Nielsen Holdings plc
Q2 2014 Earnings Call Transcript

Published: 29 Jul 2014

[Operator:]

Ladies and gentlemen, thank you for holding, and welcome to this conference call on our second quarter 2014 results for Nielsen N.V. [Operator Instructions] Thank you. I will now turn the call over to the host, Kate Vanek, Senior Vice President of Investor Relations. Ms. Vanek, you may proceed.

[Kathryn H. White Vanek:]

Thanks so much, Tiffany, and good morning, everybody, and thank you for joining us to discuss Nielsen's second quarter 2014 financial performance. Joining me on today's call from Nielsen is Mitch Barns, Chief Executive Officer; and Jamere Jackson, Chief Financial Officer. We posted slides on our website that we'll use on this call, under the Events section of our IR website at nielsen.com/investors. Before we begin our prepared remarks, I'd like to remind you all that the following discussion contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of '95. These forward-looking statements may include comments about Nielsen's outlook, expectations and prospects and are based on Nielsen's view as of today, July 29, 2014. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties. The risks and uncertainties that we believe are material are outlined in our 10-K and other filings and materials, which you can also find on our website. Turning to the agenda for today's call, Mitch will start with some comments on our results for the quarter and an overview of some key highlights and provide a business update. Then Jamere will discuss financials for the quarter, as well as provide any updates on our full year guidance. [Operator Instructions] And now, to start the call, I'd like to turn it over to our CEO, Mitch Barns.

[Dwight Mitchell Barns:]

Yes. Thanks, Kate. Good morning, everybody. Thanks for joining the call. We appreciate the opportunity to update you on our business. We had a strong second quarter, and we continue to extend our leadership positions in both retail and audience measurement in key markets all around the globe. So let's walk through a high-level look at the numbers for the quarter. First, revenue grew almost 16% on a constant currency basis. If we exclude our acquisitions of Arbitron and Harris Interactive, the core top line growth was just over 5%. The Watch side of our business had another strong quarter, growing almost 6%, reflecting the increasing momentum we have in digital and the continued strong growth in Ad Solutions. On the Buy side, revenues increased just under 5%, driven largely by over 9% growth in developing markets and also some new client wins. Next, adjusted EBITDA was up 16.2% or just under 18% on a constant-currency basis. Adjusted net income per share was $0.62, up more than 29%. Our free cash flow of $116 million was up over 8% in the quarter versus the prior year. Now onto a few other updates that I want to call to your attention. First, the ongoing successful integration of Nielsen Audio continues to have a favorable impact on our results, and we continue to be very pleased with the progress. Second, we continued to execute against our long-term capital plans that we shared with you earlier this year. We increased our dividend 25% in May, and we further strengthened our balance sheet with our most recent debt refinancing activity. Separately following another secondary offering by our private equity sponsors during the quarter, over 80% of Nielsen shares are now publicly held. And lastly, we're pleased to reiterate our guidance for 2014. As we close another successful quarter of growth, margin expansion and cash flow generation here at Nielsen, we remain well-positioned to achieve both our short- and long-term goals and drive shareholder value. Our business and our priorities, as you've heard from us before, are guided every day by 2 big trends operating in the marketplace

[Jamere Jackson:]

Thank you, Mitch, and good morning, everyone. As Mitch indicated, we delivered a solid second quarter performance, reflecting another quarter of strong execution and the strength of our business model. Revenue was $1.59 billion, up 15.9% constant currency. Excluding the impact of Audio and Harris, revenues grew 5.2% constant currency. Adjusted EBITDA was $460 million, up 17.9% constant currency. And adjusted EBITDA margins were 28.9%, up 50 basis points, due primarily to the accretive impact of Nielsen Audio, but also the continued progress on our productivity initiatives. Adjusted net income was $240 million, up 31.1% constant currency. And diluted adjusted net income per share was $0.62, up 29.2% versus prior year. Finally, we generated $116 million in free cash flow, up 8.4% versus a year ago. Overall, I'm pleased with our execution in the quarter and the solid results that we've delivered across the business. Next, I'll move to the segment revenue and give you a little color on the pieces. As I mentioned, revenue was up 15.9% for the quarter. Our revenue growth was broad-based across both Watch and Buy. This also marks the 32nd consecutive quarter of revenue growth for our business, reflecting our ability to deliver growth due to cycles. Total Buy revenue was $900 million, up 7.9% in constant currency and up 4.8% excluding the Harris acquisition. Our information business grew 5% to $676 million constant currency. We benefited from good demand in retail measurement services, key client wins and strengthened our developing or emerging markets. Our Insights business revenue was $224 million, up 17.9% constant currency or up 4.2% excluding Harris, due to strength in developing markets and more modest growth in North America. Developing markets were up 9.2% as we saw broad-based growth in many of our markets. We continue to see double-digit growth with our local clients and steady progress with our multinational clients in places like China, Latin America and India. We remain committed to investing in coverage and capability to help our clients grow in these markets, and we remain confident in our strategy. I've spent some time in Europe in 2Q, and I'm looking forward to visiting our teams in Asia in 3Q to see firsthand some of the exciting opportunities that we have there. Finally, our Watch business revenue was $694 million, up 28.3% constant currency or 5.9% excluding Arbitron. We see continued strength in audience measurement. And as Mitch mentioned, our digital initiatives have tremendous momentum, with the rapid client adoption following the launch of Mobile OCR. We continue to see double-digit growth in Ad Solutions, and the Arbitron integration is progressing well. We're on track to deliver the synergies, and we're seeing early dividends from our efforts to build out the business. So again, broad-based revenue growth for the quarter across both Watch and Buy. Moving to profitability. Buy EBITDA was $167 million, up 3.1% constant currency. The dynamics within our Buy business are in line with our strategy

