free cash flow was above the initial range. We achieved these results by quickly adapting and evolving throughout the organization, especially in the field our call centers, and our products. Importantly, our actions were not just temporary reactions to the COVID pandemic. We created permanent structural improvements by enacting our optimization plan mid-year. We rationalized the product portfolio with a focus on essential higher margin syndicated businesses. We also simplified the underlying technology and data science around two unique global platforms. one for audience and one for content, which will drive faster and bolder innovation in 2021 and beyond, taking advantage of the rapid media ecosystem evolution that has only accelerated over the past year. Finally, we strengthen our leadership team and our board of directors. Together, we are driving the cultural shift to a growth mindset across the entire organization, led by our diverse leadership team. I want to add that our increased focus on diversity, equity, and inclusion was essential to achieving our solid 2020 results. We focused on every member of the Nielsen team being able to feel safe and supported this year, and this helped our people show up in amazing ways. We have also focused on being an inclusive business, and we see great value from insisting that all of our partners share our accountability to diversity equity, and inclusion. We've discussed our compelling financial model and our cultural transformation. Now let me address the final key message from Investor Day. The new Nielsen is driving new growth from new solutions across all of our end markets worldwide. I'll walk you through our three essential solutions, audience measurement, audience outcomes, and grace note content services. Starting with audience measurement, in December, we announced the planned launch of Nielsen One, our new cross-media measurement solution. Nielsen One evolves the Nielsen ratings to a single measurement solution for both streaming and broadcast consumption. This is an enormous innovation for Nielsen and for the media industry. It's a transformative move that is critical to the future of the media ecosystem. The industry's critical need was validated by clients at our NielsenOne launch event, where industry leaders such as Unilever, MasterCard, NBC, Google, and GroupM, and others, discussed the need for a single currency across streaming and broadcast. If you weren't able to attend the virtual launch, I recommend watching the replay, which is available on our website. These and other companies are also actively involved now in the advisory committees for NielsenOne. We are starting off 2021 with clear proof points that we are advancing on our cross-media vision. At Investor Day, we laid out the roadmap for the major components of Nielsen I through 2022. We are delivering as planned on these interim milestones toward the Nielsen I launch today, and clients are already using our new capabilities. Our cross-media measurement solution has three fundamental principles at its core, resiliency, coverage, and comparability, and we are making good progress across all three principles. Let me provide you some color. First, resiliency is built through more data sources. In Q4, we announced strategic data partnerships with Vizio, DirecTV, and DISH to unlock addressable measurement. This builds on the existing relationships we have in place for local measurement, the return path data we ingest from Comcast, Charter, DISH, and DirecTV. Of course, there is noise and biases in big data alone, which is why our gold standard Nielsen panels are essential to clean and correct this data. We are strengthening our resiliency by upgrading our panel to include streaming meters and an advanced nanometer across the entire base. We recently met our initial goal of 10,000 streaming meters, and we expect to have streaming meters in 100% of panelists' homes as we refresh the panel over the next 24 months or so. Second, coverage. We are expanding our connected TV footprint, as we said we would, with the addition of YouTube, YouTube TV, and Vizio, and we'll work to further this. We've also recently expanded coverage of streaming to include the viewing of movie releases that are directly available to consumers through streaming or MVPD platforms. For the first time, we released viewership data for WarnerMedia's HBO Max streaming platform for their blockbuster, Wonder Woman 1984. The third principle, comparability, is enabled by all of our measurement solutions being built off a single Nielsen audience ID. This ID was built in 2020 and successfully tested in Q4 as planned. The ID allows us to deduplicate metrics and ensure that we have one view of reach and frequency across both broadcast and streaming signals. In January of 2021, we implemented the new measurement methodology for digital ad ratings, which is our flagship digital offering. And I'm also proud to announce that we were recently recognized by the media industry with an Emmy Award for our technology innovation to measure video viewing across a