4 TH QUARTER AND FULL YEAR 2016 RESULTS THURSDAY FEBRUARY 9, :00AM ET NYSE: NLSN

Transcription

1 4 TH QUARTER AND FULL YEAR 2016 RESULTS THURSDAY FEBRUARY 9, :00AM ET NYSE: NLSN

2 SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS The following discussion contains forward-looking statements, including those about Nielsen s outlook and prospects, that relate to the Private Securities Litigation Reform Act of 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 February 9, 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 such as our most recent 10-K, 10-Q and 8-K reports. 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 This information may not be appropriate for other purposes. 2

3 MITCH BARNS CHIEF EXECUTIVE OFFICER

4 FULL YEAR 2016 OVERVIEW Financial highlights - Revenue of $6.3 billion up 4.1% constant currency Watch: up 6.3% constant currency Buy: up 2.3% constant currency - Adjusted EBITDA of $1.9 billion up 5.2% constant currency - Diluted net income per share of $1.39 vs. $1.54 a year ago up 35.0% ex-items - Record free cash flow of $941 million up 16.5% vs. a year ago Executing on our balanced capital allocation framework - Acquisitions remain integral, bolstering key parts of our strategy - Returned $850 million back to shareholders in the form of dividends and buybacks Updating 2017 guidance RESILIENT BUSINESS MODEL 4

5 GRACENOTE ACQUISITION GRACENOTE DATA STATISTICS 40+ Years in the Business 1,800 Employees 12M TV Shows & Movies 200M Tracks 4,500 Events, Leagues & Teams 85 Territories with Data Coverage 3,000+ Customers Globally 75M Cars 20M Smart TVs 1B Devices 250M TV Households 35 Languages 5

6 WATCH: STRATEGIC INITIATIVES Total Audience Measurement Digital in TV Ratings : newly MRC accredited; to be included in C3/C7 Total Content Ratings: limited commercial release on March 1 st Digital Content Ratings: syndicated September 2016; continued adoption Subscription Video On-Demand: >20K episodes; improving data capture Digital Ad Ratings: growing client adoption and use for guarantees National TV: incorporating out-of-home viewing in April 2017 Upfronts: Total Audience and its many components to play a key role Local Incorporating out-of-home viewing Set-top-box data to add stability and granularity to ratings Audio 10% increase in Portable People Meter sample size (48 markets) Marketing Effectiveness: Convergence of Watch and Buy Nielsen Marketing Cloud: increasing the value of data and analytics 6

7 BUY: TWO-SPEED WORLD Developed Markets: Challenging Growth Environment Measurement + everyday analytics remain mission critical for clients Renewal rates with large global clients 100% Clients reining in costs and reducing spend, our business not immune Emerging Markets: Compelling Story Global footprint remains strategic advantage Balanced portfolio of global and local clients, broad-based growth Ongoing investments in measurement coverage and granularity Connected System: The Future of Buy Linking measurement data with analytics, explanatory and predictive Addressing client needs of speed and efficiency Expanding to an additional clients as the year unfolds; broader rollout in 2018 Connected Partner Program growing, adding value to measurement data E-Commerce: Building Out Coverage Covering 90% of US e-commerce sales of fast moving consumer goods Strategic agreement with JD.com in China Active in 11 markets, expanding to six more in

8 JAMERE JACKSON CHIEF FINANCIAL OFFICER

9 TOTAL NIELSEN RESULTS FY 2016 ($ in millions, except per share amounts) U.S. GAAP RESULTS FY 2016 FY 2015 V% (a) NON-GAAP RESULTS FY 2016 FY 2015 V% (b) Total Revenue $6,309 $6, % Total Revenue $6,309 $6, % Net Income (NI) $502 $570 (11.9%) Core Revenue $5,924 $5, % Diluted NI per share (c) $1.39 $1.54 (9.7%) Adjusted EBITDA $1,938 $1, % Adjusted EBITDA margin % 30.7% 30.1% 31 bps Free Cash Flow $941 $ % (a) Growth as reported (b) Growth in constant currency, excluding Free Cash Flow (c) Calculated using weighted average shares outstanding of million for FY 2016 and million for FY

