尼爾森 (NLSN) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for holding and welcome to this conference call on first quarter 2014 results for Nielsen Holdings N.V. Please note, all lines are in a listen-only-mode at this time. After the speakers' remarks, there will a question and answer session.

(Operator Instructions)

Thank you, and I will now turn the call over to the host, Ms. Kate Vanek, Senior Vice President of Investor Relations. Ms. Vanek, please proceed.

Thank you so much.

Good morning, everybody, and thank you for joining us to discuss Nielsen's first-quarter 2014 financial performance. Joining me on today's call from Nielsen are Mitch Barns, CEO; Jamere Jackson, CFO; and Brian West, our COO. A slide presentation that we will use on the call today is available under the Events section of our IR web site at Nielsen.com/investors.

Before we begin our prepared remarks, as I always have to do, I need to remind you that the following discussion contains forward-looking statements within the meaning of the Safe Harbor Provisions 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 24, 2014.

Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, both of which are outlined in our 10K and other filings and materials, which you can find again on our web site.

For today's call, Mitch will start with some comments on our results for the quarter and an overview of the key highlights. He will then provide an update on key growth catalysts that we have here at the Company. Then Jamere will discuss financials for the quarter and, obviously, touch on guidance as well.

During the Q&A, with we ask everyone to limit themselves to one question and one follow up in order to accommodate everybody that we have in the queue. And now to start the call, I would like to turn it over to our CEO, Mitch Barns.

Thanks, Kate.

Good morning, everybody. Thanks for joining the call. We appreciate the opportunity to update you on our business.

We had a great first quarter, with growth from all across our global client base and from all regions of the world. Let's walk through a high-level look at the numbers through the quarter.

First, revenue. Revenue grew a little better than 15% on a constant-currency basis. If we exclude our acquisitions of Arbitron and Harris Interactive, the core topline growth was just under 5%.

The Watch side of our business had a strong quarter, with growth just over 6%. And that reflects our increasing momentum in digital and continued strong growth in ad solutions.

On the Buy side, growth came in just under 4%, driven by developing markets, client winds, and steady, consistent performance in developed markets.

Next, adjusted EBITDA. It was up 19.4%, or just under 23% on a constant-currency basis. On adjusted net income per share, it grew 48%, coming in at $0.43 for the quarter.

We continue to execute on the integration of Nielsen Audio, and the positive impact from that is reflected in our numbers.

A few other highlights for the quarter that I want to call to your attention.

First, as many of you know, we recently executed a series of transactions in the debt markets. And those moves further strengthened our balance sheet and improved the economics of our debt structure. The moves were supportive of our long-term capital plan, which we continue to feel very good about.

Just as a reminder, our long-term capital plan follows a balanced approach. Starts with the dividend, which is a great fit with our steady, consistent business model. We'll continue to grow the dividend at least in line with earnings.

For our net debt leverage, we recently reset our target to the 3-times area. And that give us flexibility -- flexibility for M&A, flexibility for share repurchases.

Separately, on the heels of another secondary offering by our private equity sponsors during the first quarter, approximately 75% of Nielsen shares are now publicly held. And we're pleased to reiterate our guidance for 2014.

So big picture, we're off to a good start to the year, well-positioned to deliver steady, consistent growth on our core business throughout the rest of 2014 and beyond.

Population growth and media fragmentation -- these continue to be the big long-term trends that inform our growth strategies. Our response to both of these is coverage -- coverage of what consumers watch and listen to, and coverage of what they buy.

And then we connect the two sides. We connect what people watch with what they buy, and we use that to help our clients improve the effectiveness of our market. These are things that every client needs, and these are things we can do better than anybody else.

Let's take closer look at some of the specific efforts that we're working on against these objectives.

The first one is our investments in our Buy business focused on the key developing markets: China, India, Indonesia, Africa, Mexico, Brazil. We love markets with growing populations, a rising middle class, and growing disposable incomes. We'll continue investing for growth in markets like these all day long.

China is a great example. And I'm sure you've all seen stories in the press about growth slowing in China. But our business in China saw strong double-digit growth in the first quarter, driven by both local clients and multi-nationals.

Another source of strength for our Buy business are things that leverage our global presence and scale. One example we have been rolling out over the past year is a product called Global Track Complete.

This product provides sea-level executives at the headquarters of our largest global consumer package goods clients a simple and clear view of their sales volume and market share harmonized globally, but with the ability to drill down and see region, country or even city-level views. This really delivers on the promise of Nielsen's global presence, and our clients love it. It's one of the reasons why we're winning in our Buy business.

In our Watch business, we're making great progress on our audience measurement initiatives. TV, of course, remains the major platform; and our franchise there continues to be rock solid.

But the growth of digital video continues to build momentum. And as it does, the major digital players, they're increasingly aligning themselves with the metrics of the TV world. And they're doing this to meet the requirements of advertisers, who insist on the kind of independent, third-party measurement that Nielsen provides. We like this trend.

Our Online Campaign Ratings metric, or OCR, is perfectly in tune with where the market is going. And as a result it continues to gain broader acceptance. And its extension into mobile advertising, which continues to grow rapidly, is an important part of that.

You have seen some examples of our progress in this area in our recently announcements related to Google and Facebook in particular.

We are also leveraging (inaudible) infrastructure to support our Digital Program Ratings metric, which is set for launch in Q2. And finally, one of our most important plays in this area will happen in July with our full scale launch of mobile video measurement, when mobile viewing of television content will begin to be included in the C3 Currency metric that the market trades on. We couldn't be happier with this one.

Next is eCommerce. This is truly one of the most exciting developing areas for our business these days.

At its most basic level, you can think of eCommerce as another retail channel. And so we simply need to measure it for our coverage of what consumers buy. But eCommerce is developing into much more than just a retail channel.

