Nielsen N.V. Ordinary Shares

Thank you very much for your patience. The call will begin shortly. If you'd like to ask a question at the end of the presentation, please press star 1 on your telephone keypad. Thank you for your patience. Thank you. Thank you. Thank you. Ladies and gentlemen, good morning and a warm welcome to the Q1 2021 Nielsen Holding PLC Earnings Conference call. My name is Louisa and I'll be co-operating this call. If you'd like to ask a question at the end of the presentation, please press star 1 on your telephone keypad. I will now hand over to one of your hosts, Sarah Gubbins, Senior Vice President, Head of Investor Relations, Treasury at Nielsen. Sarah, you may begin.

Good morning, everyone. Thank you for joining us to discuss Nielsen's first quarter 2021 financial performance. I'm joined by our CEO, David Kenney, and our CFO, Linda Dukakis. Our COO, Karthik Rao, will also be on for 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 relating to our business plans and 2021 guidance and the impact of COVID-19. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, May 6th, 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-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 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.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.

Good morning. Thank you for joining our first quarter earnings call today. We delivered a solid first quarter, building off the strong momentum and execution you saw from us in 2020. We have the right leadership team in place, a deep bench, and we are building a track record of success. In March, we closed on the sale of Global Connect, and we've now officially embarked on the next new chapter as a new Nielsen. We are uniquely positioned as the essential data, measurement, and analytics provider for the entire media ecosystem with a strong foundation for the future. We are focused on driving new growth from new solutions across all of our end markets, and we are doing this globally. We are undergoing a cultural shift with a growth-driven mindset, and we have a compelling financial model with an improving financial profile. I am really excited about our clarity, focus, and alignment as we move forward with executing on our growth strategy. Linda will review the financials in detail, and I'll provide a high-level look before I review the business highlights. We are very pleased with our first quarter performance. Revenue grew 1.3% year over year on a constant currency basis, or 2.3% organic. Our adjusted EBITDA margins expanded over 600 basis points. Our adjusted EPS of 47 cents increased from 36 cents in the prior year, and free cash flow was $115 million up from the first quarter of 2020. Our teams are executing well. Across the organization, our employees have rallied. It is so rewarding to see all of our hard work and perseverance over the last couple of years begin to pay off. From a macro perspective, we are starting to see some economies and spending gradually open up as pandemic restrictions ease, although this varies greatly by market, and the pandemic is still prevalent. Our colleagues in hard hit areas such as India and Brazil are top of mind right now. We continue to prioritize the safety and wellness of both colleagues as we do with all of our colleagues. I want to once again thank our employees for the resilience and dedication they've shown since the start of the global pandemic. This is a team I'm proud to lead and proud to be a part of. Looking ahead, we remain confident in our ability to deliver on our 2021 growth plan, and we are raising key elements of our 2021 guidance. Now, let me walk you through the progress we are making and driving growth across our three essential solutions. Audience measurement, audience outcomes, and great note content services. Across the board, our product-led strategy has been an important driver of our growth. We are adding new clients and markets while also bringing more services and value to existing clients. Starting with audience measurement, Nielsen One is at the forefront of our strategic priorities. We are committed to providing a single cross-media currency to the media industry in the United States and our markets around the world. Since our launch announcement in December 2020, we've made good progress on the product, our client commitments, and with industry engagement. We have great engagement with advertisers, agencies, platforms, and networks in the Nielsen One committees around both technical implementation and business and currency changes. The currency evolution is important to both media buyers and sellers. We're working with advertising associations, such as the ANA, or Association of National Advertisers, and WFA, the World Federation of Advertisers, on their long-term cross-media initiatives. We are also working across the ecosystem with broadcasters and leading digital players to meet advertiser requirements. And we're focused on ensuring that clients see the value of our innovative solutions both today and in the future. Let me now share some specific audience measurement milestones hit during Q1, starting with client renewals. We are encouraged by renewals in Q1 across both broadcast and digital peer plays with multi-year commitments and price escalators. Our commitment to full coverage, resilient, and comparable cross-media measurement will serve the industry well as it evolves. We launched our identity resolution system in January. As we announced in March, our strategic alliance with Roku substantially expands our footprint of smart TVs and other devices, now nearing 100 million in total. As part of the alliance, our ad and content measurement products will also be integrated into the Roku platform. Last month, we announced the launch of Nielsen Streaming Video Ratings, which provides unique visibility