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Nielsen Holdings PLC (NYSE:NLSN)
Q4 2019 Earnings Call
Feb 27, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2019 Nielsen Holdings PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Sara Gubins, Senior Vice President, Treasury and Investor Relations. Thank you. Please go ahead.

Sara Gubins -- Senior Vice President, Investor Relations

Thanks, Lisa, and good morning, everyone. Thank you for joining us to discuss Nielsen's fourth quarter and full year 2019 financial performance. I'm here with our CEO, David Kenny; and our CFO, Linda Zukauckas.

A slide presentation that we'll use on this call is available under the Events section of our Investor Relations website. Before we begin, I'd like to remind all of you that our remarks and responses to your questions today may contain forward-looking statements, including those about Nielsen's outlook and prospects that are based on Nielsen's current expectations. Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those identified in the Risk Factors section of our most recent Annual Report on Form 10-K and in subsequent reports filed with the SEC, which are available on our website. We assume no obligation to update any forward-looking statements except as required by law.

On today's call, we will also refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available in the earnings press release which is available at the Investor Relations section of our website at nielsen.com.

For Q&A, as always, we ask you to limit yourself to one question, so that we can accommodate everyone. Feel free to join the queue again and if time remains, we'll call on you.

And now, to start the call, I'd like to turn it over to our CEO, David Kenny.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Thank you, Sara. Good morning and thank you all for joining the call. I'll start with the key topics for today. First, I'll cover our 2019 accomplishments at a high level. And one of our two accomplishments was strengthening the management team. I'm especially happy to introduce you today to two key critical executives for Nielsen's next chapter: David Rawlinson and Linda Zukauckas. David is the leader of Nielsen Global Connect and he will be as CEO, following the separation. David joined Nielsen Board of Directors since 2017 and brings a digital perspective, a strong international background and a track record of driving growth.

David Rawlinson -- Chief Executive Officer Nielsen Global Connect

Good morning.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Linda is the CFO of Nielsen and she'll remain as CFO of Nielsen Global Media, following the separation. Linda most recently served as the deputy CFO at American Express.

Linda Zukauckas -- Chief Financial Officer

Good morning.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Second, we're going to have an update on the planned separation of Nielsen Global Media and Nielsen Global Connect, then I will turn the call over to Linda to review the fourth quarter and full year 2019 financial results, as well as our 2020 guidance, which is consistent with the medium-term growth plan discussed in November.

We are being prudent, and our guidance reflects the disciplined transition path that we are on in Media and Connect. Following that, I'll update you on our key strategic initiatives and how that shapes our path forward. David Rawlinson will also share some of his early thoughts on Connect.

On 2019. 2019 was a year of tremendous progress at Nielsen, and I'm extremely proud of the way our team has executed. We delivered solid results, achieving or beating the goals we set out for 2019. Full year constant currency revenue growth at 1.7% was ahead of our guidance, with growth in both Media and in Connect. Importantly, Connect grew organically for the first time since 2016 and it's strongly positioned now to continue that growth.

Adjusted EBITDA and free cash flow were in line with our guidance. Adjusted EPS beat our original forecast, which we provided a year ago, last February. Our results reflect increased financial discipline and operational progress. Through 2019, we aligned our technology and operations within each segment, which drove greater end to end accountability and visibility and we began shifting our culture to that of a product driven technology organization. Specifically, we develop clear product road maps, prioritizing the products that our clients need most. The digitization of media through streaming and the digitization of retail through e-commerce, create new opportunities for information services to help our clients in both businesses.

We also made good progress with modernizing our architecture and retiring legacy infrastructure at Media and Connect. Each executed on their vision of operating on a single global platform. We also built a stronger and more accountable sales culture, which is needed to bring innovative new products to new and existing clients in both businesses.

And finally, in November, we concluded our strategic review and announced the plan to separate Nielsen Global Media and Nielsen Global Connect.

So, on that, I want to also update you on the planned separation. Our Board concluded that this is the best path forward to enhance strategic focus growth and to drive long-term shareholder value. We're focused on successful separation into two strong independent companies and this work is progressing well.

Since we were last with you when we reported Q3 results, we've added three new independent Directors, growing our Nielsen Board to 12. And we'll be ready have the Board for Connect as we move toward the separation. We have dedicated internal teams with external experts responsible for planning and supporting operational readiness of the new structure of each company.

Over the next few months, we will focus on several critical steps, including establishing public company capabilities and functions for Connect, separating our financial systems, our global facilities and our IT infrastructure. Ensuring that each of our associates have an understanding of different roles within each of the companies and establishing the new legal entities and replicating benefit plans as applicable.

We expect to complete the separation within 12 months of our initial announcement, subject to legal approvals and market and regulatory conditions.

With that, let me turn the call over to Linda to review the financials.

Linda Zukauckas -- Chief Financial Officer

Thank you, David, and good morning everyone. I'm very pleased to be here, having joined the company earlier in the month. The 2019 results are solid and reflect tremendous focus by Nielsen leadership and by our global colleagues. It's a particularly exciting time to join the company with so many opportunity ahead for the Media and Connect businesses.

I'll start with Slide 7 for the fourth quarter and full year 2019 results review. As you heard from David, the company achieved or exceeded 2019 guidance across all key measures. Revenue growth was better than expected at 2.7% in the fourth quarter and 1.7% for the full year, both on a constant currency basis. This growth includes Q4 organic revenue growth of 2.3% and full-year organic revenue growth of 1.2%, both on a constant currency basis.

Excluding the carryover effect of one-time items in prior periods, organic revenue grew 2.7% for the fourth quarter and 2% for the full year. Adjusted EBITDA for the fourth quarter was $492 million, up 1.4% constant currency. Adjusted EBITDA margins in the quarter were 29.1%, down 37 basis points on a constant currency basis, reflecting an elevated level of investments in media in Q4 '19.