ECommerce providers are also playing a growing role as marketing platforms, driving offline sales for brands. And they're converging with location-based marketing in terms of how consumers access and use them, especially from their mobile devices.

Ultimately, we predict that eCommerce will prove to be the perfect environment for the full range of Nielsen's Watch and Buy capabilities. And it's all digital, through by highly granular, realtime data.

We're excited about our developing relationships with the likes of Alibaba, Tencent, and eHalsien in China; Amazon here in the US; and a number of other eCommerce players around the world. A lot more to come on this one, so stay tuned.

I mentioned earlier the continued strong growth we're seeing in advertising solutions. This is where Watch meets Buy in our business. And the work we do here helps our clients improve the precision of their marketing. This trims waste from the system and significantly improves their marketing ROI.

This aligns well with the objectives of CMOs at nearly all of our major CPG clients, but also with our media clients and clients in a number of other big verticals, including auto, financial services, and retailing. We still see a lot of runway in this area, so our product development and business development efforts won't slow down one bit.

Finally, Nielsen Audio. I mentioned earlier that the integration and resulting cost energies are all on track. We're also making good progress on our growth initiatives.

We recently presented our work linking radio advertising to its resulting sales impact at a big industry conference. And this is a great example of big data informing the effectiveness of a traditional form of media.

The work we presented made a strong case for the ROI of radio advertising, and it's being incredibly well received by the key industry players. We're also hard at work developing our digital audio measurement capabilities, which the market very much needs. We have only just begun to develop the global growth opportunity for Audio.

I said at the outset that our strong first quarter is a result of our clear focus on our clients' key priorities. These efforts we have just walked through are examples of how we're responding to the opportunities that we see.

We're confident in our choices. We're confident that our success with these efforts will continue to drive our growth throughout 2014 and beyond.

Given what the long-term trends say about where consumers and markets are heading, we're perfectly positioned for steady and consistent growth, both for today and into the future.

Now I'll turn it over to Jamere, and he'll give you a deeper look at the numbers.

Thank you, Mitch.

As Mitch indicated, we delivered a solid first-quarter performance, reflecting strong execution in our proven business model.

Revenue was roughly $1.5 billion, up 15.1% constant currency. Excluding the impact of Arbitron and Harris, revenues grew 4.8% constant currency.

Adjusted EBITDA was $376 million, up 22.9% constant currency. And adjusted EBITDA margins were 25.3%, up a strong 160 basis points due to the integration of Arbitron, operating leverage, and good execution on our productivity initiatives.

Adjusted net income was $165 million, up 48.6% constant currency. And diluted adjusted net income per share was $0.43, up 48.3% versus prior year.

Finally, we generated $13 million in free cash flow, up $28 million versus a year ago.

Next, on page 9, I'll move to segment revenue and give you a little color on the pieces.

Total Buy revenue was $837 million, up 5.9% in constant currency, and up 3.9% excluding the Harris acquisition.

Our Information business grew 4% to $656 million constant currency. We saw an increased demand for our retail measurement services, pockets of strength in the developing markets, and the benefits of recent client wins in the developed markets.

Our Insights business was $181 million, up 13.8% constant currency, or 3.8% excluding Harris, due to strength in developing markets and modest growth in the developed markets.

Developing markets were up 7.6%, as we saw broad-based growth driven by our local clients and steady progress with our multinational clients as well. This growth continues to fuel our conviction that investing coverage and capability to help our clients capitalize on the growth opportunities in these markets.

Finally, our Watch business was $652 million, up 29.4% constant currency or 6.2% excluding Arbitron.

As Mitch said, the Arbitron acquisition is progressing well. We saw a continued strength in audience measurement, which includes Digital; and we see double-digit growth in Ad Solutions. And as Mitch mentioned, our Digital initiatives continue to gain traction and we are pleased with the results we have seen. Again, broad-based, solid revenue growth for the quarter.

Moving to Profitability.

Buy EBITDA was $118 million, up 1.7% constant currency. There are 2 key drivers here. One, we continue to invest, in a very disciplined way, in developing market coverage to fuel long-term growth and support our clients. And, two, we are investing in our platforms ahead of new-client wins.

We will continue to be disciplined and opportunistic and explore only those investments that make sense for our business and client, which in turn will be accretive to shareholders. We have a strong track record of investing through the cycles and monetizing these investments over the long-term.

On the Watch side, EBITDA grew 38.4% to $267 million constant currency, driven by the addition of the Arbitron business, and the scalability and operating leverage capability of our business model.

Flipping to page 11, I want to remind you that we report on a constant-currency basis to reflect our operating performance. We don't take on transactional risks; this is strictly the transaction impact for reporting purposes.

Hence in the quarter, we saw foreign currency impacts that resulted in 220 basis points drag on revenue and a 350-basis-point drag on EBITDA, in the ballpark of what we laid out in our February call.

Separately, we took a $20 million charge related to revaluation impacts from the Venezuelan Boulevard. If yesterday's spot rates held constant through the rest of the year, then the estimate you see here are the projected impacts on future revenue and EBITDA.

As we've previously indicated, the anticipated drag based on today's rates is included in our full-year annual outlook and will be offset entirely by the acquisition Harris and accretion associated with it.

Moving to the balance sheet and some of the key financial metrics. On the top left, you see some of the key financial metrics. Note, we generated $13 million in free cash flow this quarter, up $28 million versus prior year, due to our solid operating performance and benefit from lower interest expense.

On the bottom left is our proforma net debt ratio. Our gross debt is $6.7 billion, with roughly $300 million in cash to get to $6.4 billion in net debt and a 3.6-times ratio.