10 TOTAL NIELSEN RESULTS 4Q 2016 ($ in millions, except per share amounts) U.S. GAAP RESULTS 4Q Q 2015 V% (a) NON-GAAP RESULTS 4Q Q 2015 V% (b) Total Revenue $1,656 $1, % Total Revenue $1,656 $1, % Net Income (NI) $159 $251 (36.7%) Core Revenue $1,550 $1, % Diluted NI per share (c) $0.44 $0.68 (35.3%) Adjusted EBITDA $548 $ % Adjusted EBITDA margin % 33.1% 32.7% 13 bps Free Cash Flow $476 $ % (a) Growth as reported (b) Growth in constant currency, excluding Free Cash Flow (c) Calculated using weighted average shares outstanding of million for 4Q 2016 and million for 4Q

11 WATCH SEGMENT RESULTS ($ in millions, growth in constant currency) REVENUE 4Q 16 4Q 15 V% 4Q DYNAMICS Total Watch $788 $ % Core Watch $722 $ % PROFITABILITY Adjusted EBITDA $363 $ % Margin 46.1% 46.0% 25 bps Strong total revenue growth: +6.2% Audience Measurement (Video/Text): +9.0% Audio: (1.6%) Marketing Effectiveness: +9.2% Other Watch/Corporate: (2.9%) Growth initiatives delivering Digital Ad Ratings adoption Nielsen Marketing Cloud momentum Continued traction with Digital Content Ratings Continued margin expansion while investing 11

12 BUY SEGMENT RESULTS ($ in millions, growth in constant currency) REVENUE 4Q 16 4Q 15 V% 4Q DYNAMICS Total Buy $868 $ % Modest total revenue growth: +0.9% Developed: +0.4% Core Buy $828 $ % Emerging: +7.2% Corporate: (24.5%) PROFITABILITY Emerging markets remain robust Adjusted EBITDA $193 $195 (1.0%) Portfolio pruning underway U.S. consumer segmentation U.S. custom survey research services Margin 22.2% 22.2% (43 bps) Investing in the Connected System and future productivity 12

13 FOREIGN CURRENCY IMPACT 2016 CURRENCY PROFILE - REVENUE PROJECTED FX IMPACT (a) : REPORTED VS CONSTANT CURRENCY 21% % 3% 3% 9% 61% (140) (60) (190) (90) (50) (160) (40) (40) (120) (70) (10) USD EUR CAD GBP CNY Other 4Q16 FY16 1Q17E 2Q17E 3Q17E 4Q17E FY17E Rev (bps) EBITDA (bps) (a) Projected impact assumes rates in effect at 2/8/17 remain in effect for the balance of Note: We report on a constant currency basis to reflect operating performance 13

14 2017 GUIDANCE (Revenue and adj. EBITDA margin growth in constant currency) OTHER FINANCIAL METRICS Total Revenue 5% - 6% Total Revenue Core 6.5% - 7.5% Total Revenue Core (ex Gracenote) 3% - 4% Net book interest $365M - $375M GAAP Tax Rate 38.0% % Restructuring $60M - $70M Adj. EBITDA margin growth Flat Cash restructuring $100M - $110M GAAP Net Income Per Share $ $1.46 Net Debt Leverage Ratio ~3.8x D&A $665M - $675M Est. wtd. avg. diluted shares outstanding for FY 2017 ~359M Free Cash Flow ~$900M 14

15 & 15

16 APPENDIX

17 CERTAIN NON-GAAP MEASURES Overview of Non-GAAP Presentations We use the non-gaap financial measures discussed below to evaluate our results of operations, financial condition, liquidity and indebtedness. 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 valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the company s operating performance and liquidity. In addition, these non- GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data the Company has determined that it is appropriate to make this data available to all investors. 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, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the company s 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. No adjustment has been made to foreign currency exchange transaction gains or losses in the calculation of constant currency net income. 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. 17

18 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, stock-based compensation expense and other nonoperating items from our consolidated statements of operations as well as certain other items that arise outside the ordinary course of our continuing operations. 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. Free Cash Flow We define free cash flow as net cash provided by operating activities, plus contributions to the Nielsen Foundation, less capital expenditures, net. We believe providing free cash flow information provides valuable supplemental liquidity information regarding the cash flow that may be available for discretionary use by us in areas such as the distributions of dividends, repurchase of common stock, voluntary repayment of debt obligations or to fund our strategic initiatives, including acquisitions, if any. However, free cash flow does not represent residual cash flows entirely available for discretionary purposes; for example, the repayment of principal amounts borrowed is not deducted from free cash flow. Key limitations of the free cash flow measure include the assumptions that we will be able to refinance our existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt. Free cash flow is not a presentation made in accordance with GAAP. 18

