Nielsen Holdings plc
Q2 2011 Earnings Call Transcript

Published: 28 Jul 2011

[Operator:]

Ladies and gentlemen, thank you for holding, and welcome to this conference call on the second quarter 2011 results for Nielsen Holdings N.V. Please note all lines are in listen-only mode at this time. I will now turn the call over to the host, Liz Zale, the Senior Vice President of Investor Relations. Ms. Zale, please proceed.

[Liz Zale:]

Thank you. Good morning, everyone. Thanks for joining us for our second quarter results call. The following discussion contains forward-looking statements including those about Nielsen’s outlook and prospects that relates to Private Securities Litigation Reform Act of 1995. Forward-looking statements are those which are not historical facts. These and other statements that relates to future results and events are based on Nielsen’s current expectations as of July 28th, 2011. Our actual results in future periods may differ materially from those currently expected because of a number of risk and uncertainties. The risks and uncertainties that we believe are material are outlined in our disclosure filings and materials which you can find on 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 maybe required by law. Our outlook is provided for the purpose of providing information about current expectations for 2011. This information may not be appropriate for other purposes. And, with that, I will turn the call over to our CEO, Dave Calhoun.

[Dave Calhoun:]

Good morning, everyone. I’ll give a quick overview of course results for second quarter and then turn it over to Brian, and then get back to Q&A. We had a very solid quarter. Revenue for the quarter grew at 10%. That’s 5% on a constant currency basis. Adjusted EBITDA grew at a 11%, at 7% on a constant currency basis. And, importantly, we have continued to fund investments for the future at roughly the same pace we left at the end of first quarter. Two consistent themes driving our business; first and foremost growth of middleclass consumers in the developing markets. That part of our business now is over $1 billion. On a rolling basis it has grew in this quarter at 17% on a constant currency basis. Second major theme, more ways to watch than ever before, and bringing together those variety of screens, our best available screen for consumers continues to represent opportunity for Nielsen. Geographic representation on growth, slowest growth and planned slowest growth still remains Western Europe; most resilient for sure the United States; and then high growth developing world, developing markets. Very significant event just occurred, of course, which we announced, and that is having been named preferred provide for the Wal-Mart US business. It’s very hard to overstate the significance to Nielsen, its franchise, the industry, and the client North American base. It’s a big deal. I’ll be happy to take questions towards the end of this. But, again, at least on my watch, probably the most significant event to date. Key product initiatives remain on track. We’re optimistic. Our Nielsen online campaigns rating product has been through some very thorough beta testing, with lots of advertising clients. It’s resilient. We try to break it everyday. So far we’ve been unable to do so. And we feel good about the progress we’re making. We still have a lot of industry players to educate as we move through this process, but again remain optimistic. And then, secondly reach and read, which is the extension of our Buy side footprint across the world, China, India, and Africa, we continue to fund and feel good about the potential of both the markets. And, of course, our ability to measure difficult developing economies. And then, finally, just again a reaffirmation of the guidance that we provided for the course of the year including the recent win here with Wal-Mart. So, with that, I’m going to turn this over to Brian, and let him run you through some more detail.

[Brian West:]

