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Nielsen Holdings plc (NYSE:NLSN)
Q3 2021 Earnings Call
Oct 28, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to Q3 2021 Nielsen Holdings Earnings Conference Call. [Operator Instructions]

Thank you. Sara Gubins, you may begin your conference.

Sara Gubins -- Senior Vice President Head of Investor Relations And Treasury

Good morning, everyone. Thank you for joining us to discuss Nielsen's third quarter 2021 financial performance. I'm joined by our CEO, David Kenny; and our CFO, Linda Zukauckas. Our COO, Karthik Rao, will also be on for the Q&A portion of the call. 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 relating to our business plans and 2021 guidance and the impact of COVID-19. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, October 28, and we are under no obligation to update.

Our actual results in future periods may differ materially from those currently expected because of a number of risks and uncertainties, including those defined in our disclosure filings and materials, such as our 10-K, 10-Q and 8-K reports 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 are available in the earnings press release, which is available at the Investor Relations section of our website at nielsen.com.

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

David Kenny -- Chief Executive Officer

Good morning. Thank you for joining our third quarter earnings call. Before we dive into our strong Q3 results, I want to start by taking a step back to provide context around what is happening in the media industry, and why Nielsen is becoming even more relevant as viewing habits continue to accelerate toward streaming. The media industry is going through unprecedented change only accelerated by the pandemic with an audience that is watching programming whenever, wherever and on whatever device she chooses. An industry built on linear TV programming, supported by ads is evolving to an industry that is moving to streaming content supported by subscribers and ads. According to our September 2021 release of the Nielsen Gauge data, just over 50% of viewing took place over broadcast and cable, while streaming alone grew to 37% in the 18 to 54 demographic. This compares to 2016 when more than 75% of viewing was on broadcast or cable. The evolution of our solution mirrors this massive shift, and this context is important to keep in mind as you read the news. It is evident that media measurement will be dramatically different five years from now, and we are leading the industry's evolution despite the recent headlines.

As the media ecosystem and audience viewing becomes more fragmented, having a single, independent cross-media measurement solution across streaming, broadcast and cable is essential to the industry. Both the World Federation of Advertisers, which represents advertisers globally and the U.S.-based Association of National Advertisers have put forth principles around measurement integrity and standards. Nielsen ONE, which is focused on the future of measurement aligns with these principles. We have laid out a clear time line leading up to the Q4 2022 launch of Nielsen ONE and we are looking at opportunities to accelerate this. Nielsen alone is uniquely positioned to provide the industry with a currency-grade, cross-platform measurement solution. Let me walk you through some facts about our unique market position. First, our approach to Nielsen ONE is big data, validated by panel. Over time, we have built partnerships with a wide variety of industry participants that now give us visibility into hundreds of millions of big data inputs on TV for return path data and billions of impression connected TVs, computers and mobile devices that we combine with robust, opt-in and audited panels to correct for biases and other limitations of big data.

This uniquely allows us to provide persons-level measurement that is representative of the entire U.S. population. Measurement tools derived on big data alone cannot do this. Potential competitors who want to optimize TV may claim that they can use individual-level information from other big data sources. But big data has flaws and biases. It lacks rich detail about who the people are or it underrepresents diverse populations and certain age groups. Big data alone might work for targeting and optimization, but it does not work for currency-grade measurement. Second, advertisers want independent measurement as evidenced in recent public statements by leading advertisers such as P&G and Anheuser-Busch. Walled gardens are complex and they cannot provide the independent holistic view of the market that Nielsen does. Stitching together data sources from multiple sources using different methodology would only further add to the complexity. Third, Nielsen is deeply embedded in the media ecosystem across buying platforms such as Mediaocean and with advertisers and publishers who want to transact on a common fact base. And finally, Nielsen is the trusted leader in the industry with a proven history of building alignment across the ecosystem of media buyers and sellers. I also specifically address our accreditation status for traditional broadcast television in the U.S. with the Media Rating Council, or MRC.

As discussed on previous calls, during the height of the COVID pandemic, we had limited in-home field work. As the pandemic continued, we made changes to adapt operationally, including changes to our maintenance procedures. We disclosed those changes and the impact on estimates and have since addressed the outstanding maintenance-related issues. This was obviously a fluid and unprecedented time for all of us. We followed MRC protocols around logging changes, but we accept the constructive criticism that we could have better communicated changes and their impact to clients. As a result of all these factors, MRC members voted to suspend accreditation of our national and local TV services in August. We believe in accreditation and fully support the audit process. In fact, we continue to be the only service audited across our products. We are in continuous dialogue with the MRC, and we've also engaged an external firm to support our efforts toward remediating outstanding issues. It's a methodical process and a focused work plan, all of which are aligned with the MRC's feedback. Our panel recovery efforts are well underway, and we're already back to more than 40,000 homes. We are on track to reach 41,600 homes by Q1 of 2022, which is our target, and we will continue to expand beyond that.

