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NOVEMBER 2014
NIELSEN INVESTOR OVERVIEW
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FORWARD LOOKING STATEMENTS
The following discussion contains forward-looking statements, including those about Nielsen’s outlook and prospects, in the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those which are not historical facts. These and other statements that relate to future results and events are based on Nielsen’s current expectations as of November 6, 2014.
Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. The risks and uncertainties that we believe are material are outlined in our disclosure filings and materials, which you can find on http://nielsen.com/investors. Please consult these documents for a more complete understanding of these risks and uncertainties. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
Our outlook is provided for the purpose of providing information about current expectations for 2014. This information may not be appropriate for other purposes.
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NIELSEN AT A GLANCE
Measurement and analytics for content, advertising and activity for
television, digital, social and audio
Measurement and analytics for sales, market share and consumer goods
Adjusted EBITDA Margin
43% 2013 Revenue
$3.4B Adjusted EBITDA Margin
19% 2013 PF Revenue*
$2.7B
2013 PF Revenue*
$6.1B 2013 Free Cash Flow
$573M
2013 Adjusted EBITDA Margin
28.4%
Dividend Yield
2.4% Market Cap
$16.5B Private Equity Ownership
~19%
Our focus is to drive shareholder value through substantial growth, profitability and improvement of cash flow
Market Cap and Dividend Yield are reported as of 11/6/14 *2013 Pro forma revenue includes full year Nielsen Audio revenue of $489M
Watch 44%
Buy 56%
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NIELSEN’S BUSINESS STRATEGY & OBJECTIVES
BUY
WATCH
Expand coverage of consumer purchase behavior globally
Enabling monetization of content and advertising across all screens and platforms
MARKETING EFFECTIVENESS
Help clients understand how individuals’ viewing behavior impacts purchase behavior
OUR VALUES
OPEN
SIMPLE
INTEGRATED
OUR BRAND
QUALITY
INTEGRITY
NEUTRALITY
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SOLID BUSINESS MODEL DRIVES COMPELLING RESULTS
• 5% revenue CAGR from ‘08 to ’13
• 33 quarters of consecutive growth • 70% of annual revenue committed under contract
• More than 450bps of margin expansion ‘08 to‘13
• Significant market/product reinvestment
• Sustainable operating efficiencies
• 8x increase in Adj. Net Income ‘08-’13 • Reduced Int. expense by more than $300M since ‘08 • Cash Tax rate down 50% ’08-’13 to ~16%
• De-levered from 9.1x to ~3.5xPF between ’06 to ’13
• Capital return through Dividend…~40% Payout ratio • $1.4B available in stock buyback program
ADJ. NET INCOME GROWTH
CAPITAL EFFICIENCY
CONSISTENT CORE REVENUE GROWTH
OPERATING LEVERAGE
RESULTS
Well positioned to deliver consistent results
(1) Based on constant currency growth
FRAMEWORK
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WHY INVEST IN NIELSEN?
Comprehensive understanding of what consumers buy and watch
Global leader in our segments with market presence in 106 countries
“Mission critical” measurement and analytics embedded in client workflows
Syndicated, scalable products and services
Strategic investments to drive continued and future growth opportunities
Proven track record of growth and economic resilience
Balanced approach to capital allocation
Focus on delivering value to clients and shareholders
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OUR GROWING GLOBAL FOOTPRINT Our focus is relentless on our pursuit to provide clients with the most complete
understanding of what consumers buy and watch in 106 countries…
2013PF REVENUE DISTRIBUTION
U.S. & Canada 56%
Western Europe 17%
Asia <15%
LatAm, Africa, <15%
Middle East, Eastern Europe
Nielsen presence
…underscored by a global employee base of 40,000 talented associates we work hard to attract, develop and retain
• ~20% of revenues in emerging markets, growing at double digit pace
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LONG-TERM, BEST-IN-CLASS CLIENT BASE
BUY WATCH
• 20,000+ clients
• Relationships with top 10 clients for over 30 years
• Long-term contracts provide stable, recurring revenues – average length of 3-10 years
• No client represents more than 4% of 2013 revenues
HIGHLIGHTS
For 90 years, we have been at the forefront of measuring consumers around the world, helping clients drive better business decisions and profitable growth over time
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KEEPING PACE WITH THE CHANGING LANDSCAPE
Mobile Measurement
• Offer clients two ways to monetize their mobile viewing • Mobile OCR: Non-C3 credited mobile viewing; allows for Dynamic Ad Insertion • Mobile TVR: C3 credited mobile viewing • Live Fall 2014
Digital Content Ratings
E-Commerce
Nielsen Twitter TV
Ratings
• Syndicated ratings of audiences for all types of digital content using the same measurement architecture as Nielsen Online Campaign Ratings.