into total viewership and advanced audience demographic insights at the platform level alongside linear TV ratings. Demand has been strong, with seven out of our top ten clients already signed up. Combined with Nielsen SVOD content ratings, which provide ratings at the program level, we now deliver comprehensive streaming performance metrics across program, platform, and streaming category. We are working across our clients to embed Nielsen more easily into their buying and selling workflows. A big first step was relaunching NPower, our measurement portal, as an easier-to-use cloud-based interface. We've also made good progress with always-on digital measurement, which is a significant step towards true, comparable cross-media measurement across digital, linear, and addressable TV. Our recent alliance with Roku will include always-on measurement. There has been some recent press about how the COVID pandemic impacted viewing habits and the resulting ratings. Let me help frame this for you. Without a doubt, the pandemic affected audience behavior. New content production slowed. Sports were sidelined for a while and then had abbreviated and overlapping schedules. Streaming platforms accelerated massively beyond the pre-COVID trends. We were able to perform most of our field work remotely throughout the pandemic, but CDC and state guidelines prevented us from entering panelists' homes, either to sign up new panelists or maintain existing homes. As with any change or disruptive event, such as extreme weather in the past, we recorded our changes with the media rating council or mrc and committed to assessing the full impact of the changes as soon as possible however the pandemic has lasted longer than anyone anticipated we only were able to recently restore full in-home maintenance for the vast majority of communities in recent weeks We have continued to work with the MRC to make sure we had validated data to fully assess any impact. Our panel remains robust and representative, and the integrity of our ratings estimates remains high. I also want to be clear that our panels are foundational to audience measurement. panels combined with big data enable us to provide the media industry with a comprehensive and representative view of consumer media behavior at the person's level with panels as the key truth set. As a part of our broader Nielsen One strategy, we're continuing to invest in and grow our panel and continue to incorporate big data to make our measurement deeper and richer. Let me turn to audience outcomes, where we serve as one of the largest outcomes measurement providers in the media ecosystem globally. We have a broad array of solutions within outcomes and continue to make progress on integrating our portfolio. This simplification will help to improve our go-to-market approach to clients across publishers, platforms, advertisers, and agencies. We continue to grow our business with advertisers across new verticals in the U.S., and globally. Recent wins include Dell, WWE, J&J, Florida Blue, and Hasbro. In April, we launched Nielsen Market Lift, a campaign outcomes measurement tool built on scalable cloud-native platforms. The global launch covers 37 markets, enabling clients around the globe to quickly evaluate the effectiveness and efficiency of marketing campaigns. And we're growing with leading digital players, including Spotify, as we mentioned last quarter. In April, we expanded our relationship with Twitter. a long-standing audience measurement client to help their video advertisers do more robust pre- and post-campaign planning, maximize ad effectiveness, and deliver campaign results with increased speed and agility. Finally, GraceNote content services. GraceNote is the global leader in entertainment metadata, and we are making good progress on our strategy as of the world recognize the increased value of our content solutions. We are developing new solutions to address market needs on a global basis, particularly as content and streaming platforms continue to grow, creating more competition for audiences. For example, we recently launched a new service personalized imagery, which allows linear and streaming TV providers to dynamically display program images that resonate with individual viewers based on their preferences and previous consumption. It's a valuable tool that drives engagement and enables clients to maximize viewership on their platforms. I look forward to sharing additional new GraceNote products later this year. Before I sum up, I want to note that in March, we appointed Sandra Sims Williams as Chief Diversity Officer. You may recall that this is a role I previously held as we worked to make the New Nielsen a truly diverse business. Diversity, equity, and inclusion are crucial to the success of our business, and it remains a top personal priority for me, for the leadership team, and for the Nielsen Board. Sandra's been a great partner since joining Nielsen in January 2020, and I am confident that her leadership, wisdom, and experience will only accelerate our progress. To close, with the Connect sale behind us, this marks our first quarter as the new Nielsen, singularly focused on the media ecosystem. We have made significant progress modernizing our technology and data science, which drives scale and efficiency throughout the organization. We are driving growth from new solutions across all of our end markets, and we are benefiting from the cultural transformation driven by a growth mindset. We have a compelling financial model and our focus on driving improvement across key metrics. Our solid first quarter reflects the strong execution by our teams globally, and we are excited about the opportunities ahead. We have confidence in our ability to deliver on our 2021 plan and our medium-term targets. I'll now turn the call over to Linda to review the financials.