Thanks Dave. And, we’ll go to the total Nielsen results, that’s page seven of the webcast. For the second quarter, revenue came in at $1.396 billion, that’s up 5% constant currency; and the adjusted EBITDA came in at $386 million, that’s up 7% constant currency versus last year; and our adjusted EBITDA margins on a constant currency basis grew 53 basis points year-over-year. Adjusted net income came in at a $155 million and our diluted ANI per share came in at $0.41. Couple of things I’d point out is that year-to-date revenue has grown 6% constant currency; our EBITDA growth has been up 8% constant currency; and adjusted net income has come in over $200 million through the first six months. The one point that I’d point to and Dave mentioned it, the FX benefit in the quarter was big, 10% reported for the top line. This time last year, the dollar was the strongest. So I would just remind everyone that as we go through the second half of the year that increment benefit of FX is not going to be so great. If rates stay where they are today, we will get a lift in the second half, but it won’t be nearly as big as it was in the quarter. Moving on to page eight, the segment revenue; our Buy side came in at $911 million of revenue, that’s up 7% year-over-year; and the information business, the bigger part of the business was $654 million, up 8% constant currency; and our Insights business was over $250 million, up 4% constant currency. As Dave mentioned, the developing markets was the big driver of the growth. Total Buy business up 17% constant currency and our Insights growth versus prior quarter continues to accelerate as we get over the year-over-year comp from last year. On the Watch side, revenue came in at $447 million, that’s up 1% year-over-year. It’s important to point out that in the second quarter of 2010, we had a impact of our radio business that drove those revenues last year higher. If they had not, if you took radio out of last year, our year-over-year growth rate in Watch would have been about 3.5%. We will not see anymore radio impact in the second half of the year. I think what’s important is the TV measurement inside of Watch almost 4% growth in the second quarter, a 5% growth in the first half, and that part of the business is doing just fine and it’s stable as ever. Our Expos business, $38 million flat, timing seasonality and a couple of shows in there, but it is a relatively low revenue point in the season for us. And that gets to the 5% growth year-over-year. Page nine, in profitability; for the Buy side, adjusted EBITDA came in at $194 million, that’s up 3%. Important there is that there are certain integration other redundancy cost that are bringing that profitability at a lower growth rate in the revenue. We also have inside of that number investments in developing markets. I will say the second half buy profit growth is going to be higher as both integration and redundancy costs are behind us. On the Watch side, the profit was $185 million, that’s up a 11%, a nice tailwind for productivity initiatives that we have completed over the back half of 2010; our Exposition business is a light quarter; and then our corporate had some benefits from the reduction in Sponsor Advisory Fees slightly [ph] to the 7% year-over-year growth. Page 10, cash flow and balance sheet. In the upper left, free cash for the quarter was $32 million, CapEx came in at $90 million, cash taxes of $32 million, and then restructuring of $24 million. It’s not a big deal, but I would point out that our free cash flow in the discreet second quarter had the impact of change of time at interest payments, based on our debt refinancing since the last fall. So we’ve actually paid out lot more interest, second quarter this year than last year, strictly because of those timing of the change of the interest payments schedule. And the balance sheet growth that came in at $6.9 billion, our net debt $6.5 billion, the net debt ratio at 4.4. The capital table on the right hand side of the page, our total debt was, it came down by $11 million. That includes a mandatory prepayment that we made in the quarter of around $20 million and also some planned amortization of $10 million, and then the weighted interest as you can see came in just around 5.5%. Page 11, as Dave mentioned, we’re reaffirming the guidance that we gave the last time we spoke. Our revenue growth on a constant currency basis will be between 5% and 7%, there will be a small impact from the Wal-Mart announcement that Dave mentioned. Our adjusted EBITDA margin growth will be between 30 basis points and 50 basis points on a constant currency basis, and that will include incremental investments on the OpEx line associated with Wal-Mart inside of that range. Our adjusted income growth in still on track for 20%, 25%, and we plan to delever by about 0.5 a turn. I would point out on a couple of items more mechanical that I want to make sure everyone is aware of. CapEx; so CapEx year-to-date is a $142 million. We still see the range of $320 million to $360 million as our CapEx tends to be backend loaded in the second half. Our net book interest at 445 to 465, it’s important to point out that on our net interest in the quarter was a $112 million and we adjust for the convertible interest, that gets you to $107 million. That $107 million per quarter will increase slightly in the back half of the year based on some FX and swap runoffs, and those put us in the position where we were going to still be in this 445 to 465 range. Cash taxes will be slightly higher in the second half. Based on the first half results we still 130 to 140 range. And then the estimated average diluted shares, it’s a new number, we just want to make sure everyone was square on about a 367 million share count outstanding that we expect based on where the second quarter landed and the first quarter and we expect for the second half. Finally, one other item is stock based compensation, there were many grants that were made. It’s a $6 million charge in the quarter. That puts us on a $10 million quarterly run rate that you should expect for the second half. With that, I think we’ll throw it away to Q&A, so if operator you want open up the lines.

[Operator:]

Sure. (Operator Instructions). And your first question comes from Sara Gubins of Bank of America Merrill Lynch.

[Sara Gubins:]

Hi, thank you. Good morning. I think first I’ll take you up on your offer to talk more about the Wal-Mart deal, if you can just talk more about what it means and the financial impact and the implementation of it. That’d be great.