The Nielsen panel remains a key differentiator. I remind you that no other provider has a representative, empirical person-level panel. We will have more to share in the coming months, but I can assure you that getting reaccredited as soon as possible is a top priority. I would add that today, Nielsen remains the de facto audited currency. Across the board, broadcast, digital-first, audio, agency and advertiser clients continue to use our currency ratings every day to drive critical business as they did in this year's media upfront. We have not been perfect, but we believe in the integrity of our ratings and our high-quality panels that are foundational to measuring audiences. I am incredibly proud of the way our teams have executed over the past 18 months, demonstrating resilience and courage as we adapted to new ways of working during the global pandemic. And I want to thank you all for your dedication. You'll hear more from Linda in a few minutes, but I'd also like to touch on our third quarter financial results. We reported another strong quarter, building on our track record of execution and demonstrating continued progress on our strategic growth plan. Revenue grew 6.6% on an organic basis including 4.4% growth in Audience Measurement and 12.5% growth in Outcomes & Content. Adjusted EBITDA grew on a constant currency basis.

Our margins remained strong at 43.3% in the third quarter. As expected, these were down year-over-year as some code temporary costs return. Adjusted EPS of $0.45 increased from $0.42 in the prior year, and free cash flow year-to-date is $514 million, up from $383 million a year ago on a comparable basis. Following our strong performance year-to-date, we are raising our 2021 revenue and EPS guidance, and we are raising the low end of our ranges for adjusted EBITDA and free cash flow. Let's turn to business highlights. In Audience Measurement, we made good progress on product milestones ahead of the Q4 2022 launch of Nielsen ONE. Let me start with some recent examples using coverage, comparability and resiliency as a framework. Starting with coverage. Our objective is full coverage across all audio and video media, and we already have the broadest coverage in the industry. We have full coverage in national and local broadcast and audio and a leading position in digital, which includes streaming services across both ads and content. In Digital Ad Ratings, we have the ability to measure 75% of connected TV media spend and approximately 90% of total video digital spend across computer, mobile and connected TV. We've expanded our coverage of streaming content, which we measure at both the platform and individual program level. Platform measurement is enabled by our streaming meter.

Since launching in January 2021, we've tripled the sample size of streaming meter homes and are now at 18,000 homes. We've increased the number of platforms covered to 17 from 10 earlier this year and we now cover around 85% of the entire streaming market. Our expanded sample size will allow us to track newly introduced services faster with greater stability. We're using big data validated by panels to enhance our coverage at the program level, which includes the recently completed integration on the Roku platform. This adds to the program data collected through our household panels and we've increased the number of programs measured by 30% year-to-date. And we are continually improving our methodology. We recently rolled out our new Portable People Meter wearables to better measure media consumption outside of the home. Next, comparability. The ultimate measure of comparability is being able to measure all content and ads in a common methodology whether it's linear or streaming. This means making TV measurement more like digital. A clear proof point is our move to a common sample as we include broadband-only homes in the local panel in January 2022. This will enable the industry's transition to trading on impression-based measurement and result in more complete, precise and representative measurement. Media sellers and buyers such as Nexstar, Hearst and MAGNA Global, all voice support of these initiatives.

In National, we are incorporating big data into the measurement, which will be validated by our panels, and we're on track to share impact data with clients in January. The big data integration will enable addressable advertising, it will increase stability and support long tail channel measurement in the currency ratings. As a first step, we've already shared initial evaluation data with the MRC and their TV committee. The final point is resiliency or consistency. I discussed earlier the importance of our panel in ensuring big data is validated and fully inclusive and representative. Having a robust opt-in panel is even more important to ensure that our measurement solutions are durable and can adapt to evolving changes in the technology and privacy landscape. Clients see the value in our enhanced and expanded audience measurement products, and it is driving strong performance. Growth in the U.S. was led by national media clients and digital-first clients and we saw particular strength in digital products from our national media client base. Streaming is becoming increasingly important to our clients and the simplification of our streaming solutions makes these products more accessible. We've had key learnings with both media sellers and buyers.

Vevo, our global video hosting service, recently expanded their agreement with an emphasis on our Digital Ad Ratings, connected TV capabilities, and Apple added streaming platform ratings in addition to their current usage of content and national TV ratings. On the buyer side, GroupM recently leveraged our platform ratings in a thought leadership piece for global marketers. And in fact, 14 top agencies are using Nielsen's content ratings. The shift to streaming is creating a greater need for cross media measurement globally. Sweden is the latest example. There, Nielsen has recently been endorsed as their full-service provider of cross-media measurement. In the U.S., the enhanced value and belief in the Nielsen ONE road map continues to drive strong renewals. This year, we've renewed important contracts across national, local, audio, digital and agency clients. Both Meredith Corporation and Whitehardt, a broadcast and digital media agency, recently renewed in mobile TV. Turning to Outcomes & Content, which grew 12.5% year-over-year on an organic basis. In Audience Outcomes, we help clients across the marketing cycles, plan, analyze and maximize their marketing investments. Just as in Audience Measurement, advertisers are looking for common metrics to help drive decision-making in a complex environment.

