Nielsen Holdings plc
Q1 2015 Earnings Call Transcript

Published: 22 Apr 2015

[Operator:]

Good morning, my name is Jonathan and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2015 Nielsen N.V. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be question-and-answer session. [Operator Instructions] Thank you and Ms. Kate Vanek, SVP of Investor Relations, you may begin your conference.

[Kate Vanek:]

Aye good morning everybody and thank you for joining us to discuss Nielsen’s first quarter 2015 financial performance. Joining me on today’s call from Nielsen is Mitch Barns, CEO; and Jamere Jackson, our CFO. A slide presentation that we’ll use on this call is available under the Events section of our Investor Relations website at nielsen.com\investors. Before we begin our prepared remarks, I’d like to remind all of you that the following discussion contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include comments about Nielsen’s outlook, expectations and prospects and are based on Nielsen’s view as of today, April 22, 2015. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. These risks and uncertainties that we believe are material are outlined in Nielsen’s 10-K and other filings and materials, which you can find also on our website. For Q&A as we did last quarter, we ask everyone to limit themselves to one question only so that we can accommodate everybody in the queue and we thank you in advance for that. Feel free to join the queue again and if time remains, we will certainly call on you. For now to start the call I’d like to turn it over to our CEO Mitch Barns.

[Mitch Barns:]