On the capital table on the right, you can see we have remixed our debt based on some of the recent refinancing actions, which I'll cover in more detail on the next page. And based on these recent refinancing activities, our weighted average interest rate is approximately 4.25%, which remains largely unchanged.

On page 13, a few comments on our capital structure. We have proactively addressed our capital structure and made great progress on extending maturities at attractive rates since our March 26 update. We have executed more than $4 billion of refinancing activities, with increased tenure by 2.4 years at attractive rates that have significantly strengthened our balance sheet.

The refinancing has also resulted in a flatter maturity profile, with fewer peaks in any given year. We were able to secure investment-grade-like covenants, and we received favorable reactions from the credit agencies.

We still have a little juice left as we turn our attention to the $800 million of 7.75% notes that are callable in the second half of the year. As you can see on the bottom graph, after we refinance the 2018 notes, we will not have any significant maturities until 2019.

Importantly, as you know, we updated our net debt leverage target to the 3-times area, which gives us tremendous flexibility to grow our business and return capital to our shareholders. We'll continue to update our capital structure, and I look forward to updating you on future earnings calls.

Finally, on page 14, we are reaffirming our 2014 guidance of 245 to 255 adjusted net income per share with no changes to the underlying levers. However, in light of the recent refinancing activities which I covered, we're going to be closer to the lower end of the net book interest range we've provided. We're also reaffirming our full-year free cash flow guidance of $700 million.

So to wrap up, the year's off to a strong start due to solid execution, the underlying strength of our business model, and disciplined investments, all of which enable us to continue to deepen our relationship with our clients. And this puts us in a great position to continue to deliver strong returns for our shareholders.

With that, I'll turn it back over to Kate.

Thanks so much, Jamere.

Operator, we're ready for the first question.

(Operator Instructions)

Your first question comes from the line of David Bank with RBC Capital Markets. Please go ahead.

Thanks very much.

I guess two questions, the first for Mitch specifically.

You know, you mentioned a little bit of this in conjunction with your comments around eCommerce and even a little bit around the acquisition at the time of Harris. Was wondering if you could talk a little bit about your extension into other verticals and how you see that progressing, a little tiny toe hold in it maybe with a Harris and how you see that developing over time, early results.

The second question is more, I guess, on the operating leverage on the Buy side. You know, I think you have made it clear what the investment strategy is; and it makes a tremendous amount of sense. But, you know, no good deed goes unpunished.

I was wondering if I could push a little further to see if we can get a little bit more visibility in terms of the timing of a return to a little bit stronger operating leverage gains in that business.

Thanks David.

Let's start with the first question, where you're asking about extension of the verticals. First, to step back from that, we're always first and fully focused on the core verticals that we serve, the core verticals for us of course being consumer package goods and media. We always start there.

Our Ad Solutions business, though, which of course is focused just as much on those two verticals, is one of those great places that the capabilities in Ad Solutions are just as useful, just as important, just as valuable to advertisers across a whole number verticals. That's one of the most natural places for our business to serve a lot of these other verticals -- auto, financial, retail in particular are some we have been especially active in lately.

Then, yes, to your point, of course our work with Harris just simply adds to that. And eCommerce takes you into a lot more verticals as well.

We continue to stay focused on those core verticals and then let sort of a natural development happen in those other verticals, primarily through our Ad Solutions business right now.

On the Buy business, the thing I always want to go back to here is these developing markets have such great underlying fundamentals, but they are developing over the longer term. Population growth, rise of the middle class, rising incomes, and in some of these markets also urbanization.

And these things will play out over not just the next couple of quarters, but we're really talking about several years and even decades. And that's the way we approach these markets. We invest for that longer term.

The second thing to remind you, we invest in multiple ways here. So initially to go into a market, we gain broad coverage so that there is broad understanding of sales and market share for our clients. And increasingly over time, they push us to go to subsequent ways of investment to provide more granularity of the markets -- city level views, channel specific views, and additional views like that.

And so that's the way these markets tend to develop over time, and we'll invest like that all day long. Because again, each wave of that investment produces a good return for us; and the long-term opportunity in these markets is fantastic.

Thank you very much.

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

I wanted to ask about Buy information. I was intrigued about the acceleration here in the first quarter just reported.

The year-ago comp is still a bit tough there. It's still a part of the new Wal-Mart product ramp a year ago. And so I wanted you to go a little bit deeper into, say, increased global demand for retail measurement.

What does that mean? Is it related to the comment that Mitch said about the Global Track Complete product? And more importantly, heading into second quarter where the comp gets a lot easier, should Buy information accelerate further?

Yes, thanks, Andrew.

We do feel great about our Buy business. We have momentum on a number of fronts: momentum in the developing markets; momentum in terms of new client wins; and, yes, we do see momentum in terms of global demand.

Our Buy business too, another thing to just try to highlight for you, is we have the measurement side of our business and the analytic side of our business; and we do well on both of those fronts. But increasingly, what we see from the big global clients is they want to go deep in terms of integrating the measurement side of our business and the analytic side of our business. And that really plays to our strength in the Buy business because if they want to have deep linkage between measurement and analytics, then that's perfect for Nielsen.

Our broad portfolio, we tie those two things together to drive more value and also give them a more forward-looking view of their business to help them find the growth opportunities in the markets -- whether it's developing or developed markets. And that's one of the reasons why our client relationships are growing stronger and broader at the same time.

That's one of the reasons why we're winning clients. And, yes, Global Track Complete that I mentioned earlier is a part of that. But it's only one of several parts and the reason why our Buy business is showing so much strength right now.

The only thing, Andrew, I would add to that is in terms of your question about the forward, you know, we haven't seen broad-based acceleration. But, to Mitch's point, we're just seeing nice, steady consistency between the full offering to our clients, whether it's the measurement or the analytics. And that feels great, and we'll take 4% any day of the week.