[Dave Calhoun:]

So, just by way of broad outline, there is no retailer who if entering the cooperative could represent a significant of coverage increase as Wal-Mart obviously. That means greater accuracy, greater detail for every one of our manufacturing clients across the US, and of course, a new relationship with Wal-Mart to help them compete more effectively in their world. So again for the franchise, for the client base broadly, there has been a lot of sort of celebration simply because they know they can compete more effectively, broadly. Secondly, this means that we help Wal-Mart first in their endeavors to become a more effective retailer which we love, and we look forward to working with them as a client. And then, secondly, to create a deeper, better collaboration with their supply partners or manufacturers. And it is in that collaboration which is a program that we will run with them, that’s where all of the potential insights and opportunities are created for them to compete more effectively and for manufacturers to understand more precisely what Wal-Marts’ consumers are doing and are all about. So it is – it just touches every part of our franchise. The industry model is better almost the day it starts and our model gets better somewhere in the around of 24-month clip. So we will mostly invest in this relationship for the next 24 months to bring the data in, to make sure the coverage representations or what they need to be, and to work with manufacturers around market shares and so forth. For us then the opportunities by way of revenue growth and so forth begins somewhere in the 18-month time range, and then they’ll fulfill themselves over a long period of time, and I have a very high level of confidence that it’s accretive to our business model. But that’s in essence of the timing of it.

[Sara Gubins:]

And is this is an exclusive relationship?

[Dave Calhoun:]

No. Let me comment on that one, because I get that question frequently. With respect to the cooperative and to use of retail data, we don’t do exclusives because at the end of the day it’s not good for the industry. If we have a certain set of exclusives then the other guys have a certain set of exclusives, our manufacturing clients and retail partners end up in a very convoluted space with different representations coming from different places and the industry begins to fall in on itself. So we have always been committed to a open cooperative model where all players get access and that is the way we went into the Wal-Mart discussion always. Exclusives on the sell side are sort of different, but they’re also sort of silly. There is no such thing as an exclusive on the sell side. In other words, the work we do for them with panels and other thing, that’s just a contract. And at the end of the day, those contracts reopened, et cetera. So people tend to get a little confused about the use of the word exclusive, but our policy is, always has been not to engage exclusives on the Buy side of the retail data.

[Sara Gubins:]

Great. And then just last question. There was an announcement by Eric Danziger [ph] about moving to work with your competitor. Could you talk about the impact of that, and also maybe just more on the competitive dynamic and the pricing environment?

[Dave Calhoun:]

Well, the financial impact is negligible. The emotional impact I hate. I don’t like to lose anything. At the end of the day, you wouldn’t don’t want us to take that deal at this level. So we failed in our ability to sell what we do best in this case I’ll be the first to admit it. I don’t believe this is a trend of any sort, of any kind. Nothing changed about their competitive circumstance or offer whatsoever. This is just one of those pending the details just didn’t work out for us. But I will tell you, you would rather have us work on the other multiple opportunities that we have ahead of us than necessarily secure that at that level.

[Sara Gubins:]

Thank you.

[Dave Calhoun:]

Thank you.

[Operator:]

Your next question comes from the line of Michael Meltz of JPMorgan.

[Michael Meltz:]

Come on, she took all the good ones. On Wal-Mart though, I mean, Dave you stressed the significance and I think you made a comment the most significant thing you’ve done since you go there. Just so we better understand what this primary provider relationship means, are they taking answers – I mean are they – what – how does the commercial relationship broaden going forward between you and Wal-Mart? And then, also, is there a cost – while you have some redundant costs near-term, I don’t know if it’s redundant or incremental costs, since you’re using – I think you’ve been using Homescan in to project Wal-Mart, does that kind of phased out, because now you actually have the data that you will be gathering, so it’s – over time might be a net wash on the cost side?