We are focused on driving growth through market and vertical expansion, and we are demonstrating success. We are connecting our cross-media measurement to outcomes, which only Nielsen can do. Starting with market expansion, we're pleased with our July acquisition of TVTY, a leading TV attribution provider, and we're focused on leveraging Nielsen synergies to sign on new clients in the U.S. and Europe. We are expanding our industry coverage of our predictive ROI tools, which are used by advertisers, agencies and media owners, and now cover more than 75 countries globally. We are deepening our penetration with advisors across a broad range of industries. We further grew our relationship with Microsoft. And in the retailer vertical, we're working with Petco to help fuel their media investment decisions. In Europe, we're working with Ria Money Transfer in the financial services sector. And in Asia Pacific, we've won [Avon] in healthcare, MitoQ in wellness and Suntory in spirits. In sports, we see continued stronger partnerships around critical sports intelligence. We expanded our relationship with FIFA to help them enhance their commercial strategy, and we worked with Mondelez on their 2021 Olympics investment. Earlier this week, we announced a new offering that uses proprietary Nielsen data to help college sports teams demonstrate the marketing value of their athletic program.

Earlier this week, we announced a new offering that uses proprietary Nielsen data to help college sports teams demonstrate the marketing value of their athletic program with Duke Men's basketball signing on as the first client. Our global capabilities uniquely makes us a strong partner for global platforms. We recently entered into an agreement with Spotify, who is using our media planning software in 18 markets to help them understand the incremental reach on their platform. And we're also working with TikTok in various markets around the globe to help them demonstrate the effectiveness of their platform. On the product side, we launched new formats of Total Media Resonance, our upward funnel offering that leads an advertisers' media plan to brand metrics with a faster solution for advertisers and a new offering for media owners. We also went live with our cloud-native multi-touch attribution offering. Turning to Outcomes & Content Services. We are the market leader in metadata, and we are building on our global leadership position with geographic expansion and new solutions beyond the core metadata business. In the U.S., Gracenote is now contracted with all of the top 10 MVPDs as measured by subscribers having acquired two additional providers earlier this year.

In our top European markets, our market share is just under 20%, which provides a strong runway for growth because the remainder of the market is highly fragmented internal or point solutions. We've continued to win new business, and we are poised to accelerate our market share as we migrate new clients in 2022, extend into incremental geographies and increase our customer coverage in the markets in which we already operate. The U.S. and Europe are our largest markets, but we also have particular strength in Australia, Brazil and Mexico and several other big markets are in development. Ahead of the 2022 Beijing Winter Olympics, we published the Gracenote Virtual Medal Table, forecasting which countries will take home metals enabling clients to deliver Olympics-focused stories across digital and broadcast properties. On client wins, we renewed our relationship with LG, adding services to help them expand their global service coverage and enhance the quality of their service. We are focused on the Gracenote ID becoming the universal solution for discovering content. And as content spend continues to grow, this creates opportunities to help content distributors better represent their programs in search and better understand and manage their catalogs. The ultimate goal is for the Gracenote ID to serve as a unifier across all content, similar to a UPC code in the retail industry to help clients answer key questions around licensing and distribution.

Let me sum up. I opened the call discussing the massive shift in audiences and its impact on all of our clients, which is creating opportunity for Nielsen. In Audience Measurement, we are solving for a critical need in the industry with the development of Nielsen ONE. In Outcomes & Content, we are helping clients to maximize their investments in advertising and drive their content strategies. As you may have seen, we recently unveiled our new brand identity, which reflects the ongoing transformation of our culture and redefined strategy. And you'll see us continue to sharpen the narrative around the core strengths that differentiate Nielsen in the marketplace. Our purpose is to power a better media future for all people. We're well positioned to do so as the information services market leader for the media ecosystem. I look forward to keeping you updated on our continued progress.

I'll now turn the call over to Linda to review the financials.

Linda Zukauckas -- Chief Financial Officer

Thank you, David, and good morning, everyone. Similar to the last two quarters, I'd like to provide a relevant backdrop to the strong Q3 results that I'm pleased to share with you today. First, my remarks today focus on our results as of the Connect sale we completed earlier this year in March and the resulting $2.3 billion debt paydown took place at the beginning of 2020, which helps with the year-over-year comparisons. Second, I want to remind you of the strength of our business, with 80% contracted revenue headed into any given year, and that accreditation is not a requirement of our contracts. That being said, as David noted, regaining accreditation is a top priority. I'll start with slide seven, which summarizes our third quarter revenue performance. Revenue for Q3 was $882 million, up 5.1% year-over-year on a constant currency basis or up 6.6% organic, which adjusts for exits related to the 2020 optimization plan, the April sale of our Advanced Video Advertising business to Roku and the recent acquisition of TVTY in July. Reported revenue grew 5.5%, which includes an FX benefit of 40 basis points. Revenue growth accelerated in the U.S. and remained solid in international markets. Of note, this quarter represents a high watermark for Q3 revenue in spite of revenue loss as a part of business exits over the past year.