Thank you, David, and good morning, everyone. Before I discuss our Q1 results, I want to spend a moment on the Connect sale and resulting debt paydown. We closed on the sale of Connect on March 5th. We used $2.3 billion of the $2.4 billion of net sales proceeds to pay off our 2021 and 2022 bonds, as well as $1.3 billion of term loan debt due in 2023 and 2025. The transaction also strengthened our balance sheet by lowering pension and other liabilities by approximately $200 million. Although these liabilities, the sale proceeds, and the related gain on sale are preliminary and subject to change as we finalize the transaction accounting later in the year. As a result of the sale, effective this quarter, Connect is reported as a discontinued operation for all periods presented. My remarks today will focus on the new Nielsen, which represents our results pro forma for the Connect sale and as if the $2.3 billion debt paydown took place at the beginning of 2020. This approach helps with prior year comparisons, and it's consistent with how we handled Investor Day in December and our 2021 guidance. Turning to the first quarter, as David highlighted, we are pleased with our Q1 results, which reflects solid performance and a nice start to the year. I'll start with slide seven, which summarizes our first quarter revenue performance. Revenue for Q1 was $863 million, up 1.3% year-over-year on a constant currency basis, or up 2.3% organic, which adjusts for exits related to the 2020 optimization plan. On a reported basis, revenue grew 2.5%, which includes an FX benefit of 120 basis points. We saw strength in both the U.S. and international markets. We were pleased to see quarterly growth trends continue to improve following the COVID dislocation. The effects of COVID continue to lessen, though we did still see some ongoing impact in the first quarter. Audience measurement revenue grew 1.9% constant currency and 2.3% on an organic basis. Growth was solid across the board and especially strong in digital measurement. We're also pleased to see pressures in local subsiding. Outcomes in content revenue declined 0.4% constant currency, with organic revenue up 2.2%. The uneven return of live sports due to COVID continued to play out in Q1, but we did see some improving trends in short cycle revenue as well as solid growth in content. The right side of the page shows revenue for the past five quarters as well as constant currency and organic revenue growth rates. As you can see, the growth trend improved nicely in Q1 following the impact of COVID over the last few quarters. Turning now to slide eight. Adjusted EBITDA was $388 million, up 19% year-over-year on a reported basis, or up 18.3% on a constant currency basis. Revenue was up 21 million compared to the first quarter of 2020 and costs were down 41 million year over year, resulting in margin expansion of 646 basis points on a constant currency basis and adjusted EBITDA margins of 45%. On the right side of the page, we show adjusted EBITDA and margins over the last five quarters on a new Nielsen basis. As a reminder, we took swift actions in late Q1 last year and cut temporary costs by approximately $100 million. These temporary costs return more meaningfully in the second quarter and will continue to ramp as this year progresses. We also began to implement a restructuring or optimization plan in the third quarter last year. So the incremental year-over-year benefit is more pronounced in the first half of this year versus the second half. Adjusted EPS was $0.47 as compared to $0.36 in Q120. This was driven by higher EBITDA and slightly lower depreciation and amortization, offset in part by higher taxes. Our effective tax rate was 35.5% in the first quarter, which included a $16 million discrete item as we revalued our net deferred tax liability to reflect the new Nielsen tax profile in the absence of Connect. This discrete item is added back to adjusted net income, resulting in a normalized first quarter tax rate of approximately 26%. We continue to expect an estimated tax rate of 26% to 28% for the full year, excluding discrete items. Free cash flow was $115 million, which compares to $22 million in Q1 2020. Key drivers of the year-over-year improvement include higher EBITDA, one-time cost in the prior year, and lower CapEx, which was largely timing-driven. we continue to expect CapEx to be relatively flat for the year. And now I'll discuss our updated 2021 guidance on slide 10. With Connect discontinued operations treatment finalized, we have rounded out the pro forma amounts here on slide 10 to include 2020 adjusted EPS and updated free cash flow. And in the appendix on slide 20, we've recast our 2020 P&L by quarter on a continuing operations basis, So you can see the impacts of Connect as a discontinued operation. And then on slide 21, we are providing quarterly new Nielsen adjusted EPS for 2020. Today, we are raising elements of our 2021 guidance following the strong first quarter results. We are increasing our adjusted EBITDA guidance range by $10 million, which results in a range of $1,470,000,000 to $1,490,000,000, with margins in the 42.25% to 42.5% range, which compares to 2020 pro forma standalone margins of 42%. As we discussed last quarter, our 2021 EBITDA forecast reflects the approximately 60 million benefits of the optimization plan this year and the underlying efficiency of the business, partially offset by the return this year of approximately 100 million of COVID temporary cost cuts made last year, as well as incremental growth investments. Adjusted EPS is now expected to be in the range of $1.47 to $1.58, up 4 cents from our prior guidance range. This compares to $1.45 in 2020 pro forma for the new Nielsen. This higher adjusted EPS range is driven by the adjusted EBITDA guidance range of $10 million plus another $10 million of lower debt costs, mostly due to the higher debt pay down than initially contemplated. We are raising our free cash flow guidance by $15 million to a range of $595 to $645 million. As a reminder, adjusted EBITDA, adjusted EPS, and free cash flow guidance ranges do not include the impact of one-time separation-related costs, which Nielsen bears under the Connect Sale Agreement. These cash costs are forecast to be $220 to $240 million this year, with approximately $134 million incurred in Q1. The vast majority of these costs are included in discontinued operations. This is the last year of any meaningful separation-related cash costs. For revenue, we continue to forecast 3.5% to 4.5% organic growth with significant improvements in both audience measurement and outcomes and content, and we forecast constant currency growth of 2% to 3%. Organic revenue growth adjusts for the impact of business and market exits. And now I'll provide some commentary on how we see the balance of the year playing out. We continue to expect revenue growth to be faster in the second half of the year than in the first half. Recall that we began to see more significant impacts of COVID beginning in the second quarter of 2020. In addition, we expect the benefit of our growth initiatives to ramp as the year progresses. We continue to expect year-over-year margin expansion in the first half of the year, driven by the strong margin expansion in Q1. As I noted earlier, temporary costs are returning this year, which impacts margins beginning in the second quarter. And we began to implement the optimization plan in the third quarter of last year. As a result, the second half faces a more challenging comparison, and we continue to expect year-over-year margin contraction in the second half of the year. Beyond these results and our outlook, we were pleased that following the Connect sale, Moody's revised its outlook on Nielsen from negative to positive, and S&P took us off credit watch negative. We ended Q1 with 3.77 times net debt leverage on a new Nielsen basis. This is the first time our net debt leverage has been below four times since 2017. And we're progressing well to hit our three to three and a half times net debt leverage target. To wrap up, we are pleased with our first quarter results and remain confident in our ability to execute on the new Nielsen growth story and deliver results in line with the full year guidance we updated today. And now I'll turn it back to Sarah for the Q&A session.

