Nielsen (NLSN) Q2 Earnings Grow Y/Y, Revenues Miss Estimates

Nielsen Holdings plc (NYSE:NLSN) reported second-quarter 2017 diluted net earnings of 37 cents per share, increasing 19.4% year over year.

Nielsen’s shares have lost 4.91% year to date versus the 21.12% growth of its industry .

Revenues

Reported revenues came in at $1.64 billion, increasing 3% year over year. The increase was driven by recent contribution from the acquisition of Gracenote, continued strength in the company’s Watch segment, and growth in emerging markets, partially offset by weakness in the U.S. Buy segment.

On a constant-currency basis, revenues increased 4.1%.

However, revenues were slightly below the Zacks Consensus Estimate of $1.66 billion.

Revenues by Segment

Watch business revenues were $821 million (50% of total second quarter revenue), reflecting an increase of 10.3% year over year or 10.9% on a constant-currency basis. The increase came on the back of continued strength in Audience Measurement and Marketing Effectiveness, which improved 15.5% and 16.0%, respectively, on a constant-currency basis. Excluding the acquisition of Gracenote, Watch revenues increased 4.3% or 4.7% on a constant-currency basis.

Buy business revenues were $823 million (50% of total revenue), declining 3.4% year over year and 2% on a constant-currency basis. Excluding the foreign currency impact, revenues in the Developed market decreased 1.2% on a constant-currency basis due to softness in the U.S. market. However, revenues from emerging markets were up 10% on a constant-currency basis.

Operating Results

Reported gross margin was 58.8%, down 20 basis points (bps) from the year-ago period.

Nielsen’s operating expenses, namely selling, general and administrative expenses of $471 million, decreased 0.6% from the year-ago figure of $474 million. Therefore, operating margin increased 200 bps year over year to 19.7%.

Net Income

On a GAAP basis, Nielsen registered net profit of $131 million or 37 cents per share compared with $113 million or 31 cents in the year-ago quarter.

Balance Sheet & Cash Flow

Nielsen exited the quarter with cash balance of approximately $510 million compared with $451 million in the last quarter.

Net debt (gross debt excluding cash and cash equivalents) was $8.013 billion and net debt leverage ratio was 4.05x at the end of the quarter.

Cash flow from operations increased to $226 million in the second quarter from $40 million in the prior quarter and $210 million in the year-ago quarter. Capex was $64 million in the reported quarter. Free cash flow was $162 million in the second quarter against ($74) million in the previous quarter and $98 million in the year-ago quarter.

Share Repurchase

Moreover, the company repurchased $41 million of shares during the second quarter of 2017. It has a total of $354 million remaining for repurchase under the existing share repurchase program.

Outlook

For full-year 2017, management updated its guidance. It expects total revenue growth on a constant-currency basis of 4%, adjusted EBITDA margin growth on a constant-currency basis of approximately 20bps and GAAP net income per share in the range of $1.40–$1.46. Also, free cash flow is expected to be approximately $900 million.

Our Take

Nielsen Holdings is an information and measurement company which offers media and marketing information on what consumers watch and buy locally.

Continued share repurchase reflect Nielsen’s financial strength and commitment to return value to its shareholders. Also, the company's product launches are progressing well and should drive revenues in the near term.

However, continued investments in technology and infrastructure could weigh on margins and profitability, going forward.

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Nielsen N.V. Price, Consensus and EPS Surprise

Zacks Investment Research

Written By: Zacks Investment Research