The return of COVID-impacted revenue also contributed to stronger revenue growth. Audience Measurement revenue of $637 million was up 3.7% constant currency and 4.4% organic. National and digital measurement products were areas of strength. And from a client perspective, we had high single-digit growth with national media clients and double-digit growth from digital-first clients. Local posted another quarter of positive growth, but coupled with a weak Q1, we still expect local to be roughly flat for the year. Outcomes & Content revenue of $245 million grew 8.9% constant currency with organic revenue up 12.5%. We continue to see some improving trends in short-cycle revenue and strong growth in our sports business. We also continue to drive solid growth in content. The right side of the page shows revenue for the past five quarters as well as constant currency and organic revenue growth rates. As you can see, the growth trend continued to improve in the third quarter. Turning now to slide eight. Adjusted EBITDA was $382 million, up 2.1% year-over-year on a reported basis or up 1.9% constant currency. Following strong margin expansion in the first half of the year, we reported adjusted EBITDA margins of 43.3% during the quarter, down 143 basis points reported or 139 basis points constant currency year-over-year. This contraction was in line with our expectations.

As we have discussed in prior quarters, there are several factors impacting our margins in 2021 that explain our year-over-year margin expansion in the first half of the year and compression in the second half of the year. First, because our cost base is relatively fixed, revenue growth drives operating leverage. Second, in early 2020, we reduced temporary costs by approximately $100 million. These temporary costs began to return in Q2, though at a lesser pace than initially expected with the prolonged pandemic. And while they continue to increase in Q3, they have not reached the levels we expect when the pandemic is fully behind us. So we expect these costs to continue to trend up in Q4 and into 2022. Third, we began to implement our restructuring or optimization plan in Q3 '20. As a result, we saw significant year-over-year benefit in first half margins but the third quarter margin did not see the same kind of benefit on a year-over-year basis, and we'll continue to see this play out in the fourth quarter due to the timing of the optimization initiatives that phased in during the second half of 2020. On the right side of the page, we show adjusted EBITDA and margins over the last five quarters as if the sale of Connect took place at the beginning of 2020. Adjusted EPS was $0.45 in the third quarter, up from $0.42 in Q3 '20. This was driven by higher EBITDA and lower depreciation and amortization.

Our effective tax rate on a GAAP basis was 22% in the quarter. This included $8 million in discrete benefits primarily related to audit settlements and state funds. When we adjust for this, our normalized third quarter effective tax rate was approximately 27%, which is in line with the normalized effective tax rate on a year-to-date basis. Our year-to-date free cash flow is $514 million as compared to $383 million in the prior year period. Key drivers of the year-over-year improvement include higher EBITDA and lower interest payments. These improvements were partially offset by higher tax payments. And now I'll discuss our updated 2021 guidance on Slide 10. Today, we are increasing elements of our full year guidance to reflect our solid Q3 results and our confidence in the balance of the year. We are raising our revenue and adjusted EPS guidance and raising the low end of our adjusted EBITDA and free cash flow guidance ranges. Let me take you through each of these. For revenue, we are raising the range to 4.5% to 4.75% for organic growth and to 3% to 3.25% for constant currency growth. This is above the guidance range of 3.5% to 4.5% organic revenue growth for the year that we communicated back in February, demonstrating our ability to successfully manage through the COVID recovery.

Our updated guidance reflects the year-to-date strength and growth outlook for the fourth quarter, which faces a tougher comparison versus Q3 as COVID pressures on revenue began to subside in the fourth quarter of 2020. We remain optimistic about driving mid-single-digit organic revenue growth next year and beyond, in line with our medium-term targets. For adjusted EBITDA, we are now guiding $1.480 billion to $1.490 billion and maintaining our margin outlook of 42.3% to 42.6%. This compares to 2020 adjusted EBITDA margins of 42% as if the sale of Connect took place at the beginning of 2020. Our 2021 EBITDA guidance reflects the benefit of the optimization plan, underlying efficiency of the business and improved cost discipline, partially offset the return of COVID temporary cost cuts made last year and incremental investments and initiatives to drive growth over time. I'd remind you that COVID temporary costs have been coming back at a slower pace than initially expected, and we have been using some of that favorability to invest in the business this year, including investing in our panel and in growth initiatives. When we consider the dynamics that will lead to fourth quarter margin compression, they are similar to those impacting the third quarter and include the return of COVID temporary costs, growth investment and less of a year-over-year benefit from the optimization plan began in July of 2020.

We are raising and tightening our adjusted EPS guidance to $1.65 to $1.70 versus a comparable $1.45 in 2020. This higher adjusted EPS range is driven by the tighter adjusted EBITDA guidance range and lower depreciation and amortization. And finally, we are raising the low end of our free cash flow guidance by $10 million to a range of $630 million to $650 million on solid year-to-date performance. As a reminder, adjusted EBITDA, adjusted EPS and free cash flow guidance ranges do not include the impact of onetime separation-related costs, which Nielsen bears under the Connect sale agreement. We now expect approximately $200 million of full year versus our prior forecast of $200 million to $220 million, with $179 million paid in the first nine months of the year. The vast majority of these costs are included in discontinued operations, and this is the last year of any meaningful separation-related cash costs. We've made terrific progress during the year, strengthening our balance sheet. We ended Q3 with 3.15 times net debt leverage on a pro forma basis while on the path toward our medium-term target range of three to 3.5 times. As we approach the target, we will be well positioned to think more broadly about deploying capital. To wrap up, we are very pleased with our third quarter financial results, and we are confident in our ability to execute on our growth plan.