Thanks, Linda. With that, let's turn to Q&A. Operator, can you open up the line, please?

Thank you. Ladies and gentlemen, if you'd like to ask the Nielsen management team a question, please press star one on your telephone keypad now. While preparing to ask your question, please ensure your line is unmuted locally. Please note there'll be a brief pause while questions are being registered. Our first question comes from Dan Solomon from BMO. Your line is open. Please go ahead.

uh hey good morning everyone um i'll try to keep it quick and keep it to one question for david um one of my favorite slides from the investor day deck was that audience measurement product roadmap slide and it looks like you've checked the boxes on a few of the first half items that were on there already including the identity solutions and more connected tv coverage uh number of things always on ads measurements sub-minute tv measurements addressable measurement uh coming up in the second half david Any of those you want to update your views on in either timing, enthusiasm, we'd love to hear more about that to start.

Yeah, thank you, Dan. And, you know, we published the roadmap today. to be as transparent as they could and be accountable. I have to say I was confident in December. I'm as confident about a little more today. It's been encouraging the progress that we've made. It's been, I think, a real progress on the team to see the power of that data platform and the data science that makes it all comparable. The other thing that I feel really good about is the amount of industry engagement. As I mentioned, for some time, the ANA and WFA have had cross-media measurement task forces, and we're engaging with them and making sure that their requirements. And in addition, agencies, advertisers, networks, and platforms have all committed people to join us on regular committee meetings. There are six subcommittees to make sure the industry is ready for this. So I feel like we're delivering, but more importantly, I think the industry is engaged and wants to move in this direction.

Excellent. Thanks, David.

Thanks for the question, Dan.

Thank you very much. Our next question comes from Tim Nolan from McGuire. Tim, your line is open. Please go ahead.

Hi, thanks a lot. Question for David as well. A broader industry question, actually. It draws a little bit, David, on your background on the advertising side, and that is, The TV upfronts and the digital new fronts are upon us right now, and I wonder if you could give us your perspective on how the market looks this year, not in terms of its growth or anything, but just Nielsen's role and the evolving use of Nielsen measurement tools for connected TV, for combined linear and digital sales that the networks are doing. Just if you have any broad thoughts on Nielsen's role in the upfront this year, that would be great. Thanks.