multi-platform service, technology that's core to Nielsen One. And finally, I want to remind you that Nielsen One is a global vision. Any new markets, such as last year's wins in Denmark and Saudi Arabia, will be on the Nielsen One solution, and we will convert the rest of our markets over the next two to three years. Let me turn to plan optimize. This is where our two other essential solutions, audience outcomes and grace note content services, are housed. Given the portfolio rationalization we did in the 2020 optimization plan, we will now start referring to plan optimize as outcomes and content, which is more precisely descriptive of the remaining products and services. Starting with audience outcomes, we are one of the largest outcomes measurement providers in the Medio ecosystem globally, helping clients plan their cross-media spend and answer questions like, did the viewer visit the dealership or buy the product online? We already do this today, but we have the opportunity to accelerate outcomes growth with new clients, new syndicatable products built on a single platform, and connecting our cross-medium measurement to outcomes, which is a key, only at Nielsen, differentiator. A key element of our growth strategy is further expanding in verticals beyond consumer packaged goods, which are currently the vast majority of our advertiser clients. yet represent only 10% of the world's ad spend. We have recently organized our sales teams to better focus on end markets, such as financial services, insurance, pharmaceuticals, automotive, retail, digital brands, and technology. And this has already driven new client wins across these verticals. In fact, at Investor Day, we mentioned success with a number of leading brands, such as Visa, Equifax, Petco, Volkswagen, and LVMH. We've expanded with LVMH to now include their Bugari division, and we've added new clients such as Spotify, Flipkart, and others. These wins span both the US and international markets. Our progress is underpinned by our technology transformation, which is helping to shorten turnaround times, bring on new clients faster, and accelerate product innovation. Earlier this month, we announced our new ID resolution methodology for attribution, which enables advertisers and publishers to understand the entire consumer journey across platforms, better optimize their spend, and prove the impact of advertising even as cookies go away. Finally, let me turn to GraceNote Content Services. As you may remember, GraceNote is the market leader in entertainment metadata. We power the consumer entertainment experience on a truly global basis. For example, GraceNote provides detailed information on movies and TV shows that you see on your cable program guides or discover on your streaming services. GraceNote also provides real-time sports score statistics for the world's top leagues, events, teams, and players, to use in their audience experience. GraceNote is deployed in over 120 million cars worldwide, providing data through car entertainment systems. And GraceNote's information on artists and songs powers music services and consumer electronics brands. GraceNote metadata is the de facto standard across the entertainment industry. Virtually every consumer interacts with GraceNote metadata multiple times in any given day. We are focused on three key growth opportunities for GraceNote content services. First, more audiences, content, markets, and platforms means that there are more opportunities for our core GraceNote metadata services. We're growing our substantial base by adding new platforms, markets, and content, and increasing the capacity and speed of our ability to grow metadata. We have been building our global leadership position with key industry players such as Comcast, Samsung, Google, and Liberty Global. Second, we're developing new solutions for new products across discovery, marketing, and insights. For example, last week we launched GraceNote Inclusion Analytics to accelerate diversity in content and enable clients to create more resonant programming backed by our data-driven analytics. And third, we have a bold ambition for GraceNote. GraceNote can help studios leverage the GraceNote Content ID to attach a unique identifier to their content, which will serve to simplify and scale the distribution and discovery of content across the full range of channels and streaming services used by audiences today. To sum up, we are excited about the opportunities ahead in 2021 and beyond. We have a compelling financial model. We are shifting our culture to that of a growth mindset, and we are executing on key initiatives to drive accelerating growth through new solutions and new clients. Building on our progress in 2020, we have confidence in our ability to deliver on the 2021 plan and to deliver our medium-term targets. We are indeed a new Nielsen. Strongly positioned for the future, and ready to deliver enhanced value to our clients and to our shareholders. I'm now happy to turn the call over to Linda to review the financials and provide greater detail on our 2021 guidance. Linda?