Yes thank Kate. Good morning everyone thanks for joining us on the call. It’s incredibly exciting time both for Nielsen and our clients. Pace of changes faster than ever, it starts with the relentless margin technology which is then driving this accelerating fragmentation in both media and retail worlds. That contributes to the growing of abundance of data which all of the players are waiting to put to use. Our mission to it all is to provide a clear and complete understanding of consumers and markets. Given the pace of change are priority [ph] that clarity more than ever. That’s why when we look at everything happening around us, we say there’s never been a better time to do what we do. Let’s take a look at the first quarter it was the great quarter, reflecting our solid business results and the progress we made in executing our strategy. First quarter revenues grew 4.4% on a constant currency basis. Watch revenues increased nearly 4% driven by strength in audience measurement and marketing effectiveness, partially offset by actions we took to prove our portfolio of some non-core products, as well as the expected ongoing runoff in our legacy online rankings product that will replaced by digital content ratings in the fall. Excluding these our Watch segment underpinned by our Total Audience Measurement strategy grew 5.8% on a constant currency basis. Buy revenues were up 5% constant currency, and this includes 3% growth in developed markets and another quarter of double digit growth in emerging markets where the investments we made in expanding our coverage continue to pay off. Next adjusted EBITDA was up approximately 7% constant currency, reflecting the scalability of our business model and the tremendous work by our teams around the globe who executed with discipline and delivered on productivity. Adjusted net income per share grew 18% constant currency to $0.46. During the quarter, we also continued to execute on our balanced capital allocation framework, today we announced that our board has approved that dividend increase of 12%, increasing our quarterly dividend to $0.28 per share. We also continue to buyback our stock under our existing $1 billion share repurchase authorization, which were on track to exhaust by mid-2016. Both of these actions demonstrate our ongoing commitment to delivering shareholder value. Our resilient business model and strong free cash flow also enable us to pursue strategic acquisitions as we add to our capabilities in step of the evolving needs of our clients. In March, we completed the acquisition of eXelate. This acquisition adds tremendous value to Nielsen in terms of capability. Actually thousands of behavioral and intend based audience segments, many which were built from Nielsen’s data helps improve the precision of buying and selling decisions in the digital marketing and programmatic ecosystems. Finally, so we do the changes in FX, since we last reported. We will be updating our 2015 guidance and Jamere talk more about this in a moment. Next, I’ll turn to our key strategic initiatives. Let’s start with Watch. I first talk about our Total Audience Measurement and that remains our number one priority. We’re sharply focused on first, providing our clients with the solutions they need for Total Audience Measurement. And second, guiding the industry towards redefining the currency, to capture more of the time consumer spend with video content across the growing variety of screens, devices and platforms they’re using. I want to spend a few minutes on those two topics. First, what is Total Audience Measurement? Total Audience Measurement is our framework for comprehensive measurement for our clients, following consumers wherever they go and however they view. Total Audience Measurement is itself not a product. Think of it as a framework that integrates our measurement capabilities both existing and the new capabilities that we continue to bring to the market as we follow the consumer, for instance, for a video, measuring the Total Audience means measuring live TV, time-shifted TV, over-the-top video on the TV screen, as well as video on a computer, tablet or smartphone. And here is another important point each of those measures needs to be comparable to the others so they can be combined to represent the Total Audience. This is what the market needs and Nielsen is uniquely positioned to deliver it. On the second point, redefining the currency, let’s revisit 2006 when C3 was adopted by the industries, as the current C. That process took about 12 months of negotiation, and collaboration between the agencies and the media companies before they reached agreement. The industry is going through with similar process now, except there’s a new voice at the table, the Digital Voice, which adds another dimension to the discussion. We’re in the early innings and we’re doing all we can to help move this process along, but ultimately, it’s the players in the market who determine the currency. What we can control is our own execution and we’re moving rapidly to provide our clients with the solutions they need to see the Total Audience. Meanwhile, we continue to renewal all of our major television audience measurement contracts. This business is rock solid, which is important because despite everything you may hear about the rising use of mobile devices, over 90% of the time spent watching premium video content is still on the TV, glass that includes live viewing and time-shifted viewing and viewing the content delivered to connected devices like Roku, Apple TV, Chromecast, game consoles, and so on. That said, we follow the consumer, so when they use a computer or a mobile device to watch video, we’ll also be there to measure it. Next our video on-demand measurement, the capabilities are progressing nicely. In March we launched our newest measurement product, which uses the audio signature of a program to measure the audience. Any client who’d like to measure the VOD viewing of their content on a television screen can simply provide us with the audio signature for the program and then we can measure it. So far we have 14 networks and studios signed up, and we expect those numbers to steadily increase. And in 2016 we’ll add additional capability in this area. On mobile measurement we are now working in the 49 broadcasting cable networks and 15 distributors including several MVPDs. These numbers are up shortly from just a few weeks ago when we were at 34 networks and eight distributors. In short we’re gaining critical mass. We also made good progress on digital audio, where we’re working with more than 30 players across the industry to implement our SDK in their apps and players. We continue to see impressive growth in digital ad ratings, formerly called OCR. 20 of the top 25 advertisers have chosen Nielsen’s measurements, and that's up from 18 of the top 25 that we sided in December. Renewals are strong, impressions are up, revenue nearly doubled in the quarter and we are on track to expand in the seven new international markets including China by the end of this year. This is a great product on its own. It will be even more valuable to our clients once our new Digital Content Ratings product goes out. Together these two measuring capabilities are important parts to the foundation of Total Audience Measurement. Speaking of Digital Content Ratings our partnership with the Adobe is progressing very well. We’re on schedule to launch our beta version this summer with the production launch targeted for September 30. In the meantime, we’re already working with clients like Hulu and Sony Crackle to measure the audiences for their content. A place in the market see a lot of growth opportunity here, in fact in industry report published last week predicted it Web-TV advertising revenue could quadruple over the next five years, thanks to the arrival of Digital Content Ratings from Nielsen working with Adobe. If that is an independent measurement, along with the precision and accountability to come with it will boost this market, as it has for so many other markets and this is great for Nielsen. A marketing effect in this practice has continued to see strong double digit growth in the quarter in fact it was north of 20%. In both Watch and Buy segments we expect measurement and analytics to continue to converge and that drives big improvements in the precision and optimization that needs a better return on investment in advertising. As the ROI of advertising increases, we expect that investment in advertising will also grow, and this too is great for Nielsen. Let’s now turn to the Buy business. Globally our Buy margins were up for the third straight quarter on a constant currency basis. This is as planned and there are longer-term trend lines which continue to be positive. In the develop markets our Buy business had a solid quarter with revenue growth of 3%, driven by our investments in our analytics products, as well as new client wins especially in the relatively faster drilling mid-tier and small client segments. Our Buy segment innovation practice had a strong quarter. This part of our business is focused on helping our FMCG clients with their new product launches. We forecast the sales potential and then we help them to optimize the launch. We’ve been the global leader in this area for many years. New products are vital to this top line growth of our FMCG clients and we’ve likely heard some of them talk more about this part of the business lately. This is encouraging for both our clients and for Nielsen. In emerging markets, our business grew just about 10% for the third consecutive quarter. This is driven by growth with both our local clients and the multinationals. The growth was broad-based including Latin America with strong growth in our core measurement business. Southeast Asia with several new wins the Middle East with outstanding execution by our team there and a challenging environment and Greater China, where we continue to make incredible progress. In fact let me say just a little bit more about China. You all have probably read that Chinese GDP growth in the first quarter was around 7% which is – it’s been since 2009. Yet our growth in Mainland China was over 14%. We continue to make good progress with our e-commerce measurement, where we now cover over 70% of online FMCG sales in that market. We also expanded our relationship with our Alibaba by launching an automated new product testing capability, called New Offer Advisor on Alibaba’s platform. Lastly, we’re on track to launch Digital Ad Ratings in China in partnership with Tencent in early May. All in all, another great quarter of progress for Nielsen in China. So as you can see, point 15 shaping upto the and extremely active and highly productive year for us. We still have a lot of work to do, but we feel great about the path we’re on. Over to you, Jamere.

[Jamere Jackson:]