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

Sara Gubins -- Senior Vice President Head of Investor Relations And Treasury

Thanks, Linda. With that, let's turn to Q&A. Operator, can you open up the line, please?

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from Tim Nollen with Macquarie. Please go ahead.

Tim Nollen -- Macquarie -- Analyst

Thanks. David, I'd like to pick up on something you were talking about here and you've talked about before, which is the actual big data that Nielsen actually does use. One of the criticisms of Nielsen has always been that you -- to exaggerate the point, people say that you define the media industry terms based on the small household panel, which you extrapolate. But you do have access to a lot of big data that you then run through the panel. So my question is, can you talk a little bit more about how this setup compares with some of the other competitors out there in terms of the scope, the size, the availability, the access to that data that you have?

David Kenny -- Chief Executive Officer

Certainly. Thank you for the question, Tim. So let me start with linear. The best big data there for television is return path data which, of course, we have from our partnerships with the satellite folks and good cable on the local side. And on the audio side, then I'm from connected cars, which is something we're in discussion with the auto manufacturers on. It's the same RPD data for other models. So I think the difference between our approach and others who use RPD data is that we then validate that data with the panel because there are errors in it. There are places where the set-top box might be on and the TV is off. There are certainly no ability to append that back to actual people. We've had a statistical panel to put people on the overlay. So I would say we add to it with the panel. I think we make it better as a result than just using it in a raw form. In the streaming side, it's important to have ACR data. And I would say streaming is important, even -- the streaming approach and the ACR focus is even important for linear today. Keep in mind that four out of 10 households no longer have a cable subscription. So by definition, there's no set-top box.

So you've got to get that through signals, audio signals that come off the TV. And we're unique in pulling that together. And then if it goes through a streaming platform like Roku, of course, with that deal announced earlier this year, we have added value there. There are other players who also use ACR data, a lot of that IP came from Gracenote. We certainly have real leadership in the technology. And I think we do it exceptionally well. And again, we can validate all that with empirical evidence from the panel. So last -- that's a great question. So sorry to go long, but the last thing I'd want to say about being the only party that has empirical evidence with the panel, that is a proven technique throughout data science today. I came to Nielsen after a decade in machine learning and artificial intelligence. A couple of relevant examples that might be useful to you.

One is vaccines. So AI was used to get to a COVID vaccine much faster than ever before. Big data certainly helped, but it was really important to have empirical panel of clinical trials so that real people were tested and those models were improved. And it absolutely would have been a disaster without taking the time for empirical data. Similarly, AI has vastly improved weather forecasting. But when it's really important, like a hurricane, you still get empirical data by flying hurricane hunters into storms to take real-world evidence, and you still validate those models every day with weather balloons and satellites. So we can go on and on, but I would just say nobody has a big data advantage on us, and nobody has our advantage with empirical evidence to validate that data. Thanks for the question.

Operator

Next question comes from Andrew Steinerman with JMP. Please go ahead.

Andrew Steinerman -- JMP -- Analyst

Hi, Linda. I wanted to talk about the fourth quarter implied organic guide. To arrive at 4.5% to 4.75% organic revenue growth for the year, I believe that implies 3% to 4% organic constant currency revenue growth for the fourth quarter. So I'm looking at slide seven, and I still see an easy comp in the year ago quarter, fourth quarter of 2020. And I'm just wondering if there was anything about the strong organic revenue growth for the third quarter, 6.6%, that might have pulled forward revenue from the fourth quarter, and just verify that my calculation of 3% to 4% for the fourth quarter is right for organic constant currency revenue growth.

Linda Zukauckas -- Chief Financial Officer

Great. Thanks for the question, Andrew. Good to hear from you. I guess what I would say is that we really look at things on an annual perspective, and sharpen the pencil, of course, as we move into the fourth quarter of the year. But to your point, things can always shift around a little bit from one quarter to another, but there's really not anything in particular that I would call out. If you just reflect on 2020 versus 2021, we do face tougher comparisons even in Q4 versus Q3, because COVID was most impactful to us in Q2 and Q3 of last year. More broadly, there is still uncertainty around the pandemic. And I would say that some global supply chain challenges are out there, and that starts to raise questions about how this might impact short-term spending in the balance of the year. It could be a favorable or it could be an unfavorable. But with the pandemic still looming, we are just being very smart about the way that we're setting our guidance, again, full year guidance, but as you backed into the fourth quarter. I would say too, that overall, we've been pleased with our renewals this year, and it's for that reason that we do still feel optimistic about our medium-term guide on mid-single-digit organic revenue. So I would say, overall, biggest factor is definitely the tougher comparison and the varying of what's in Q3 versus Q4, always a little bit of shifting. But overall, we feel very good about the outlook.

Andrew Steinerman -- JMP -- Analyst

Great. Thank you very much.

Linda Zukauckas -- Chief Financial Officer

Thank you.

Operator

And your next question comes from Dan Salmon with BMO Capital Markets. Please go ahead.