[Kathryn H. White Vanek:]

Thanks so much, Jamere. Tiffany, we'd love to open it up for Q&A.

[Operator:]

[Operator Instructions] Your first question comes from the line of David Bank with RBC Capital.

[David Bank:]

Actually, 2 questions. The first, a quick one. Can you give us a sense of the magnitude of total Ad Solutions revenue now, maybe at least annualized? And the second question, a bit broader. So we've done some of our own proprietary work segmenting the online video market into what I call premium, which we think of as advertisers who truly view online as a substitute for television versus non-premium, where it's kind of dollars falling from the digital bucket to the video digital bucket, right? So -- and that premium market today, to us, is less than about 15% of the total online video market. And it's probably not going to grow that much in the near term from there. So in that context, I wonder if we revisited your long-term targets for OCR revenue given out at the Investor Day, they're a function of the overall video market as opposed to the kind of premium versus non-premium market, do you think there's a bifurcation of OCR as the key currency between premium and non-premium? And do you think premium online video will adopt OCR at a different pace than non-premium? And would it impact those targets? Does that make any sense?

[Jamere Jackson:]

Yes. I'll take the first -- I'll take a shot at the first part of your question, which is around Ad Solutions. So we've said that, that business is -- was about a $200 million business. As you've seen from us in the first couple of quarters of the year here, we said that the business is growing at the low end of double-digits. We saw that again here in the second quarter. So we feel very good about where we are as a business. This is a key competitive advantage for us as we link our Watch assets and our Buy assets. And based on where we are in the back half of the year, we continue to see that kind of growth.

[Dwight Mitchell Barns:]

And David, I'll take your second question about OCR with regard to video and whether we would anticipate a bifurcation between premium and non-premium. Ultimately, I think that will get decided by the marketplace. What we can deliver to the marketplace is a metric that performs well across a broad spectrum of the marketplace's needs, and that's the kind of response that we're getting right now from the marketplace. Ultimately, whether OCR gets used and adopted at different rates for premium video versus non-premium, it is going to depend on a lot of things that are outside of Nielsen's control. And our role is to simply measure the consumer and to do that in the most complete way across all delivery platforms, across all advertising models and across all business models, and let the market decide the direction it wants to go from there. And so that's the way we do that one.

[Operator:]

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

[Suzanne E. Stein:]

Can you talk about your relationship with Google and how that's been progressing?

[Dwight Mitchell Barns:]

Yes. Thanks. This is a great story for us, a good news story in just about every way. As we communicated on our last earnings call, Google was slated at that time to begin to accept OCR tags on its YouTube-preferred inventory as of May 1, and that happened. And then, as of July 1, that was expanded to ads across all Google platforms, all Google properties, not only in -- not just in North America, but also in a number of markets in the Asia-Pacific region. And so, we feel great about how this one's progressed. We're confident that Google will continue to benefit from the role that having independent third-party measurement plays and gaining confidence from advertisers that are important to their business.

[Suzanne E. Stein:]

Okay. And then, I guess, keeping on the theme of international. Other than what you mentioned regarding Turkey, where else do you focus internationally for Audio?

[Dwight Mitchell Barns:]

I'm sorry, say the last part of your question again?

[Suzanne E. Stein:]

For Audio, for the Arbitron piece, where are you focused internationally?