Thank you, Mitch, and good morning everyone. Year is off to a good a start. We had good execution around the world with steady revenue growth and margin expansion in the quarter. We are delivering on our capital allocation strategy by investing in assets to grow our business, executing on our share repurchase plan, and the Mitch, our Board of Directors approved the 12% quarterly dividend increase. Our business remains well positioned to deliver consistent growth of the cycles and our strong balance sheet and free cash generation capabilities enable us to grow our business, and return cash to shareholders in a meaningful way. Again a great start to the year. First, I’ll hit the total company results for the quarter. Revenue was just under $1.5 billion, up 4.4% constant currency with solid growth across both Watch and Buy. I’ll highlight again that this marks the 31st [ph] consecutive quarter of constant currency revenue growth reflecting our remarkable consistency through the cycles. Adjusted EBITDA was $380 million up 7.3% constant currency and adjusted EBITDA margins were 26.1% up 70 basis points on a constant currency basis, as we delivered strong productivity, while we continue to invest for long-term growth. Importantly we saw strong margin expansion in both our Watch and Buy segments. Adjusted net income was $173 million, up 14.6% constant currency and diluted adjusted net income per share was $0.46, up 17.9% versus the prior year on a constant currency basis. Our earnings growth was fueled by solid top line growth, strong operating leverage and our share repurchase plan as I will remind you is to execute $1 billion of share repurchases by mid-2016. In the first quarter, we repurchased 3.2 million shares. Finally, we had one million free cash flow uses in the quarter, down 14 million versus prior year due to timing on CapEx related to ratings enhancements which benefit both our local and national TV clients in the U.S. These are important commitments that we have made to our clients and we are executing. Next, I will move to the segments. First is our Watch segment. In the first quarter, our Watch business revenue was $660 million, up 3.6% constant currency. Now our revenue was dampened by a 220 basis points drag from actions we took to shed to non-core products, as well as the expected runoff of legacy online rankings products, which will be replaced by Digital Content Ratings in the fall. Excluding this impact, the Watch segment grew 5.8% constant currency. Audience measurement excluding Audio grew 5.5%, Audio grew right around 2% and Marketing Effectiveness grew 22.7%, building on the strong momentum we saw in the fourth quarter on increased demand for our Marketing ROI products. Well these three product lines which represent 93% of our business grew just shy of 6%. We also added the eXelate business in March and while the revenue contribution was small in 1Q, we are excited about the capabilities that we have to offer new and existing clients in this fast growing area of the industry. Watch adjusted EBITDA was 278 million, up 6.1% on a constant currency basis. Watch margins expanded nearly a four percentage point as we continue to drive productivity and operating leverage in the business. Our Watch segment has never been stronger. Over the past 18 months, every one of our national clients that has come up for renewal, has renewed their agreements with Nielsen and every major local client that has come up for renewal has also done so with Nielsen, including most recently narrative [ph]. This is the great business and we had another strong quarter. Turning on to our Buy business, first quarter total Buy revenue was $798 million, up 5.1% on a constant currency basis, our business in the developed markets was $549 million, up 3% on a constant currency basis and our business in the emergency markets continues to deliver broad-based growth with revenue of $249 million, up 10.2% on a constant currency basis. In the developed markets, we continue to invest, resulting in growth in our subscription-based business, as well as good growth from client discretionary spending in areas like advanced analytics, segmentation and innovation. Emerging markets continue to remain strong and in particular we saw double digit growth in Greater China, Southeast Asia and Latin America. Additionally, Africa, the Middle East and Eastern Europe were all up mid-single digits. Our continued commitment to investing and coverage in analytics capability has delivered three straight quarters of double digit growth in the emerging markets. Our EBITDA was a $110 million, up 8.9% constant currency. Our adjusted EBITDA margins were up 47 basis points in the quarter, as we improved profitability, while we continue to invest in emerging markets. Margin expansion in Buy has a big focus area for our teams and we’ve started to see the benefits over the last three quarters. Overall we had a great quarter and Buy with solid revenue growth on a constant currency basis and strong margin expansion. Next I’ll move to foreign currency impacts. I want to remind you that we report revenue with EBITDA on a constant currency basis to reflect our operating performance. We generally don’t pick on transactional risk so this slide focuses strictly on the translational impact for reporting purposes. And like many multinationals, we saw significant foreign currency impact that resulted in a 650 basis points drag on revenues and a 620 basis points drag on EBITDA during the quarter. The drive was about a 170 basis points greater on revenue and about 230 basis points greater on EBITDA than what we laid out on our 4Q earnings call, which is almost an incremental $0.02 impact on our earnings per share results in the first quarter. As yesterday’s stock rates held constant through 2015 then we expect the 630 basis points drag on revenue and a 530 basis points drag on EBITDA for the full year in 2015. The currency impact represents $0.08 of share impact versus our February 12 update. Turning now to 2015 guidance, we are updating our 2015 guidance to reflect the impact of foreign exchange rates as a result we now see adjusted net income per share in the $2.60 to $2.66 range, down from our previous range of $2.68 to $2.74 a share. This is $0.08 of share lower on the top and bottom end of the range and it’s solely due to the impact of currency. On an operational basis, we remain confident in our plan to execute and deliver. All of the other metrics on the page remain unchanged versus our previous update, including our free cash flow guidance of $850 million to $900 million. So to wrap up we are pleased with our execution in the first quarter, where we delivered steady consistent revenue growth and margin expansion. We are delivering on our commitments to grow our business with investments in key growth initiatives in both of our segments, as well as coverage [ph] expansion in the emerging markets. Continued execution along with our plans to return over a $1 billion in cash back to shareholders in 2015 in the form of dividends and buybacks, gives us continued confidence that we have the elements in place to drive long-term shareholder value. And with that I will turn it back to Kate.

[Kate Vanek:]

Operator, we’d love the first question.

[Operator:]

[Operator Instructions] And your first question comes from David Bank with RBC. Please go ahead.

[David Bank:]

Start with – up to 30,000 feet that that’s okay. As we kind of head into the upfront here, we’ll find ourselves in middle of these debates about the future of video measurement and Nielsen’s role and whether it should sort of center around the census spaces [ph] of set top box data, or panel base data and when we look at it, it seems like you solved that problem online by creating OCR, hybrid using Facebook data that kind of grows up the panel, right. So you use almost a census basis to gross up the online panel. So where are we with that on the traditional TV side, why don’t we have a version of OCR using set top box data? Is that the right answer? What would a cost, what would be a big incremental is that already sort of embedded in guidance that you’ll do something like that and the way we think about long-term margin progression and it’s the data actually for sale? Thank you.