Dan Salmon -- BMO Capital Markets -- Analyst

Good morning, everyone. David, I wanted to circle back on a couple of things in your prepared remarks. First, you mentioned that Nielsen is embedded with Mediaocean. And I know many of us know what Mediaocean is and does, but can you expand on that and how being embedded with their buy-side software is important to Nielsen? And then second, maybe I'm overreading it a little bit, but it seemed like you were speaking to the specific number of houses in various panels a bit more today. You talked more publicly about efforts to communicate with the ecosystem a little bit more regularly. Is that the type of thing that we should expect more often?

David Kenny -- Chief Executive Officer

Those are both good questions, and they deal to the operations of audience measurement. I'm going to turn that over to Karthik because he's driving that day to day, and I think can give you the detailed answers on both how we work in the ecosystem and having better quality metrics disclosed on a more regular basis to the industry. Karthik?

Karthik Rao -- Chief Operating Officer

Thanks, David. On the first question of the ecosystem itself, as every part of being a currency is to actually facilitate between buyers and sellers. So there's a lot of ecosystem players that play a very important role. And so our data obviously fuels these buying and selling systems so that it can operate in effective pure in-house contest between buyers and sellers. So we're very close to all of these players because there is a good interdependency and that actually makes things easier and more fluid for the industry to operate efficiently. So that's the role that the two players play and we're embedded with many of them. And we called out a couple, obviously, but that becomes particularly important even as we transform all of our products because all of these ecosystem players then need to revamp how they use our data in the role that they perform for the industry.

On the second question, yes, I think part of David called out as well as the feedback that we have taken to heart is being much more explicit in our communication of what we're actually doing. Panel, again, we don't want to dominate all the conversation about our innovation in just with panels. That panels continue to be important. We will communicate more broadly with our clients and the industry around the progress we're making, especially around getting reaccredited, panel sizes themselves have a role to play in the reaccreditation process. And so yes, this is the way we want to continue to operate to, again, drive transparency and clarity for what we're working on.

Dan Salmon -- BMO Capital Markets -- Analyst

Great. Thank you, Karthik.

Operator

And your next question comes from George Tong with Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good morning. I wanted to go back to your revenue outlook. You increased your revenue guidance for the full year. Can you discuss which parts of the business are tracking above your initial expectations and how your 4Q outlook specifically has evolved over the past quarter?

Linda Zukauckas -- Chief Financial Officer

Yes. So we -- as I mentioned to Andrew, we give annual guidance. And so we don't really provide deeper insights on a quarterly basis aside from that. But there were definitely some bright spots in our Q3 performance that contribute to the overall optimism that we're feeling broadly. And just as the year progresses and you get closer to the end of the year, you feel good about the overall revenue guidance level. And I would say that we've had strong top line performance during the course of the year. And we've held back a little bit on that as we thought about EBITDA just to give us some financial flexibility during the course of the year. But as I think about Q4, and as I reflect on our performance in Q3, we saw really nice strength in national and digital measurement products and local was also slightly positive, and we really consider that all to be encouraging. So I think it's more macro, just our sense of the overall business performance and the impact that we're getting out of some of our investments during the course of the year in growth in that initiative, and it just has us feeling optimistic about the fourth quarter.

George Tong -- Goldman Sachs -- Analyst

Got it. That makes sense. As it relates to Nielsen ONE, can you talk about key milestones and goalposts that you've achieved in the quarter and what your near-term targets are?

David Kenny -- Chief Executive Officer

Sure, Karthik, why don't you take that?

Karthik Rao -- Chief Operating Officer

Thanks, David. I'll just reinforce, the transformation of the product is fairly broad and began pretty much beginning of this year with transforming our digital product to use an actual identity backbone that we built in 2022. So that, sort of think of that as a first step to building all of digital measurement, which will also affect anything delivered over IP. So that entire body of work has gone really well, it continues to go well. I'd say the next big thing is increasing our coverage, and you've seen a whole lot of announcements around our expansion to measure connected TVs. David called out a few metrics, but that program continues to go really well. Our capability is now -- help us cover pretty much 75% of CTV that's out there, and we will continue to expand that. Then comes the actual work on the traditional rating, which is what we would call linear broadcast. And the big move there is incorporating big data to drive obviously much more breadth, depth, granularity by also leveraging the panels there.

So that is on track. January '22 is when we start to put that out there in the marketplace at scale for the market to start to play around with it and get a feel for it. It will have a pretty much a year of prior-year data so that people can use and learn from the change in the obvious methodology and the scale of the product. And then continuing to expand the rollout of meters through the panel. Like we've said, the panel is an important component to make sure the meters capture things sub minutes, which is important ultimately to the vision of driving de-duplicated cross-media currency, which by putting it all together is our time line for end of 2022. So everything is progressing like we have wanted. And I'll just also go out and say we're looking at every opportunity to accelerate because that's what clients are asking us for. But we feel very optimistic and are excited not just by the progress we've made, but also the milestones that we will hit as we have so far in the last 18 months. Thank you.

David Kenny -- Chief Executive Officer

And George, wrapping up with what Linda and Karthik said, because underneath your question, there's a couple of clients who've been vocal and had headlines and that was referred to earlier. To contrast that, I would just remind you what I said, which is audience measurement did grow organically 4.4%. I would say, in terms of things that are performing exceptionally well, as I said, digital-first clients and the digital components of the national clients has been great growth. And our national clients have continued to grow quite nicely. So there's one thing, what you're reading in the press, there's another thing about what's actually happening in the business.