Listen, thank you, Tim. It's a really interesting year for an upfront, right? Because we know that there were so many things that were unusual about 2020 that you can't completely use 20 as the basis for 21. You've got to, I think, look back, but you've also got to look forward because so many things were launched and innovated, even in the last 90 days. And so I think the whole industry is trying to figure that out. And we are actively engaged. What I would say is that the role of Nielsen is broader. So on the new front side, of course, Woku mentioned their partnership with us and their ability to provide third-party measurement. Nielsen was very strong in the Google presentation yesterday. And so I would say what is encouraging to me is that the advertisers are getting what they want, which is comparable and full coverage metrics and uh and we're in more places than we've ever been before to help solve that so it's it's going to be an interesting uh upfront as everybody kind of has to agree and commit to their best guess for 21 we're certainly helping to do that and then we're very committed to making sure we measure that thoroughly as we go through the year and it's again much more broad than it's been in the past i think that's reflective of how the industry is coming together as one industry

Thanks.

Thank you very much for your question. Our next question comes from George Tong from Goldman Sachs. Your line is open. Please go ahead, George.

Hi, thanks. Good morning. You talked about progress with your Nielsen One initiative over the past quarter. Can you talk about key next steps that you're looking to do that are outstanding and when you might expect financial benefits to begin to accrue from the rollout of Nielsen One?

Certainly. So on the second question, on financial benefits, I think that Nielsen One helped us with q1 to be honest we had some really important renewals as i mentioned in my remarks and you know as always we have multi-year contracts with clients they do involve you know, pricing and price escalators over the course of those multi-year contracts. And so in those, the road to Nielsen One was clear and it enabled those who were signing up with us for the next phase to have a roadmap that they believed in and could align their business models with. So, you know, it's not like there's suddenly a new product. Nielsen 1 is the migration of a number of audience measurement products into a new product. And everybody who's subscribing to those is making longer-term commitments, are agreeing to pricing, and I think we're adjusting pricing in some places to get it all comparable as well across digital and linear measurement. And so I think we'll just continue to see benefit, and it will compound the way a subscription business does. In terms of milestones and the ones we've committed to, it's the roadmap we laid out at Investor Day. I think we're very keen to get to addressable in the metric and to be able to serve the addressable market. So that's next. Connected TV is coming on strong. Roku, of course, helped with that. But there are others as well that are being integrated. You know, I think we are also really focused on the buy side, as I said, to make sure we're embedded in workflows. We're making real progress on being easier to use. And that's important because I think the other part of Nielsen, one, with all the data we're going to provide, it's going to allow many more decisions to be made at the front line. And so getting all the media buyers and planners in advertisers and in agencies to to find us easier to work with and to connect to all the tools they're using is also helping. So that's where we are. And, again, I think the industry engagement and making sure we have industry associations aligned, we're working closely with MRC, making sure accreditation can work, you know, all of that's right on progress, and I think we'll continue to report progress virtually every quarter for the next couple of years on this roadmap.

Very helpful. Thank you.

Thank you for your question, George. Our next question comes from Andrew Stanneman from JP Morgan. Your line is open. Please go ahead.

Hi, it's Andrew. Obviously, you're emphasizing your Roku newest partnership. I just want to know if Nielsen One has all the needed data partnerships on top of its streaming meter to do what it wants to do in terms of measurement. I know Vizio, DirecTV, Dish, and now Roku are those partners. My question is, do you need more data partners to get to where you want to be?

Andrew, good morning and thank you for the question. I want to remind people that there are three criteria for Nielsen. One is coverage. So are we measuring everything? And I certainly believe we have methods to measure everything that exists today. Do we have everything we need in the future? No, we will continue to innovate because our clients are innovating, and every day we find new ways that people are engaging in media, and we're going to continue to move at that pace. I'm excited about the re-platforming of the company because it allows us to go faster to make sure that coverage works. Comparability, to make sure we're measuring it all the same way, I think we've got a a good method to do that we've got the data to do that and we're proving it out um and i'm i'm really happy with the rollout of the nielsen id to help tie those things together resiliency is you know always enhanced with more data to be very clear we you know we we've had you know this is a big increase in data as we've been combining big data and panel together uh so i feel you know certainly our estimates are our way the best in the market and will continue to be so I will always be seeking additional partners to make sure that we can make that as robust as possible. I don't think there's anything we have to have beyond what we have, but I think that doesn't mean we're not going to keep working to improve our resiliency And the industry is going to continue to fragment. And so as you get to more fragmentation, you do want to make sure you've got as much data as possible so that you can be really as precise as you can, not only on big properties, but also on niche properties as well.

