Nielsen N.V. Ordinary Shares

Ladies and gentlemen, thank you for standing by. And welcome to the second quarter 2021 Nielsen Holdings PLC Earnings Conference Call. At this time, all attendees are in a reason-only mode. After today's presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Thank you. And now I would like to welcome Ms. Sarah Gubbins, Senior Vice President, Head of Investor Relations and Specialty. Ma'am, please go ahead.

Good morning, everyone. Thank you for joining us to discuss Nielsen's second quarter 2021 financial performance. I'm joined by our CEO, David Kenney, and our CFO, Linda Zoukakis. 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, July 29th, 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. 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 second quarter earnings call. Our second quarter results demonstrate Nielsen's continued strategic and operational transformation in an evolving global media ecosystem. These results also show that we are executing as planned on the growth strategy we laid out at our investor day in December. Let me remind you of the three overarching messages and compelling opportunity for Nielsen. First, we are focused on driving new growth from new solutions across all of our end markets globally. Across the board, we are delivering on the key elements of our product roadmap. Second, our cultural transformation is progressing well. Our associates around the globe have rallied around a growth-driven mindset and we're benefiting from their energy, enthusiasm, and clarity of focus. This means focusing on accelerating revenue growth and advancing our product evolution to match the rapid changes in audience behavior and the media ecosystem. And third, we have a compelling and strengthening financial model with 80% recurring revenue, expanding margins, and increasing free cash flow conversion. I'll provide a high-level look at our second quarter results before turning to the business highlights. I'll then hand the call over to Linda for a more detailed review of our results. We are building on our consistent track record of success, and we are pursuing opportunities to further improve. Year-over-year revenue grew 6.2% on an organic basis. We are seeing the benefit of a COVID recovery in some markets, although it remains uneven globally. Our teams are doing a great job serving clients around the world, even in markets that remain challenged. Our adjusted EBITDA margins of 43% expanded 256 basis points on solid revenue growth and strong cost discipline. Our adjusted EPS of 43 cents increased from $0.35 in the prior year, and free cash flow was $190 million, up from $86 million in the second quarter of 2020 on a comparable basis. Following strong first half performance and reflecting our confidence in the 2021 outlook, we are raising the low end of our ranges for revenue and adjusted EBITDA, and also raising our EBITDA margin, adjusted EPS, and free cash flow guidance ranges. Turning to the business, I'd like to start with a high-level discussion on the value we bring to the media industry. There is no question that audiences are changing how they consume media, and platforms, networks, studios, advertisers, and agencies are all transforming to meet and drive these changes. In the second quarter alone, our clients were involved in big mergers, big product launches, a robust advertising upfront, and global expansion. Nielsen's three essential solutions, audience measurement, audience outcome, and grace note content services, were used by our clients to make decisions and negotiate with a common fact base as they navigate a changing media industry. We are growing especially well with our largest global partners with a scalable, digital-first approach. And we are seeing our clients increasingly invest across these three essential solutions which will accelerate our growth over time. Finally, I'd remind you that Nielsen's mission is to power a better media future for all people. And this includes our strong commitment to our ESG priorities and performance. In June, we released an interim responsibility update which highlights the important work we have done around the six key areas of our ESG strategy. The board and I firmly believe these efforts are essential to the overall success of our organization. Now let me share some specifics for each of our three solutions. Starting with audience measurement, which posted 4% year-over-year organic growth, we are making significant progress on the building blocks that are foundational to Nielsen One, our cross-media currency solution. Industry engagement is critical to the success of Nielsen One, and we are partnering closely with media buyers and sellers in its development. We've launched a series of cross-functional working committees and recently met with the Executive Steering Committee, which consists of senior industry leaders. We received good feedback on our progress against coverage, comparability, and resiliency. Our work with the industry includes the ANA, the Association of National Advertisers, and the WFA, the World Federation of Advertisers. Nielsen One aligns with their objectives for a cross-media measurement solution that best addresses the needs of advertisers. We are also supporting the ANA's Alliance for Inclusive and Multicultural Marketing, or AIM, to help their members measure their investments in Black, Hispanic, and Asian-owned media. We continue to be encouraged by renewals and expanded scope with both multi-channel and digital pure play clients, as well as advertisers and agencies. Clients are renewing with larger contracts as they add more services. These are largely multi-year commitments with annual price escalators. Due to advertiser and agency growth examples would include the extension of our digital ad ratings agreement with Toyota and Dentsu's expanded relationship to include streaming measurement. On the publisher side, nine of the top 10 TV network groups are now using our streaming measurement solutions. And just this week, Google cited Nielsen Metrics on their earnings call to demonstrate the incremental reach for advertisers on their platform. We also recently partnered with DAZN, a global streaming sports platform, on an audience measurement tool ahead of the Italian football season. Our local video and audio business continues to strengthen. We recently renewed and expanded our agreement with EntraVision, which includes a comprehensive suite of measurement services, including local TV ratings, covering their 22-market footprint, and Nielsen Audio for all radio stations in 14 markets. We also renewed a multi-year deal with iHeartMedia across all of their markets. Let me walk through some recent product milestones for Nielsen One using coverage, comparability, and resiliency as a framework. starting with coverage, which we are expanding significantly. The addition of Roku as a data provider brings the aggregate number of devices measured close to 100 million in combination with DirecTV, DISH, and Vizio. And we've doubled the number of connected TV partners over the past year to most recently include Samsung TV+. When combined with our existing coverage of major platforms such as Hulu, Amazon, and YouTube, this will bring our big data coverage of video digital ad spend in the United States to approximately 90%. We continue to hit milestones on streaming measurement also. We are expanding our base of streaming meters with approximately 