• Strategic alliance with Adobe to bring DCR to the market more efficiently. • Helps agencies and publishers plan and predict OCR outcomes more confidently. • Live 2015
• Measure shoppers and content similar to media • Nielsen Omnichannel for an Alibaba key account in China to compliment channel
measurement • Launched in 5 markets (UK, France, Spain, China, and Korea); 2015 plans across NA,
Europe, and SE Asia
• Syndicated-standard metric around the reach of the TV conversation on Twitter • Complements Nielsen’s existing TV ratings, giving TV networks and advertisers the real-
time metrics required to understand TV audience social activity • Expansion in Mexico; Live 2015
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WHAT CONSUMERS BUY
2B electronic
records collected weekly
1.7M+ store
visits monthly
25M+ characteristics
collected for 30M products
3M store level data files annually
16M consumer surveys
per year
Broad, unparalleled reach of consumers worldwide
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BUY: PROVIDING INFORMATION AND INSIGHTS Total 2013 Revenue: $3.4B…Approximately 60% recurring in nature
INFORMATION
2013 Revenue: $2.6B
Retail sales measurement and market share information
• Presence in 106 countries
• Cover CPG sales for 90% of the world’s population and countries that account for over 90% of GDP.
• Store level data from nearly 2 million stores, supplemented from proprietary household level data from 250K households across 27 countries
2013 Revenue: $758M
Advanced capabilities and solutions helping clients assess marketing ROI
• Demand strategy
• Help clients “see around corners”
• Product innovation
• Pricing and promotion
• Shelf placement & product assortment
• Marketing ROI
Our measurement and analytics are embedded in the operating
disciplines of our clients, helping to drive their growth
Marketing C-Suite Supply Chain
Research Sales Investor and Media
Relations
INSIGHTS
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DIGITAL SHOPPING & E-COMMERCE
SALES SHOPPER SHELF
INSIGHT TO UNDERSTAND THE 21ST
CENTURY SHOPPER BEHAVIOR AND SEGMENTATION
COMPETITIVE BENCHMARKS
AND ANALYTICS TO WIN
@THE DIGITAL SHELF
DELIVER SHARE MEASUREMENT FOR E-
COMMERCE COMPARABLE TO BRICK & MORTAR
• Launched in 5 markets (UK, France, Spain, China, and Korea); 2015 plans across NA, Europe, and SE Asia
• Nielsen Omnichannel for an Alibaba key account in China to compliment the channel measurement
• Insights on how shoppers browse and buy across devices
• Shopper segmentations to guide communication and engagement plans
• Measure shoppers and content similar to media
• Insights to understand and improve the digital shelf conditions
• Analytics to optimize assortment choice for multi-channel retail
Powerful long-term opportunity for Nielsen
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EMERGING MARKETS
2006 2013
11% CAGR
$0.6B
$1.2B
$0.4B LOCALS
$0.8B GLOBAL MNCs
10-30% Growth
GROWTH OF MIDDLE CLASS EMERGING MARKETS REVENUE
BIGGEST INCREASE EVER ACCELERATION WITH LOCALS
Source: OECD; CAGR represented in constant currency
3.7B
7.0B
8.3B
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NIELSEN IN EMERGING MARKETS