[Dwight Mitchell Barns:]

Oh, I see, I see. Well, even before we had acquired Arbitron, we did have a radio audience measurement business in a handful of countries around the world. And so our first focus is, of course, when those audience measurement contracts come up for renewal, we're focused on winning that renewal process. And we've done that in a number of markets over the past few years. And then we leveraged the capability that we acquired through our acquisition of Arbitron, and then we continued to press into new markets. Now the way this audio audience measurement business tends to work in markets around the world is these contracts are multiyear contracts. And so they don't come up -- they don't all come up for a renewal every single year. And each year there's a handful that come up for renewal. We position ourselves against the ones that we think are the best opportunities. And then we're going to win more than our fair share of those going forward, and Turkey is a good example of that.

[Operator:]

Your next question comes from the line of Andrew Steinerman with JPMorgan.

[Andrew C. Steinerman:]

Jamere, I'm going to ask you about the investment timing for the year. And obviously, we heard that you're reiterating full year margin guidance. I'm asking if any course or investments were accelerated into the second quarter. You gave a long list of areas of investments that all seemed sensible. I'm more asking about were they aggregated in the second quarter maybe because of new client wins in the Buy business that were shouted out? I'm just really asking kind of a cadence of investments as we get through the year.

[Jamere Jackson:]

Yes, so the investments will be relatively steady. As we talked about, the investments in our developing markets, in particular, are ones that we're very pleased with. And you can see some of the early returns there with the growth that we're seeing in some of those markets. And we will continue to invest in a disciplined way to make sure that we're investing in those markets and going after the growth that's there. So the investment will be relatively stable. I wouldn't be date-certain about when there'll be an inflection point there. But what I will say is that we're vastly underpenetrated there, and we're going to continue to invest and expect to see the kind of returns that we're looking for.

[Andrew C. Steinerman:]

I didn't quite catch that. So you're saying stable through the balance of the year, but I'm asking was there any acceleration of investments into the second quarter?

[Jamere Jackson:]

So the only acceleration would have been around some of our new client wins, and those are things that we had planned for. But then in the back half of the year, you're going to see a more stable set of investments, mostly focused on what we're trying to do in the emerging markets.

[Operator:]

Your next question comes from the line of Sara Gubins with Bank of America Merrill Lynch.

[Sara Gubins:]

Your information revenue was strong and certainly stronger than we were expecting in the quarter. Can you talk about what drove the acceleration versus the first quarter? Was it really more developing market-focused or are there other areas?

[Jamere Jackson:]

So our information business in the first half has been very strong, and we've seen really steady progress there. A couple of dynamics. One is the developing markets have been very strong. Our clients are continuing to invest there. We're seeing better-than-average growth in the developing markets. And then the second dynamic is really around new client wins. And typically, when we get new client wins, that gives us some pretty good momentum. They tend to have a few more data needs upfront, and we get a little lift from that. So that's a little bit of the driver in the first half. But we feel very good about our progress up to this point, and we expect the business to continue to grow in the way that we've seen it in the past.

[Sara Gubins:]

Great. And then separately on margins. I know that we can only see the reported EBITDA margin by segment, and there is an FX drag. But when I look at Watch, your margins were down about 40 basis points year-over-year, which is not something that we've seen recently. Is that a short-term function of investment? And should we expect expansion in the back half? And then similarly for Buy, margins were down about 120 basis points in the quarter on a year-over-year basis, and they were down in the first quarter. The comparison does get easier, though, and so I'm wondering there if we should see more of a stabilization in margin on a year-over-year basis.

[Jamere Jackson:]

Yes. First, on your question on Watch. So the Watch margins there were entirely due to the Arbitron delivery. So typically, in Arbitron, our highest-volume quarters and our highest-margin quarters are the first and the third quarters. And so what you saw in the Watch business was purely seasonality associated with the Arbitron deliveries. On the Buy business, it all goes back to what we said about our Buy strategy here. We feel very good about where we are. We're going to continue to invest for the long term. We feel very good about the progress that we're seeing to date and the early returns. And again, as I've said on a number of occasions, we're doing those investments in a very disciplined way. We've got a great track record of turning those into great returns. And so you'll continue to see that -- see us do that going forward.

[Operator:]

Your next question comes from the line of Tim Nollen with Macquarie.

[Tim Nollen:]

I wanted to ask about your Watch division again as well. You just mentioned Google basically added some business with you as of July 1, and you mentioned that your mobile measurement -- Mobile OCR also basically kicked in, in July. You've had about a 1% step-up already in the growth rate, which I'm presuming, correct me if I'm wrong, I'm presuming has something to do with OCR and further Ad Solutions sales and so forth. I'm just wondering if we're in line for a further step-up now in Q3, given what seems to be some more business that's coming on. And then secondly and separately, and it's really just housekeeping, I just want to make sure the debt refinancing you just did, looks like it -- obviously reduces your interest expense, and you just brought down your guidance. Was that incorporated in your beginning-of-year EPS guidance? Or does that implicitly move your EPS target up a little bit for the year?