14,000 installed meters as of July and broadened our coverage to include the top 15 streaming platforms. Outside the U.S., our streaming meters are now live in six markets, and we will continue to add markets over the next several quarters. Next, comparability. In June, we launched the Gauge, a new monthly analytic tool that provides the industry with a simple view of time spent that is comparable across streaming, traditional cable, broadcast channels, and gaming. We were, of course, pleased that Netflix's co-CEO, Reed Hastings, publicly acknowledged that Nielsen is uniquely positioned to help scorekeep in the dynamic media landscape and that Netflix used the gauge to demonstrate their runway for growth in their Q2 earnings update. There is a lot of great work in progress behind the scenes on driving comparability across TV and digital. Deduplication is a critical component, and we have recently completed a key step in this area, developing a methodology for cross-device deduplication within households. Another key milestone this year will be the integration of big data sources into Nielsen's national television measurement, calibrated by our panel. These integrations are on schedule, and we're on track to have impact data by year end that clients can use during 2022 for analytic purposes. We are also on track towards sub-minute measurement in our television panel, which will be enabled by innovation in our watermark and signature technologies. The work to make our existing metered panel sub-minute capable is near completion and expected to roll out in Q4 of this year. And finally, we remain in active discussions with the MRC, ANA, WFA, clients, and other industry organizations as we build towards evolving the currency. The last point is resiliency. As the privacy landscape continues to evolve, with third-party cookie deprecation being the most notable change, we have taken proactive steps that provide us with the flexibility to adapt, enabling us to understand the audience and audience demographics in a privacy-focused way. Earlier this week, we unveiled our cookie-less approach for audience and outcomes measurement eliminating our reliance on digital identifiers. This new approach is enabled by our Nielsen Identity Spine, which allows us to deduplicate across linear and digital platforms as a part of Nielsen One. A full privacy-focused redesign has already been completed for the two largest digital platforms. And we continue to enhance coverage of the Identity Spine, recently adding new data partners such as Teluna, BDX, full contact, SINT, and ID5, and this builds on existing data relationships with NuSTAR, narrative, throttle, and true data. I want to reiterate that all of our big data sets are validated by our robust panel, which represents an important truth set and statistically representative view of the audience in the U.S. and in key markets around the world. As discussed on our first quarter call, during COVID, CDC and state guidelines prevented us from entering panelists' homes, either to sign up new panelists or maintain existing homes, and this presented an operational challenge. I'm happy to say that we have now restored full maintenance protocols and have been improving panel size and quality every week during the second quarter. We are closely engaged with the MRC, and they are up to speed on our progress. We remain committed to the MRC audit and accreditation process. Turning to outcomes and content, which grew 12.6% year-over-year on an organic basis in Q2, audience outcomes growth is driven by geographic expansion, expanding to new verticals beyond CPG, and helping media companies better sell on the outcomes they deliver. Let me start with geographic expansion. We are extending the global reach of our campaign outcomes measurement tool with the addition of Vietnam, India, Portugal, the Philippines, and Switzerland, among others. We expect to be in over 40 markets by the end of the year. And earlier this month, we acquired TVTY, a leading TV attribution provider based in France, which expands our capabilities and data partnerships in Europe as well as the U.S. This tuck-in acquisition aligns with our strategy to deliver cross-media outcomes as a complement to audience measurement. In terms of new verticals and capabilities, we are seeing continued traction, growing our client base across a broad range of industries. We have an impressive roster of new wins in the U.S. and around the world, including industry giants such as Samsung, Microsoft, and Anheuser-Busch. We recently expanded our capabilities in the important automotive vertical through a new partnership with IHS Market to integrate their Polk automotive data. Initially available for addressable audience activation, we'll expand the use cases across audience and outcomes measurement solutions over the next year. We have expanded our norms database designed to establish syndicated standards for campaign outcomes measurement across platforms, which we launched last fall, to now include non-durable retail and pharma in the U.S. Finally, we have made significant progress with many of our media publishers adding outcomes metrics on top of audience measurement as they evolve the way they sell advertising. A timely example this week during the Tokyo Olympics, Our outcomes and sports teams jointly worked with the International Olympic Committee to create a new solution measuring the return on sponsorship investment for some of the IOC's top partners. This is a first in the sports market and is a good example of expanding outcomes into sponsorships. We are evolving our core multi-touch attribution product from digital exclusive to digital first with the addition of linear television and over-the-top, and we are expanding our channel coverage, which helps pinpoint the optimal spend across the entire media mix, now including the coverage of radio, print, and social influencers. And finally, turning to GraceNote content services, which is also growing through geographic expansion and additional solutions beyond the core metadata business. We continue to see a very high renewal rate of GraceNote services. For example, we recently renewed our multi-year agreement with Verizon with a focus around streaming video services. During the second quarter, we expanded GraceNote with major clients into the Netherlands, Austria, Switzerland, and most recently, Poland. We are also developing new solutions to add more value off the GraceNote platform. Earlier this year, we launched Inclusion Analytics, empowering smarter decision-making around inclusive content investments and helping to drive towards a more diverse and equitable future. And we've seen strong interest for this service across media, agency, and advertiser clients. We also recently signed long-term deals with two connected TV manufacturers to use GraceNet ID as a part of their advanced advertising platforms. Let me sum up. We reported another strong quarter due to solid execution and a cultural shift to a growth mindset. We are making continued progress on our product roadmap and we are driving growth across our three essential solutions. We are adding new clients and new markets while also bringing more services and incremental value to our existing clients. We have increased confidence in our ability to deliver on our full year outlook which is reflected in our updated guidance provided today. Let me now turn the call over to Linda to review the financials.