Full-year adjusted EBITDA was $1.85 billion, up 1.4% constant currency, resulting in adjusted EBITDA margins of 28.5% for the year, down 8 basis points on a constant currency basis, but in line with expectations.

During 2019, margins benefited from productivity, offset by product and related technology investments, as well as higher annual incentive compensation due to better performance in 2019 versus 2018.

Adjusted EBITDA and adjusted EPS do not include the impact of a non-cash pension charge of $170 million in the fourth quarter related to the settlement of two defined benefit pension plans outside of the U.S. This charge was not tax deductible.

Adjusted EPS for the fourth quarter was $0.41 compared to $0.51 in the fourth quarter of 2018, mostly due to higher depreciation, amortization and taxes and slightly higher EBITDA. Full year adjusted EPS was $1.80 compared to $1.83 in 2018 and in line with the most recent guidance range of $1.77 to $1.83. As compared to the prior year, the $1.80 adjusted EPS reflects slightly higher EBITDA and tax favorability offset primarily by higher depreciation and amortization. And for the full year, performance was above the high end of the initial guidance range provided last February, which called for an EPS range of $1.63 to $1.77. Our fourth quarter tax expense of $65 million was unusual due to discrete items. Adjusting for the decrease and the non-deductible pension settlement, our tax rate would have been 25% in the quarter. For the full year, the effective tax rate benefit of 39% reflects a number of discrete items, including the non-deductible impairment charge the company took in the third quarter, audit settlements and reserve releases as statute expired and we closed open tax years. Excluding the impact of these items, the full-year effective tax rate would have been approximately 30%.

For the full year free, cash flow was $547 million, up slightly from $542 million in 2018 and in line with the guidance range of $525 million to $575 million. Key drivers for 2019 compared to 2018 include the timing of annual incentive compensation payouts, which were lower in Q1 2019 on 2018 results, and lower retailer payments and lower restructuring, partially offset by higher cash taxes and slightly higher interest payments.

The fourth quarter and full year results reflect solid performance during a busy year for Nielsen. The teams at Media and Connect did a great job of executing.

Now, let's review each segment. Turning to Slide 8. I'll first talk about the media results on the left. Revenue for Q4 was $889 million, up 2.4% year-over-year on a constant currency basis. For the full year, revenue grew 2.6% constant currency, in line with the guidance range of 2% to 3%. Audience measurement revenue grew 1% constant currency in the fourth quarter and 3% constant currency for the full year, both in line with expectations.

On a sequential quarter basis, there were several drivers of slower growth, including pressure in local, timing and audio and slower growth in national, while digital remained strong. Plan/Optimize revenue grew 6% constant currency for the fourth quarter and 1.6% constant currency for the full year, which is in line with the 1% to 2% guidance range.

In 2019, we saw mid-single-digit growth in Gracenote, our metadata and discovery platform, and steady growth in outcome-based solutions. Telecom pressure drag plan optimized by roughly 100 basis points in 2019.

During the quarter, Media's adjusted EBITDA was $377 million, down 2.6% constant currency, resulting in adjusted EBITDA margins of 42.4%, down 200 basis points in constant currency.

In Q4 we did accelerate investments in media growth opportunities, which impacted the margin. For the full year, adjusted EBITDA was $1.48 billion, up 0.4% in constant currency. Adjusted EBITDA margins were 42.9%, down 94 basis points year-over-year. We're investing in Media growth drivers, offset in part by our continuous focus on productivity initiatives.

Now, I'll discuss the Connect results on the right side of the page. Fourth quarter revenue was $802 million, a 3.1% on a constant currency basis. Connect showed progress throughout 2019, delivering 0.7% constant currency revenue growth for the full year. This was above guidance and marked a return to growth after 2 years of revenue declines. Measure revenue grew 2.6% constant currency in the fourth quarter. As mentioned last quarter, Q4 revenue benefited from timing as some Q3 revenue shifted into Q4.

For the full year, Measure revenue grew 1.4% constant currency on stream and retail measurement services. This was above the expectation of minus 1% to plus 1%.

Full year Predict/Activate revenue declined 0.9% constant currency. revenue growth accelerated to 4.1% in the fourth quarter. In 2019, we saw strength in analytics and less drag from innovation and shorter cycle consumer insights than in the prior year. From a geographic perspective, developed markets grew 4.2% constant currency for the quarter and was up 0.8% for the year, while emerging markets revenue grew 2.8% for the quarter and 2.3% for the year.

Connect Q4 adjusted EBITDA was $125 million, up 15.7% on a constant currency basis. Adjusted EBITDA margins were 15.6%, up 171 basis points, constant currency.

For the full year, adjusted EBITDA was $422 million, up 5% constant currency. Adjusted EBITDA margins were 13.8%, up 55 basis points year-over-year driven by productivity initiatives.

Now, let's turn to the outlook and 2020 guidance on Slide 10. Today, we're providing guidance for Nielsen as a whole for 2020, while we work toward the separation of the Media and Connect businesses later in the year. On a total company basis, we expect constant currency revenue growth to be approximately 1.5% to 3% in relation to 1.7% growth in 2019. This does include approximately 80 basis points of net benefit from acquisitions and divestitures completed within the last 12 months. And I'll go into these in more detail when I review 2020 revenue guidance for the businesses.

The guidance range for the adjusted EBITDA margin is 27.7% to 28.5%, which suggest margins will be flat-to-down slightly versus 2019. So, let me explain. As discussed on the Q3 earnings call, we are investing in Media growth drivers. Our investments are focused on strengthening our panels, driving digital and investments in Plan/Optimize. As a result, we expect Media margins to be down for 2020 but by less than the compression we saw in 2019.