[Jamere Jackson:]

So let me take the first one on the debt refi. That was included in our guidance. We had contemplated a number of moves. We said that we're going to be opportunistic about making those. So that's included in the guidance that we have laid out there. In terms of the growth rate of our Watch business as it relates to a number of things that you've laid out, we clearly have seen a pretty strong first half in our Watch business. I would say things like Ad Solutions growing double-digits and a digital business that gives us -- that's been doubling through the first half of the year, certainly, gives us a growth year Watch number, if you will. And so those are the key drivers there. I think our progress is going to be steady. We'll continue to see the same kind of momentum in the back half of the year. But at this point in the year, I wouldn't say that you should expect it to be materially different from what we've seen thus far.

[Operator:]

Your next question comes from the line of Todd Juenger with Sanford Bernstein.

[Todd Juenger:]

I wanted to ask, if you wouldn't mind, just revisiting the Buy revenue question just a little bit more once again. Just trying to dissect it a little bit. So listen, winning new customers is fantastic. Congratulations. Wonder if there's any help you could give us to just sort of sort out how much that -- those new customer wins contributed proportionally to your revenue growth, just so we can think about sort of the underlying rate of growth. And then separately and equally important, Europe, and how that influenced the growth and nongrowth. I heard you say it was in line with expectations. I think you said expectations were basically flat year-over-year, if you can just confirm that. And I have a follow-up.

[Jamere Jackson:]

Yes. So from a Buy standpoint, one of the things that we've talked about on the first quarter call that we've had some new clients. And as those new clients come on, they tend to -- as they're ramping up, they tend to have additional data needs. Sometimes it's historical data sets, et cetera. And so occasionally, when you have those new clients come on, you get a little bit of lift early on in that relationship, and then it sort of normalizes. So that's part of the momentum that we've had in the first half of the year. The other thing that we've seen and that we've experienced as it relates to Buy is that the investments that our clients are making in the developing markets has been relatively steady. And so the number that you see us talking about in the developing markets has been at a 9% number, certainly gives us some lift on that Buy number. So overall, we feel pretty good about where we are at this point and what we expect that to be.

[Dwight Mitchell Barns:]

Let me just add a comment on the developing markets side of the growth there, again, broad-based growth and broad-based in terms of our portfolio, but also just as importantly, broad-based in terms of the clients that we serve. It's not just the multinationals, but as you've heard from us before, it's also the local companies in these markets who continue to perform well and win share from the global companies in their own business, and then that strengthened their business, gets reflected back in the work they're doing with us. And so the strength across the breadth of our client portfolio and the breadth of our product portfolio really playing well in the developing markets for us these days and gets reflected in that 9%-plus growth that you saw for the quarter.

[Todd Juenger:]

All right. And a quick follow-up, if you don't mind. Listen, as a company that knows more about market share than anybody else, I'm sure you measure your own market share. I'm wondering, on the Watch side, specifically the OCR side, if there's any metrics you could share with us just in terms of your progress there relative to the overall market. And if you have some sort of shares statistic of what percentage of that business you think Nielsen is capturing.

[Dwight Mitchell Barns:]

Well, Todd, we always talk about the importance of independent, third-party measurement for market share. And of course, that would not be us on this particular question. So you got to start there. But it's not just about market share. We look at this as a market that is in and of itself developing. And that's really what our focus is on, is the market, not the competitor. And so we're taking that bigger approach and hoping this market develop. And we've got to measure the consumer wherever, however, whenever the consumers consuming content. That's what drives us, and that's what's going to drive the size of this market and the size of our share or role in it going forward.

[Operator:]

Your next question comes from the line of Andre Benjamin with Goldman Sachs.

[Andre Benjamin:]

My first question, I know it's early going and it was just announced recently, but could you provide any additional color on what we should actually expect from your recent deal to launch the Omni Channel with Alibaba, like either how it works, the timing or economic impact and what the go-to-market is, whether it's project-based or subscription-based, what it looks like, et cetera?

[Dwight Mitchell Barns:]

Well, you're right, it is early going, and it's something that the clients in the marketplace are still getting their arms around, figuring out what it means for their business. And so it's a new -- this is a new area for the marketplace in terms of how they're doing business. It's a new area for us in terms of measurement as well. So yes, there's not a whole lot of additional details we can provide in terms of Omni Channel. I think it's pretty straightforward. It's bringing these 2 views of off-line and online sales together in an apples-to-apples way so people can understand their market share, not just in those 2 respective areas, but on a total-market basis. Then I think what that does is it informs people about how they want to allocate their resources and where they want to put their priorities in terms of how they market their brands going forward. And then that will probably open up second- and third-level opportunities for us in that particular part of our business. So this is one of the key things we're doing with e-commerce in the China market. There's additional things that we're also focused on and working on. And we're looking forward to sharing more details on some of those additional things in the future.