Thank you, David, and good morning, everyone. Similar to last quarter, my remarks today focus on our results as if the Connect sale and related $2.3 billion debt pay down that we completed earlier in the year 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. You'll find comparable prior period comparisons in the appendix of today's slide presentation. Before I get into the results, I would just like to remind you that a year ago this time, we faced our most impacted quarter from a COVID perspective, and we had recently announced our large-scale optimization plan. All of this is a relevant backdrop to these strong Q2 results I am pleased to now review with you. I'll start with slide seven, which summarizes our second quarter revenue performance. Revenue for Q2 was $861 million, up 4.5% year-over-year on a constant currency basis, or up 6.2% organic constant currency, which adjusts for exits related to the 2020 optimization plan and the sale of our advanced video advertising business to Roku earlier this year. On a reported basis, revenue grew 6.2%, which includes an FX benefit of 170 basis points. Revenue growth accelerated in both the U.S. and in international markets. We're continuing to see recovery from COVID-related pressures and strong execution by our teams around the world despite an uneven global recovery. For some perspective, despite the loss in the current year of revenue associated with business exits that were part of the 2020 optimization plan, Q2 21 revenue was higher than Q2 19 revenue. The same was true for the first quarter, and we believe surpassing pre-pandemic revenue levels demonstrates that we are driving fundamental growth in addition to recovering from COVID impacts in 2020. Our solutions are resonating with clients across our end markets around the world. Audience measurement grew 3.3% constant currency and 4% on an organic basis. Growth remains solid across the board and especially strong in digital measurement. As expected, pressure in our local business has subsided, with local posting positive growth for the first time in 10 quarters. As we discussed previously, our local business was down in the mid-single digits during the last two years due to pressure on multi-year contract renewals as we went through our local transformation. And that work was completed in late 2019. We cycled through those contracts and expect local to be roughly flat for the year. Outcomes in content grew 7.9% constant currency, with organic revenue up 12.6%. We saw improving trends in short cycle revenue and strong growth in our sports business, both of which were hard hit in Q220 due to COVID. We also continued to drive 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 continued to improve nicely in the second quarter. Turning now to slide eight, adjusted EBITDA was 370 million, up 11.8% year over year on a reported basis or up 11.1% on a constant currency basis. Adjusted EBITDA margins of 43% expanded 216 basis points reported or 256 basis points constant currency. On the right side of the page, we show adjusted EBITDA and margins over the last five quarters, as if the sale of Connect took place at the beginning of 2020. There are several drivers to our margins. First, operating leverage from top-line growth was strong. Second, we took swift actions in late Q120 and reduced temporary costs by approximately $100 million. These temporary costs began to return in Q221, though at a lesser pace than initially expected, but will continue to ramp as the year progresses. And third, just over a year ago, we did a restructuring or optimization plan. So the incremental year-over-year benefit of this plan is more pronounced in the first half of this year versus the second half. Adjusted EPS was 43 cents in the second quarter as compared to 35 cents in Q2 20. This was driven by higher EBITDA and lower depreciation and amortization offset in part by higher taxes. Our effective tax rate was 29% in the second quarter. This includes $2 million in discrete items, which we add back for adjusted net income, resulting in a normalized second quarter tax rate of approximately 27.4%. Free cash flow was really strong at $190 million, which compares to $86 million in Q2-20 on a pro forma basis. Key drivers of the year-over-year improvement include higher EBITDA, improved working capital, in part due to strong collections, and lower interest payments. These improvements were partially offset by higher tax payments, which is timing-related within 2021. And now I'll discuss our updated 2021 guidance on slide 10. Today, we are increasing our full-year guidance to reflect our solid Q2 results and our confidence in the balance of the year. We are raising the low end of our revenue and adjusted EBITDA guidance ranges and raising our margin, adjusted EPS, and free cash flow guidance. Let me take you through each of these items. For revenue, we narrowed the range, and we are now guiding 4% to 4.5% organic constant currency growth. We've similarly raised the low end of the range for constant currency revenue growth, where we are now guiding 2.5% to 3%. For adjusted EBITDA, we are now guiding $1,475 million to $1,490 million, with margins of 42.3% to 42.6%. This compares to 2020 adjusted EBITDA margins of 42%, as if the sale of Connect took place at the beginning of 2020. As we discussed last quarter, our 2021 EBITDA guidance reflects an approximately $60 million benefit of the optimization plan this year and the underlying efficiency of the business, partially offset by the return of COVID temporary cost cuts made last year, as well as incremental growth investments. The return of temporary costs is more heavily weighted in the balance of the year. We also began to implement the optimization plan in Q3 20. As a result, the second half faces a more challenging comparison and we continue to forecast margin compression in the second half of the year. We are raising and tightening our adjusted EPS guidance to $1.54 to $1.61 versus a comparable $1.45 in 2020. This higher adjusted EPS range is driven by the tighter adjusted EBITDA guidance range and lower depreciation and amortization, which is offset in part by a slightly higher share count. And finally, we are raising and tightening our free cash flow guidance to a range of $620 to $650 million on solid EBITDA performance, lower interest payments, and strong collections. 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 has absorbed under the Connect Sale Agreement. Today, we are lowering our expectation for these cash costs by $20 million and now expect a range of $200 to $220 million for the full year, with $164 million paid in the first half of the year. The vast majority of these costs are included in discontinued operations, and this is the last year of any meaningful separation-related cash costs. We ended Q2 with 3.62 times net debt leverage on a pro forma basis, well on our path toward our medium-term net debt leverage target of 3 to 3.5 times. Given this progress, we are lowering our year-end leverage guidance range to 3.5 to 3.7 times. To wrap up, we are pleased with our second quarter results. The strength of key underlying drivers reinforces the confidence that we have in our ability to execute on Nielsen's growth story and deliver our full-year guidance and longer-term goals. And now I'll turn the call 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, presenters. We will now begin the question and answer session. And as a reminder, if you wish to ask a question, simply press star then the number one on your telephone keypad. Your first question is from the line of Andrew Steinerman from JP Morgan. Your line is now open.