But the year-over-year comp matters, right? It gets a lot easier.

Yes, you know what though, as Mitch said, we're starting to necessarily see comps one quarter versus another versus info versus insights. More and more, clients are really talking about trying to increase their level of investments, increasing their demand for our tools.

And overall, buy and grow a little faster feels good; and a point matters.

Well said. Thank you.

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

Thank you.

Following up on that, could you give us an update on what you're seeing in Europe? It's been a drag, and I'm wondering if there's any potential easing there that might have contributed to the almost 4% organic growth in buy

Our outlook on Europe really hasn't changed. Flat, plus/minus 1, somewhere; that's still the way we're planning for our year to unfold.

I was in Europe last week, I was in our UK business in particular. And while we're not changing our longer-term outlook for what we should expect in Europe, I can say that there's more life and optimism and energy right now in Europe than what I have seen in the recent past.

The team, in fact the office environment, if I can talk about inside baseball here, our Nielsen office environment would rival the office environment of Nielsen anywhere else in the world, including the developing markets right now. They just feel good.

I think it's partly maybe things have stabilized a little bit, and now they're out there hunting. And in our UK business in particular, a little bit different maybe from the rest of Europe, they are getting some wins right now. And they've put together a few good quarters of some growth here and there.

So, yes, we feel a little bit better about it. But we're not really changing our outlook for it right now.

Great.

And then turning to Digital, there have been a number of announcements recently around Google partnerships with you and with comScore and a number of products that are being rolled out.

Could you maybe just walk us through the latest, in particular the activity with Google. And to any extent that you can distinguish what you're doing versus what comScore is doing, I think that would be helpful. Thank you.

The bigger picture here -- we said it a quarter ago when we were with you all on this call, that the bigger picture here, the good news is that the market, Google in particular, continues to open itself up to independent third-party measurement, the kind of independent third-party measurement that Nielsen provides.

We think that's a good trend for the overall market, not just us of course. And the reason why that's happening is primarily because advertisers are insisting on it; they are.

And they're insisting on the same kind of metric in the digital world that they have enjoyed for a long time in the TV world. And so that's why these digital players increasingly are aligning themselves in the digital world with the metrics of the TV world, so that there's comparability across the choices that advertisers have.

That to us is a very positive trend, certainly for our business. And that's what is really behind, to a very large extent, what you have seen in terms of the developments with Google.

We initially announced our agreement with Google with regard to YouTube back in November of last year. And went through beta, [milk] mode, and now moving out of beta into full-scale mode. And so OCR tagging for their premium content on YouTube will now just be a normal thing.

And so that's incredibly positive for us. And then also OCR integration into their double-click platform to make it as simple and seamless for advertisers as it possibly could be is also very positive for our business.

And then on the Facebook front, we're also obviously a very being part of the advertising growth, in particular with mobile.

They have called that out. I think they even called that out on their own earnings call yesterday, in terms of how they view Nielsen OCR and the role that it plays in terms of putting them on a the level playing field for the TV world through advertisers; and that's the game they want to play.

Again, we think OCR is perfectly positioned for where the market is going. And we're very happy with the momentum that we continue to gain, and the broader and broader acceptance that we continue to build in the marketplace.

And it's part of that broader audience measurement strategy that we have and that we feel great about.

Thank you.

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

Thank you.

Mitch, when you talked about the eCommerce opportunity, you mentioned your relationship with Amazon. I'm just curious, can you talk about the nature of this relationship and has anything changed there?

It's a relationship that's been around for awhile. We work with them on a number of fronts, helping them with their business questions like we do with a lot of our clients. And that relationship will continue to grow and build over time.

They are, as I mentioned, very much like a lot of the other eCommerce players. They are not just a retail outlet, they are also an advertiser, and so we have capabilities that can help advertisers of course.

They also are a video platform with Amazon Prime Video. And so we have opportunity to help them in terms of their decisions that they might make there.

Similar with that Amazon, we deal with a lot of other eCommerce players in a broad way, not just in terms of retail measurement. And we're really still at the very early stages of these relationships, very early stages. So we're excited about how much opportunity there really still is out there.

And this is the first quarter in a while you haven't mentioned the Twitter TV ratings. I'm just wondering how that's progressing, and do you expect that to be meaningful at some point from a revenue perspective?

Well look, social for us is going great. It's big; there were almost a billion tweets about TV in 2013 -- is a stat that our social group just put out not too long ago. Right now, we're involved with more than 90% of the TV networks using our service.

Our relationships with agencies in this area is growing too. Got more than 90 clients have signed on. New capabilities rolling out. We're expanding to other markets around the world.

We announced expansion planned for Italy and Australia, which will happen later this year. And I think you'll see Nielsen Twitter TV ratings playing a big role this year than ever before of course in the upcoming TV upfronts. So we're very happen about it in terms of it addressing a very important area for our clients.

They're very curious about the role of social, in particular, Twitter, in terms of the impact it can have on their programming, on their ratings, and also what they can learn from it to make decisions for the future.

And so that's what we're doing in this part of the business is we're addressing an area of great curiosity and great opportunity for our clients. And it's natural for Nielsen to do that given our historical role in TV.

Great, thank you.

Your next question comes from the line of Todd Juenger with Stanford C Bernstein. Your line is open.

Thank you, good morning.

A question on Share Count and then a quick follow up on Buy. Just on the Share Count side, it looks like you kicked in the use of your buyback this quarter, so good to see that. But on top of that, the shares did creep up a little bit -- not just from the convert, I think, but probably from some new shares this year.

If you could just talk about the progression of how you see that playing out over the year in terms of dilution and then offsetting that dilution from the buyback, and what we should expect from that terms of the use of cash.