George Tong -- Goldman Sachs -- Analyst

Very helpful. Thank you.

Operator

And your next question comes from Tony Kaplan with Morgan Stanley. Please go ahead.

Greg Parrish -- Morgan Stanley -- Analyst

Hey, It's Greg Parrish for Tony. Linda, I wanted to talk about the EBITDA margin guide. I know you sort of addressed, but hoping you could help bridge a little bit more. You called out return of COVID costs, but the compressions look pretty robust in the fourth quarter. So I'm wondering if maybe there's something else that we're missing, anything else to call out. I think, previously, you've talked about bonuses. Maybe those are pretty significant, given your performance has been so strong. Anything to help us bridge there?

Linda Zukauckas -- Chief Financial Officer

Sure, Greg. Thanks for the question. So a little bit like revenue, there are a lot of moving parts on margin as well. And maybe I'll just kind of take you back to last year. First, on revenue, we had the most pronounced COVID loss in Q2 and Q3 of 2020. And those declines started to lessen as we moved into Q4 last year. And then to your point, we did take actions early in 2020 and really protect our margins at that time. And we cut a lot of temporary costs and that had a range of different underlying levers as you referenced from executive salaries to 401(k) contributions. We had furloughs. And of course, G&E, as every company that's been faced by this pandemic had. And so that was about $100 million of temporary costs. And those costs started to come back in early 2021, but they've come back at a slower pace. And that has given us some flexibility to continue to invest in the business. And it gave us the flexibility to invest in both growth initiatives and our panel restoration activities.

So we felt really, really good about the additional flexibility that, that gave us. But we do expect those costs to continue to return, the temporary costs into Q4. And if I just use T&E as a directional example, we're pretty much seeing those costs -- they're at a very low level, record low level, but we're pretty much seeing those costs double each quarter. And so I think that's probably a pretty good indication of how slowly but surely, we are recovering from this pandemic. The other thing that I think is important to mention, Greg, is optimization plan that we implemented last year. And again, as I referenced earlier, we implemented that plan really to protect our margins last year. And we've got the margins laid out in our deck on page eight. But if you actually saw the Q2 '20 margins, they were considerably lower at 40.8%. And so when we implemented that plan, it gave us a really nice lift on the margin in the balance of 2020.

But most of the initiatives played out in the second half of 2020, and they were phased in. And so we'll -- we saw the most benefit that optimization plan in Q4 last year. And of course, in the second half year, we're lapping that program. We are continuing to make investments and feel good overall about where things stand. But as a result of all of this, we do anticipate that the margin compression will be greater in Q4 than in Q3. I would note that we raised the low end of our 2021 EBITDA guidance, and we maintained our full year margin forecast, which is the 42.3% to the 42.6% but as a point of reference, that compares to a pro forma margin of 42% in 2020. So still very strong margins overall.

Greg Parrish -- Morgan Stanley -- Analyst

Great. Thank you.

Linda Zukauckas -- Chief Financial Officer

Thank you, Greg.

Operator

Your next question comes from Doug Arthur with Huber Research. Please go ahead.

Doug Arthur -- Huber Research -- Analyst

Yes. Thank you. I'm not sure if this is for David or Karthik, but two questions. One, what are kind of the main friction points on raising the household panel number? I mean coming out of COVID, I'm just wondering if you could discuss that. And then secondly, I mean, obviously, you made reference to NBCU, has made a lot of headlines. Wondering if you can sort of put the Nielsen-NBC relationship in some kind of historical context. And any comments you could add in terms of what's going on there?

David Kenny -- Chief Executive Officer

I'm going to let Karthik take the panel question, and then I'll come back on the second one around NBCU and others, actually. Karthik?

Karthik Rao -- Chief Operating Officer

Thanks, David. Doug, what we're working on first is getting the panel back to the health and wealth it had prior to COVID, and we feel very good about the work plan that we're executing against. If you ask anyone in the world, what should the size of a panel be? The typical answer is as big as you can make it, but that's not how we view the world. We view the world as a combination of data sources that is our strategy. So when David talks about the role of big data, it's all about how you get the best of each of these capabilities into the product, ultimately, for strength resiliency coverage. So we are very confident in the product strategy and the role the panel and its components play in that. But what we're working on immediately is just to get the remediation plan executed, which was sort of called out as the cause for the accreditation challenges we've had. So that's the way we're thinking about it.

Again, last thing I'll just point out is different components of our panel augment the overall capability. So when you think about the role of streaming platforms and being able to provide robust data there, that's where things like the streaming meter make a huge difference, right? And there's nothing else out there in the marketplace that provides that level of breadth, accuracy and granularity. So there is many components to this. But right now, what we're focused on is the overall product strategy to get the Nielsen ONE. Back to you, David.