Hi, all. I wanted to follow up on your point, David. You said we're on track with the product roadmap. So, you know, obviously I think back to the December 2020 product roadmap, which is, you know, laid out year by year. First of all, I just want to make sure that the key date of cross-media currency launch is still fourth quarter of 2022. And if you could, you know, just go over the second half of 21 on terms of which pieces to the product roadmap will be introduced in the second half of this year.

Yeah, thank you, Andrew. And we're tracking that daily, as you can imagine. Part of the reason Karthik's on the call is he's driving the product roadmap. So I'm going to turn it over to him to lay out the sort of key things that our clients in the market are expecting to see in the remainder of this year.

and you know reiterate the great progress that's been made so far karthik thanks david um hi andrew just a couple of things first uh nielson one is foundationally about cross media measurement and the three biggest components of which are obviously coverage resiliency and comparability those are the sort of three core pillars that get us ultimately to what we are going to deliver in 2022 And as a reminder, we launched all of our digital solutions already under a completely new backbone that is completely resilient for all the changes in the privacy environment. That was an important component. The identity spine that powers that is another component of that. And going into the second half of the year is a little bit more focused on expanding coverage, which is all of the CTV coverage expansions that we're launching with all the players David called them out. So those are important. They start to launch in Q3. And going into the rest of the year is all of the work we're doing around granularity, and addressable, which is boldened by the launch of our analytic capability where we're putting out the national linear capability with big data. So you can imagine all of the flexibility and granularity that starts to add and ultimately pushes us into next year where there's a whole host of other things, including the deduplication methodology, which is ultimately the core of where all this comes together, deduplicating across every component of media delivery that takes place. So that's what we're building towards. The roadmap is completely on track. from all of the inputs, as well as what clients start to see periodically going into the rest of the year and into early next year. Okay.

And just to be clear, you know, in terms of your identity spine, you know, obviously there are several identity solutions in the industry. Does Nielsen One need to be the solo identity solution, or is it okay to be a identity solution as long as you're the measurement solution?