Predictable, attractive long-term investment
TREND EARLY STAGE LATE STAGE
INVESTMENT $$$ $
COVERAGE NATIONAL HYPER-LOCAL, GRANULAR
LOCAL CLIENTELE <50% >50%
MARGINS(a) LOW- TO MID-TEENS (i.e., Africa)
LOW 30’S (i.e., Brazil)
(a) Excludes corporate overhead
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WHAT CONSUMERS WATCH
6K+ TV stations monitored
1.8K OCR campaigns
tracked daily
1.7T+ web impressions
collected annually
6M+ television programs measured
7+M mobile phones
on which activity is monitored
Measuring video consumption across screens
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WATCH: MEASURING CONSUMPTION ACROSS SCREENS Total 2013 PF Revenue: $2.7B*
Global television audience measurement
• A leader in US television advertising
• Television audience measurement in 35 countries
• Proprietary data methods
• Gold standard, MRC accredited panel
Digital measurement, audience analytics and consumer research
• Online Campaign Ratings
• Digital Content Ratings
• Mobile measurement
• A leader in social media measurement
• Strategic relationships (Adobe, Experian, Facebook, Twitter)
Our measurement and analytics are embedded in the operating
disciplines of our clients, helping to drive their growth
Media Executives
Programmers Media Sales
Agencies and
Advertisers
Marketing Investor and Media
Relations
TELEVISION DIGITAL
*Pro forma to include full year Nielsen Audio revenue of $489 M
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NIELSEN AUDIO Expanded measurement of US consumers by 2+ hours
Radio listening measured in 270+ markets
• Digital Audio (Streaming) Audience Measurement: 2+ hours of consumer’s day
• Audio ROI…linking listening behavior to consumer purchasing habits
• Global expansion
LONG TERM GROWTH OPPORTUNITIES
Advertisers gain an average of $6 for each
$1 spent on radio(a)
(a) Source: Nielsen Catalina Solutions
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OUR ADVANTAGE: MULTIPLE LEVELS OF CROSS PLATFORM MEASUREMENT
BY DEVICE TYPE
BY ADVERTISING MODEL
BY CONTENT TYPE
BY DELIVERY TYPE
BY USAGE
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TWO TYPES OF CONTENT
TV Originated Content
ONE ENCODING PROCESS
COMPARABLE OVERNIGHT
RATING
TV Ratings
Digital Ratings
Cross
Platform
ONE CLIENT-SIDE IMPLEMENTATION
SOFTWARE METER
BIG DATA ENABLED
MEASUREMENT
GOLD STANDARD PROCESS
MRC ACCREDITED
Nielsen Online Campaign Ratings is accredited by the Media Rating Council (MRC). Featured elements including DMA, verification and viewability are not currently accredited, but are undergoing review by MRC.
UNIVERSAL
CROSS PLATFORM MEASUREMENT ARCHITECTURE
Native Digital Content
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OUR MEASUREMENT FOOTPRINT
TV SET CONNECTED
DEVICES PC TABLET SMARTPHONE
PROGRAMS
Fall 2014 Fall 2014
ADS Fall 2014 Fall 2014
CONTENT 2015 DPR Q2 2014 Q2 2014
ADS 2015 OCR Q3 2014 Q3 2014
Lin
ear
TV
Dig
ital
D
ynam
ic
DEVICE
AD
MO
DEL
In currency (C-3) or where comparable Digital Ratings are provided
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NIELSEN ONLINE CAMPAIGN RATINGS The largest, richest data sets (Facebook, Experian) calibrated by our MRC accredited TV panel.