[Andre Benjamin:]

And then a quick follow-up on the client win in Turkey in radio. A similar question or anything on the timing or impact on the numbers? And are there any other major contracts that you expect to be bidding on, either this year or next, as we know those are long-term deals?

[Dwight Mitchell Barns:]

Yes, look, we did mention Turkey because it's going to have a huge impact on our revenue. It's a good one. We like it. But we mentioned it more because it was part of our rationale for the Arbitron deal, and we wanted to just give an update on delivering on that part of several rationale that we had for that deal in the first place. So Turkey and then as I mentioned, we also renew our radio audio measurement contracts in a number of other markets around the world, 2 that happened earlier this year, for instance, Malaysia and the Philippines. As far as other ones that come up, we're not going to share a bunch of information about other wins that come up. We'll update you, though, once those things come on board and they're part of our business.

[Operator:]

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

[Brian W. Wieser:]

Attribution has been quite a buzzword among the ad tech and digital media companies in the last while, Google and Adometry, and AOL and Convertro. I was wondering if you see these companies' efforts as comparative or more complementary at this point in time, given that it's really hard to do attribution without TV-based measurement at minimum? And second question, just a bit of a follow-up to Dave's earlier question on Mobile OCR, specifically. Given that it seems that it's unlocking a lot of new inventory, making it interesting to big brands, have you seen any new customers at all? Even -- maybe it's not material financially, but I'm curious if there are new publishers in the mobile environment sort of signed up for you?

[Dwight Mitchell Barns:]

Well, let me take your first question first on what we sometimes refer to internally as MTA or multi-touch attribution modeling. It falls in the overall marketing ROI space or marketing effectiveness area. Ad Solutions would be another way to categorize within our business. And it is -- it's a hot item. It's a very exciting capability for clients. It addresses an incredibly important business need, trims waste out of the whole marketing process, helps them be more efficient and improves the return that they get on marketing spending. And the other thing that I think is so appealing about it is it's one of these analytical capabilities that is able to bring together the online or digital world and the traditional retailing world and do it in a way that's pretty powerful. So we've been very active in this area, and we have a lot of growth happening within our Ad Solutions area. That is tracing to multi-touch attribution modeling. Convertro, you mentioned, that was one of the firms. Yes, we see firms like this certainly as complementary. We work very closely with a number of them, and we'll continue to do that going forward. That's part of our open value here at Nielsen, and it serves us incredibly well. Your other question was about Mobile OCR, and you were asking if there were additional clients coming on board, is that right, Brian?

[Brian W. Wieser:]

That's right. Yes.

[Dwight Mitchell Barns:]

Well, we mentioned that we already have more than 100 clients who are using Mobile OCR. So you can imagine that it reflects a pretty broad base in the marketplace and the important players out there. Some of them, we also mentioned, were first-time OCR clients. And so those are the ones where the business model is primarily or even exclusively focused on mobile. And so what we have had available before wasn't really relevant to them. Well, now, Mobile OCR is right in their wheelhouse, and so they've come on board. Others are players that are playing across a platform, and so Mobile OCR more or less filled the gap that had existed for them previously. So we have a mix within that list of clients that we mentioned, more than 100 already. And we're going to see more come on board in the weeks ahead.

[Operator:]

Your next question comes from the line of Doug Arthur with Evercore.

[Douglas M. Arthur:]

Yes, 2 questions for Jamere. You may have touched on this, as the line was sort of breaking up a little bit. The -- what is -- is the pro forma growth and profitability for Watch similar to the pro forma revenue growth, given the fact that margins were sort of flattish? That's question one.

[Jamere Jackson:]

So the pro forma -- your question was, is the pro forma EBITDA in line with the revenue growth?

[Douglas M. Arthur:]

Yes, on a pro forma basis.

[Jamere Jackson:]

So we haven't broken out the EBITDA for stripping out the impact of acquisitions. We're -- we've been hard at work at sort of wiring the 2 businesses together, and it gets increasingly difficult to sort of split out the margins associated with that. What I will say overall is that we're getting very similar kind of margin performance from our Watch business, as we've historically gotten, and the operating leverage associated with it is pretty good. And the synergies associated with the Arbitron business are certainly contributing to the Watch margins there.

[Douglas M. Arthur:]

Yes, because it -- I mean, it looks like Arbitron had a very strong quarter. And then the second question is on the adjusted EBITDA, it looks like there's a $51 million add-back on nonoperating expense. I know there's a $45 million item in the reported earnings. What -- can you just elaborate on what that is?