Yeah, so Andrew, the key around all of the identity solutions that exist are what they enable and power. For us, the key is to make sure it works for measurement use cases. That's what we're focused on. and interoperability with all the other identity solutions in the marketplace. So when David talked about all the integrations we have, it's about enabling an interoperable world where identity is obviously a big challenge. So it is a team sport, but the version that we're building and have continued to build is largely around use cases of measurement. And use cases of measurement is foundational. You can think about it as deduplicating where Many different versions of exposure are difficult when you have to put them together into deduplicated feature frequency. That's the use case that we're solving for primarily. And so interoperability and deduplication, that's what we're about. And that makes us a little bit different than the other solutions. But we're making really good progress on that.

Got it. And I ask one other piece to that. And you're still on track for fourth quarter 22 launch for cross-currency measurement.

Absolutely. The full rollout where ultimately it comes together, Nielsen 1 is completely on track. And then once the data gets put out there, it gives everybody, buyers, sellers in the ecosystem, all what they need to start to make all the adjustments because it's going to be very exciting and challenging. What we also want to do is make sure all of the component launches, the building blocks, as David calls them, continue to come out so people start to get familiar with each of the components, ultimately leading up to the deduplication across everything for ads and content in 2022. Thank you very much, Karthik.

Your next question is from the line of Tony Kaplan from Northern Stanley. Your line is now open.

Hey, Greg on for Tony. Thanks for taking our question. Wanted to talk about your cookie with measurement, you know, did 60% resiliency called out a few new data partners on the call here. So one, do you need to improve the resiliency number? I don't know if there's any targets or goals in regards to that. And does that mean new data partners? Or is it on the technology front? And then related, Google recently delayed its shift. So hopefully, maybe you could talk about What are you hearing from clients in terms of willingness to make the shift and also timing?

Thanks. Thanks, Greg. I would say on the client side, sophisticated clients know that privacy is still a good thing. Yeah, Google delayed to give people time, but I think it's important for us to keep moving. and get get forward because we know this will happen and of course you know apple has what it's doing around made and that isn't delayed so we you know we think it's important we continue to lead we are big believers in privacy policy and we believe that we have solutions that allow for the audience to be served well and respect for privacy at the same time and that's the reason we went ahead uh with with our launch and our quickie list solutions for measurement and for attribution What I would say on the 50%, that really has more to do with which of the publishers have already been solved for. So we obviously started with the biggest ones, and they're there. We now have this solution. And in our release, we talked about the solution for the unauthenticated, for those who are smaller who may not have as much first-party data. We're getting there with some added techniques. that use probabilistic models and machine learning. So we believe the methodology works. It's tested. It's now a matter of sort of integrating the long tail of publishers to make sure we're covering the whole market.

Thank you so much. Your next question is from the line of Dan Salmon from BMO. Your line is now open.

Good morning, everyone. For better or for worse, probably the most popular investor question of late has been about maybe some of the negative headlines related to the COVID measurement issues. So maybe, David, could you expand on that just a little more? We've had the VAB call to remove MRC accreditation. What do you think the likelihood of that is? What would be the potential financial impact of a worst-case scenario? Because it does sound like the VAB is acknowledging that everyone would continue to use the ratings. So just maybe a little bit more color on that would be helpful. And then maybe on the brighter side, you mentioned both Netflix and Google highlighting your streaming data on their earnings calls, and Google in particular highlighting it for YouTube more. How impactful is that to your business? Does your sales team start to feel that? Because it feels like that's an element that isn't being recognized as much as the secular leaders promoting your products for you these days. I'd love to hear more on that as well.

Well, those are two very different questions. So let's answer both because I think they're both valid. On the first part, I'm going to let Karthik go into the details on COVID recovery. We had to do some things differently during COVID. And of course, COVID is not done, but we could get to the point where it was safe to be back in homes, both for recruiting and replacement. And we're operating at a very strong pace, and we've actually increased investment to make sure that We have the panel the way it needs to be. It's a fair complaint that people would want that instantly. So I don't love the tactics, but I would agree that it is important that we rebuild the panel. And I'm not going to describe how. The second part of that, though, to be clear, accreditation is very important. We think it really builds trust in the industry. But it's a vote of confidence. It's not required to use the product, and it's not in our contract. So we're not required to maintain accreditation. We certainly have it as a goal, and we think the MRC is a really important partner to set standards, and we're going to continue to work with them. So I'm not going to let Karthik answer the rest. He's been kind of in the front with the MRC discussions.

Yeah, thanks. Just to reinforce what you said, we continue to work with the MRC before, during, and even now. That leads up typically to an accreditation process, which is largely an audit of every single process that goes into managing the panels and ultimately what gets produced from the panels into our products. So our plan is completely on track in terms of all the corrections we needed to make coming out of COVID, even though COVID is not over. We've managed to get back into field basically completely, going and checking for all of the homes in Falls and Flags. that we were unable to do during the peak of COVID. So our execution there to get the panel back up to where it needs to be is completely on track. And yeah, as David said, we don't love getting the added push. But look, we work with clients as well to showcase and tell them exactly what we're doing. And so we're completely committed and our plans are doing exactly as we planned, as well as working with the MRC, because they bring a lot of value to the process of reinforcing confidence in what we produce.