For Connect, we expect continued underlying margin expansion driven by revenue growth and an ongoing focus on cost management. However, you'll recall the announcement last month of our acquisition of Precima, which is a leading provider of retail analytics. While Precima contributed favorably to revenue growth, it comes with negligible EBITDA margin in year one. So, we expect the overall Connect margins to be roughly flat for the year.

Adjusted EPS is expected to be in the range of $1.67 to $1.80 compared to the $1.80 that we earned in 2019. This range reflects a higher level of recent investment in our platform, which is driving higher depreciation and amortization expense. We expect free cash flow to be in the range of $530 million to $580 million, which at the midpoint is up slightly versus 2019. We're focused on continuing to improve our working capital management and we're investing in Media with higher capital expenditures.

I want to note that adjusted EBITDA, adjusted EPS and free cash flow guidance ranges do not include the impact of onetime separation related costs or the incremental costs to beginning to operate as two separate publicly traded companies. We estimate cash costs of approximately $350 million to $400 million in 2020 and we don't plan to include these costs in adjusted EBITDA or adjusted EPS.

The vast majority of these costs are one-time in nature, related to execution of the separation David described earlier. The largest component of these one-time expenses are third-party advisor costs, tax friction and technology related to spin, such as standing up data centers and network.

In addition, we will incur costs to operate as two companies, the majority of which will be in the second half. We will work on strategies to mitigate incremental cost, while we also rationalize structures, so that they are appropriately scaled for each business. As you can imagine, these separation costs can vary from quarter to quarter and we will provide more details on these costs as the year progresses. We have included additional assumptions related to this 2020 guidance in the Appendix.

Turning to Slide 11. I'll go into more specifics for Media and Connect. For Global Media, we expect constant currency revenue growth to be approximately 1% to 2% versus 2% versus 2.6% in 2019. The divestiture of our Music business in December 2019 is incorporated into this estimate and it lowers the constant currency growth by 70 basis points.

Within Media, we expect Audience Measurement to grow 1.5% to 2.5% and Plan/Optimize to be flat to up 1%, which incorporates a 250 basis point negative impact from the Music divestiture.

For Connect, we expect constant currency revenue growth to be approximately 2.5% to 4.5%, which includes 250 basis points of growth related to that acquisition activity. Within Connect, we expect measure revenue to be minus 1% to plus 1% and Predict/Activate to grow 11% to 13%, which incorporates approximately 800 basis points of growth from net acquisitions, largely Precima.

David will provide some additional commentary around the revenue guidance for 2020 in his remarks.

Let me talk a little bit about how we see the year playing out from a timing perspective. First, we've talked about investing in Media growth initiatives and we will start to see the increasing benefits of these investments in the second half of 2020. Clients want new products to support streaming services as well as new outcomes measures. We're investing to provide these products to meet their needs, which will accelerate growth in the back half of the year. The accelerated revenue growth will drive EBITDA growth in the second half of the year.

Second, in Connect, we expect accelerated revenue growth in the second half versus the first half. In 2020, we'll see the impact of a few client losses in prior periods, which are most pronounced in Q1 and David will speak more about this later. These flow through to margins and so we expect margin pressure in Connect in the first quarter with profit trends improving during the balance of the year.

As discussed last quarter, in our medium-term framework, we are focused on realizing identified operational efficiencies and driving continued margin expansion at Connect over time. In addition, we've adjusted the low end of our guidance range to incorporate our current assessment of risks related to the coronavirus.

Quarterly free cash flow should be consistent with historic patterns, which are heavily second half weighted. The first quarter 2020 free cash flow should show an improvement versus Q1 '19, driven by working capital improvements, offsetting a higher incentive compensation payout for 2019 compared to 2018.

In summary, 2020 is an important year as we redefine Nielsen as two separate company. We developed a very sound plan for this transition period and we're making solid progress in separating the companies. We are investing to drive faster growth in Media over time and we expect to sustain Connect improved performance. I'm very excited to be part of the team driving Nielsen's next important stage.

And now, I'll turn the call back over to David.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Thanks, Linda. Let me add some color starting with Nielsen Global Media. We have a significant opportunity to expand the Nielsen's role in the media ecosystem, so the buyers and sellers can transact on the basis of one mediator. To remind you, that should cover measuring the audience, tracking content and making it easier to discover content by the audience and ensuring the outcomes for Media investments.

As Media evolves, there are more players and even greater need for common standards on audience, content and outcomes. Our digital transformation is our top priority and we are investing where the market is headed to deliver solutions across both audience and outcome.

For example, Google continues to adapt Nielsen total ad ratings in their work with marketers to demonstrate the incremental reach of YouTube. They will also began to use our national TV data in their planning suite to help advertisers guide cross platform investments across YouTube and television.

Nielsen Digital Ad Ratings do serve as the currency measurement for platforms such as Hulu as Roku, as you'll see in this year's upfront and we're partnering with NBC [Phonetic] to help further evolve their measurement in the rapidly changing ad supported video on demand landscape.

On the content side, our roles spans measurement, metadata and discovery. As evidenced in our recent total audience report, these capabilities increasingly work together to help drive key decisions for clients. And with the explosive growth in streaming, many of you are asking about the future of linear TV. Linear continues to be the dominant video advertising platform, offering advertisers mass reach and brand building. Linear remains an important part of our business and our currently measurement is critical to clients. We renewed every National TV contract's that came up last year, with multi-year agreement and price escalators. Addressable linear advertising is another future growth Driver and we're investing in the tech stack and delivering addressable ads at scale within linear broadcast.