[Dave Calhoun:]

So the implications to your questions are sort of both accurate. Now the relationship with Wal-Mart is one that will sort of we’re going to put a stake in the ground, we are in essence going to help them use the broad cooperative data to benefit them. So yes they’re given us the data, but then of course they gain access to the cooperative data, and then they can begin to plan for more aggressively maybe different category moves, et cetera, take steps to reinforce their merchandizing philosophies, et cetera, and then of course we will try to influence those philosophies on the basis of a data that we collected in their behalf. So for the most part that’s what it is, very intense analytics to support their merchandizing strategies and influence merchandizing strategies of course for their benefit. The cooperative benefits are significant because of the precision as you suggest. There are so many compensating processes and methods that manufacturers and Nielsen use to estimate the coverage that we’ve lacked prior to the Wal-Mart involvement, then a lot of that work is not necessary going forward. Our piece of that one is small as measured in our own sort of revenue on that basis. The real opportunity for us is actually the number of compensating practices within the manufacturing world as they try to take their own data and shipment data to Wal-Mart and begin to extrapolate what they think the rest of the market is doing, so for us that there is a productivity benefit inherent in that for the manufacturer and now an ability for us to use this cooperative data to sort of support their alignment with retail. So I know that’s a long way around it, but in effect, this just becomes an enormous efficiency benefit for the industry broadly and Nielsen will lean into that efficiency benefit every way we can think of, and that will provide the growth opportunities and the market opportunities for us.

[Michael Meltz:]

And then on – just as we think through the Watch performance and the radio revenue comp that you had into the second half, is there any other factor we need to think about in Q3, or is there a reason I shouldn’t think that revenue growth strengthens in Q3 versus Q2, given –

[Speaker:]

No.

[Michael Meltz:]

– you won’t have a similar – you have a similar organic comp and this you won’t have the radio drag?

[Brian West:]

No. Radio was literally – it was a one-time second quarter last year-only. You will not see any kind of noise in the second half.

[Michael Meltz:]

Okay. And then the last question, in terms of the guidance – the full-year outlook that you reaffirmed, it sounded Brian like the Forex was a margin drag in the quarter. So I know your guidance is on a ex-currency basis, but the margin improvement is – it should – any reason we should think that on a reported basis with Forex being what it is that you won’t hit that margin improvement on a reported basis as well?

[Brian West:]

Well, what I would say is this, for the quarter, margin improvement on a reported basis was around 25 bps and constant currency is 50 bps. So you’re probably in the zip code at the lower end based on just the second quarter. But again I remind you is that the second half is going to look a little different because just what were rates – where the rate comparable will end up versus last year so I believe so Michael. But I think for us, we’re always going to be focused on that constant currency growth.

[Michael Meltz:]

Okay. And then I’ll stick in one more. Online campaign ratings, any actual sales yet? I know that this is launching next month, but –

[Dave Calhoun:]

Yes, no, we’re – and I wouldn’t anticipate and we’ve never planned for any big significant revenue growth at this moment. So the way this will play out is this will be introduced here August and September. There will be a number of advertisers who will play with a significant campaigns, use the data, and our – the real tracking for you should start in the first quarter with respect to real revenue book hitting our operating statement. It will come slow, it’s just the way – it’s the nature of the piece as we begin to hopefully turnover advertiser, advertiser, advertiser. But it really to date and asked around, to date so far the trials have been going very, very well.

[Michael Meltz:]

Great. Thanks for your time.

[Dave Calhoun:]

Yes.

[Operator:]

Your next question comes from the line of Suzy Stein of Morgan Stanley.

[Suzy Stein:]

Hi, thank you. You’ve expressed an interest in running the business to get to investment grades, but one of the push backs that I know I know you’ve got from investors is whether that’s really the best use of capital just given that your business could really handle more debt, and then I guess than what’s implied by an investment grade rating. Are you rethinking this at this point, or is that kind of seven stone as part of your strategy?

[Brian West:]

We will, but not right now.

[Suzy Stein:]

Okay. And then, just to follow-up on Michael’s question on the online campaign ratings, when do you think you’ll be able to give us a sense of how significant that will be from a revenue standpoint? I mean are we a year away from having any sense of how they exist today?

[Dave Calhoun:]

I’ll be disappointed if I can’t give you a real view on that in the first quarter.

[Suzy Stein:]

And what about as far as getting people to opt into participate? Has that been an issue at all or not?

[Dave Calhoun:]

No. Advertisers, we’ve been very happy, I might even say surprised that the extent to which advertisers are leaning into this.

[Suzy Stein:]

I guess I was coming at that more from the angle of Facebook subscribers or kind of getting the data, has that – that hasn’t been an issue?

[Dave Calhoun:]

No, no. There is no additional optimal requirements part of this products. It’s not been an issue at all.