[Mitch Barns:]

Yes, thanks for the question David. We said back to our Analyst Day in December that the way we think about the future of measurement and this applies the Watch and the Buy side of our portfolio. The way we think about the future of measurement is that we will continue this on our high quality panels, which provide incredibly high level of quality and descriptiveness around consumers and also tapped into these growing numbers of big data set available to a single world, which provide granularity and they do it economically. We already do that in some parts of our portfolio, as you mentioned in the digital audience measurement. But the way we see the future of measurement across all parts of our portfolio is that this is the direction it’ll go, it’ll leverage our high quality panels and these big data sets in order to get the best of both worlds. And yes, we do see that applying to television Audience Measurement in the future, as well. We’ve been clear on that now for quite sometime and we’re going to continue to head in that direction. The key obviously is the do it in a way that gives for visibility and comfort to the industry, as well. You can use set-top box data for analytics, that’s easier in fact we already do that, we do it quite productively in our portfolio in Nielsen Catalina Solutions, which is performing very well growing very well. It’s a much more difficult proposition when it comes to measurement, but this goal doesn’t scare it’s way at all, we’re still moving in that direction, we’re looking to incorporate those powerful big data sets into our measurement portfolio including in television. And yes, you will see us continue to move that direction for the market. But we will do it with the market, with full visibility to them and with their full input, as well. Again, we have access to all of these data already. We are always looking to increase our access to it and we will do that within the normal operating numbers so that we can see within our business. Jamere, anything to add?

[Jamere Jackson:]

Yes, you mentioned the upfront and one of the things that we’ve seen as it relates to other data sets associated with the upfront is notion of marketing ROI products plan a more prominent role in the upfront. We have a couple of products there and our business in the first quarter was up 30% to 40% in areas like NCS and NDI. So right inline what David was suggesting and right in line with what we will expect to see at this time of the year.

[David Bank:]

Great.

[Operator:]

Your next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.

[Toni Kaplan:]

Thank you. So I’m just wondering about the quarter, where the product discontinuations and the declines in the legacy online rankings product included in the original guidance it just seem like the other component of Watch was furthermore negative than you had anticipated at the Analyst Day. So just wondering if that implies and Watch might be a little bit weaker than the original 4.5% to 6.5% constant currency range. Thank you.

[Mitch Barns:]

So our Watch business is in great shape and this is the way that we plan the year and we expect sort of the year to be 4.5% of 6% business we laid of in December.

[Operator:]

Your next question comes from Todd Juenger with Sanford Bernstein. Please go ahead.

[Todd Juenger:]

Hi, I would like to take my one question and Jamere talk a little bit about capital structure if you would. Given the visibility and confidence you have in your continued revenue growth, the access to continued, relatively low cost borrowing and what I think of you is a low price of your stock, is there any reason you had, I mean, considering may be up in your leverage, borrowing some more money and buying back some more shares quicker, given all those elements come together. Thank you.

[Jamere Jackson:]

So we do operate with our balance capital allocation approach. And if you recall last year we updated our leverage target to the three times area, we’re conformable running business in this area. We think this gives us tremendous flexibility to both grow our business and return cash for the shareholders in a meaningful way. When we talked about our free cash flow allocation, we said that we would allocate roughly 45% to the dividend which we intend to grow inline with earnings. We said we toggled somewhere between, roughly 40% between buybacks and tuck-in M&A opportunities and the remainder to service a bit and so we’re comfortable running in that area and we are executing a balance capital allocation approach that way and we expect to continue to run the business in the three times area going forward.

[Mitch Barns:]

Yes, it’s a great question. We like the question we talk about our sales on a regular basis. But we like where we are.

[Operator:]

Your next question comes from Andrew Steinerman with JP Morgan. Please go head.

[Andrew Steinerman:]

Good morning guys. Jamere, I want to ask about how much was the buy discretionary revenue up year-over-year on an organic constant currency basis meaning taking out acquisitions from Harris and Afanova?

[Jamere Jackson:]

Yes, so if you look at, Harris we did have a little bit of a Harris tough period there was about $8 million in revenue and then we have the Afanova business, which if you remember is a part of our innovation practice and will actually cannibalize some of our legacy basis business. So on an organic basis the Afanova business probably gave us about a point of list and then Harris $8 million on our Buy business is probably also another point.

[Andrew Steinerman:]

Right. So how much was discretionary by organic?

[Jamere Jackson:]

So our total Buy business was up $5 million in the quarter or 5% in the quarter, we had about two points from the acquisitions that we just talked about. And I would say our discretionary business was up in line with what we seen historically if you take those two things out.

[Mitch Barns:]

I do want to reiterate Andrew we do continue to get new client wins. We mentioned relatively faster growing mid-tier and smaller client segments, we’ve also continued to make some progress even with some of the bigger clients and some of the larger developed markets outside of Europe and the United States, most recently an example of that was Unilever in Australia and New Zealand who had been working with the other provider in those markets in fact for quite some time, recently decided to move their business back to Nielsen who couldn’t be happier about that.

[Operator:]

Your next question comes from Sara Gubins with Bank of America Merrill Lynch. Please go ahead.

[Sara Gubins:]

Thank you. Continuing on Buy, could you talk to us a bit about how Europe versus North America performed? And to the extended that you can break it out between the more stable formerly called the information business and the more discretionary spend that will be helpful. Thanks.