We recently launched a beta test of the new addressable platform with clients such as CBS Discovery and NBCUniversal. Finally, in local TV, we transformed our measurement offering in 2019, which played a key role in our new multi-year agreement with the Nexstar Media Group. This agreement covers all of Nexstar stations for the first time in 16 years. This is a clear validation of Nielsen's role in the local marketplace.

Now [Technical Issues] measures across Media investments. For example, Nielsen is partnering with The Trade Desk, which brings our TV viewing data into their platform to further enhance cross-media buying capabilities. And in International, we renewed multi-year measurement contracts in both Australia and Italy and saw strong growth in digital measurement in 2020.

When we announced the outcome of our strategic review in November, we said we expected Media to grow at mid single-digit revenue CAGR through 2023, including low single-digit growth through 2021 and then ramping to mid-single digit in 2022 and beyond.

This will result in a growth profile that is in line with the Media market and our information services here. This expected ramp in growth is a result of the key investments we're making now in Audience Measurement, both streaming and linear and our Plan/Optimize portfolio continues to scale on a global basis, and I'd say we are executing well on these initiatives.

We have a deliberate and disciplined transformation path and it highlights the importance of our investments in order to align with where the Media is coming from.

That said, transitions are not linear and they take time. We will see our investments pay off as revenue growth accelerates later this year. And then over the medium term, we are confident that we are taking the right steps for long-term growth. In Audience Measurement we expect mid-single digit declines in local in 2020 as pressure from previous renewal flows through revenue. Clients are seeing the value of our local transformation and this business should stabilize after 2020.

In National TV Measurement, we expect low to mid single digit growth in 2020 and over the next couple of years. Our digital volume growth remains strong and we believe independent third party measurement will become even more important to digital and streaming platform over time. We continue to see double-digit growth in our digital ad ratings offering. On the content side, measurement is extremely important, particularly with growth in streaming, and we're also more closely linking measurement with metadata-tagging and discovery to deliver greater value for our clients.

We're investing to drive penetration of all of our content capabilities across the streaming platform. In Plan/Optimize where we predict and measure the outcomes of advertising and content, we expect revenue growth to accelerate in 2020 after adjusting for the divestiture of our Music business in December 2019. This faster growth will be driven by actions we took in 2019 to improve our product and our go-to-market strategy. We have ample runway to further embed ourselves across advertisers, agencies and media owners to accelerate our Plan/Optimize growth. And globally, we are focused on bringing the next generation of products to more market in 2020.

Our recent hire of Sean Cohan as the Chief Growth Officer and President of International, underscores the role that international will play in our medium-term growth.

To sum up, Nielsen has an essential role across the media ecosystem, delivering one media through across audiences, outcomes and content discovery. We are the only player that can provide currency grade solutions across the spectrum with trust and confidence around the world.

The actions we took in 2019 strengthened us and we are now deliberately investing in our key initiatives to accelerate our transformation and delivering greater value to clients and shareholders.

Let me turn to Connect. 2019 was also a year of steady progress in Connect, as we executed on our transformation and strengthened our leadership position in the global CPG and retailer ecosystem. We returned to growth for the full year 2019 for the first time in 2 years and expanded our margin. We have increased confidence as we move toward separating Connect out as a stand-alone company with David Rawlinson as the Connect CEO.

Before I go further, David Rawlinson would like to share a few thoughts.

David Rawlinson -- Chief Executive Officer Nielsen Global Connect

Thank you, David. It's an honor to be here today. I'm thrilled to join this outstanding team as CEO of Connect, at this pivotal time in the company's 97-year history.

I joined Nielsen's Board in 2017 and I've gotten to know Connect very well since then. I'm impressed with the strong franchises, global scale, technology platform and its people. Connect is the only business that can provide measurement, data and analytics for millions of products across more than 100 countries. Its global role at the center of the consumer packaged goods and retailer ecosystem has never been more critical.

With the Nielsen Connect platform now deployed, we have strong opportunities to grow in predictive analytics and omni channel measurement. The business has stabilized. We have confidence that we have the right strategy in place to further drive improved revenue growth and profitability. I am committed to delivering next strategic growth plan and I look forward to sharing our progress with you as we move forward toward separation.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Thanks, David. Our Connect accomplishments in 2019 were in part driven by our pivot to a product-driven technology company and fostering the robust sales culture. And I have confidence this will continue with David Rawlinson [Indecipherable]

In measurement, we've exceeded our full 2019 guidance. Our U.S. business improved as product investments enabled us to successfully defend and win market share. We accelerated deployment of the Nielsen Connect platform and we are live with key clients such as Coca-Cola and buyers who are among others.

Nielsen Connect platform is an important driver of client wins and renewal discussion, including recently renewed global multi-year partnerships with Colgate, Kimberly Clark and AB InBev, J&J, L'Oreal and Bacardi also recently renewed global partnerships and we had a competitive takeaway with McCormick's, winning their Measurement business in Europe, the Middle East and Africa.

We're further building our coverage and adoption and factoring channels that are important to our clients, emerging markets, e-commerce, omnichannel and specialty retail. E-commerce is a global priority and we are the only company that can truly provide an omnichannel view across both on and offline. Rather, we've got strong growth in client adoption and revenue and we've secured new data partnerships in countries such as Russia, Ukraine and Turkey and we launched a new e-commerce measurement solution in India.

In specialty channels, we recently entered into an exclusive long-term analytic relationship with [Indecipherable]. Predict/Activate also came in ahead of our expectations in 2019, largely driven by three pillars, field selection, consolidation in the super hubs and platform convergence.

Turning to Connect outlook for 2020. In November, we laid out our key initiatives, which include continuing to deploy the Nielsen Connect platform, deepening our coverage to measure the total consumer, strengthening retailer relationship and driving operational cost efficiencies through automation and platform convergence.