[Suzy Stein:]

Okay. All right, thank you.

[Dave Calhoun:]

Yes.

[Operator:]

Your next question comes from the line of Brian Karimzad.

[Brian Karimzad:]

Hi guys. On the online campaign, I know you don’t want us get ahead of it on estimates ranging like that. I know it will be a slow launch, because it is an internal business decision for every advertiser. But could you give us a sense given it’s formally launching next month, how you planned to structure it in terms of is this going to be a subscription versus an ad-hoc type of product and a sense of the relative cost of it versus some of other services you offer?

[Dave Calhoun:]

Yes, I’d say, of course, it’s been a significant investment on our part. And our model will look more like the TV model than sort of ad-hoc models. And so yes we are – our plan is to rundown a subscription again. We really need that to support the product and of course the relationships with advertisers. It will tend to get structured around the total online spend within a particular advertiser’s shop. So, of course, the bigger advertisers and higher quantities and bigger spends in the online environment are likely to achieve better rates for their purposes.

[Brian Karimzad:]

Okay. And then any sense of the scale to cost versus other things that these folks are subscribing to now, because I know the online mobile business is somewhere in the $200 million revenue range for you. I know it’s hard to put. But any –

[Dave Calhoun:]

This is – it’s definitely more. We have so many things to sort out before we figure out how much more. But the degree of precision and accuracies that this brings to the market clearly warrants and premium, and that’s at the end of the day yes we’re going to ask that, and then advertisers will make their choices on just how much that’s worth, and that is just a serious of discussions it have to go on though the rest of the year. But we know what we need to justify this – justify the investment and ultimately achieve our objectives, and we’ve been very straightforward and open with our early advertising clients about what that is, and they remain very interested and they remain involved in all the betas.

[Brian Karimzad:]

All right, fair enough. Thank you.

[Dave Calhoun:]

Yes.

[Operator:]

Your next question comes from the line of Matt Chesler of Deutsche Bank.

[Matt Chesler:]

Good morning. Thanks for taking my call. I’ll skip on the Wal-Mart questions. Just wanted to talk about growth. I think you’ve highlighted 17% growth in emerging markets and it seems like you’re embarking on perhaps pretty massive upgrade in your online capabilities with expectations on that going forward. What would it take for you to rethink the growth – the growth profile of your business?

[Dave Calhoun:]

Traction. So look I – it’s just the way we’re going to work with you. We have wonderful ideas, we are implementing in our investment case, and I’ll always be honest with you about what the investment case is and the best that we’re making. As we get traction and get real understanding about what the markets will accept and ultimately how quickly we can penetrate, we will be out there with all revisions, all updates that we can master it. So I commit that to you. It’s just that I don’t want to predict before we have traction. Most of the products that we bring to market take time to see themselves into the various constituents. In the OCR case, we have to work with the agencies, we have to work with the advertisers, we have to work with the publishers. It’s – we have to walk our way through all those wickets. You don’t want me to take a wild guess until I get a pretty good sense about what all those interests are and how they’re going to lineup, and it’s just complicated. But I promise you, we won’t – we’re not going to wait and keep you guessing if we know and we’ll get there.

[Matt Chesler:]

If emerging markets are growing strongly now and expected to continue to grow nicely into the future, would any change that likely in the result of your new product introductions’ events and how they’re tracking in the marketplace? You think that would be the key variable as to know whether –

[Dave Calhoun:]

The developing market growth for you should be a little bit of a math exercise. We hope and can – that we can continue the kinds of revenue growth in the developing world that we have been achieving, quarter after quarter after quarter. I would tell you 80% of that comes right out of geographic footprint expansion, 20% of it is sort of the product penetration part of it. Over time that will shift from pure footprint expansion to a – to new product introductions. And, of course, the new product part of this one is a very long and big opportunity for us and we know that, which is you sort of have to in these markets first get the footprint established and then move down that path. So – and that’s why of course we remain excited and fully commit to developing market bets, because the predictability of those bets actually is pretty secure absent a massive economic problem for all developing economy, which we can’t foresee, and if it happens we will have to deal with. So we’re fine, we’re very much committed to those markets, and we’re going to stay committed, and your question is a good one.