Right. Let me just add a small follow-up. You know, besides for the data partnerships, another key thing is that Nielsen 1 is integrated behind a firewall of large digital publishers. Is that all done now? Or are there still kind of large integrations beyond firewalls to be done?

There may be other ones in the future. I think we have methods agreed on the ones that are the biggest and most key. That's part of the work plan, so I would say we're actively testing those now, but it's operational. I don't have any huge issues there, but I would also say this method works for players at scale, so there may be others that we work on direct integrations with as well.

Very well. Thank you so much.

Thank you for your Thank you for your question. Our next question comes from Tony Kaplan from Morgan Stanley. Tony, your line is open. Please go ahead.

Thank you. Congrats on the strong margins this quarter. Just wanted to ask a question on the EBITDA guide. You raised it by about $10 million, but the 1Q EBITDA was so strong that it seems like that more than accounts for the raise. So I guess my question is, why not raise by more? I know you're expecting expenses to ramp. But I guess, are there some positive trends in the quarter that won't persist? Or are there extra investments that you're expecting to make now that you weren't expecting to be making last quarter? Thanks.

Tony, thanks for the question, and thanks for actually asking a question for Linda so I can put the others on the call. Linda, I think you put a lot of thought into this exact question, so if you could give Tony our thinking.

Yeah, sure. Good morning, Tony, and thanks for the question. You know, if we just step back a little bit and we think about all of the elements of our guidance, you know, we definitely spent a lot of time thinking through that because of the strength of the quarter. And what I would say is, you know, first and foremost, we're confident about the revenue guide, which we did not change. The strength of the quarter, though, did give us confidence to raise the EBITDA range by the 10 million, as you note. And, you know, there are a lot of moving parts. And with COVID last year, it makes for a really complicated analysis, a little bit of noise with the Connect divestiture as well. But, you know, we analyzed all of that and we thought that given that EBITDA was a little bit ahead of our expectations, But yet, there are some things that we have to be mindful of in the balance of the year. So if we think about this, Q2 last year was the quarter that we saw the impacts of COVID from a revenue perspective. You know, I would also point out that we will see the return of the temporary costs. And those will start to ramp up more significantly in this current quarter, because it's this time last year that we were really starting to take those costs out. Then also, Tony, in the balance of the year, you're going to see our investments and growth initiatives, which are going to ramp. And so when you think about all of that, in addition to The optimization plan, which we implemented in the second half of last year, obviously the optimization plan served us very well in the first quarter with the margin expansion that you noted. But we will start to lap the impacts, the benefits of the optimization plan as we get into the second half of the year. So it makes for quite a bit of unevenness. As we think about the revenue in relation to expense throughout the balance of the year. But, you know, stepping back from it all, it's in line with what we expected and all reflected in our guidance. So it's really just as we reflected on the strength of the quarter and our consideration of the balance of the year and what we had anticipated, it's what really made sense. you know, we are definitely in a growth mode right now. But as I pointed out with the incremental investments that are going to be a little bit lower margin as the revenue will lag the investment. And so that will be some noise that plays out in the balance of the year, all considered in our guidance. So, you know, I think if you step back and reflect on all of that, it's a complicated analysis, but one that we continue to be comfortable with, you know, given permanent cost dynamic, temporary cost dynamic, COVID revenue impact. So that's really the thought process that we went through as we analyzed how to handle guidance for the quarter.

Thanks so much.

Thank you for your question. Our next question comes from Todd Junger from Stanford Bernstein. Your line is open. Please go ahead.

Hi, good morning. I was going to direct this to David, but maybe I should, on the last comment, I'd obviously welcome Linda's comments as well if you want another break, David. So for whoever wants to take it, I was hoping you could help me. I'm still trying to wrap my mind around what the shape of the type of commercial relationships you think will evolve with your digital first, so pure play digital customers over time. And what I mean is, you know, for your traditional historical TV-centric business partners, customers, you know, we have decades of history with that. We sort of know what that looks like. You have multi-year, as you've said, sort of master service agreements contents with a lot of certainty around, you know, a sort of guaranteed price with escalators, and we know what that looks like.

On the digital side, is that the model that you think will evolve that you're trying to work towards? There's so much growth there.