And then the quick follow up on Buy -- a lot of it's has been asked, but I'm really particularly interested in I know there was a big new customer win I think that you cited. And just wondering, how much was that a contributor generally to the acceleration we saw in the quarter buy business?

If you could dimensionallize the importance of that versus other just strengths would be great. Thanks.

Todd, I'll help out with the share count question.

You know, the 4th quarter was up 5% on a gap basis. And that really wasn't creep; 3 points is just the impact you have to adjust for related to the mandatory convert.

When you adjust for that, the 4th quarter was under 2%; last year was under a 1.5; the first quarter is under a 1.5. And that is pretty consistent; and as you mentioned, we got this opportunity around the buyback that we could lean more heavily in over time with all the capital priors that we've mentioned.

I'm glad you asked that question. I want to make sure there's no confusion out there.

We really don't see that impact as "creep." It really is just an adjustment we have to work through. And as you probably know, we disclosed that in a releases of the appendices -- the press release and the 10K filing.

So it's just one of those things we'll work our way through the course of this year. But it will be over by the time we exit this year because the comp issue will be behind us

I think the other thing is, we haven't changed our guidance in terms of what we put out there in terms of weighted average, diluted shares.

And as you mentioned, we did have some pretty good progress in the quarter. We bought back 350,000 shares as part of our buyback. Pretty good progress there, and we're executing on the strategy that we laid out.

Todd, I'll take your question on the Buy business.

Again, the bigger picture here, we continue to feel great about our Buy business -- momentum across the world, momentum in terms of these client wins. The client win that you asked about that we mentioned last quarter was Mars, where we expanded our relationship with them across a number of additional markets around the world; and that's now very active.

We're working with them to drive growth in their business every day now, and we feel great about that. It's an example of a broader slate of client wins that our teams are out there battling for and succeeding with every single day.

All right, fair enough. Thanks, guys.

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

Thanks for taking the question.

I was wondering, can you talk about the growth of Ad Solutions in the quarter?

And separately, I guess, or maybe relatedly, I was wondering how you think of alternative data guarantees the use in the upfront, maybe using DOD or using Nielsen Twitter TV ratings or anything else. Does that make any difference for you financially, or do you see it more as just helpful in entrenching the existing relationships and product traction that you have?

I'll take your question on Ad Solutions, and I'll let Mitch address the guarantees piece of it.

Ad solutions continues to trend very, very well for us. We continue to see it as a key growth driver in the Watch business. And growth at the quarter was at the low end of the double-digits range -- so again, very strong growth on Ad Solutions. We feel good about its contributions to the Watch business at this point.

On the guarantees and the upfronts, that's still underpinned of course by the ratings. We don't see anything changing on that anytime soon of course; that's just where the market continues to be focused.

But I think increasingly, it's multilayered. So it's the ratings, and then there is an additional layer where they will look at characteristics that might come from some of our Ad Solutions capabilities. Brand effect, for example, might look at some of our Watch buy connection type capabilities as well.

And then also social plays a role into it as well. Programs that are associated with higher levels of social media activity, more tweets online.

There will be a tie breaker or an enhancement in terms of how somebody will view that underlying rating. And that is the way the market increasingly is playing.

So the rating still underpins it. And the other things sort of add color and allow people to make choices between things that otherwise might look pretty similar, just on the basis of the core age/gender rating metric.

Sure, I guess I'm just wondering, do you get paid more if there are more guarantees being used? Or is it more you're getting paid in context of just the overall annual use of the products?

Well, to the extent that our clients see value in those services to provide those additional layers, that's where it would add growth to our business. So, yes, to some degree that contributes to the development of our Nielsen Social business and also the development of our Ad Solutions business.

Thank you very much.

Thanks, Brian.

Your next question from William Bird with FBR. Please go ahead.

My first question is for Brian. Could you talk about your new role as COO, your perspective on your first 90 days and key priorities? And then I have a follow up.

Sure, Bill.

For me personally, it's an opportunity to look under the hood. And when you look under the hood, you feel better and better about this business and unique capabilities that we enjoy. And the angle is one that I'm having fun with.

Priority wise, look, client delivery is job one -- making sure we can have a consistent, high-quality, on-time product is something we ought to keep focusing on, we do a great job. Because when you do that well, then you get to go work on innovation and investments.

We have a full plate of programs that we're working hard on to deliver and execute as we find those vital consumers and try to characterize them on behalf of our clients because, ultimately, that's what is going to drive the growth.

And finally, leadership development side. I get to work with a team. They truly are the highest calibers folks in the industry. ¶

And that's fun, creating opportunities and giving them fun stuff to work on. I'm completely fired up and I'm learning a ton.

And a follow up for Mitch. Anything to read into the slight growth moderation we saw in insights?

Well, look, we love our Insights business. It is the choppier side of our Buy business, though. Information tends to be a little bit more stable; Insights tends to move around a little bit more quarter to quarter. But the longer-term trend on Insights is still great within our business.

And again, as I mentioned earlier, I think in response to a question from Sara, clients increasingly want us to link the Information/Insights part of our business more closely and more deeply. That plays to Nielsen's strength and the breadth of our portfolio. That's what I would say about Insights.

(multiple voices) angle, Bill, just because Andrew asked something similar, is this phenomenon Mitch is mentioning clearly is happening.

At the same time, we exited last year with one where they were investing -- investing a little heavily in the analytics and not as much in the info. And this quarter, actually they're investing in some data sets that is helping drive their growth questions.

So like you said, it's a mix. We enjoyed some nice Insights lift. We probably saw a little pop in our Info based on off-the-shelf data sets. But overall, our buy business growing at 4% is one we're really proud of.

And in developing markets, do you have any broader perspective on, you know, I guess how the business feels in that part of the world? Any insight on whether the quarter strengthened throughout or any change in trend we should expect coming up in developing markets?