[Mitch Barns:]

Yes sure, thank you Sara. So it’s still relatively slower growth environment both in North America in our Buy business, as well as in Europe. One thing we did point to on discretionary side, is a little bit more sign of life within the new product innovation area, both within our portfolio and we see that picking up both at our clients, as well. One reason why we pointed out and it’s noteworthy is at least historically, that’s been kind of a lead indicator of a little bit more discretionary spend across our portfolio for our clients. I worked in this area of our business in the new product testing area innovation practices as we call it for more than half of my time at Nielsen so I know well I love it, and I recall that history, when you start to see a pickup how that often is the lead indicator for some of the other areas of discretionary spend. Let me just add one other thing back to Europe. Again we’re not changing our outlook for Europe, but there are in fact a few encouraging signs of life in terms of slightly better consumer confidence, so consumers are feeling a little bit better about their personal income, job security, may be showing a little bit more willingness to spend, off to a relatively low base, but we’ve all been looking for early signs of life there in Europe and we’re starting to see a few in pockets. They haven’t yet, translated into the numbers though, for our business and until that happens, we’re not really going to change our outlook for that particular region of the world.

[Operator:]

Your next question comes from Manav Patnaik with Barclays. Please go ahead.

[Unidentified Analyst:]

Hi, this is Ryan signing in for Manav. Can you just talk about kind of Nielsen’s roll in those industry discussions around measurement you talked about? Obviously Megan has kind of pitched the idea of Total Audience in the public, but just kind of where does Nielsen sit in the negotiations between advertisers and kind of the video providers and have those talks started yet, or they just beginning or just a little bit of the timing around where we are with that?

[Mitch Barns:]

Yes, hi Ryan thanks. Look, our first role obviously is to execute on our strategy, to deliver these capabilities that bring to life all of the elements of the Total Audience. And as I mentioned earlier, we’ve been making great progress on every single front. Digital ad ratings continue to make progress on track with digital content ratings, our VOD Measurement, we upgraded with our launch of that new capability last month, and we have enhancement to our television audience measurement ratings both benefiting our local and our national TV clients as the year progresses. So executing is job number one for us. Second though is of course having that data start to flow in particular for the mobile viewing for our clients, having to start to flow to their systems, having them start to see some incremental rating points, find their way into the currency, that’s crucial. And then, the other big thing has to happen is redefining of the currency. And that’s where some of the discussions are still in their early stages, but already underway. We’re talking about that need for that to happen, there seems to be growing agreement that it certainly does. And then what are some of the options for, what it might be refined to – redefined to. And that will continue to progress and build consensus as the year progresses. And again our role is to foster that conversation, relate some real options out there, but ultimately any redefinition of the currency has to be made, that decision has to be made by the players in the industrial themselves. So, yes, we will continue to update everybody on this as it progress, but those are the key sings that look for. We will continue to execute and data will increasingly start to flow where some of these new areas that consumers are moving to as they are finding their highly desired video content and then this discussion about redefining the currency. Those are the key signs that I’d suggest that you look to.

[Operator:]

Your next question comes from Tim Nollen with Macquarie. Please go ahead.

[Tim Nollen:]

Hey, thanks for taking the question. I’d like to follow-up on the mention you’ve made of retiring of your legacy systems and some of the non-core products. I guess they don’t really understand fully what that means. It feels like you’ve done this before. So if you could explain it better what those things are that you are retiring. And the difference in Watch growth of 3.6% or 5.8% excluding those, I mean, should we expect this to be a recurring theme the next two quarters, or is this kind of a one-off shutdown and we will have a cleaner number going forward? Thanks.

[Jamere Jackson:]

So let me add a little bit more clarity there. So first as I said, this is the way that we plan a year and we expect the total year to be a 4.5% to 6.5%. Now the other watch bucket was around $240 million, roughly half of that’s either non-core businesses which we are approving and replacing with growth efforts like eXelate, or the legacy online rankings product which is being replaced by DCR when it launches in the fall. So this screening or sun setting of products is normal course of business for us inside Nielsen, and all-in-all we feel great about our total Watch growth for the fiscal year 4.5% to 6.5% which we provided in December.

[Mitch Barns:]

Again, total Watch ads audience measurement which is growing very well, marketing effectiveness, which had a great quarter and then other. And there is a reason why it’s called other. So it’s from that other bucket that we pruned and that we have these legacy products that continue to rundown. The pruning, let me give you one example of the pruning there. We have product that years ago came into our portfolio through an acquisition that was good to expect than, but no longer really fits with wherever going as a company, product called Flow Share and what it did was it looked at the market share and switching behavior of consumers in the telecomm world. So when you would have your monthly mobile phone subscription, maybe it’s with one company, you start to switch to another company Flow Share was a service that looked at that market share and switching activity. And well, it’s just not aligned with where we’re going from the strategy standpoint. So that was an example of a small part of our portfolio that we decided to prove. This is what good companies do. They don’t just live with the portfolio you have, you always looking to bring great new capabilities in that are aligned with where you and your clients want to go, and you’re always revaluating what’s already there and asking yourself does that still make sense, is that still fair or is that more valuable at some other company. So that's what this one is about.

[Operator:]

Your next question comes from Anjaneya Singh with Credit Suisse. Please go ahead.