Delivers unique reach, frequency, viewability and verification across campaigns, by publisher, by placement
Provides Online Gross Rating Points (GRPs) consistent with Nielsen TV Ratings
Delivers results overnight WITH demographics
Provides MRC* accredited demographic ratings, that provide unique audience views for internet advertising campaigns
Q4’10 • Nielsen/Facebook announcement
Q3’11 • OCR launch… MRC accreditation
Q4’11 • 100 campaigns
Q1’12 • Unilever, Group M announcements
Q2’12 • Publisher guarantees at Upfronts • 1,000 campaigns
Q3’12 • XCR beta period
Q4’12 • XCR launches… TV & Digital
Q1’13 • ABC cross-platform guarantees
Q2’13 • OCR international expansion • Digital Program Ratings
Q3’13 • First testing of mobile OCR complete
Q4’13 • Experian as 2nd data provider • Google tag acceptance • 11,000 campaigns
Q1’14 • Google, Facebook announcements • >12,000 campaigns
Q2’14 • Mobile OCR launched (7/1) • ~16,000 campaigns
Q3’14 • mTVR launches
Oct. ‘14 • Digital Content Ratings/Adobe Partnership
KEY MILESTONES
Delivering accurate audience measurement for online advertising campaigns , comparable to TV, helping advertisers, agencies and publishers deliver improved ROI across platforms
*Nielsen Online Campaign Ratings is accredited by the Media Rating Council (MRC). Featured elements including DMA, verification and viewability are not currently accredited, but are undergoing review by MRC.
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THE DIGITAL OPPORTUNITY U.S. INDUSTRY OUTLOOK
$83B
AD SPEND MEASUREMENT SPEND
2013 TV/Radio Spend 2013-2017 CAGR: 4%
2%
$15B
~2%
~$300M opportunity
2013-2017 CAGR: 25%
AD SPEND MEASUREMENT SPEND
$18B
<1%
2017 Digital Display Spend 2013-2017 CAGR: 11%
AD SPEND MEASUREMENT SPEND
Industry significantly benefits from a single currency
~$200M opportunity
2017 Digital Video (incl. Mobile) Spend
Source: PwC Media & Entertainment Outlook 2013, e-Marketer, Nielsen financials; Excludes Display Mobile
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MARKETING EFFECTIVENESS/ ADVERTISER SOLUTIONS Helping clients understand how individuals’ viewing behavior is impacting their purchasing behavior to increase ROI marketing efforts
BUY WATCH
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NIELSEN’S WATCH PRODUCTS
REACTION RESONANCE REACH WHAT DID IT MOTIVATE
THEM TO DO? WHAT IMPACT DID IT HAVE? WHO DID MY CREATIVE REACH?
• Nielsen Catalina Solutions
• Buyer Insights
• Marketing Mix
• Brand Effect TV, Online, Mobile, Audio
• Twitter TV Ratings
• NeuroFocus
• TV Ratings
• Audio Ratings
• Online Campaign Ratings
• Digital Content Ratings
Better ROI for Marketing
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IMPROVING MARKETING EFFECTIVENESS…HELPING CLIENTS IMPROVE ROI
10-20% GROWER
DRIVES REVENUE OPPORTUNITY
• Automotive
• CPG
• Media
• QSR
• Travel & Leisure
• Retail
• Financial Svcs.
• Technology
• Telecom
• Entertainment
VERTICAL/MEDIA EXPANSION
TV Audio Digital
Linking audience assets to new verticals
FINANCIALS
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ANNUAL PERFORMANCE BY SEGMENT REVENUE (1) ($ BILLIONS)
ADJUSTED EBITDA & MARGIN (2) ($ BILLIONS)
Buy Watch ex Audio ADJUSTED
EBITDA MARGIN
23.9% 26.6% 26.8% 27.2% 27.8% 28 .4 %
(1) Revenue growth rates derived on a constant currency basis. 2013 Pro forma revenue includes full year Nielsen Audio revenue of $489M.
(2) The representation by segment does not include Corporate, which contributes to the full view of total Adjusted EBITDA for the Company. Constant currency EBITDA growth rates exclude Audio.
$4.6 $4.6
$5.3 $5.4
$6.1
$4.9
CAGR 5.5%
$1.3 $1.5
$1.2
$1.5 $1.6
CAGR 8.9%
Nielsen Audio
$1.1
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3.9% 2.3% 7.4% 5.8% 3.6% 3.1%
STEADY SEGMENT REVENUE GROWTH BUY SEGMENT
($ BILLIONS) WATCH SEGMENT
($ BILLIONS)
CONSTANT CURRENCY GROWTH(2)
11.0% 11.4% 4.6% 5.2% 4.8% 11.7%
(1) Revenue growth rates derived on a constant currency basis; figures are as reported 2013 includes 4Q of Audio.