Sure, thanks.

I was just in China two weeks ago and once again reminded, what's true in China is true in a lot of these developing markets. Our business is still very underpenetrated in these markets.

I know a lot of times people see the GDP numbers, and they think that our business is going to be tightly correlated to changes in GDP. It's just really not very much the case at all because of this underpenetration that our business still has in these markets. There are still lots of opportunities out there.

And the other thing is the strength of our business with the local companies -- not just the multinationals, but the local companies in these markets. Again, China is a great example where the local companies are actually winning against their global competitors.

And it's something the local companies are proud of and the multinational's are very much aware of. And it's a very active topic of conversation with CEOs with the multinationals in the China market. In fact, I had some of those conversations while I was there.

So the fact that our client base stretches across the multinationals and local companies, that helps our growth in these markets -- true in China, true in India, true in Southeast Asia, and a lot of these other developing markets as well.

Again, the underpenetration is the opportunity for us to continue to grow, even when the overall market growth rate that you might read about in the press might move up and down quarter to quarter.

Thank you.

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

Good morning, guys.

I guess my first question is on Nielsen audio. The potential revenue synergies that you're looking at now that the cost synergies are sort of behind you, could you give maybe a time line for things such as international potential, maybe going after clients such as Pandora things like that?

We're still very early in terms of pursuing the topline growth opportunities for our audio business. Our focus initially was on integration realizing the cost synergies, and we have done very well executing on that front. We're still relatively early in terms of our development of some of the growth opportunities. I mentioned a few of them in my opening comments, global being one of them.

In global, one of the things to note there is in a lot of these markets, the radio measurement service is managed through joint industry committees, or JICs as they are often known. They're usually multiyear contracts.

While we now have a global role to play in that market, those contracts don't necessarily all come up each year. You have to wait for some of them to come up in the markets. It's a little bit longer-term play, and it will be a little bit slower development on the global front.

On Digital Audio Measurement, the exciting there is we're able to leverage our OCR capability and get even more value out of that fantastic capability that we have and bring that to digital audio measurement. And the market very much wants it and needs it.

But it's similar in audio as it is in video, in that there's a role that Nielsen plays; and then there are some things that clients also need to do to make the whole thing work.

One of them is to incorporate our code, if you will, into their apps. And then the market also needs to align around how the metric will be reported out to the market. And there are often winner and losers in that process, and it takes some time to play out.

That's where we are on that one. Long way of saying, don't really have a clear time line or specific numbers to give you on the growth front.

We like where it's going. We think we're doing all the right things. We're getting all the right feedback from the marketplace. Stay tuned.

Got it.

The second question is back to the Buy business. And you guys have done over the last two or three years, actually longer, but it's been more focused, it seems like, on the developing country side.

And I wanted to understand better how the economics of a typical developing country client contract works relative to the multinationals. I mean, from a profitability standpoint, obviously I would expect them to be smaller currently. What kind of products do they take up -- things like that, If you would have some comments, that would be useful.

Are you referring to the local companies in these markets -- is that what you're asking about?

Yes, the local companies.

That one is evolving. First thing to say is we the entire market. We don't just serve one part of the market. We think that's very important to the way Nielsen is viewed in the marketplace. So we have to serve the entire market, not just one client or not just one segment of clients.

And so the local clients are a big part of that story. In some of these developing markets they are evolving, I think, in terms of how they operate, whether they're operating according to local standards or international business standards. And we need to be right there with them at whatever stage of development that they're in.

Initially, our experience with local clients is that their needs start out being fairly basic. They want just basic measurement of the marketplace.

But over time, our relationships with them develops and looks very much like it does with global players, where they want to get involved with some of the analytics capabilities, things that help them not just measure their performance but also improve their performance over time.

And then what I would say about what we see in the most recent year or two is more and more of these larger, local giants within the developing markets, we're seeing more of the people that we knew from the multinationals in those markets now showing up in leadership roles at these local companies.

And that of course is a positive for us because these are people that are familiar with Nielsen, familiar how to access the value that we provide. And I think it's one of the reasons why our business has performed so well with the local giants in the developing world.

That's very interesting. Thank you.

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

Good morning, everyone.

Mobile measurement sounds like it's one of the biggest issues on clients' minds these days. Could you walk us through the Nielsen solutions in that area and where they are in the adoption cycle and how they're going to fit into the audience measurement landscape this fall?

The broader audience measurement picture of course is we measure the consumer. We're not thinking about measuring just one channel, like mobile or online or just TV. We measure the consumer; and we're going to measure the consumer, wherever, however, and whenever the consumer is accessing content -- whether that's video, audio, or text.

Mobile is obviously a growing and important part of that. Our OCR capability is, again, perfectly positioned to help us on that front. And it's one of the reasons why we're seeing so much momentum in the marketplace right now.

Mobile video in particular is a hot area of focus. And as we mentioned, our mobile video measurement capability will roll out full scale starting in July. And the television viewing portion of that content will begin to be included in the C3 currency metric that the market trades on starting in the fall.

And so we're everywhere we need to be in terms of mobile measurement. And we're getting great feedback from the marketplace and from the clients. And it fits perfectly into our broader audience measurement strategy.

Got it.

And then the CBG Company seeing the cycle between emphasizing revenue growth and emphasizing margin preservation. Could you comment on where we are in that cycle and how it's impacting the Insights business?

Well I think you should ask them. They're probably the better voice on this.

But I think your question is a good one, and we do see a little bit of a swing in the broader market right now, with variance across specific clients.

I think there was a heavy leaning in the last couple of years into -- call it efficiency -- and now people are leaning a little bit more into things that are going to drive a little bit more topline growth for them going forward. And that's natural -- the swings back and forth in the marketplace.