We've been intensely focused on improving the trajectory of the U.S. business and driving improved operational performance across the business globally. We've begun to make progress and it is showing up in our results.

We said we expected a low single-digit organic revenue CAGR through 2023 and this is what we expect to deliver in 2020. Let me add some color. For Measure, we expect revenue to be flat year-over-year at the midpoint of our guide. We are working through the impact of some 2018 competitive losses, largely in the U.S., and their roll-off is impacting 2020. That said, we won all of our major client renewals in the United States in 2019.

What really changed in 2019, is that clients are truly excited about our transformation with the Connect platform and the multi-year renewals reflected this. We'll further broaden our deployment of the Nielsen Connect platform in the U.S. and begin to deploy internationally.

In Predict/Activate, we expect to see accelerating growth driven by our investments in analytics and ongoing momentum in innovation, as well as the Precima acquisition in January 2020. This important acquisition of an industry-leading SaaS-based retail analytics provider enables us to accelerate our retail product road map and positions us to win with retailers.

Before I close, I want to spend a moment on China, which is about 6% of Connect revenues or about 3% of total company revenue. As you know, China has been a big focus and we've made progress in turning it around. We have a strong leader in place and the team is driving expanded coverage, better execution and improving revenue trends.

While we head into 2020 from improved division in China, we are monitoring the coronavirus closely. On that, our main concern is the safety of our employees and we're taking precautions to minimize the risks in impacted areas. Our initial focus was on China, but we're monitoring the situation very closely around the globe. We've incorporated known risks around the coronavirus into the guidance provided today, but of course this is a fluid situation and we'll keep you updated as there could be unknown risks from coronavirus, affecting our clients and Nielsen.

To sum up on Connect, we have a strong foundation, unique global reach and scale. This business has consistently delivered in 2019. Our strategy is clear and we have a strong team in place, committed to executing on our goal. Connect is well positioned for success as a stand-alone company later this year.

And with that, I'll turn it back to Sara, for Q&A.

Sara Gubins -- Senior Vice President, Investor Relations

All right. Thanks, David. Lisa, can you open up the line for Q&A, please?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Andrew Steinerman from JPMorgan. Your line is open.

Andrew Steinerman -- JPMorgan -- Analyst

Hi, David. You talked about One Media Truth with Nielsen Media, do you personally think there is a distinction between media measurement data and media planning platforms flash data? So, with that in mind, do you think Nielsen is as well positioned in Plan/Optimize as it is in Audience Measurement?

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Thank you, Andrew. I do, because what we're finding in Plan/Optimize is that it needs to connect back to the Measurement. What we can uniquely do when kind of helping folks plan is manage yield management across the total audience. And in the content space, which is a growing space, the metadata on one side and the content ratings on the other are increasingly becoming one service, and that's unique to Nielsen to be able to actually understand where your content is going into help, right? New content deals, the distribution of content, is going to have a lot of new innovation over the next couple of years.

Operator

And our next question comes from the line of Bill Warmington from Wells Fargo. Your line is open.

William Warmington -- Wells Fargo -- Analyst

Thank you. Good morning, everyone, and congratulations and welcome to David and Linda. Would you -- for my question, would you please talk about what you're doing to stabilize the Local Media business and also share your thoughts on why national will not be the next local?

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. So, I would say in local, we did complete the local transformation. That has been a big investment we finally got finished in 2019 to strengthen the panel and strengthened the methodologies that made that happen. I was very excited to see Nexstar come back after 16 years. That really does cement our position in currency and I would say we're feeling very good about the renewals from here and we've got a strong base in local.

So, I feel quite good about where we are competitively on that. On national, I would say we're moving in front of it, but certainly some of what you're seeing this year in term of the heavy investment load is to make sure we get in front of this and make sure our panel moves as national becomes increasingly both linear and streaming for virtually all of our national customers.

Operator

Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you. You mentioned coronavirus, and in the 10-K you talked about its led to some curtailment of business activities, particularly in China. I guess, could you talk about how much is included in the guidance as an impact from it? And just, what activities are being curtailed? I guess, based on what you know today, what could be the impact outside of China as well? Thank you.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. So, we've incorporated about 0.5 point of revenue on the Connect side from known risks in the Connect forecast. And what that largely represents is the work of Connect that requires you to be in the field. Certainly, anywhere in the world if employees feel unsafe or we feel they're unsafe, we're encouraging them to work from home. Much of our work can be done that way, but some field operations can't be done. And, of course, some client negotiations have to be done by videoconference versus face-to-face. So, that's where we are. And I feel like we've got a good handle on it. We're going to continue to monitor it depending on where else it expands, but we're certainly never going to have an employee out in the field in unsafe position.

It's less of an impact on Media because most of Media is actually measured remotely. So, while there is some field operations, they're far less. That said, we're still encouraging people to watch their travel and we're pretty flexible letting people work from wherever they feel safe.

Operator

Our next question comes from the line of Todd Juenger from Sanford Bernstein. Your line is open.

Todd Juenger -- Sanford Bernstein -- Analyst

Hi, good morning. Thanks for taking the question. I'd like to go back, if you don't mind, to national media. And just thinking about the investment in transformation and growth plan there. Is there anything you could point us to David as outsiders trying to follow this progression? Because it looks like the revenue as per your guidance is to come later next year and then in the outyears. Is there anything you can point to that we could look for in terms of operational milestones, client progress or sign-ups, to give us confidence and how that is progressing other than your continued reassurance and waiting for that revenue to show up later? That would be great. Thanks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes, that's nice. I think what you need to look for in national is how we're adding new services that help our national clients as they expand. So, again, what I want to be clear on national, as we did renew all of our major clients in 2019, and those renewals did include annual price escalators in line with historical levels. That said, around that, there are other services where there are some shifts as clients move more to the additional services that help them launch their streaming businesses, whether they be DTC businesses, direct-to-consumer businesses or whether they be partnerships with other platform.