(2) 2013 Pro forma revenue includes full year Nielsen Audio revenue of $489M
CAGR 4% CAGR 7%
(2)
CONSTANT CURRENCY GROWTH(1)
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SELECTED FINANCIAL METRICS & BALANCE SHEET ITEMS (in millions)
FINANCIAL METRICS
3Q 14
Free Cash Flow $289
Capital Expenditures $103
D&A $139
Net Book Interest $73
Cash Taxes $48
Cash Restructuring $20
Wtd. avg. diluted shares 385.9
BALANCE SHEET – 9/30/14
Gross Debt $6,620
Cash $369
Net Debt $6,251
Net Debt Ratio (a) 3.4x
(a) Reflects net debt (gross debt minus cash), divided by Adjusted EBITDA calculated on last twelve months basis. (b) Does not reflect annual amortization of Term Loans and excludes Capital Leases of $118M and miscellaneous debt of $8M.
CURRENT DEBT MATURITY PROFILE – 9/30/14 (b)
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STRONG FREE CASH FLOW FREE CASH FLOW(1)
($MILLIONS)
CAGR(1) 25%
$573
Strong free cash flow supports growth investments and increased shareholder returns
1) Defined as cash flow from operations, normalized for non-recurring Arbitron transaction costs, less CapEx. Excludes $102M sponsor termination fee paid in 2011 and $46M in certain Audio deal-related costs paid in 2013 ; CAGR excludes 2008.
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9.1x 7.9x 7.4x6.2x 5.8x
4.1x 3.9x 3.5x
2006 2007 2008 2009 2010 2011 2012 2013
LONG TERM CAPITAL ALLOCATION PLANS Updated target net debt to adjusted EBITDA ratio to 3x area.
Committed to dividend growth: 25% increase of quarterly cash dividend to $0.25…intent to grow at least in-line with earnings over time
$1.4 billion share repurchase program
DELEVERAGING PROGRESS(1)
Free Cash Flow 2015/2016
~$1B/YR
Dividend ~45%
Mandatory Debt ~20%
Buyback / Tuck-in BD
~35%
1) Reflects net debt (gross debt minus cash), divided by Adjusted EBITDA calculated on last twelve months basis including Arbitron proforma Adjusted EBITDA. Excludes $288M of mandatory convertible subordinated debt due 2013, but includes all other debt, including capital leases; Proforma as if Arbitron had been acquired 12/31/12.
Commitment to driving strong shareholder returns
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FOREIGN CURRENCY IMPACT 2013PF REVENUE
DISTRIBUTION
U.S. & Canada 56%
Western Europe 17%
Asia <15%
LatAm, Africa, <15%
Middle East, Eastern Europe
No single currency is >3% of revenue excluding USD, CAD,
EUR & GBP
Projected Impact (a)
FX IMPACT: REPORTED VS. CONSTANT CURRENCY
(a) Projected impact assumes rates in effect at 10/21/14 remain in effect for the balance of 2014. Also based on company estimates for future quarters on distribution of revenue by currency.
We report on a constant currency basis to reflect operating performance
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CAPITAL ALLOCATION UPDATE Board authorized a $1.0B increase to our existing program bringing the total available authorization to $1.4B
Plan to complete the ~$400M under our existing program by year-end 2014 and the new program by mid-2016
Buybacks will increase our 2014 leverage to ~3.5x…our long-term target remains in the ~3x area
Our balanced capital allocation approach demonstrates our commitment to drive strong shareholder returns while holding firm on our key priorities:
• Drive growth • Maintain a strong balance sheet • Make strategic acquisitions • Increase our dividend at least in line with earnings
Maintaining a balanced capital allocation approach
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2014 GUIDANCE – OCTOBER 23, 2014 (Amounts in constant currency except adjusted net income per share)
Total Revenues ~12%
Total Revenues (Core) 4.0% - 4.5%
Adj. EBITDA margin rate 29.0% - 30.0%
Adj. Net Income 29.0% - 30.0%
Adj. Net Income Per Share
$2.50 - $2.55
Deleveraging
~3.5x
Free Cash Flow
~$700M
Capital Expenditures $400M - $410M
Depreciation & Amortization
$575M - $600M
Net book interest
~$300M
Cash taxes $160M - $170M
Cash restructuring $110M - $130M
Est. wtd. avg. diluted shares outstanding for FY 2014 ~385M
OTHER FINANCIAL METRICS
Note: Total Revenue (Core) excludes the impact of the Arbitron and Harris acquisitions
Well positioned to achieve both 2014 and long-term targets
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LONG TERM FINANCIAL TARGETS
REVENUE GROWTH MID-SINGLE DIGIT
ADJUSTED EBITDA GROWTH 1X - 2X REVENUE
EMERGING MARKET GROWTH
DOUBLE DIGIT
ADJUSTED NET INCOME PER SHARE GROWTH
MID-TEENS
CASH TAX RATE MID-TEENS TO LOW 20’S
TARGET LEVERAGE 3X AREA
DIVIDEND GROWTH AT LEAST IN-LINE WITH EARNINGS GROWTH
Note: All measures represented on constant currency basis.
