Nielsen Q1 income up, thanks to retail measurement


NielsenNielsen reported Q1 net income was up a healthy 36% to $34 million, or 53% compared to Q1 2012. Net income per share, was $0.09 compared to $0.07 in the first quarter of 2012.

The Buy (5%) and Watch (4%) segments posted gains, while Nielsen’s Expositions segment saw a decrease (7%).

Global growth in information services was driven by increased client investment in retail measurement, including the impact of additional coverage in the U.S. market. Insight service revenue declined due to lower discretionary spending by clients.

Adjusted EBITDA for the first quarter increased 5% to $349 million, or 6% compared to Q1 2012.

“Nielsen delivered solid revenue growth and strong operating performance in the first quarter,” said David Calhoun, Nielsen CEO. “Our results reflect our continued ability to create value for our clients and we remain well-positioned to achieve our 2013 expectations.”

During the call, Calhoun referenced ongoing traction in the media marketplace with regard to online campaign ratings (OCR). While the most important player in online video Google is strategically at odds with Nielsen at present, it’s inevitable that the largest brands (and the media agencies they work with) will adopt and incorporate OCR-based metrics. That will only help Nielsen in the future.

As of 3/31, cash balances were $233 million and gross debt was $6,320 million. Net debt (gross debt less cash and cash equivalents) was $6,087 million and net debt leverage ratio was 3.76x at the end of the quarter. On 3/20, their first quarterly dividend payment of $0.16 per share was made to shareholders of record as of 3/6.

Capital expenditures were $70 million for Q1, as compared to $82 million in the first quarter of 2012.

On 4/16, Arbitron’s shareholders voted to approve the proposed acquisition of Arbitron. Nielsen reiterated that transaction remains subject to customary closing conditions, including regulatory review.

In February, Nielsen amended its senior secured credit agreement to provide for a new class of term loans with an aggregate principal amount of $2.9 billion maturing 5/1/16. The proceeds were used to repay or replace in full a like amount of our existing Class A Term Loans maturing 8/9/13, Class B Term Loans maturing 5/1/16 and Class C Term Loans maturing 5/1/16. As of 3/31 some 90% of Nielsen’s debt had a maturity of 2016 or beyond.

Also in February, a secondary public offering of 40.8 million shares of common stock was completed on behalf of certain selling stockholders, primarily comprised of the Sponsor group. It did not have a significant impact on operating results or financial position.

Brian Wieser, Senior Research Analyst, Pivotal Research Group, noted that  Nielsen’s revenue growth was slightly below consensus their 4.4% growth consensus. “Nielsen remains positioned to meet full year guidance, which was essentially reiterated on the call. Our view on Nielsen remains unchanged: the company is the world’s dominant player in marketing research, but growth is limited by constraints in spending on marketing research in general. Still, Nielsen’s industry position enables stable growth, supported by a management team focused by ongoing improvements in profitability. At current prices, we believe Nielsen is fairly valued and reiterate our HOLD rating and $34 per share target price.

Adjusted EBITDA margins of 25.4% were below our 26.1% expectation, but above consensus of 25.1%. Adjusted EPS at $0.38 was ahead of $0.36 consensus, but below our expectation (however this difference was mostly due to the timing of cash vs. book taxes incorporated into our model).

That TV measurement and Information continue to move ahead at mid to high-single digit growth rates is positive, too, if expected. Put together, these results highlight that an improvement in Insights related businesses over the course of the year (or rather, diminishing year-over-year declines) make guidance very achievable. However, if these businesses do not improve, the lower-end of guidance may prove to be a more likely outcome on the year. Overall, we continue to expect this improvement.”