And I would say, as we add in the streaming metrics in a broader way, and as we add in the additional services, that's how we grow with those national clients in the way they grow. I think because you're not only following us, you're following our clients, one of the markers you can look to is where our clients are growing and how is Nielsen helping them in those new areas?

We will continue to launch products and as we launch products. That will be the other thing you'll see to, I think, have more confidence that we're investing in the places that will pay off because we're helping our national clients grow.

Operator

Our next question comes from the line of Jeff Muller with Baird. Your line is open.

Jeff Muller -- Robert W. Baird -- Analyst

Yes. Thank you. I guess maybe a different variation of the structural media question. So just, I guess the concern, it seems to be: Hey, you're replacing this previous position of strength with a new one where you're generating revenue, but maybe there is less value-add. So, would love your perspective both on as SVOD and I guess ad-supported digital video or video-on-demand. Just, does Nielsen have the same value-add as the world transitions to those forms of media delivery from the standpoint that if there is less ad supported or if ad supported is increasingly digital and more natively generating data instead of valuing Nielsen's proprietary data aggregation capability, does Nielsen just have a less valuable role and monetize less as the world transitions to those forms of digital media delivery? Thanks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. Listen, I think you're getting to a broad question about Media Audience Measurement. So, let me unpack it a little. To be clear, there still is a strong and growing linear measurement business and then there are new opportunities above it. So, I don't want to be -- I don't really think we're replacing something and we're building on top of it. If I unpack it, what I would say is on digital, we do continue to see double-digit growth in our ad ratings products. And as I mentioned on Hulu, Roku, NBCP, in the AVOD space, in the ad-sponsor space, we have a really important role to play on that side.

On the SVOD side, and actually on both sides, then you get to the second question of content. And there I would say, we have two really strong foundations, the great foundation, which helps them with tagging their content and helping to be discoverable and the measurement of their content, which I think is still pretty early in terms of the way those content deals with the platforms will be tracked. But increasingly, the SVOD players, including folks like Netflix are using Nielsen, quoting Nielsen publicly and using it to help establish the new marketplace and content. So, I believe we have a really important role to play in both the ad space and the content space, and it is growing quite nicely.

What's offsetting that are the other component. So, national, as I said, it's continuing to grow at a slower rate in 2019 -- at a slower rate in 2020 relative to 2019. As we work through some renewals and people do content and some things that are readding it in over the course of the year, as they add in the new things they need. Local does remain negative in 2020, but it will stabilize over time because we've made the right investments for those innovations. And, for example, I'd say the NBC, Telemundo stations are innovating their local ad sales and they're using the Nielsen tools as evidenced by the NBC Spot On launch.

So, as local innovates the use of there as well. And then audio flat to slightly up. So, you've got to break apart the components to see the full effect, but we are moving through the transition and I do believe we have a really important role as SVOD and AVOD mature.

Operator

Our next question comes from the line of Manav Patnaik from Barclays. Your line is open.

Manav Patnaik -- Barclays -- Analyst

Thank you. Good morning. I just had a quick question around how you guys think about pricing in your revenue model. You talked about some price escalators in some of the new contracts you had in the past. There was always this element of strong pricing power at Nielsen. I was hoping you just give us an update there.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. Listen, I think we certainly -- we do have strong pricing power. We also are making sure that we continue to be a good return on investment to our clients. So, I'd say we've established the currency, we certainly, as I said, are renewing those contracts. They continue to have price escalators.

I would say in the end markets that are a little more challenge, local TV in particular, we are certainly pricing and make sure we sustain that. You're not going to have exactly the same pricing pressure in a declining segment. That's our innovations and our investments in things that help new services and local give us new ways to add on, just as we do in national.

So, in short, I would say, we continue to enjoy price escalators as that market matures. But I think we're also getting the pricing on the new innovations as we establish new currency. To be really clear, that all adds up to the same road map that we gave you in November, which is a medium term view of mid to single digit revenue growth in media.

Operator

Our next question comes from the line of Dan Salmon from BMO Capital Markets. Your line is open.

Daniel Salmon -- BMO Capital Markets -- Analyst

Good morning, everyone. Thanks for taking the questions. David, Google added to the continued pressure on third-party cookies of its January announcement about some changes that are coming in Chrome. Could you maybe just tell us a little bit more about businesses with the Nielsen that might be impacted by that? I know a few of them have already been impacted by GDPR, but maybe just remind us what specific exposure is? But maybe more importantly at a high level, how do you think major digital platform changes from companies like Google or Apple in particular? How is that creating maybe new opportunities for Nielsen to help its clients and maybe just a quick one just at a high level -- a quick one for Linda, I'd love to hear just some high-level thoughts on your most important two or three priorities for the CFO role. Thanks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Great. Listen, thanks for the question. First of all, on the Google Chrome policy update and what's happening across the system, our measurement has always been designed with consumer privacy in line. So, we're happy to see the changes. While this does impact how we measure some of the digital ecosystem. It isn't a surprise and the industry including Google has a vested interest in Nielsen Measurement and are really working with us to make sure our methodologies support their businesses in the new system.

Throughout the digital ratings, we've got deep relationships with the publishers and platforms that instrument and enable our measurement and give us unique access to data and the ability to work with insecure walled-garden environments. I do think there's an opportunity as the industry migrate away from cookies. We've got a really important pilot and one of the investments is duplication methods that don't rely on cookies, which are going to be more important, and then being able to model those within secure privacy engineered environments.