And on the second question, the digital players, I don't know that they're promoting the Nielsen product as much as they are clearly using them. And they're using them to understand their market share, to understand their competitiveness, to be able to respond and make their products better. And I was really pleased to see a couple of them use them in their earnings calls because it means they're pretty core to the way they operate their businesses. And I think that's a really nice validation. And, of course, as I said, those digital first players are driving a lot of our growth. in this post-COVID period, and will continue to drive our growth given the nature of the relationship. So I feel really good about that. More broadly, I would say on the demand side, the people who buy advertising, the people who invest in content, I think there's a lot more credibility that Nielsen really does measure the total audience. I think there was a narrative when I got here that maybe we were more broadcast and linear focused, and I think it's really clear we're audience-focused. and we're following the audience wherever she goes and is going to streaming in a lot of ways and a lot of categories. So, listen, it's early days, but I think this is the kind of validation leading up to Nielsen 1 and leading up to moving the whole market towards an integrated view of the total audience across both streaming and linear on the same basis. And already it's being used for decisions and for folks to manage their product strategies.

Okay, that's very helpful. Thank you both.

Your next question is from the line of George Strong from Goldman Sachs. Your line is now open.

Thanks. Good morning. You delivered accelerating organic constant currency revenue growth across both audience measurement and outcomes and content in 2Q. How do you envision organic constant currency revenue growth progressing in these businesses in the second half of the year? And what initiatives remain outstanding that you have to work on in order to deliver on your organic growth targets, not just over the second half, but also over the medium term?

Yeah, so Linda, why don't you start? You and your team have spent a lot of time getting behind that question. And if Karthik or I can add some color beyond that, we'll come back.

Yeah, sure. So thanks for the question, George. I would just start by saying that we feel good about the Q2 results, as you noted. they are really strong results. As we think about the second half of the year, we do still continue to expect solid revenue growth. I will point out that the first half of the year was a bit stronger than our expectations. You see that in the guidance revisions that we've provided today. You know, the subscription portion of our business, which is about 80% of the total, doesn't have as much variability because we've got a lot of visibility into that business. But on the outcome side of the business, there's definitely more variability. And we saw that last year and now this year with the impact of COVID. We're benefiting, though, from an improving ad market from a COVID recovery. We're optimistic, but we're of the opinion that this pandemic is not behind us, and it's an unpredictable environment. So we've incorporated a bit of risk at the low end, around the the speed or the pace of the global recovery um you heard earlier from from karthik and david that we're doing well on our product roadmap and execution on that is important for the second half we do have our initiatives and and growth investments that we're making which are more second half weight and some of those will take a little bit of time to ramp But overall, we think the second half will be in line with, of course, the way that we've guided today. And I think that we, on an overall basis, are feeling very optimistic about the second half and our performance as reflected in the guidance revisions.

And we remain very confident in the medium-term forecast that we laid out in December at Investor Day. These things are happening as predicted. Not everything in the macro environment is the same. I think COVID continues to pop up around the world. But I think we're getting much more agile at managing that. I'm really proud of the teams for doing that. I think we already covered the Nielsen One Roadmap, which, of course, is super important. That's a heavy subscription business. I might have Karthik spend a minute on some of the product innovations that are coming in content and outcomes because those are, as you saw, driving even more growth, and we're really excited about all three legs of the Nielsen revenue fuel.

Thanks, David. Thanks, David. Just calling out on outcomes, what are we really trying to accomplish there? Again, just laying out the strategy. Three components there. One is vertical expansion. I think you've heard us talk multiple times about going outside of consumer packaged goods because that's where 90% of marketing dollars get spent or ad dollars anyway. So expanding coverage, you saw what we're doing in the automotive space. You saw mentions about retail, non-verbal retail and pharma. That frame will continue to expand. Then it's about making it even more relevant to both sides of the coin, not just the buyers, but also the sellers, so that sellers can really tell the story of their inventory, not just from a volume perspective, which is reach, but also from a value perspective, which is outcomes. And so everything we've mentioned there about how we're being used, our outcome capabilities are being used and will continue to be used by sellers as well as an important component. And then global expansion is a really important component because Again, everything we're doing in outcomes is about telling the story about the value of marketing and that's relevant everywhere, almost the same way. And so expanding into more markets, going again into 2022. And on the Graysnoke side, It's about a couple of things. One is the world of discovery is even more exciting just given the proliferation of platforms and the new innovations in which content is being delivered to consumers. So it's a combination of market expansion as well as capability expansion, such as advanced discovery technology. And then the ultimate angle there for us is the expanded use of the GraceNode ID, because in a world where content is proliferating to so many platforms, the GraceNode ID becomes a unifier to figure out exactly where that content is going and how it's being licensed. Is the content being used the way it was expected to? So there's a whole bunch of components there that are very exciting for us. Many of those in in the second half, as well as going into 2022.