Would you rather have something that's more variable in nature to sort of

flex that commercial relationship with the growth in their impressions and revenue? Is there some sort of hybrid? You mentioned even in the quarter, renewals with digital customers. I'm just wondering how you're evolving those commercial relationships as those relationships mature. Thanks. Thank you, Todd. I will take that question because I spend a lot of time with our clients on that topic. Listen, the whole movement to Nielsen One is telling the industry that we believe the audience is the audience, whether she's engaged on a streaming platform or a broadcast platform, and that everybody is going to be more of a hybrid. So that means there really should be one model. And the model is closer to the historical model we've had with the with the linear players, which are now all digital players also. And so I think we've certainly been working with the digital players on multi-year relationships, and we have been successful there in some really important places. And pricing that is comparable for the value, so they're going to compete with everybody else at that pricing, then the pricing from Yieltsin needs to be the same as well. And so it's multi-year escalators. Of course, with every client, we also look at their volume and scale. So we do certainly make some arguments about future growth with our digital players. But I would say we're going to be better off to serve the industry on a level playing field with very similar terms, standard contracts, standard pricing as a subscription business. And, you know, I hear you about do you leave some of the exposure to the upside? Perhaps. But I think the flip side is what the industry needs. And particularly keep in mind we serve the buyers as much as the sellers here. Having comparability, having full coverage, meaning it's all the same, and having resiliency really does put it all on the same platform with the same terms. That makes sense. Thank you, David. OK. Thanks for the question. It's a good one.

Thank you very much. As a reminder, ladies and gentlemen, if you'd like to ask the Nelson management team a question, please press star 1 on your telephone's keypad. While preparing to ask your question, please ensure your line is unmuted locally. Please note there'll be a short pause while questions are being registered and reviewed. Our next question comes from Jeff Miller from Bud. Please go ahead. Your line is open.

Yeah, thank you. I guess a follow-up on that last one and that potential march toward parity and the one price for everybody methodology. This might be a foggy memory and it's several years old, but I think at one point the Nielsen TV audience measurement revenue equated to somewhere around 2% of ad spend and Digital was like 1% of premium digital video ad spend. And correct me if I'm incorrect, but just how wide does that gap remain? And it does sound like you think there's an opportunity to get to parity, correct?

Yeah, thank you. Thank you, Jeff. And we look at multiple factors here. That would be one, because we're looking at our value to the sellers and our value to the buyers here. I would say it's closing. And in particular, where ratings matter are premium scheduled video. So I think if you search is search, and that's a different play. But as we're moving to really anyone for all video, we are getting in the video space to something that I think is certainly far more comparable and in a very tight range, whether that be on a streaming signal or a linear signal.

Thank you.

Thank you for your question. Our next question comes from Matthew Brunton from Trust Securities. Your line is open. Please go ahead.

Yeah, good morning. Good morning, David. Good morning, Linda. Maybe a question on the Roku exchange that closed back in April for the advanced video assets. And the question is, I guess, can you talk a little bit about the net impact to your revenue and EBITDA this year, how material or not that is. And then more importantly, just maybe talk a little bit about how important that deal is for either the data that kind of feeds into Nielsen 1 or adoption because you're having the data, the measurement always on. on the Roku platform to try to kind of sense the impact of the P&L, but more importantly, the strategic importance, whether it's more because it drives adoption or because it really does beef up the data for Nielsen 1. Thanks.

Thank you. Listen, I'm going to let Karthik answer the strategic question. He spent a lot of time personally getting that in place and now making sure we get full value of it in the way we execute. the financial of what we sold to them is pretty minimal. But I'll let Linda actually answer your financial question directly after Karthik. Because I think to understand the strategy will help you understand the financials. So, Karthik? Thanks, David.

Yeah, thanks, David. The short and sweet answer is both, which is it's not just about – The data, that is a critical component because it helps us measure better. The always-on nature of the partnership is really important to drive adoption. Look, Roku's rate of growth is impressive, and their impact in the addressable space is tremendous. So they're a great partner to us, but more importantly, validate everything we're doing in Nielsen One, which foundationally is about more adoption with more of their clients, And so the simple answer is, yeah, it is about data as well, but we love this relationship also because it drives adoption for the Nielsen One set of tools and capabilities across all the users. Over to you, Linda.

Okay, great. Yeah, from a financials perspective, the revenue, I would say, is effectively in the guidance now. And, look, this was more strategic than it was financial. So there's a small revenue impact from the sale, but overall we consider it to be in the guidance ranges that we shared this morning. You know, financially just not that much of an impact and no impact on our organic revenues.