[Jamere Jackson:]

So we had the $45 million from the extinguishment of the long-term debt. That was in the numbers. And then while we're at it, if you just want to hit all of the kind of the nonrecurring, we had about $13 million of restructuring, $13 million of onetime items associated with a couple of settlements, little bit on foreign currency and a little bit of other. So that just kind of breaks it all down for you.

[Operator:]

[Operator Instructions] Your next question comes from the line of Bill Warmington with Wells Fargo.

[William A. Warmington:]

So you'd mentioned that Ad Solutions was running about $200 million and growing in the low double-digits. The -- I wanted to ask the OCR revenue and growth rate. And then, also, when you fully anniversary-ed the displacement of net ratings and start to see that growth flow through completely.

[Jamere Jackson:]

Yes. So we haven't broken out the OCR revenue at this point. It's still in the tens of millions. When we get to a number where we think we've got critical mass, we'll certainly start to share that. We're in the early innings of this market. We're very, very pleased with our progress. As Mitch indicated, the launch of mobile and the new clients that we signed up give us a lot of excitement around the business, and that we hope to break that out for you soon when we get to a number that has a critical mass of revenue associated with it. But we feel very good about where it is. And again, as we said, our digital business through the first half of the year has doubled.

[William A. Warmington:]

Okay. And then as my follow-up, I wanted to -- Jamere mentioned the softness at some of the U.S. clients late in Q2. I just want to ask your thoughts on Insights' growth for the remainder of the year.

[Jamere Jackson:]

So as I mentioned, we did see some tightening with some of our North American clients. You probably have read some of the rhetoric from several of our clients as they look into the U.S. market in particular. As I said, that tends to manifest itself for us in -- sometimes our clients will tighten spending a little bit on additional data sets or tighten spending a little bit on certain categories. And as you know, our Insights business also is the lumpier, more discretionary piece of the business. And over time, that may impact that as well. Again, at this point in the year, we've seen it. We're watching it very closely, and we're watching it very closely in the back half.

[Operator:]

Your next question comes from the line of Hamzah Mazari with Crédit Suisse.

[Anjaneya Singh:]

This is Anj Singh dialing in for Hamzah. My first question is just on mobile ad measurement. You saw really strong adoption this month, which was encouraging to see. I'm wondering if you can offer any other milestones we should be looking for as mobile measurement is included in TV ratings later on this year.

[Dwight Mitchell Barns:]

Well, that will be a big event. It will build off of what we've already done in the marketplace, bringing Mobile OCR out there and there's a number of other things that have to happen, some of which are incumbent on the -- that require actions by the marketplace. I think when you see the marketplace start to embrace the mobile television measurement and it starts to show up in the currency metric that's out there, and then it will play probably more heavily as we go into 2015 and the upfront process renews itself in the early part of 2015, you'll start to -- because then, by that time, the market will have had some experience with it. They'll see it in the numbers. They'll have some confidence with it, and then it will play a bigger role as they start to plan their business in the following year. So our focus right now is to get it out in the marketplace and let the marketplace start to get some experience with it.

[Anjaneya Singh:]

Okay. And just one other question. You had cited Buy strength driven by new client wins. I'm wondering if you can give some insight into the profile of these clients, their general size, industry. And also, on the developing market strength, can you pare down how business trends have fared year-over-year and sequentially for the multinationals versus locals?

[Dwight Mitchell Barns:]

I'm sorry, say that last part again about multinationals and locals, you're asking what?

[Anjaneya Singh:]

How have their growth trends fared, say, year-over-year? Have they increased? Have they been stable, and on a sequential basis as well?

[Dwight Mitchell Barns:]

Okay. Well, first, on your first question. We talked about Mars on a previous earnings call, might have been when we reported fourth quarter for 2013. And there are other client wins that will come through. We're not going to broadcast all of them, but you can be sure that when the big multinational clients make a move like this, we're always excited about it. It always means a lot in terms of mobilizing resources to serve these clients in a more complete and global way, and it opens up opportunity for us, and that's certainly been the case with Mars, and it will be the case for the other ones that we win going forward. The other question again, remind me. Sorry.

[Anjaneya Singh:]

Just how growth trends have fared for multinational year-over-year versus locals?