Very helpful, Collin. Thank you.

Your next question is from the lineup, Ashish Sabrada from RBC. Your line is now open.

This is John filling in for Ashish. Can you talk more about the pickup and short cycle work as shows in major leagues sports resume? Any visibility on the pipeline for us to hear? Thanks.

Ashish, I think your question was about sports, right? So we don't give line item detail, but I would say the sports business returned nicely. I mentioned the work for the IOC. There was obviously a lot of work around Olympic sponsorship. But as leagues have been returning around the world, certainly those leagues have gotten smarter about how they demonstrate the value of sponsorships and advertising, and we've been really helpful to them. So I think sports continues to strengthen, and Certainly, we expect that to continue to be a strong business for months and years to come.

Great. Thank you. Maybe can you just touch on quickly any impact you're seeing from the Delta variant, perhaps internationally?

Yeah, I would say we're not seeing anything that would be unexpected. I think it's been a bigger challenge just operationally. Our first priority is always going to be to keep our people and our panelists safe and healthy. So we're adapting quite agilely operationally to every market and what it predicts. Of course, even vaccination rates beyond Delta variant, vaccination rates generally vary quite a bit around the world. So we are certainly adapting to local conditions.

Great, thank you.

Your next question is from the line of Doug Arthur from Uber Research. Your line is now open.

Yeah, David, this is sort of a big picture question on your IT backbone, but a lot of commentary, at least in the release, about cloud-based solutions and the speed to market. Do you feel the IT backbone is where you need it to be, or it's still a work in progress, but it's helping you provide more quick solutions to the customer base?

I'm well known for never being satisfied inside of Nielsen. You raised a place where I think we're always going to continue to innovate and improve on the tech backbone and take advantage of the latest technologies. um because i i think that is important and technology as a science continues to evolve what i will say is uh you know that the foundation is there the work that needed to be done from when i first got here till now to get us on a single platform to be able to uh be cloud-based which really means that more of your software can be composable the the ability to get things done in in days and weeks not months and years is, you know, it gets better every day. So, I think it's a very solid foundation. I think the fact that it is a single platform makes it much easier to continue to innovate on, but it's going to be a never-ending process to make sure that Nielsen's at the front edge of the technology curve going forward. Flip side is, I would say that's really helping us with talent, because people are finding that they can do really leading-edge things here, and they're pretty excited about that. So as we've been bringing new people in this year, this has been a really interesting draw. They love our CTO. They love the tech team, and they love the project.

Great. Thank you.

Your next question is from the line of Tim Nolan from Aquari. Your line is now open.

Hi. David, I hope you don't mind if I come back to the accreditation question with the VAB. It sounds like if you've got your panel rebuilt and you're rolling out streaming meters, then is this issue really actually put to bed? And I should say, does it actually have any impact on your Nielsen 1 rollout, whether negative or actually even positive if you're getting the meters out, the nanometers, the panel rebuilds, any kind of further color on the status of that and how it affects Nielsen I, if at all?

Yeah, I'll start, and if helpful, Karthik can add. I don't want to say it's put to bed, because obviously the VAB doesn't feel it's put to bed. And their basic argument is, you know, You can be back operationally, but they want the panel in every geography to be fully representative. And, you know, there is still, you know, recruiting work to be done. I would say the maintenance backlog has been cleared, so we're back to those procedures. But, you know, of course they want high standards, and they ask the MRC to make sure in the accreditation process that happens every year that they pay extra close attention given that so much change. So, you know, we're going to continue to invest, we're going to continue to improve, and we're going to continue to be transparent so that everyone can have confidence and trust in the fidelity of what we're producing. That said, what I would also say is this changing market that we're trying to measure with Nielsen One is more sophisticated. It has a combination of ACR data, which is why deals like Roku were so important, why the CTV integrations are so important. And you need that for streaming. There's still a lot of cable data, and there's an increasing number of homes that are broadband-only. So, you know, us making sure we're measuring all of it is key, and I think it's certainly telling the market that the Nielsen One solution is going to be needed and needed as quickly as we can get it out there. So, yeah, I do think it creates demand as people acknowledge the changing market. And I think, you know, we need to continue to strengthen all aspects of our data, including our panel, and be transparent about that. Karthik, I don't know if you want to add anything.