19 ADJUSTED EBITDA RECONCILIATION ($ in millions) Quarter ended December 31, Year ended December 31, Net income $ 159 $ 251 $ 502 $ 570 Interest expense, net Provision for income taxes Depreciation and amortization EBITDA ,743 1,834 Equity in net loss of affiliates Other non-operating income, net (4) (199) 3 (170) Restructuring charges Stock-based compensation expense Other items (a) Adjusted EBITDA $ 548 $ 531 $ 1,938 $ 1,858 (a) For the three and twelve months ended December 31, 2016 and 2015, other items primarily consists of business optimization costs. 19

20 ADJUSTED EBITDA RECONCILIATION ($ in millions) Operating Income Restructuring Charges Depreciation and Amortization Stock-Based Compensation Expense Other Items (1) Adjusted EBITDA Buy $115 $19 $54 $4 $1 $193 Watch $251 $11 $98 $3 - $363 Corporate $(25) $2 $1 $7 $7 $(8) Total $341 $32 $153 $14 $8 $548 Operating Income QUARTER ENDED DECEMBER 31, 2016 QUARTER ENDED DECEMBER 31, 2015 Restructuring Charges Depreciation and Amortization Stock-Based Compensation Expense Other Items (1) Adjusted EBITDA Buy $138 $4 $50 $2 $1 $195 Watch $246 $2 $91 $3 $1 $343 Corporate $(74) $2 $1 $4 $60 $(7) Total $310 $8 $142 $9 $62 $531 (1) Other items primarily consists of business optimization costs. 20

21 ADJUSTED EBITDA RECONCILIATION ($ in millions) Operating Income Restructuring Charges Depreciation and Amortization Stock-Based Compensation Expense Other Items (1) Adjusted EBITDA Buy $331 $61 $212 $16 $3 $623 Watch $935 $18 $387 $10 $2 $1,352 Corporate $(123) $26 $4 $25 $31 $(37) Total $1,143 $105 $603 $51 $36 $1,938 Operating Income YEAR ENDED DECEMBER 31, 2016 YEAR ENDED DECEMBER 31, 2015 Restructuring Charges Depreciation and Amortization Stock-Based Compensation Expense Other Items (1) Adjusted EBITDA Buy $369 $32 $207 $15 $1 $624 Watch $880 $14 $363 $8 $4 $1,269 Corporate $(156) $5 $4 $25 $87 $(35) Total $1,093 $51 $574 $48 $92 $1,858 (1) Other items primarily consists of business optimization costs. 21

22 ADJUSTED EBITDA RECONCILIATION ($ in millions) 2016 Reported QUARTER ENDED DECEMBER 31, 2015 Reported % V Reported 2015 Constant Currency % V Constant Currency Buy $193 $195 (1.0%) $195 (1.0%) Watch $363 $ % $ % Corporate $(8) $(7) NM $(7) NM Total $548 $ % $ % 2016 Reported YEAR ENDED DECEMBER 31, 2015 Reported % V Reported 2015 Constant Currency % V Constant Currency Buy $623 $624 (0.2%) $ % Watch $1,352 $1, % $1, % Corporate $(37) $(35) NM $(35) NM Total $1,938 $1, % $1, % 22

23 REVENUE RECONCILIATION ($ in millions) QUARTER ENDED DECEMBER 31, 2016 Reported 2015 Reported % V Reported 2015 Constant Currency % V Constant Currency Developed Markets $545 $553 (1.4%) $ % Emerging Markets % % Core Buy $828 $ % $ % Corporate $40 $54 (25.9%) $53 (24.5%) Buy $868 $879 (1.3%) $ % Video and Text $519 $ % $ % Audio (1.6%) 122 (1.6%) Marketing Effectiveness % % Core Watch $722 $ % $ % Corporate/Other Watch % 68 (2.9%) Watch $788 $ % $ % Total Core Buy and Watch $1,550 $1, % $1, % Total $1,656 $1, % $1, % 23