I think we can take the next question. Thank you very much. Our next question comes from Richard Kramer from Ariq Research. Please go ahead, Richard. Your line is open.

Thanks very much. Question for David and one for Linda as well. David, one of the big issues that's coming up in CTV is some accusations or really thoughts of dramatic levels of fraud and, you know, around some of the challenges, the early challenges of measurement. And you have a lot of newer entrance looking at your ability and measurement there is fraud aspect of ctv or sort of uh... ascertaining the quality of ctv impressions something that you plan to address alongside traditional measurement and my question for linda is now that you have a stand-alone media business and and you know the worst of the separation headaches might be behind you. Would you look to give us some improved disclosure so we can sort of measure your R&D spend or your product development spend separate from your SG&A the way we would with a lot of other companies that are in the sort of digital measurement space and to get a better handle on what costs and what effort is sort of being put into product development of Nielsen One over the next couple of years? Thanks very much.

Thanks for the question. I'm actually going to let Karthik also step in here because we spent a lot of time on our design of the connected TV measurement. And honestly, this is why we are so robust to have this combination of big data we get from a lot of platforms, including connected TV platforms, and the importance of validating that with a very robust system. panel sample because I think there have been just challenges for anyone who just tried to use big data to ever do audience measurement and it is important to do both. On the other hand, there's also some specific things that others are doing and some new companies were formed totally around visibility or viewability and part of what we're doing is also making this more interoperable as opposed to sort of having to launch yet another viewability I think we can work with others. I don't think we have to be in all these spaces directly. I think we're the fundamental platform for audience measurement, and we will connect with others to help make that work. Karthik, I don't know if you want to go any deeper on that, because I know you've put a lot of work into the ERIC team.

Yeah, so I'll just highlight one of the things you mentioned, because It's really important to understand how we integrate directly with the CTV player. I think that's where it all begins. Eventually, when the measurement of CTV goes into the entire ecosystem so that measurement is available across all steps of the value chain, we will obviously pay a lot more attention. Just like in digital, we'll pay a lot more consistent attention to things like viewability and fraud. Those are important complementary metrics, just like in good old digital. But I think our starting point is direct integrations with the CTV players. not about being connected into the intermediaries. So this way, our starting point as this measurement evolves is starting at the purest form. That's the way it's actually delivered. So this is important, but as the industry expands, as there's more ecosystem players, there's a great growth opportunity at large. That's going to be an area where then fraud, viewability, all these capabilities are going to be important bolt-ons.

Hmm. Linda, do you want to take the other question?

Sure, yeah. Look, we are expanding our disclosures, and you'll see that even what we put out today is more singularly focused. on the new Nielsen and on media, and we'll look to improve from there. But I think the best analogy, Richard, would be to go back to some of what Karthik talked about at Investor Day, and he shared directionally some of how we're thinking about growth versus sustain as we look at our CapEx investments. Now, obviously, you know, there's a lot in the thought process from an R&D perspective. But even as we went through our strategic planning process last year, we really focused on what the return is going to be on investment. So we're continuing to introduce more rigor and refine that process. But if I just go back to some of the trends that Karthik shared at Investor Day, For 2020, we're kind of looking directionally at a 75-25 relationship of growth versus, let's say, sustained investments as we think about our CapEx. And in 2021, we're dialing that up significantly. We'll be looking at more of a 40-60 relationship. as we think about growth versus sustained. And then as we discussed that investor day, we're looking to have that relationship be more of a 50-50 relationship by 2023. You know, what's interesting to see playing out here is the convergence between linear and digital. And that influences the way in which we are investing. We made very clear at Investor Day that our current priority is investing in single platform, investing in Nielsen One. And so suffice it to say, the lion's share of our current investments are being directed there. And we are significantly dialing up that investment in order to be where our customers and clients are. in order to support the continued convergence. But that will give you a feel directionally as far as breaking it out in the future. We'll continue to assess, but don't expect anything in the next 90 days or six months.

Okay. Thank you.

Sure.

Thank you for your question. It appears we have no further questions, so I'll hand back over to David Kenney and the team for any closing remarks.

Hey, listen, thank you all for joining the call today. I was so happy to share the continued progress that we are making across all three of our essential solutions. I'm really proud of the fact we delivered on our plan in the first quarter, and I want you to know how much confidence we have in our plan for the rest of the year. We look forward to updating you next time and appreciate your continued support. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you very much for the management team for joining. You may now disconnect your lines. Have a lovely day.