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.