We're also investing in the evolution of the panels in order to have direct operating relationships with consumers globally. Panels are a very consumer friendly privacy-friendly way to inform sites, non coverage models, and have visibility on how consumers are behaving. I would say there is good opportunity here. I also think we need to continue to engineer it, which is why you see us investing right now to stay ahead of these changes.

Linda Zukauckas -- Chief Financial Officer

And I'll lean in here a little bit. Dan, thanks for the question. It's really a pleasure to be here. Early days, I mean, week four, but I've been very impressed by the colleagues that I've met and the focus and discipline within the company. As far as what I have on my priority list, as I see it right now, clearly, it's extremely important to execute on the separation. And that comes hand in hand with making sure that we remain focused on the business. We really got to deliver on this guidance that we put in front of you today.

As I think more about the function of finance, there are some terrific processes in place. And I think we just need to continue to drive rigor in the underlying analysis to really help position the business to achieve the guidance that we put out there today. And I think a lot of that was summed up nicely back in the Q3 call with the medium-term growth plan and we just really need to be executing on that because that's really what's going to drive future value margin expansion as we think about the business on a go-forward basis.

Operator

Our next question comes from the line of Ashish Sabadra from Deutsche Bank. Your line is open.

Ashish Sabadra -- Deutsche Bank -- Analyst

Thanks. My question is more on the Connect side. Maybe you can just provide some more color on the client losses, but also the new wins. Any color on what led to those losses in 2018, but also the McCormick win and how do we think about the pipeline going forward for new potential win? Thanks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes, listen, the effort that wasn't here in 2018, but we learned a lot and I've spoken to those clients. I would say at that point in time the Connect platform wasn't fully ready. I think they found a different product solution, and I think some of the retail integration wasn't as strong either. We focus on both in 2019, again, all the renewals stayed with since 2019. McCormick, was fundamentally an addition to that. We've got some real advantages in a few categories, particularly e-commerce. And I would say continuing to build with retailers is making a big difference.

I think that advantage continues to strengthen with the addition of Precima, which gives us even more strength into the retail segment. So, we've got both sides working.

Operator

Our next question comes from the line of Matthew Thornton from SunTrust. Your line is open.

Matthew Thornton -- Sun Trust -- Analyst

Hey, good morning everyone. Thanks for taking the question. Maybe one on Media and one on Connect, if I could. On the Media side, David, can you maybe just update us on what's changing it or what will change in the next couple of years here, as you think about the data that you use in the syndicated product? Obviously, I think we all understand the panel side of things, but when we think about what's being incorporated in the syndicated product Gracenote, set-top box data, smart TV data, national versus local, just any update on kind of where that -- the data assets are going here?

And then on the Connect side, just maybe an update on -- just when you think about the connected platform, how penetrated are we, maybe what inning are we in regionally? And where you are penetrated, what are you seeing? Is it better retention, is it share gain or share recapture from competitors? Just any update on that side will be helpful as well? Thanks everyone.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Sure. Thank you for the questions. On Media -- and we are starting already, I would say, first of all, in Audience Measurements, we're already to a point that we have a lot of big data, which is then being corrected and improved by the panel. So, this is not a panel-only answer anymore. The data science is really evolved here. And I think the partnerships we have with set-top box data, some of the things we're learning in the addressable [Indecipherable] new dataset to help improve that.

I would say on the content side, Gracenote, they're really important, but it is the reference data for content. And that certainly helps with Discovery. But as we've improved our ability to measure streaming content and know what people are actually watching, the Gracenote data has been important to add into that. And I would say we are increasingly working with our partners who license Gracenote data to also make sure we have data back that helps us improve content measurement, which helps both the buyers and sellers of content expand that.

And lastly on outcomes, we're making a lot of progress and further rearchitecture of the Media platform, which is really being built more in micro-services, is the ability to sort of compose that with other services. And for the earlier question about, do we have the strength in Plan/Optimize that we had in Measurement?

I would say, when Plan/Optimize connects to Measurement is where Nielsen has an advantage, But connecting all that third-party data, which we have access to and which our clients actually bringing themselves into their own model, allows people to build better outcome inference model on top of the measurement, so that the whole thing can work in a smarter way.

New data is going to continue to come from places. The more the media systems are digitized, the more data comes out of that. And we are increasingly finding an easy way to ingest that and enhance our model.

Similarly on Connect, first of all, to be really clear, the Connect system has largely been penetrated in the United States today, we are beginning to deploy components internationally and get to one global platform, but we're in very early innings of Connect, which is why we see continued growth of that platform over time.

It has certainly helped the retention when folks are looking at renewal, they're testing the new system and to road map against others, and choosing to stay with us, which is great. I would also say it's becoming stickier. It's the only platform that's truly cloud-based and I think open with APIs connecting the services, again, that makes it easy for people to connect. The connected system to the other data services and the other analytic services that they are subscribing to, so that they can build one system for managing their business and that's really helping us in some fundamental ways. So, firsthand, how easy it was to integrate Precima with Connect as a result of the new platform.

Operator

Our next question comes from the line of Surinder Thind from Jefferies. Your line is open.

Surinder Thind -- Jefferies -- Analyst

Good morning. David, you spoke about a stronger sales culture. Can you provide some additional color on the changes you've made to the sales organization in terms of maybe discuss the size of the sales force, maybe turnover involuntarily versus voluntary? And then, maybe if there's been any changes in that base versus variable compensation?

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. So, let me cover couple of things. And I need to separate Media and Connect. So, firstly, you've got these strong subscription businesses. There is a lot of culture around client service. I think what we've really done is that make sure that in addition to that, we're adding new targets for additional sales and building better account plans, largely to understand where our clients are going and make sure that they know where we're relevant in their new services.