[Anjaneya Singh:]

Thanks for taking the question. I was wondering if you can give us a bit more insight or talk a bit more about Nielsen audio, it seems to be two quarters of what’s been anticipated growth wondering if the Q1 performance is in line with your expectations, if there any one off factors there that you can call out. And do you anticipate the progress in digital audio that you spoke to earlier provide to us – fiscal 2015? Thanks.

[Mitch Barns:]

Yes, thanks. Look at this, its right in line with where we thought we would be on this more single-digit growth, we still have these other growth drivers that are going to be a little bit slower to build. Let me remind you what those other growth drivers are. First, it’s about international expansion, and we said from the very start in this acquisition that these contracts were audio, Audience Measurement around the world always tend to come up every few years and so that’s going to be a slower ramp. But we are already making progress on that front, we mentioned a couple of quarters to go about winning the Audience Measurement business in Turkey, that’s one example. And we are always looking for more on the international front. Second is bringing our analytics capabilities to the audio industry. In fact, our fitment from My Heart media was on, I believe it was CNBC just yesterday talking about exactly this question, where the radio industry has always had an opportunity to let a story more effectively about the return on investing in advertising on the radio platform and inside of Nielsen as helping in this issue to bring our analytic capabilities and showing what that return is, and in fact cited [ph] that is better than many people expected. So we’ll continue to see a gradual build in our business with audio clients in our analytics capabilities. And then lastly on digital, we mentioned that we now are working with more than 30 of the players in the marketplace with their Apps and with their audio players that work browsers. They implement our SDK, so that we can measure the audiences for their digital screening service. So that’s a great sign of progress. So what's going to happen in the audio world is very similar to what we referenced in the video world which is the digital players and the industrial players, as well as the media agencies that sit between need to come together and agree on how those audience metrics will be recorded as we bring together a terrestrial and digital parts of that market. And that still working progress, it is in fact progressing, but it is not across the line yet. So that’s the summary of where we are. On audio we are right where we thought we would be, we feel very good about that progress and we look forward to seeing it continuing to unfold.

[Operator:]

Your next question comes from Bill Bird with FBR. Please go ahead.

[Bill Bird:]

Good morning, I was wondering if you talk about pricing for 2015, what does your pricing growth look like for each of Buy and Watch? And do you think you can sustain Watch pricing power given some of the headwinds that TV is experiencing. Thank you.

[Jamere Jackson:]

Yes, so we said total company that, will get about 1.5 to 2 points of price and that’s been consistent for the last several years and we look at where we are competitively at this point and we look at where we are with our client basically feel good about sustaining that that pricing power now and into the future.

[Operator:]

Your next question comes from the line of Brian Wieser with Pivotal Research. Please go ahead.

[Brian Wieser:]

Thanks for taking the question. Another question on the pricing theme, I was wondering if you could talk about how you’re thinking concepts about pricing the Digital Content Ratings product or alternately how you’re thinking about those revenue generating potentials?

[Jamere Jackson:]

Yes, thanks Brian. Well, it’s going to probably play out somewhat differently depending on the client segment. For instance if you are one of the big media conglomerates and we already have a measurement contract relationship with you, then this product is going to be part of that portfolio where you’re paying us to measure to you audience, no matter where, or how, or when they are consuming your content. And so it will be folded into that arrangement and may pay us fee for that measurement and we look that model, that model worked great for us historically. If you are on the other hand digital first player, then our relationship with you might be at a different stage of development and might be more volume based. And now we’re adding a new metric into that relationship where you might already be using digital add ratings where we are describing the size of the audience as you’re ads that you’re selling around your content. If you’re an advertiser, the people are seeing ads for your brand. But if you’re a digital first publisher, now you want to know, you want to have us measure the size of audiences but see the content, not just the add but the content as an additional metric and it’ll probably follow the same path that digital ad ratings did once it was first launched into the market place for those kinds of client, the digital first players. There are other segments as well, but I think those are the two key segments, the media conglomerates and digital first players.

[Operator:]

Your next question comes from Jeff Meuler with Baird. Please go ahead.

[Jeff Meuler:]

Yes, thank you. Mitch, what’s your view on how the importance or the value of currency rating for video advertising changes and increasing the programatic world relative to that well?

[Mitch Barns:]

Yes, thanks for the question. Well, it’s interesting that when we launched Digital Ad Ratings that – the autumn of 2011 if I have it right. One of the segments in the marketplace, it’s one of the earliest and strongest adopters of Digital Ad Ratings was the Ad/Tech world, including the programmatic players. And I think the key reason for that is just because of the fundamental design of that product, it was really very well suited to that part of the market. And we’ve continued to grow with them, as they’ve continued to grow as a segment, so we feel really well positioned. What is programmatic? It's at its essence automating a part of the process using an algorithm. People want that algorithm to be evaluated, in fact, they want it to be evaluated more than a person sometimes it’s really important to have that discipline and that is what Digital Ad Rating brings to that part of that market. Now our metric works exceptionally well for those players.

[Operator:]

Your next question comes from Bill Warmington with Wells Fargo. Please go ahead.

[Bill Warmington:]

Good morning, everyone. So a question for you on the competitive landscape, you’ve had WPP Group make investments and rent track and come score recently and I just wanted to ask your thoughts on what that means for Nielsen in the measurement space and also the analytics space?