[Dwight Mitchell Barns:]

Oh, yes, multinationals and locals, yes. Well, in some of these key developing markets, for the last, I'd say, the last year or 2, the local companies have been gaining market share against the multinationals, and everybody knows it. The local companies, for instance, if you go to Southeast Asia or you go to China, if you go to India, the local companies generally outperforming the multinationals, and the local companies know it, and the multinationals know it, too. And they're all digging into it to try to understand why that's happening and learn from it, and then make adjustments to their business models. The general consensus seems to be that the local companies are just more agile, more nimble. They're innovating more quickly, and they're driving more top line growth and winning market share from the multinationals who have been more leaning into scale and efficiency gains than they have been into focusing on agility and innovation. And so I think you'll start to see the multinationals respond to that impact that has occurred to their business, and it will start to level itself out, would be my guess. And you know what, Nielsen's in a good position no matter what happens in the marketplace because of our balanced client portfolio and the fact that we serve all of the clients, and in fact, the entire market. And so we look forward to helping everybody and helping the entire market move forward.

[Operator:]

Your next question comes from the line of Manav Patnaik with Barclays.

[Ryan Leonard:]

This is actually Ryan Leonard filling in for Manav. Just want to follow up on Alibaba. Just want to know, I guess, kind of financially, are there any costs associated with kind of opening up a deal like this? And then strategically, what does this mean to kind of some of the conversations that you've mentioned that you've been having with other e-commerce providers and what kind of strength does it give you on those discussions?

[Dwight Mitchell Barns:]

Well, when you're serving clients, you're always going to have costs. And right now, though, the picture is more about the long-term opportunity here, not the short-term impact, whether it's the revenue or the cost in the short term. It's really the longer-term play, as more and more consumers want to purchase the goods for their household and for their daily lives on e-commerce platforms. Again, our commitment is to measure the consumer. And so we go where the consumer goes. We measure what the consumer does. E-commerce is a very important part of the future, by all indications. And so we're thrilled with this relationship we have with Alibaba on Omni Channel, and we'll continue to focus on that, and we'll invest in it appropriately. However fast it develops and however consumers decide to behave, then we'll be there with the right amount of investment at the right time to make sure that we're in sync with the evolution of the marketplace. In terms of other e-commerce players, yes, we're active in e-commerce not just in China, but in a number of markets around the world. Yes, including here in the U.S. And you're probably wondering about Amazon. Amazon is a great client for us, and we continue to work with them in a number of areas of their business. And yes, of course, we would like to be doing more with them. But whether it's Amazon or whether it's any other client for that matter, it almost always comes down to 3 things

[Ryan Leonard:]

Great. And just one follow-up. A lot of news recently about consolidation in both the consumer space and more lately, U.S. media. Can you just comment on the impact of consolidation across Watch and Buy?

[Dwight Mitchell Barns:]

Yes, sure. Thanks for asking. Look, we watch that closely, first and foremost, because these are our clients. And so we always need to know what's happening with our clients and what the issues are that they're facing. But as far as our business, we don't expect a material impact on our business from this industry consolidation that is being discussed in the press. Look, on the one hand, there looks like there's industry consolidation in one part of the market, but don't forget, there's also media fragmentation happening all across the market. And so you have some parts that are consolidating, other parts that are sort of being pulled apart. Through all of that movement, here's what we focus on

[Operator:]

Your next question comes from the line of Paul Ginocchio with Deutsche Bank.

[Paul Ginocchio:]

I just wanted to revisit a couple of questions that were asked earlier. So because of the tightening, would you expect Insights' sort of organic revenue growth the back half of the year will be a little bit less than the first half? And also going back to the comments on Watch. Because you've, I think, cycled the discontinued online products and obviously, mobile's being rolled out, would you expect Watch organic growth to be a little bit better in the back half of the year because of mobile and the cycling of that discontinued product?

[Jamere Jackson:]

So first of all, we've sort of reaffirmed our overall guidance ranges, and we expect to be within those ranges in the back half of the year. Given where we are in the year and given some of the dynamics that we're seeing, again, we've had great momentum in the first half of the year. We're seeing clients invest in the developed and the developing markets. What you potentially would see would be maybe some toggling between info and insights. But overall, our second half is going to line up in such a way that we'll be within the guidance range that we have, and it won't have a huge impact on us until it totally materializes. I would say, the other thing, is our second half Buy clients that we're adding won't have any impact until 2015 or so. So those are kind of the dynamics there. We're comfortable with the ranges that we put out, and the geography may move around a little bit between the pieces. But overall, we feel very good about what we've said.

[Dwight Mitchell Barns:]

Insights is always the choppier side of our business. You've heard that before, you'll continue to hear that, and it's just because it's true. And so the good news is we have the majority of our business in the information area. That's one of the reasons why we have this steady, consistent business model that rides through cycles. And the big opportunity for us continues to be to bring the measurement part of our business in the analytics or inside -- insight part of our business together, to make sure those are linked as closely and as deeply as they possibly can be, so that those things start to move more together and they're more integral from a client perspective. And that's something we're going to continue to be focused on for the short term, medium term, long term, because they're such great opportunity for us right there.