I would say, last year, we piloted it with a few people at the top of the organization. We've gone down into the organization to actually have more of a commission base, we got the retail growth plan to make sure people are actually incented to drive growth and that we're measuring that quite precisely, so that's helping. I would say as the job becomes a little more sales oriented, there has been some turnover.

Obviously, you got to make sure people can deliver sales and some people are choosing to opt out of that in a natural way. So, and I think the culture continues to move. In 2020, we have gotten smarter about a matrix between product specialists and clients to make sure that all products are as strongly represented as possible into the client accounts.

So, I do think that will help our client's better take advantage of the full portfolio of Nielsen.

And similarly, on the Connect side, there wasn't changes in incentives. I think that's part of why we delivered growth last year for the first time. I think there has also been just a lot of process improvements, cadence call, making sure we're actually tracking things through the system and making sure we have a Won't Lose mentality. So, I've been pleased by that shift on the Connect side as well. And I think, David's going to push even harder on both clarity around products revenue targets, as well as overall planned revenue target, so that we're helping both our manufacturer and retail clients take full advantage of the Nielsen portfolio.

Operator

And our next question comes from the line of Richard Kramer from Arete Research. Your line is open.

Richard Kramer -- Arete Research -- Analyst

Thank you very much. Few calls ago I asked a question about in app measurement and whether that was something Nielsen would need to put more effort into and indeed, how you would get access to that maybe without potentially making acquisitions. How do you intend to address that mobile in-app space, especially as it increasingly affects TV screens?

And then maybe a quick question for Linda, the new CFO. I mean, we've now seen a third successive year where our gross margins for the group have declined. I mean, how do you think about reversing that slide from a gross margin perspective given the very tough competitive pricing environment that you're facing with many tech competitors at both sides? And maybe could you pledge to give us a bit more visibility in the split between some of the functions that SG&A, R&D, etc., that we would tend to see with other tech companies? Thanks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. And I may come back on Linda's question too, because I've working along gross margins all year and cash conversion. I think those targets remain very much front center for both of us, and we're a team here. But I'll go to the first question quickly. We do in that Measurement today. We certainly have the ability to, ACR technology, to understand I think TV screen what's being watched, even if it gets us through an app. And I think we're investing to make that work on a broader base. We're investing to make and ease the integration. But I think we're very good on the large screens. And, increasingly, when it comes to media consumption, we're picking up on all screens with the technology we have.

So, and this goes back to Gracenote and why we bought the ACR technology as a component of it. We continue to do that today and I think having good solid base there. Let me turn it over to Linda on margins.

Linda Zukauckas -- Chief Financial Officer

Yes. So, on margins, we're really looking at the overall margins and considering all of the underlying drivers to that. Certainly, revenue growth is critical to us. And I think you heard the commitment certainly of Dave and you have my commitment as well that continuing to drive revenue growth is something that we're really going to focus on. As a part of the separation, we will be looking at the structure of the two separate companies, Media and Connect and making sure that those structures are scaled appropriately for those businesses on a go-forward basis.

So, it's something that both David and I will be looking at very closely. And as we said for 2020, it is an investment year in Media as was 2019. The level of investment this year will be slightly less than what it was last year and we'll start to see the benefits of that in margin expansion later in the year. In Connect, the margins are going to be similar to what we saw last year with expansion and sustaining that will be very, very important. But it's a combination of factors that really drive that overall margin. And I can assure you that both David and I are looking at it at the top from what's the overall reserve result. But importantly, what are the underlying drivers of that and looking to manage those for margin expansion.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Yes. So, just to add philosophically, I'm really focused on the conversion of revenue to EBITDA and then the conversion of EBITDA to cash. We've been doing a lot to make that happen. I know it doesn't always feel that way in this outlook for 2020 as we're working through those investments. The investments we're making certainly drive products which helps with revenue growth, which we covered, but some of the investments are also automating processes. And as we automate those processes, we realize that productivity gain by having less costs and particularly less labor costs to deliver all the functions.

We're going to continue to work on that. I think what I am careful about now is not just having sort of discrete productivity numbers out there, but really committing revenue EBITDA cash conversion, because we want to make sure it's end-to-end on the total system. Ultimately, the only thing it really matters to as we go through the company is the cash flow that's generating from the business and we want to make sure we pull that through. It's a real discipline here.

Operator

We have no further questions at this time, I'll turn the call back to our CEO, David Kenny, for closing remarks.

David Kenny -- Chief Executive Officer, Chief Diversity Officer

Thank you all for joining. I know we're a couple of minutes past the hour. I'm excited about this journey. I think the combination of some really committed colleagues who've been here for many years and the new colleagues to help us with fresh ideas are really moving things along quickly. We are very committed to completing this transformation and we'll keep you posted over the course of the year on that, and of course on the transformation.

So, we'll talk to you again at the end of the first quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Sara Gubins -- Senior Vice President, Investor Relations

David Kenny -- Chief Executive Officer, Chief Diversity Officer

David Rawlinson -- Chief Executive Officer Nielsen Global Connect

Linda Zukauckas -- Chief Financial Officer

Andrew Steinerman -- JPMorgan -- Analyst

William Warmington -- Wells Fargo -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Todd Juenger -- Sanford Bernstein -- Analyst

Jeff Muller -- Robert W. Baird -- Analyst

Manav Patnaik -- Barclays -- Analyst

Daniel Salmon -- BMO Capital Markets -- Analyst

Ashish Sabadra -- Deutsche Bank -- Analyst

Matthew Thornton -- Sun Trust -- Analyst

Surinder Thind -- Jefferies -- Analyst

Richard Kramer -- Arete Research -- Analyst

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