I think the only thing I'll add, David, is the importance of the panel as a major source continues to be reinforced. I say that that's a good message from the market to us and one that you know, we want to reinforce even even on this call. So it is a differentiator. But it also means that it's a critical component of everything we're building. And so we're going to continue to invest there, especially in the world of fragmentation. Because ultimately, the panel is a major source, it helps us with identity, It helps us with deduplication. And so we're going to continue to invest there. And there's definitely work to be done, but we feel pretty good about all the progress we're making, not just in general with the meters and the rollouts, which is on track, but also I'd say a little bit of correction from COVID and what we needed to do there to get it back to what it used to be and what it should be.

Okay, very helpful. Thanks, David. Thanks, Karthik.

your next question is from the line of matthew wallington from truly securities your line is now open hey good morning everybody um i said two two quick ones one's more of a clarification and one is more of a housekeeping uh maybe on the clarification maybe this is for david You talked about local – or in the release release, it talks about local pressures subsiding there a little bit. You guys are actually obviously in market with an improved offering there. So just to be clear, I guess, is this more of a market conditions improving there, or is this a function of you guys being in market with an improved offering that's allowing you to – stabilize market share or even take market share or have better pricing power or what have you. So I'm just looking for some clarification there. And then just secondly, on the housekeeping front, maybe for Linda, the TVTY acquisition, I'm assuming very small, but I'm just curious if you can kind of quantify any revenue contribution from that acquisition this year. Thanks, guys. Yeah, so...

On local, I would say a lot of it's improved product, improved delivery, improved competitiveness. And I think, you know, I believe in where the roadmap's going and the way that Nielsen One principles will apply to local. That really matters in both the audio and the video business, the TV business. So I think it's that. Our business is subscription, so it doesn't tend to go up and down with what's going on in the end markets. I would just say we're more competitive. I do think the end markets are strengthening some. Audio is particularly performing well as people get back into their cars. So it helps to have a good end market, but I would say most of what's happening to our results is product-driven. And then I'll let you take the other question.

Yeah. And the other thing I would just add, Matt, on local is we were coming off of a couple of years of elevated investment as well. And so I think we're seeing the benefits of that investment in our local platform. So that also is a contributing factor. On TVTY, no revenue color to really offer. It's a relatively small acquisition. from a financial perspective, but it is important to us strategically with improving or aligned with our strategy to deliver cross-media outcomes as a complement to audience measurement. So no financial data, though, that we're sharing relative to that acquisition, but really excited to have TBTY on board.

Your last question is from the line of Richard Grimmer from Arete Research. Your line is now open.

Richard Grimmer Thanks very much. David, many of the data providers that you cited as existing or even new partners seem to be resolving IDs based on household IP addresses, and there seems to be a trend now that these are likely to get blocked at source by the likes of Apple, Google, Comcast, and others. Are you assuming that that happens in your plans? And do you think your ID solutions will be robust if those household IP addresses are not available? And then a quick one for Linda. we couldn't help noticing that removing some of the, quote, other items from Adjusted EBITDA, which is about 38 million this year versus 2 million last year, would have taken margins down quite a bit. Can you tell us what those items were? And maybe also since you highlighted international as a particularly interesting growth area, certainly at the Analyst Day, can you give us a sort of breakdown geographically of total sales between U.S. and international? Thanks.

Sure. Quickly, on the first part, our ID solution is not dependent on ID coming from everybody. There's data we get in a number of ways. So we're watching the IP address issue, but it doesn't really affect our roadmap and our ability to measure. what's going on with the audience. So I think we're fine and quite resilient regardless of how that sorts out. Increasingly, I think that's why a lot of people are partnering with us is strategically our ability to pull the data and then validate it with real examples of real people in the panel is unique, competitive, and durable. So our methods are going to sustain. I'll let Linda answer the accounting questions. Linda?

Yeah, thanks. So on the one-time items, obviously heavily concentrated last year from a Connect perspective, we do carve those out. And in the current year, those tend to be in discontinued operations. There is a little bit of a tail on those costs. Aside from that, there's a fair number of moving parts that we can circle back up with you. in order to give you a double click on that. But the typical items, but just the mix between last year versus this year is a little bit more complicated. With regard to a breakdown on international versus domestic, we don't do that breakdown regularly, but if I use 2020 as a barometer international exposure was about 17%. And I would remind you that GraceNote is a very global business. And so a meaningful portion of our international exposure is because of the global nature of that business. But we're very optimistic about international as a growth opportunity for us. So as we make our annual disclosures on the mix of domestic versus international, you know, we i would expect to see some proportion of that trend up but it's on a much smaller base so it will take time before you see that mix shift coming through in our numbers okay thank you i'm sorry sir there are no further questions i will hand it over back to mr david yeah thank you very much i want to thank everybody for joining this morning

Nielsen has a clear strategy, a great team, and each and every quarter we further prove our ability to execute its plan. I am really confident in our path ahead and believe we are well positioned to deliver growth for our clients and enhance value for our shareholders. Thanks again. See you next quarter. Bye.

And with that, this concludes today's conference call. Thank you for attending. You may now disconnect.