24 REVENUE RECONCILIATION ($ in millions) YEAR ENDED DECEMBER 31, 2016 Reported 2015 Reported % V Reported 2015 Constant Currency % V Constant Currency Developed Markets $2,096 $2,110 (0.7%) $2, % Emerging Markets 1,063 1, % % Core Buy $3,159 $3, % $3, % Corporate $163 $191 (14.7%) $191 (14.7%) Buy $3,322 $3,345 (0.7%) $3, % Video and Text $1,978 $1, % $1, % Audio (0.8%) 503 (0.6%) Marketing Effectiveness % % Core Watch $2,765 $2, % $2, % Corporate/Other Watch (4.3%) 234 (5.1%) Watch $2,987 $2, % $2, % Total Core Buy and Watch $5,924 $5, % $5, % Total $6,309 $6, % $6, % 24

25 OTHER NON-OPERATING (LOSS)/INCOME IMPACT ON DILUTED EARNINGS PER SHARE (amounts in millions, except per share information) Q4 15 FY 15 Business acquisition/disposition and sale of investment $ 187 $ 187 Diluted per share impact $ 0.51 $ 0.51 GAAP weighted-average shares of common stock outstanding, diluted All amounts are presented net of the estimated tax impact 25

26 2017 GUIDANCE NON-GAAP RECONCILIATIONS ($ in millions) ADJUSTED EBITDA RECONCILIATION 2017 Guidance Range Net income $500 - $525 Interest expense, net $365 - $375 Provision for income taxes $310 $330 Depreciation and amortization $665 $675 Restructuring charges $60 $70 Stock-based compensation and other $100 - $105 Adjusted EBITDA $2,030 - $2,050 FREE CASH FLOW Net cash provided by operating activities ~$1,360 Less: Capital expenditures, net ~(460) Free cash flow ~$900 NET DEBT LEVERAGE RATIO Gross Debt ~$ 8,320 Cash ~$ 580 Net Debt ~$ 7,740 Adjusted EBITDA $2,030 - $2,050 Net Debt Leverage Ratio ~3.8x 26

27 2017 GUIDANCE NON-GAAP RECONCILIATIONS ($ in millions) 2017 Guidance Low REVENUE RECONCILIATION % V Constant Currency 2017 Guidance High % V Constant Currency 2016 Constant Currency Total Revenue $6, % $6, % $6,265 Total Revenue Core $6, % $6, % $5,885 Total Revenue Core (ex. Gracenote) $6, % $6, % $5,885 27

28 FREE CASH FLOW RECONCILIATION ($ in millions) Quarter Ended December 31, (Unaudited) Year Ended December 31, (Unaudited) Net cash provided by operating activities $ 543 $ 401 $ 1,296 $ 1,209 Plus: Non-recurring contribution to the Nielsen Foundation 36 Less: Capital expenditures, net (67) (95) (391) (401) Free cash flow $ 476 $ 306 $ 941 $

29 DEBT CAPITAL TABLE ($ in millions) DEBT CAPITAL TABLE 12/31/16 12/31/15 Change Loan Debt (secured) $4,059 $3,496 $ % Sr. Notes (10/1/20) % Sr. Notes (10/1/21) % Sr. Notes (4/15/22) 2,285 2,284 1 Capital lease/misc. debt Total Debt $7,926 $7,338 $588 Less Cash Net Debt $7,172 $6,981 $191 Adjusted EBITDA (a) $1,938 $1, Net Debt Leverage Ratio (b) 3.70x 3.76x (0.06)x Weighted avg. interest rate (c) 4.04% 4.04% - bps (a) Adjusted EBITDA calculated based on last twelve months basis (b) Reflects Net Debt (gross debt minus deferred financing fees and cash), divided by Adjusted EBITDA calculated on last twelve months basis (c) Excludes capital leases 29

30 SELECTED FINANCIAL METRICS & BALANCE SHEET ITEMS ($ in millions) FINANCIAL METRICS 4Q 16 Free Cash Flow $476 Capital Expenditures, net $67 D&A (c) $153 Net Book Interest $85 Cash Taxes $50 Cash Restructuring $20 Wtd. avg. diluted shares BALANCE SHEET 12/31/16 Gross Debt $7,926 Cash $754 Net Debt $7,172 Net Debt Leverage Ratio (a) 3.70x CURRENT DEBT MATURITY PROFILE 12/31/16 (b) $2,323 $1,785 $1,397 $1,021 $814 $278 $ (a) Reflects net debt (gross debt minus deferred financing fees and cash), divided by Adjusted EBITDA calculated on last twelve months basis (b) Excludes Capital Leases ($158M) and other debt ($12M) (c) Includes $52 million of depreciation and amortization associated with tangible and intangible assets acquired in business combinations 30

31 NIELSEN INVESTOR RELATIONS Follow Nielsen