Some things are being written right now about a little less bit less focus on scale and allowing a little bit more variation in business in order to pursue that topline growth opportunity. That's going to play to our advantage because of the ways that our portfolio looks and feels to clients and what it helps them do in terms of finding those growth opportunities, helping them improve their performance in the market.

So we're ready for them whenever they're ready to do it.

Another angle on that, Bill, is that before several quarters when you would go talk to a client, the thing on the top of their mind probably was some uncertainty they couldn't control -- a regional melt down, a fiscal policy, an election, a financial crisis.

Now what's on top of their minds? Growth, and that's good for them and is long-term good for us. And it's a different conversation and it's fun.

Excellent. Thank you for the insight.

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

I know you're not going to give us any numbers, but I'm curious again on OCR moving into the upfront season here. You have signed up Google and Facebook. I know you have had customers like ESPN, for example, for some time.

How much could you say does this become more of a contributor to your P&L now during the upfront season? As presumably with some the of the big gorillas in the industry starting to use it, that should attract others -- both competitors as well as their customers, the advertisers to the platform?

And separately, but relatedly, could you just talk a little bit more about your digital program ratings? How much of that is a support mechanism for OCR and TV ratings versus a new separate product you'll be selling? Thanks.

Thanks, Tim.

On your first question, we said that our core Watch growth is 6.2%. And the role that digital plays, there's not just a digital slice; digital is part of the overall business picture for us.

Even our traditional media clients, one reason why our business is strong and healthy with our traditional media clients who are primarily focused on television, is that they have confidence in what we're doing on the digital front. So they continue to invest with us, so that we can continue to do what's important for their future growth.

So digital and what we're doing with OCR plays a broader role than just the specific purchases of the OCR service itself. That's the way we think about it. That's the way I would encourage all of you to think about it as well, and one of the reasons why our core Watch business did so well in the first quarter.

On DPR, it is a complementary metric to ORC in that DPR is measuring content; OCR is focused on the ads or the campaigns. One is used more for the planning phase, and the other is used more for the post-buy and the guarantee aspect of the advertising process.

And the two fitting together so well completes a system. Each of them becomes more valuable when they are both present in the marketplace, as opposed to if it's one or the other. That's the way the marketplace sees it, and that's exactly what we're going after too.

Thanks.

But you're right, no numbers.

I didn't expect that, thanks.

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

Thank you.

I actually just had a quick question on margins. We saw a pretty significant year-over-year expansion, larger than we have historically seen. How should we think about that as we go through the year?

I think if we extrapolated the 140 basis points expansion over the rest of the year, it put us at the upper end of the 29% to 30% guidance range. Are there any one-time elements that we should be thinking about -- the impact of integrating Harris or the (inaudible) expansion? Any of that stuff that can kind of put us at the upper to lower end?

We feel pretty good about what we have laid out in terms of guidance this year, and we see the margin and progress as we go through the year being pretty steady. As I said in my comments, we're seeing the benefits of a couple things.

One, obviously, is the integration of Arbitron and the progress that we're making on the synergies there. But we're also making very good progress on executing on some of the productivity initiatives; and that bodes very, very well for the margin story that we have.

So we are pretty good with where we are. We'll see steady progress throughout the year, and don't expect any major one-timers to swing it one way or the other.

Thank you.

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

Hi. It is Adrienne Colby for Paul Ginocchio. Thanks for taking my question.

Beyond the July rollout of the mobile video measurements, what other milestones should we be looking for in terms of the development of your measurement footprint going forward?

I think broadly that audience measurement, I think another thing to look for is, yes, the question asked before about audio coming into that picture.

If you want to focus on the video or the tech side of the world, I think the growing role that these measurements play that we provide in the upfronts, the new fronts, and how then how that plays out in the fall season and then how it will roll into next year where you'll see, I think again, just another step change forward in terms of how digital world will continue to increasingly align itself more broadly, more deeply with these metrics that look more like what the TV world has traditionally used.

And you are just going to see it really become much more of a video market as opposed to a separate TV, traditional TV, and then digital market.

I think that's what we would expect to happen. And I think that our strategy is perfectly positioned for where the market wants to go.

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

Thanks, just following up on Andre's question.

Jamere, if I look at the watch EBITDA growth and take out the Arbitron impact, both in terms of what they grew at and the synergies, is it fair to say that Watch EBITDA was sort of up high-single digit on a proforma basis?

And if you trickle that down to total EBITDA, the total EBITDA ex the Arbitron impact was up about mid-single digit for the Company? Is that a fair way to think about it.

We don't look at the business that way.

We have been hard at work sort of wiring the place together, if you will, on the Arbitron acquisition. So what you'll see is that we, again, made very steady progress on integrating the business.

We're continuing to see steady margin progress, which we have historically been accustomed to in our Watch business. And you're seeing the benefit of the execution on the productivity initiatives that we have been working on throughout the year.

So in total, we feel good about where our margins are and how they're progressing. And we feel very good about our execution.

Okay. Thank you.

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

Good morning, everyone.

Mitch, I have kind of a big picture question that is similar to a few that have been asked here about how you sell your products. And so just in the context, say, of the Watch business, obviously with a lot of the new digital products, you're selling those into your current large media customers that you had for a long time, but also some new clients,.

Some of them are big players, like a Google, where I'm sure it's still a high-touch, hands-on sort of relationship. But obviously what Digital does in the media world is bring fragmentation in the long tail.

And so especially as we talk about things like currency adoption and whatnot, how do you think about selling into that, say, longer group of smaller clients -- the long tail of the media ecosystem that builds out as digital takes over? And I think the question could apply to the Buy business as well, as the role of eCommerce changes the way you sell your products there as well.