[Matt Chesler:]

And then within online, OCR is getting all the attention and the discussion, but it’s my understanding that you’re also going to be introducing hybrid – hybrid measurement, site centric and user centric in the coming months. How should we be thinking about the impact of the business relative to OCR and how that might affect revenue and growth and margins going forward as well?

[Dave Calhoun:]

Well, the way I would think about those products of course is, it betters our stable of products for sure, so it gets us a little more ammunition to fight the current fight and ultimately to live within the model that you actually see today in our economics. I think we’ll get marginally better in that small market with those products. I think the opportunity to breakout and sort of change the economics for us and for our publishing clients is OCR.

[Matt Chesler:]

Okay, thank you.

[Operator:]

Your next question comes from the line of Ashwin Shirvaikar of Citigroup.

[Ashwin Shirvaikar:]

Thank you. Good morning, Dave. Good morning, Brian.

[Dave Calhoun:]

Good morning.

[Ashwin Shirvaikar:]

Congratulations on the good quarter here. I did want to go back to Wal-Mart. And the question I have which I didn’t hear an answer to or I didn’t hear this asked was why now, what changed for them now that they – that you signed this relationship?

[Dave Calhoun:]

Listen, first and foremost, you need to ask them, right? I will say they have been studying and looking at this for quite sometime. I see a real desire on the part of their merchandizing and leadership team who want to take an aggressive swing at their merchandizing format again, reinforce all the selling principles that they’ve lived by for years, and the notion that yes the use of cooperative data is going to help them in that endeavor. So that’s my observation. At the end of the day, the best person to answer that question of course is the Wal-Mart team.

[Ashwin Shirvaikar:]

Okay. And in terms of when you say about 18 months of investment here, 18 months, 24 months of investment, is there a potential sizing that you can offer in terms of –?

[Dave Calhoun:]

Sizing, well the only sizing I will tell you is that it’s within the guidance that we provide. So this becomes a high priority investment in our world of discretionary program expenses and investment, and therefore some couple other things fallout that you probably have never heard of, but that’s the way we manage this. And we’ve remained committed to the framework that we established when we came out to the market.

[Ashwin Shirvaikar:]

Okay. And if I can have a couple of more; one on emerging markets. My understanding is I guess more of that growth does come from traditional clients going global as opposed to local clients, although that second aspect over time is probably going to be quite important. And just wanted to – wanted you to weigh in on whether that part of the market is a focus for you and how the market approach might differ.

[Dave Calhoun:]

Well, I don’t have a number at my fingertips, but the local client representation in any market we’ve been in for more than three years continues to grow at a faster rate than the multinational growth. So that’s sort of an idea of penetration and that is how exactly how the model works. You always start with the local client telling a very different way, it might end up be in a custom project to just acquaint them with how to use retail measurement data and panel data to benefit themselves. And then, over time, you try to create the same reliance independency on this kind of information so that they can run day-to-day. And so it’s a very similar phenomena; it’s just that the multinationals come into the market already knowing all of that. And, of course, we have to sort of acclimate the local client. It’s not a – it’s not a widely different pricing model than what we do with the multinationals. It’s not. And so from that vantage point it’s just – it takes a little slower to inculcate into their world. But at the end of the day our objective is to end up with a consistent pricing model so that neither of those constituents are favored just by virtue of the work they do with Nielsen.

[Ashwin Shirvaikar:]

Okay, got it. Last little question was on NeoFocus; any financial impact there?

[Brian West:]

No, we closed that one in May. So there is nothing in there.

[Ashwin Shirvaikar:]

Okay, great. Congratulations. Great quarter again.

[Dave Calhoun:]

Yes, thank you.

[Brian West:]

Thank you.

[Operator:]

Your next question comes from the line of Eric Boyer of Wells Fargo.

[Eric Boyer:]

Hi, thank you. Just on the Wal-Mart, sorry asking another one, but since you have the exclusive relationship with Wal-Mart on the commercial side, do you feel like that puts you have a better competitive advantage I guess if Wal-Mart’s using your data, because that drives more work to you from their supply chain partners down the road?

[Dave Calhoun:]

Yes. No, one more time if I could, I’d prefer not to use the term exclusive, I don’t Wal-Mart would refer it that way and I don’t neither. We’re preferred. In other words, they have placed their bet with us to help them in their endeavors and will hold that on a sole provider from as long as we achieve results with and for them. And that’s the way that will work. And the answer to the second implication on that was, yes, we feel incredibly advantaged as a result of it.