[Operator:]

Your next question comes from the line of Jeff Meuler with Baird.

[Jeffrey P. Meuler:]

I wanted to ask, are there any commonalities that you can talk about in terms of what's driving the new client wins? And what I'm wondering is, are new products like Global Track Complete moving the needle? Is it now that you have complete global coverage or just any commonalities that's driving the wins?

[Dwight Mitchell Barns:]

On Global Track Complete, this is a business issue that our clients have long had. It's just incredibly difficult to deliver on it. And we've done the hard work in the infrastructure of our company over the past several years that has put us in a position where we can now layer this capability, Global Track Complete on top of it, and finally deliver on something that our clients have wanted. And so that's point one. Point two is, clients are also changing the way that they run their business, the way they view their business, the way they manage and lead their business. And Global Track Complete, the capability it offers is perfectly in sync with that trend in our big global clients in terms of the way they operate. And so the 2 things really coming together is what's driven the evolution, the growth and development of Global Track Complete amongst our multinational client base. The commonality is they're global and that this is the way they approach their business. Not every global company runs its business out of regional or global level. Some still take more of a -- maybe call it a federated approach. But the ones who do want to have a big regional or a big global view, then they need that visibility on the KPIs, and the Global Track Complete delivers perfectly on that.

[Jamere Jackson:]

Another angle on that as you think about commonalities is that, when you think about winning business with our big multinational clients, we've been very, very clear that our strategy in our Buy business is to be a global partner for global companies. And so what that means is we're in the marketplace and competing competitively. That commitment and that capability with things like Answers On Demand, Global Track Complete, investing in developing markets, plays very, very well as you're trying to win that business. So I think a key thread in all of this is that our commitment, our long-term commitment, what we've done in the marketplace really, really helps us.

[Jeffrey P. Meuler:]

Okay. And then I just want to actually ask a follow-up on that. How should we think about the framework for the pace of investment in Buy? Is it more along the lines that if you guys see a good opportunity to improve your competitive position with a good long-term payback, you're going to make that investment all day, regardless of the impact on near-term margins? Or is there also some sort of governor that you want to maintain at least a certain level of margin or limit year-over-year margin contraction to a certain level or something like that?

[Dwight Mitchell Barns:]

On developing markets, look, we just had to keep going back to this idea of the long-term tailwind that exists in these markets. And it's driven by demographics, populations growing, populations also urbanizing, rising middle-class, rising disposable incomes. And so this is something that will continue to unfold over the next couple of decades. And so our investment will be in sync with that, with that long-term view, because we know where this one's going. There's nothing that's going to stop it. And we want to make sure that we serve those markets and that we win. We're the measurement provider. So we're going to invest according to that. We're going to do it responsibly and with discipline, but we're going to continue to do it.

[Operator:]

Your next question comes from the line of Dan Salmon with BMO Capital Markets.

[Daniel Salmon:]

Mitch, you spoke a little bit about it in your prepared remarks, and Jamere mentioned it again there as Answers On Demand. And can you just maybe -- we haven't heard a whole lot about it lately, just sort of refresh us on how you see its importance playing out strategically, where the client base there is, is it a little bit more something that helps you work into the mid-markets? And then lastly, just a more scalable platform like that, what -- how it could help you on the margin side over time and mix shift?

[Dwight Mitchell Barns:]

Well, Answers On Demand, it's capability that we started developing several years ago and it's -- it was initially designed for our biggest global clients, the most sophisticated, the ones who are using the most complete breadth of our portfolio. So we designed it initially for them. It served us incredibly well for some of those biggest global clients. And what we've done now in recent times is we've started to make that capability in a form and make it available, of course, to a broader range of our client portfolio. And we're excited about the adoption that we've seen and this milestone that we've crossed in the second quarter of the year. The idea is that this provides the information in our broad portfolio of capabilities to our clients. They have direct, efficient, immediate digital access from their desktop. It's really as simple as that. But just given the breadth of our portfolio, that's easier to say than it is to do. And ultimately, it just allows the client to use everything we have. And if they don't use it, then they can't realize value from it. And so this is important to our clients. It's important to Nielsen because of the value realization that it relates to. And of course, ultimately, it's important to our shareholders for the exact same reason.

[Operator:]

There are no further questions in queue at this time, and I'd turn the conference back over to our presenters.

[Kathryn H. White Vanek:]

Thank you so much, and I really appreciate everybody joining us today. We look forward to talking to you and fielding your questions as the day and week goes on.

[Operator:]

This concludes today's conference call. You may now disconnect.