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NIELSEN ACQUISITIONS & JOINT VENTURES Company Capabilities
Marketing Analytics SaaS tool replacing PowerPoint analysis with real time, predictive analytics for marketing mix models
Neurofocus Neurological testing for consumer research
Retail Plus (JV) Measuring / monitoring sales and marketing of products in fast moving consumer goods sector
MEMRB Expansion of retail services within Middle East/Eastern Europe; synergies across several countries
Carrier IQ On-device meters for service quality measurement
Social Guide Twitter TV ratings
Vizu Marketing effectiveness
Ibope (JV) Television audience measurement for Mexico, Dominican Republic and Venezuela
Ipsa Retail Measurement Services (RMS) /Consumer Panel Services (CPS) in Ecuador
Perishables Group Product expansion for retail services
Arbitron Radio audience measurement
Bowker E-books
MediaXIM Belgium and Netherlands advertising info services
G4 Trade promotion optimization; Leader in SaaS analytics solutions for CPG companies
Nielsen Innovate Israel based incubator investing in startups that help Nielsen clients (10 countries)
Harris U.S. custom surveys
Nexium Retail shelf image identification technologies that replace manual inventory management systems
MMRD (JV) RMS in Myanmar
Czech TAM (JV) Television audience measurement
20
11
2
01
2
20
13
2
01
4
Approximately $1.7B in acquisitions and JVs since 2011
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NIELSEN: A DIFFERENTIATED GLOBAL, GROWTH COMPANY
Comprehensive understanding of what consumers buy and watch
Global leader in our segments with market presence in 106 countries
“Mission critical” measurement and analytics embedded in client workflows
Syndicated, scalable products and services
Strategic investments to drive continued and future growth opportunities
Proven track record of growth and economic resilience
Balanced approach to capital allocation
Focus on delivering value to clients and shareholders
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CERTAIN NON-GAAP MEASURES Overview of Non-GAAP Presentations We use the non-GAAP financial measures discussed below to evaluate the results of our operations. We believe that the presentation of these non-GAAP measures provides useful information to investors regarding financial and business trends related to our results of operations, cash flows and indebtedness and that when this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance. None of the non-GAAP measures presented should be considered as an alternative to net income or loss, operating income or loss, cash flows from operating activities, total indebtedness or any other measures of operating performance and financial condition, liquidity or indebtedness derived in accordance with GAAP. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP. Our use of these terms may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
Constant Currency Presentation We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. Net Debt and Net Debt Leverage Ratio The net debt leverage ratio is defined as net debt (gross debt less cash and cash equivalents) as of the balance sheet date divided by Adjusted EBITDA for the twelve months then ended. Net debt and the net debt leverage ratio are commonly used metrics to evaluate and compare leverage between companies and are not presentations made in accordance with GAAP.
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CERTAIN NON-GAAP MEASURES (continued) Adjusted EBITDA
We define Adjusted EBITDA as net income or loss from our consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, goodwill and intangible asset impairment charges, stock-based compensation expense and other non-operating items from our consolidated statements of operations as well as certain other items considered unusual or non-recurring in nature. We use Adjusted EBITDA to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors.