[Mitch Barns:]

Thanks Bill. First, WEP is a big client of ours all around the world and we appreciate them as a client. We're going to continue to work with them that way. What we see then as the world's largest media agency is increasing their assets to data and technology, so that they can win more business and also run the businesses that they already have responsibility for better than ever. And we totally get that understand it and we help them do that every single day. But it's important to see the distinction between what they're interested versus the core of our business. They are mostly about analytics, right, they want to use the data to drive the advertising services that they provided their clients and mostly in analytics application. That’s separate from what measurement is all about, core measurement, where it’s really fundamental to have independence. That’s what the clients in the marketplace really require is independence, when it comes to the measurement that’s used that the marketplace operates on. So that’s Nielsen's role in the marketplace is to provide that independent third-party measurement which is then also used not just as measurement, but also as fuel to drive a lot of those analytics that WBT and all of the other big media agencies, are increasingly relying on to run new businesses effectively. That’s the way we evaluate that Bill and then again there are big important client for us around the world. We look forward to continuing to work with them.

[Operator:]

Your next question comes from Andre Benjamin with Goldman Sachs. Please go ahead.

[Andre Benjamin:]

Thank you. Good morning.

[Mitch Barns:]

Good morning, Andre.

[Andre Benjamin:]

I was wondering if you can provide an update on how the partnership with Google is going with regard to the Digital Ad Ratings product, how much of the growth that you cited is coming from that partnership versus the other way that people can use the product. Do you have a sense of many people are using VCE and any other update on whether users are opting inverse us out when they cite them?

[Mitch Barns:]

Thanks, Andre going great. Google continues to be a very important growing client for us. And I think you might recall, few months ago we completed the integration of Digital Ad Ratings into the DoubleClick platform, that’s working very well. We continue to work with Google in the direction of expanding the integration of Digital Ad Ratings into the DoubleClick platform to other markets around the world too. And so we are looking forward to making that happen and we expect that it will. The DoubleClick platform largely focused on the display world, which is still very important. And so we are going to continue to stay focus on that, but, yes, as you mentioned as you referenced that is a more competitive part of the market. You think a video and then audio and then display advertising, we feel great about our position in video and our Total Audience Measurement strategy there, or like [ph] audio we’re seeing great progress with the clients in that part of the market incorporating digital measurement. And then the text part of the world, where better display advertising are more prevalent, that’s more of a dog fight. We are going to continue to work hard as we can that play as bigger world as we can there. And the DoubleClick platform, obviously, with the role place for the industry is an important area for us to do well. So we love the position we have on DoubleClick and with Google more generally.

[Operator:]

Your next question comes from Doug Arthur with Huber Research. Please go ahead.

[Doug Arthur:]

Yes, thanks. Good morning. Jamere, you talked about the progress you are making on margins in the Buy segment. I guess the question is, is it a function of getting more operating leverage now that you’re emerging market revenue growth constant currency is accelerating. Or you scaling back some of the investment? And so how do you see that playing out, say in 2016 in a constant currency basis. Thanks.

[Jamere Jackson:]

So we continue to invest in a discipline way and expanding our coverage in the emerging markets. What you are starting to see as we said last year that some of those early investments are starting to scale. And as a result of that we are starting to see some margin expansion and this is a big focus area of our team as those businesses scale, we continue to drive cost out and productivity and you are going to see buy margins moving in the right direction. We’ve made tremendous progress over the last three quarters. And as we look forward to 2016, we will continue to invest, but we expect the margin progress that we’ve made particularly in emerging markets still continue.

[Operator:]

Your next question comes from Tom Eagan with Telsey Advisors. Please go ahead.

[Tom Eagan:]

Thank you very much. I was hoping you could give us more detail about the Adobe partnership rollout. Specifically, what do you hope to accomplish by mid-2015 and end of year 2015. And then secondly what metrics where you use to gauge the success of that partnership? Thank you.

[Mitch Barns:]

Thanks Tom. We’re in the middle part of the years, when we are projecting to launch the beta version of this capability for Digital Content Ratings. That will give clients a first look at it and start to see some of the data, start to see how would fit into the systems that they use to run their business. And then what we’re targeting for the full-scale commercial launch is that kind of 30, and that’s when we’ll sort of turn the lights on and it will be operational if you will. And then we’ll continue to see the business for that metric grow overtime. Remember that we really aren’t active in this particular space right now. You have Digital Ad Ratings out there that measures audience is correct and this metric Digital Content Ratings is about measuring audiences for content in the digital world. And the way clients like to use these two metrics is together. So the fact that we haven’t yet launched Digital Content Ratings in the market really makes it that much more remarkable how well our Digital Ad Ratings product has done with clients. 20 of the top 25 advertisers, impressions are going rapidly, our revenue nearly doubled in the quarter, and we feel so good about it, we’re really accelerating this international extension, as well. But once Digital Content Ratings comes out it kind of completes this system. Digital Ad Ratings will get that much stronger and more valuable because of the complementary nature of it with Digital Content Ratings. And it should really accelerate where we’re going in this part of our portfolio.

[Operator:]

Your next question comes from Dan Salmon with BMO. Please go ahead.

[Dan Salmon:]

Hi, good morning everyone. Mitch you talked a little bit about the eXelate acquisition in your prepared remarks and focused on their sort of original business around customer data segments into the programatic ecosystem and a lot of Nielsen data already being incorporated and that’s bit more of the recent product launch would be the sort of ubiquitous term data management platform that we hear lot in that ecosystem, which can mean a lot of different things but to me really always includes the ability of mix and first party data from clients. And so what I’m curious is just hearing a little bit more about how you see the role of that product for Nielsen, you certainly don’t think of the company as one that manages the first-party data on a regular basis. For advertisers that it would seem that your clients are likely asking for the ability to bring that in and mix it a little bit better with Nielsen products. And I’d just like to hear from a high level, how that product within eXelate will help you with your clients going forward.

