Like most of its clients, Nielsen is undergoing profound changes, in part due to an ad market battered by the worldwide pandemic but also due to the shifting needs of its clients. The company is restructuring, cutting costs, paring non-core assets and preparing to spin off its Global Connect business by early next year.
And just like some of its radio clients, the pandemic caused the company, which is known for moving slow, to step on the gas. “We accelerated the pace of innovation out of necessity to ensure business continuity and consistency in our world-class measurement and analytics offerings, and are leveraging our learnings to permanently change the way we operate,” CEO David Kenny told investors Wednesday during the company's second quarter 2020 earnings call. “I'm seeing ambition, risk-taking, teamwork and courage across my Nielsen colleagues as we adapt to new ways of working, and I want to tell you how proud I am of our team.”
In July, Nielsen announced a restructuring that will reduce the measurement giant’s global workforce by about 3,500 employees and deliver roughly $250 million in annual savings. That also involves pulling out of some smaller, underperforming global markets and non-core businesses in the second half of 2020.
The moves are being made to transform the global behemoth into “a more efficient, agile, platform-based organization,” Kenny explained, and they reflect “a fundamental change in the way we work.” Cutting ties with less profitable businesses will allow Nielsen to invest in key growth areas, lead to higher profit margins and produce more cash. “We've taken a big step forward in our transformation, but we are not done,” Kenny stressed, saying the company still needs to bring the right products to market to address clients’ changing needs.
At its Media business, which includes audience measurement services, the transformation includes building what Kenny called a “media data lake” that combines all of its media data together into a single repository and lets the company draw upon it faster for various products and services. For example, Nielsen recently combined its TV and digital audience data onto the same platform to better provide cross-platform measurement, something of growing importance to both content providers and advertisers.
The backbone of Nielsen’s measurement services are its “gold standard” audience panels, like the 80,000 or so PPM panelists that drive its radio ratings in the top markets and also augment TV measurement. Managing those and other Nielsen panels in the U.S. and internationally became more challenging during the crisis, so the company found ways to “remotely manage our panels and deliver currency ratings,” Kenny said. The company is making efforts to automate panel operations, which would also drive down costs.
Nielsen made no mention of audio or radio during the 64-minute call, which isn’t unusual.
Kenny said the company “delivered a solid second quarter in an unprecedented period due to COVID-19.” Second quarter revenue dropped 8.1% to $1.5 billion, which Kenny said was “in line with our expectations.”
Revenue at its Global Media unit, which includes audience measurement, decreased 5.3% to $811 million. With 80% of its business tied to multi-year contracts with built-in price escalators, Audience Measurement revenues declined only 3.1%. The company attributed the decrease to the loss of live sports, non-contracted revenue and continued pressure in local television.
Revenues at Global Connect, the unit that tracks consumer purchases and is being spun off into a separate company, decreased 11.3% to $685 million.
The company reported a net loss of $30 million, or eight cents per share, compared to net income of $123 million, or 34 cents per share, in second quarter 2019. Nielsen attributed the loss to higher restructuring charges, higher depreciation and amortization expense, and the impairment of long-lived assets from its exit from some smaller, underperforming markets and non-core businesses, mainly in the Media segment.
In June, Nielsen refinanced $1 billion of debt, pushing out the maturities on its loans. As of June 30, the company had $438 million in cash on the balance sheet and gross debt of $8.4 billion.
On Wednesday Nielsen revised its full year 2020 guidance, calling for a -4% to -2% revenue decline, from the earlier forecast of -4% to -1%.
The company said it expects to complete the spin-off of Global Connect in first quarter 2021.