Fragmentation, I guess, is the driver of the basis for your question. And fragmentation, whether it's in the Watch part of the world for us or the Buy part of the world, it's our friend. It creates opportunity for us.

It means there are more things to measure. And then there's a need to stitch all those things together, so basically more ways to add value into the marketplace. That's the way we approach it.

In terms of long tail of clients being out there, whether it's the big clients or whether it's small or medium-sized clients in the longer tail, we always start with the client need. We focus on the client need, make sure we understand their business; and then we organize ourselves around that.

Obviously, we have to do that in a way that makes economic sense and also fits with the business process for whoever the client happens to be.

In the Buy side of our business, we have been doing this a long time, where we do have big global clients that we work with. But we work with a lot of smaller players, and we have a different business approach that we take there. And it's a very healthy, very fast-growing part of our business year to year.

And we are able to do that on the Watch side of our business too within the digital world. It's a different approach, necessarily so; but it's one that fits with what the client need it is and with the economics of those relationships.

And so as that transition plays out over a long period of time, one of the things that I thought stuck out from your investor day was the Nielsen Marketplace initiative, where building more server-to-server, API-driven delivery of your information products.

Is that the type of thing that, again, over a longer-term perspective that will start to become more important?

It could, but that one's still pretty early in terms of development right now; so too soon to say exactly what role that might play. And I think Nielsen marketplace is probably focused on people who might draw value from the kind of information we have that really even aren't in the current client base right now.

That's more what we're focused on with Nielsen marketplace. But that is possible, that it might also have applicability to the clients that we are already currently working with, we'll see.

Your next question comes from the line of Hamzah Mazari with Credit Suisse. Please go ahead.

Good morning, thank you.

On Nielsen audio, specifically on Arbitron, I know you haven't quantified revenue synergies specifically. But maybe give us a sense of what the timing of that looks like.

You had spoken about using your global footprint to go after non-US listeners as well as some other stuff. Maybe just update us on how we should think about that progress.

One that's already active is the one I've mentioned where we presented some of our initial R&D work at a big industry conference, where we're linking the radio advertising activity to its resulting sales impact in the marketplace. That capability is already live. It's already one that an increasing numbers of clients are interested in and starting to tap into, so that's that one.

As far as the global opportunities, I mentioned earlier, a lot of these markets around the world managed the radio measurement market through joint industry committees, long-term contracts. And so there's a bit of a waiting game in some of these markets for the contract to come up for RFP. And then we will make our pitch, and we will win some of those.

But It will happen and develop over a several-year period as opposed to something that you should expect to really start to play a meaningful role in 2014 for us.

Great.

And just a follow up. Within the Buy segment, could you give us a high -level sense of what the growth rate looks like for local clients versus multinationals?

You know, are local clients growing high-single digit? Are multinationals growing low-single digits? Any overall sense you can give us, and any sense of change of tone on the multinational side versus last quarter. Thank you.

It varies a lot, market by market, client by client. We have said before that in China last year, if you think about our business with local clients versus multinationals, we grew a lot more with local clients in China last year than we did with multinationals.

I can't remember the exact numbers, but it was certainly high double digits with the locals and mid singles with the multinationals. And that will probably look something like that again this year, and you'll see a similar pattern in some of the other markets.

But it does vary quite a bit in market to market. That's the way our business looks with them.

If you look at how their business is performing in the marketplace, it's similar -- right there gaining market share. They're growing, and a lot of it is because they're aren't trying to take a scale play into the market. They're much more in tune with some of the local market variation.

For example, in a market like China, it is incredibly diverse, that market is. And the local players are just a little bit better tuned to the diversity in that market and are able to take advantage of some of the growth opportunities more quickly. They're more agile than some of the global players are.

The global players are learning from it though; they'll catch up. And I think you'll see this balance out over time because there are smart people across all of these clients.

And it's really fun to be a part of it and really fun to watch it unfold.

Thank you, Mitch.

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

You guys are obviously making a lot of progress in the market with new deals around OCR. And you started calling out digital audience measurement in terms of a revenue needle mover.

You were kind enough to give a framework for how your thinking about the multiyear opportunity in terms of revenue around OCR and the related products. I was wondering if you could give us a similar framework for how we should think about increment margins as that comes online, given that you have already made a lot of investment?

Let me take a shot at that one. The beauty of the space around Digital is that from a margin standpoint -- and your question -- is that largely, investment is behind us. The Incremental return to drop-through rates will be high. And as you hear from Mitch, the momentum in marketplace gets better and better.

More broadly speaking, I would also point out the fact that that opportunity is going to unfold over the next few years, right? So those sort of targets were in the 2017 time frame that we're excited to go after.

I would just remind you and everybody that we lay out a pretty specific framework for revenue growth at the beginning of the year of the piece and components -- more transparency than we have ever given. The good news is, things is that things like Digital and Ad Solutions are helping us get to the higher end on the watch business.

In the Buy business, there are some things that going some high some low --kind of ending up in the middle. And that's a good spot for us because it's more fun to be showing a close to 5% growth rate than a 4% growth rate.

We had a long year in front of us. We're confident. All those things together, I think, are just going to be continuing momentum for us.

And then you said more to come after talking about eCommerce. And you also said that shortly after wrapping up the eCommerce section with the Amazon commentary.

Was that comment meant to apply more to Amazon, more to eCommerce generally, or both?

How about neither? How about that?

No, I think we fully expect to have very positive developments across a number of areas that we're working on with a variety of players at eCommerce. I would encourage you not to just focus on a big player in the US

There are big and very active, very successful players in the eCommerce world and other markets. China is a great example.

And we're confident that we're going to have very exciting things to share on a number of fronts related to eCommerce in the months and years ahead.

Thanks.

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

Thanks, everybody, for tuning in today. You know where to find us to have follow-up discussions. Talk to you soon.

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