[Mitch Barns:]

Great question, Dan you're spot on. We see two really great sources of value at least two from this acquisition. One is the business itself that we acquired in its current form. But then the second big source of value are the capabilities that reside inside of eXelate. And then how we line those up to what we see happening at our clients. And what that is, is our clients we see marketing, the activity of marketing in our client wanting to move through what we called the enterprise level, where it is much more system base, where the processors are much more connected, automated and the capabilities of eXelate see that desire, really, really well. And then as you pointed out, a lot of these clients have a lot of their own first-party data. But a big challenge for them has been to connected usefully with data outside of their company and again that data management platform, DMP capability that eXelate is the prefect environment, which to do that. So you said of capabilities that eXelate has aligned perfectly with a lot of these changes we see happening in the marketing world where its wanting to move through the enterprise level, we are going to be able to help our clients do that better than ever, thanks to the capabilities that have coming to the Nielsen portfolios to our acquisition of eXelate. So, yes, we are really excited about that.

[Operator:]

Your next question comes from Paul Ginocchio with Deutsche Bank. Please go ahead.

[Paul Ginocchio:]

Yes, I want to go back to the audience measurement pricing question that you said 1.5% to 2%, I would assume that it would have been a little bit higher because of the Digital Ad Ratings capabilities you are pushing through. Are you not getting any additional from those media conglomerates and can you remind us of the split between how you are going to regroup the investment of capture the opportunities in the Digital Ad Ratings between the media conglomerates and the digital first. Is it a 70/30 split respectively? Thanks.

[Jamere Jackson:]

So the 1.5, a few points that I talked about was the pricing that we get inside the total company and that mixes differently between Watch and Buy. Well, I’ll say about pricing for Digital Ad Ratings in particular is, this is incremental pricing for us. So as Mitch talked about the discussions and the negotiations that we had with our exciting clients. Well, it is included as a part of our negotiation. This is how we justify the pricing increases that we have with those media clients. For the latest digital client, it’s all incremental for us. Now the good news is that, as we look at media fragmentation and the difficulty associated with finding those audiences, all of our clients know the technology that we built, they know the capabilities that we’ve had. And these, quite frankly, have been pretty good pricing discussions for us. We have been able to get pricing and we also been able to get term associated with it as well.

[Operator:]

Your next question comes from Ashwin Shirvaikar with Citi. Please go ahead.

[Ashwin Shirvaikar:]

Thank you. So my question is when Digital Content Ratings grows in what level of growth rate acceleration should we expect to see in the 4Q presumably by then the drag from legacy drawdown is gone and replaced by growth. And broadly speaking of remaining a measurement standard what is the alternative to your push towards Total Audience Measurement, how the different parts of the ecosystem thinking about this?

[Mitch Barns:]

Okay, I’ll take the first part of that. So just to clarify the 3.6% that we had in the first quarter is comparable for the 4.5% to 6.5% guidance that we gave for the full year. This is the way that we plan the year and if you remember we said Digital Content Ratings will show up in the back half of the year and that will begin to replace some of our legacy online ranking products. So you would expect us as that ramps up the digital legacy products will ramp down and you'll start to see some of that drag from the legacy products start to normalize. The second piece to that is again, we've invested in eXelate, which is a faster growing business and that will also start to ramp up through the back half of the year. So that gives us confidence that we're at 3.6% in the first quarter, overall for the year we’re going to be 4.5% to 6.5% just as we laid out and we’re funding that guidance.

[Operator:]

There are no further questions at this time. I will now turn the call back over to the presenters.

[Kate Vanek:]

Sorry about that, Ashwin. That was a little awkward, but you know where to find us after the call to ask anything else that you need to. I just want to turn it back to our CEO, Mitch Barns for a few closing remarks and thank you all for tuning in today. Mitch?

[Mitch Barns:]

Yes, thanks. Just a few closing comments, again a great quarter for us, solid financial performance, we’re executing on all parts of our strategy, most notably our Total Audience Measurement strategy that all the feedback we get from the market says it’s perfectly aligned with what our clients need, independent third-party measurement that brings comparable currency grade ratings to both Content and Ads across all these screen, devices and platforms that consumers are using today. We’re making progress on everyone of those fronts, Digital Ad Ratings, Digital Content Ratings, mobile measurement, we talked about the growth and the number of networks and distributors gain critical mass there. Our new VOD measurement capability that we launched last month and then still executing on good old television audience measurement with our rating enhancements plans there as well. Our Marketing Effectiveness business had a great quarter double-digit growth in fact north of 20%. And again a third straight quarter of double-digit growth in emerging markets for the Buy side of our business. All that coupled with solid margin expansion in both Watch and Buy segments and then of course executing on our balanced approach to capital allocation, increasing our dividend that we announced this morning, we’re continuing on our share buyback program, both of which deliver value back to our shareholders. So with that, I’ll just say once again thanks for joining us and we look forward to talking with you again in a few months, when we report on the second quarter.

[Operator:]

Ladies and gentlemen this concludes today’s conference call. You may now disconnect.