[Eric Boyer:]

Okay, great. And then the agreement with Kantar Media, is that a relationship where you’re just buying the data from them and your competitors and that type of business would be able to do the same for the audience measurement?

[Dave Calhoun:]

This one is a in effect yes. We’re buying the data for them. As you know we’re going to use it to in effect complement our local market measurements. And in combination with our panel, it becomes a very powerful tool that removes the instability questions that have always surrounded our local market metrics. It doesn’t change the overall metrics in any big way, but it clearly reduces the instability which is a very big deal for our local television clients. So I’m glad you asked the question, because this is actually a sort of a big deal for us and I think will remove a bit of a eyesore in our world. But our measurement science tends to breakdown a bit on the stability question at very local markets, this will fix that. And it’s actually a reasonably big deal to the media world. It won’t be measured big by way of financial materiality but it is big in terms of emotional materiality.

[Eric Boyer:]

So should we look for similar type of deals in other local markets going forward?

[Dave Calhoun:]

Yes.

[Eric Boyer:]

Okay.

[Dave Calhoun:]

I think you should look for our desire to work with other data sources in combination with our panel, ultimately again to provide more stability and more robust metric to the local markets.

[Eric Boyer:]

And then, just, could you give us an update on your answers implementations in any further timelines going forward?

[Dave Calhoun:]

It’s precisely the same it has been, so we continue to march through with Kraft; we continue to work through all user-related issues; it’s going well; I feel good about the underlying technology in every way; and, of course, the P&G program continues to move forward on exactly the same schedule that it had been previously. In addition, the use of the platform at Safeway continues to move forward. So no changes.

[Eric Boyer:]

Are you looking to bring on a couple of large clients a year, is that the type of timeline we should be thinking of with the ramp?

[Dave Calhoun:]

Yes. I don’t think you should be thinking about more than one or two a year just given the sort of the size of the task until we get – until we find our way to the mid tier clients and smaller tier clients, then we’ll start to talk bigger numbers of clients. But in the early goal and our objective is to use this platform with our biggest clients to get maximum benefit out of the scale of the technology.

[Eric Boyer:]

All right, thanks a lot.

[Dave Calhoun:]

Yes.

[Operator:]

Your next question comes from the line of Kelly Flynn of Credit Suisse.

[Kelly Flynn:]

Thanks. Back to Wal-Mart, I wanted to ask you to talk a bit more about I guess kind of a potential revenue roll-in. I know you don’t want to give guidance and I know you said that expenses are baked into your guidance. But I mean when do you expect kind of the revenue will start to show up at a material level versus the expenses? And when we think about next year, should we be thinking about this as a needle mover on the revenue line and do you think Wal-Mart will become your largest customer?

[Dave Calhoun:]

No, I don’t think you should think about it that way. I think that meaningful numbers will occur in 2013. I think we will – we will show gradual progress over the course of next year, and relative to the cost we incur in developing the relationship it’s not – it’s going to be manageable within the framework that we discussed. The hope, desire, and belief on our team is that as we move into 2013, inside practices will be more robust as a result of this as well as – remember this is the fuel that feeds our highest margin business in the Buy side, right? And we use data to fuel that process and then ultimately sell it into the client base. This is an enormous boost with respect to that fuel and I would – as I said on OCR, as we approached 2013, it’s right for you to ask us to show some accountability in that year and forward, and we’ll be happy to do that at that time.

[Kelly Flynn:]

Okay. Was Wal-Mart a client at all previously?

[Dave Calhoun:]

Sure. We just like IRI have a variety of small panel engagements that in effect are – help them with some chopper insight. That’s just – but that that is very small and I wouldn’t think about that on anywhere near the scale of what’s been announced and the intentions of Wal-Mart.

[Kelly Flynn:]

Okay, great. And then this is a big open ended question about your results are strong, you mentioned at the beginning of the call some strength in the consumer driven things, I mean can you kind of talk about that with respect to the macro skittishness, and I mean you’re seeing any changes in any particular markets for the worst given all the choppy macro sentiment?

