3 quarter 2014 results conference call & webcast · conference call & webcast october 23,...

NYSE: NLSN

3RD QUARTER 2014 RESULTS CONFERENCE CALL & WEBCAST

OCTOBER 23, 2014 8:30AM ET

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NLSN 3Q 2014 Results 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 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 October 23, 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://ir.nielsen.com. 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.

http://ir.nielsen.com/

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AGENDA

Third Quarter Overview

Business Update

Financials and Guidance

Appendix and Reconciliations

Q&A

MITCH BARNS CHIEF EXECUTIVE OFFICER

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NLSN 3Q 2014 Results

THIRD QUARTER 2014 OVERVIEW

• Continuation of well-established path of consistent growth, margin expansion, and cash flow generation

- Revenue grew 14.4% constant currency, or 3.4% core

- Adjusted EBITDA grew 19.8%...up 22.0% constant currency

- ANI per share of $0.66...up 34.7% constant currency

- Free cash flow of $289 million…up 17.0% year over year

• Creating shareholder value…share repurchase program update

• Updating 2014 guidance

Strong business model lends itself to growth and value creation

*Core revenue growth excludes the impact of the Arbitron and Harris acquisitions

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UPDATE ON KEY INITIATIVES

Focusing on measuring and improving performance for our diverse global clients

Continued momentum with OCR and mobile measurement

Partnering with Adobe to provide Digital Content Ratings, bolstering OCR

Enhancing local television audience measurement to meet client needs

Nielsen Audio…well positioned for future growth opportunities

Helping clients improve marketing ROI through Ad Solutions

Strengthening client relationships and forging new alliances

eCommerce…a glimpse into the future

JAMERE JACKSON CHIEF FINANCIAL OFFICER

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TOTAL NIELSEN RESULTS – 3Q 2014 ($ in millions except per share amounts)

3RD QUARTER RESULTS

2014 2013 V% (a)

Revenues $1,572 $1,387 14.4%

Adjusted EBITDA $477 $398 22.0%

Adjusted EBITDA margin % 30.3% 28.7% 188 bps

Adjusted Net Income (ANI) $256 $193 36.9%

Diluted ANI per share (b) $0.66 $0.50 34.7%

Free Cash Flow $289 $247 17.0%

• Revenues, ex-Arbitron and Harris, grew 3.4% due to strength in Audience Measurement, Ad Solutions, and accelerating growth in Emerging markets

• Continued margin expansion while reinvesting for long-term growth

• Solid growth in earnings fueled by operating leverage and accretive impact of acquisitions

• Strong FCF growth of 17.0%

(a) Year-over-year growth in constant currency, excluding Free Cash Flow (b) Calculated using weighted average shares outstanding of 385.9 million for 3Q 2014 and 382.3

million for 3Q 2013. See Appendix for detail

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SEGMENT REVENUE ($ in millions)

• Buy revenue +2.0% (ex-Harris)

• Information grew 3.7% due to strength in retail measurement, key client wins, and Emerging markets

• Insights decline of 3.8% (ex-Harris) largely driven by softness in North America

• Broad-based growth in Emerging markets (+10.3%)

• Watch growth of 5.6% (ex-Arbitron) driven by continued strength in Audience Measurement, incl. Digital, and Ad Solutions

(a) Year-over-year growth in constant currency

3RD QUARTER RESULTS

2014 2013 V% (a)

Information $677 $664 3.7%

Insights $201 $184 9.2%

Total Buy $878 $848 4.9%

Watch $694 $539 29.2%

Total $1,572 $1,387 14.4%

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SEGMENT PROFITABILITY — ADJUSTED EBITDA ($ in millions)

• Strong profitability while we invest in key growth catalysts

• Buy: continued progress on margins while investing in Emerging markets

• Watch: operating leverage and execution of Arbitron integration

• Continued focus on cost leadership

(a) Year-over-year growth in constant currency

3RD QUARTER RESULTS

2014 2013 V% (a)

Buy $171 $169 4.9%

Watch $317 $239 33.8%

Corporate $(11) $(10) NM

Total $477 $398 22.0 %

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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%, excluding USD, CAD, EUR &

GBP

We report on a constant currency basis to reflect operating performance

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.

(220)

(90) (110)

(290)

(180)

(350)

(170) (220)

(300) (260)

1Q14 2Q14 3Q14 4Q14E FY14E

Revenue

EBITDA

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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 3.4x

(a) Reflects net debt (gross debt minus cash), divided by Adjusted EBITDA calculated on last twelve months basis. 6/30/14 proforma net debt leverage ratio includes Arbitron Adjusted EBITDA of $47

million for the three month period of July 1, 2013 to September 30, 2013, the date on which the Arbitron acquisition was completed. (b) Excludes bank overdrafts and capital leases

CAPITAL TABLE

9/30/14 6/30/14 Change

Loan Debt (secured) $3,516 $3,597 $(81)

7.75% Sr. Notes -- 802 (802)

4.50% Sr. Notes (10/1/20) 800 800 --

5.50% Sr. Notes (10/1/21) 625 625 --

5.00% Sr. Notes (4/15/22) 1,553 750 803

Capital lease/misc. debt 126 118 8

Total Debt $6,620 $6,692 $(72)

Less Cash 369 310 59

Net Debt $6,251 $6,382 $(131)

Net Debt Ratio (a) 3.4x 3.6x (0.2)x

Weighted avg. interest rate (b) 3.86% 4.22% (36) bps

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CAPITAL ALLOCATION UPDATE

Maintaining a balanced capital allocation approach

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

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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

Leverage

~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

Raising mid-point of 2014 ANI per share guidance range

Note: Total Revenue (Core) excludes the impact of the Arbitron and Harris acquisitions

APPENDIX

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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: Q3 ($ in millions except per share amounts)

(a), (b) See footnotes on next page

Quarter ended September 30, (Unaudited)

2014 2013 Net income $ 92 $ 131

Income from discontinued operations, net of tax -- --

Interest expense, net 73 77

Provision for income taxes 95 40

Depreciation and amortization 139 117

EBITDA 399 365

Equity in net income of affiliates -- --

Other non-operating expense/(income), net 51 (5)

Restructuring charges 6 20

Stock-based compensation expense 12 11

Other items (a) 9 7

Adjusted EBITDA 477 398

Interest expense, net (73) (77)

Depreciation and amortization (139) (117)

Depreciation and amortization of acquisition-related tangible and intangible assets 51 35

Cash paid for income taxes (48) (35)

Stock-based compensation expense (12) (11)

Interest expense attributable to mandatory convertible bonds -- --

Adjusted net income $ 256 $ 193

Adjusted net income per share of common stock, diluted (b) $0.66 $0.50

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ADJUSTED NET INCOME RECONCILIATION: Q3 (continued)

(a) For the three months ended September 30, 2014 and 2013, other items primarily consist of transaction related costs.

(b) Adjusted Net Income per share of common stock presented on a diluted basis includes potential common shares associated with stock-based compensation plans that may have been considered anti-dilutive in accordance with GAAP.

Weighted-average shares of common stock outstanding as of quarter ended September 30, 2014, basic

380,884,561

Dilutive shares of common stock from stock compensation plans 5,006,830

Weighted-average shares of common stock outstanding, diluted 385,891,391

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FREE CASH FLOW RECONCILIATION ($ in millions)

QUARTER ENDED SEPTEMBER 30,

2014 2013

Net Cash Provided by Operating Activities

$392 $321

One-time Arbitron costs -- 11

Capital Expenditures (103) (85)

Free Cash Flow $289 $247

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