Adjusted Net Income
We define Adjusted Net Income as net income or loss from our consolidated statements of operations before income taxes, depreciation and amortization associated with acquired tangible and intangible assets, restructuring charges, goodwill and intangible asset impairment charges, other non-operating items from our consolidated statements of operations and certain other items considered unusual or non-recurring in nature, reduced by cash paid for income taxes. Also excluded from Adjusted Net Income is interest expense attributable to the mandatorily convertible subordinated bonds converted on February 1, 2013. Adjusted Net Income per share of common stock presented on a diluted basis includes the weighted-average amount of shares of common stock convertible associated with the mandatorily convertible bonds based upon the average price of our common stock during the periods beginning on or before February 1, 2013. Such shares are considered anti-dilutive in accordance with GAAP for the periods presented. Free Cash Flow We define free cash flow as net cash provided by operating activities, normalized for non-recurring Arbitron transaction costs, less capital expenditures. We believe providing free cash flow information provides valuable supplemental information regarding the cash flow that may be available for discretionary use by us. Free cash flow is not a presentation made in accordance with GAAP.
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ADJUSTED NET INCOME RECONCILIATION ($ in millions except per share amounts)
Net income $736 $272 $87 $133 $(489) $(589) $(354) (Income)/ loss from discontinued operations,
net of tax (305) (30) (26) 13 132 257 (104)
Interest expense, net 307 386 443 614 598 633 661 Provision / (benefit) for income taxes 91 122 6 (54) (152) 26 12
Depreciation and amortization 510 493 502 530 519 462 451 EBITDA 1,339 1,243 1,012 1,236 608 789 666
Impairment of goodwill and intangible – – – – 402 95 – Equity in net (income)/ loss of affiliates (2) (5) (3) (5) 22 7 1 Other non-operating loss/(income), net 34 135 219 (28) 84 6 69
Restructuring charges 119 85 83 59 60 118 133 Stock-based compensation expense 47 34 27 18 14 18 52
Other items (a) 80 12 112 44 36 54 69
Adjusted EBITDA 1,617 1,504 1,450 1,324 1,226 1,087 990 Interest expense, net (307) (386) (443) (614) (598) (633)
Depreciation and amortization (510) (493) (502) (530) (519) (462) Depreciation and amortization of acquisition-
related tangible and intangible assets 162 145 161 196 211 208
Cash paid for income taxes (147) (124) (132) (129) (139) (91) Stock-based compensation expense (47) (34) (27) (18) (14) (18)
Interest expense attributable to mandatory convertible bonds 2 23 21 – – –
Adjusted net income 770 635 528 229 167 91 Adjusted net income per share of common
stock, diluted $2.02 $1.69 $1.44 $0.82 $0.61 $0.40
2012 2011 2010 2009 2008 2007 2013
(a) Other items primarily consist of transaction-related fees.
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WEIGHTED AVERAGE SHARES OUTSTANDING ($ in millions except per share amounts. Year ended December 31 for all years.) (continued)
Weighted-average shares of common stock outstanding as of December 31,
basic 375,797,629 361,787,868 352,469,181 276,499,073 273,905,810 226,674,754
Dilutive shares of common stock from stock compensation plans 5,130,337 4,523,116 5,032,773 3,153,513 – –
Shares of common stock convertible associated with the mandatory
convertible bonds 896,994 10,416,700 9,531,994 – – –
Shares of common stock convertible associated with the mandatory
convertible bonds 381,824,960 376,727,684 367,033,948 279,652,586 273,905,810 226,674,754
2008 2012 2010 2009 2011 2013
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FREE CASH FLOW RECONCILIATION ($ in millions. Year ended December 31 for all years.)
Net cash provided by operating activities $901 $784 $641 $543 $517 $317
Sponsor termination fee – – 102 – – –
Capital expenditures (374) (358) (367) (334) (282) (370)
One-time Arbitron costs $46 –
–
–
–
–
Free Cash Flow $573 $426 $376 $209 $235 $(53)
2008 2012 2010 2009 2011 2013
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