[Dave Calhoun:]

Yes, no, to be totally honest with you, I see a lot more resilience in this US based consumer than I would read in any of the newspapers. It doesn’t mean there isn’t a big segment of our population that isn’t sort of fighting everyday to sort of make ends meet and ultimately play in the value card with retailers and manufacturers in a pretty big way. It’s just that what I saw was a sort of a period of time where that got very pronounced. I don’t think it’s getting a lot worse, but it sure isn’t getting better. But the resiliency of all those consumers that do have jobs and the resiliency of sort of clearly the upper tier more than a $100,000 that actually – that doesn’t feel so bad, and it’s reflected I think in our performance and sort of what we see through our clients’ eyes. Look, I’m not – I’m not – I don’t want to convey wild optimism by any stretch, but I don think if a few things get sorted out there is more resiliency under there than most people think.

[Kelly Flynn:]

Okay, great. That’s very helpful. Thanks a lot guys.

[Dave Calhoun:]

Yes.

[Operator:]

Your next question comes from the line of Aaron Watts of Deutsche Bank.

[Aaron Watts:]

Hi guys.

[Dave Calhoun:]

Hi.

[Aaron Watts:]

For selfish reasons of the debt guy, I respectfully submit that we are on favor of your March 2 investment grade. With that said, maybe a slightly offshoot of the question that just got asked, because you’ve covered a lot of the granular staff. But Dave, I’m curious how you’re thinking or what the tone is with some of your clients on the Buy side of the business with some of the nervousness around the debt situation here, unemployment remaining high, are you seeing any change in tone from them or pullback and willingness to spend on discretionary type services from you or otherwise and with those kind of CPG clients?

[Dave Calhoun:]

Yes. So the answer is no. We haven’t seen a pullback in that kind of activity. The conversations of course that we all have with them and others are really great hope that this all gets resolved that the – of course the fiasco that’s going on solves itself, so it doesn’t create some event that then creates a consumer tailspin, right? So that’s a natural discussion for all of us to have. At the moment, nobody is planning for it. But I won’t pitcher that there aren’t a few folks nervous about it, including me. We have not seen any, any activity or actions that reflect planning for that bad outcome. So let’s all just hope that stuff gets resolved and we don’t have to deal with that.

[Aaron Watts:]

Okay, thanks. That’s helpful. And, yes, here is to hoping it turns out for the best.

[Operator:]

Your next question comes from the line of Bishop Sheen from Wells Fargo.

[Bishop Sheen:]

Hi guys. Thanks for taking the question. Focus on the balance sheet, your guidance is about a half turn and you generate a ton of cash, about a third of your EBITDA roughly is in free cash flow and you always carry somewhere north of $350,000 – $300,000 something of cash. So some thoughts about how you want to deploy all the free cash flow that you are likely to generate this year and ahead.

[Brian West:]

So Bishop it’s primarily paying down debt, and that has been the philosophy that we’ve had in the past and can either have going forward. Now, there will be a little of that we’ll use for acquisitions of tuck-in nature but it’s small and it’s manageable with that target, but this is about a – this is about a deleveraging debt pay down story for us.

[Bishop Sheen:]

Okay. And your maturities as we look out, I mean the big one is 2013, so should we just assume that you’ll be watching towards the debt reduction strategy for the next 18 months to 2 years.

[Brian West:]

As we think about a half a turn of year there is nothing that would suggest to take us off that path. So as this debt paid down and that maturity in 2013 will start to go down and we’ve got a lots of flexibility relative to pay down as we’re closer to it. So we’re not concerned about it and we feel good about the play we have to run.

[Bishop Sheen:]

Okay. And then one housekeeping, on the Wal-Mart relationship, that is a contractual relationship, correct?

[Brian West:]

Yes.

[Dave Calhoun:]

Say that again, a contractual – yes, yes.

[Bishop Sheen:]

And how long is that contract?

[Brian West:]

We’re not disclosing that details like that. But it’s more than a year.

[Bishop Sheen:]

Okay, thank you.

[Brian West:]

Yes.

[Dave Calhoun:]

Yes. Okay everyone thanks for joining us, and we’ll talk to you next quarter.

[Operator:]

This concludes the Nielsen Holdings N.V. second quarter 2011 call. A replay of this call will be available on the Nielsen Investor Relations website shortly. Thank you.