David Kenny -- Chief Executive Officer

Yes, listen, I don't necessarily need to go deep on any client. But I would say NBC, first of all, is a good client. We have a good relationship. There are a number of folks I respect there, starting with their CEO, who I consider a friend. And quite honestly, I think their research people are really solid, and we learn from each other. So I want to start with that. And bringing together everybody across optimization, analytics and measurement is a good thing. So yes, we were glad to participate in that process and actually get called out specifically as being an important player to help with the evolution. So I want to say there's good intent. Beyond that, though, what I would say is where I started today's remarks with the change in industry, it's dramatic. I mean the fact that over five years, 1/3 of the total time spent on linear has gone away. The fact that we now have four out of 10 households no longer having a cable subscription, that fundamentally means no matter what I do, the ratings for the cable channels are close to 0 on the linear side. And it causes everyone to compete for the other half, which is dominantly streaming.

That's going to change measurement. That's going to cause people to really want to step up and explain those answers. And I would say as their transition points, like the introduction of cable channels, then the introduction of the VCR, the early growth -- not only streaming but digital broadly, there's always noise about the measurement until people settle down. So I do think there is some noise now. And I think there are some constructive criticisms around COVID that we're taking seriously and improving. But I also think the noise will die down as things settle into a new state. And that state is going to be predominantly driven by streaming for most content. I think live events continue to have a role in broadcast. And so you end up with a live event world dominated by sports and an entertainment world driven by streaming. We're going to measure both. We're going to make them comparable. And as we do that, we're going to serve the industry and people will move on.

Doug Arthur -- Huber Research -- Analyst

Okay. Great. Thank you.

Operator

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

Jeff Meuler -- Baird -- Analyst

Yes. Thank you. Good morning. As I calculate the organic constant currency two-year CAGR, this quarter, I think you're in like the 1.5% range. And Linda, you said you feel confident at mid-single digit for next year. So help us understand the categories that bridge that acceleration. I hear a lot of goodness as it relates to innovation and client adoption and contract renewals in your prepared remarks. So maybe it's the timing of those factors. But does Nielsen ONE rollout also play into it? Is there incremental COVID recovery? If you could just help me bridge the categories. And then if I could squeeze in a second. You are fast approaching essentially there on your leverage target. In the prepared remarks, you said that as you approach that, you can think more broadly about deploying capital. How does the Board feel about a repurchase at this valuation? Or are you more talking about leaning in on M&A?

Linda Zukauckas -- Chief Financial Officer

Yes. Thanks for your questions, Jeff. And you kind of answered the first question because you ran a lot of the things that we're also seeing as we think about the revenue growth, clearly COVID, the impact year-over-year basis and seeing that revenue return. But it's not fully back to what we would have expected or would have hoped that it would be. Sports is a good example where things just aren't quite the way they were pre-COVID. And then as I referenced in my prepared remarks, we're seeing -- and in response to one of the questions, the whole supply chain situation bears some relevance in our outcome space with regard to what kind of spend we might see in the near term by our clients in that space. And David referenced as did I, how pleased we are with growth in national, and then our digital-first clients are also showing really strong growth. And I would point out too, that we're seeing growth around the world. We're certainly seeing strong growth, and it accelerated in the U.S. And we're seeing very solid growth in our international markets as well.

On a reported basis, Jeff, I would just remind you that there were some businesses that we also exited as a part of our optimization plan. And so you still see that revenue on a reported basis in the prior year, and they were lower-growth businesses, generally speaking. And I think we're starting to see the benefit of our growth initiatives, and we feel good also about renewals that we've done during the course of the year. So it's a combination of all of those that cause us to feel really good about the outlook from a revenue perspective. With regards to leverage, we are so pleased to be approaching the high end of what we've guided as our medium-term range, having ended the quarter at 3.15 times net debt. As far as deploying capital, we feel like we now have a range of options in front of us, but we're going to be very thoughtful about it.

And we're definitely going to look at what can give us the highest return on our capital. We work hard to grow that capital, and we want to make sure that we're deploying it in a very smart way. And we are in the midst right now of our annual planning cycle. And we're in ongoing dialogue with the Board about ways in which to deploy that capital. We like investing in the business right now, and you've seen some of that play out during the course of the year. We will consider tuck-in M&A as we've described in the past. And then certainly, return of capital to shareholders is an option. And it's just really nice to be having the level of flexibility where we can start thinking in earnest about that range of options, and we're very excited about that.

Jeff Meuler -- Baird -- Analyst

Thank you very much.

Linda Zukauckas -- Chief Financial Officer

Thank you.

Operator

Your next question comes from Ashish Sabadra with RBC Capital Markets.

John [Phonetic] -- RBC Capital Markets -- Analyst

This is John filling in for Ashish. Is the media lake still on track to complete migration by year-end? Maybe you could touch on the product pipeline that we built on the data lake?

David Kenny -- Chief Executive Officer

Karthik, why don't you take that one?

Karthik Rao -- Chief Operating Officer

Yes. Thanks for that. The entire platform is operational. All of the new integrations that we have called out, even in Q3 have all been built on the new platform. So we're very excited about the leverage that's given us the efficiency and the speed. So yes, our technology road map has gone effectively flawlessly over the last 18 months. And that's the basis for why we're so optimistic around everything we're doing around the product transformation, leading us to the notion of coverage, comparability and resiliency. It all depends on being able to do things off of the platform, and it's gone really well.

John [Phonetic] -- RBC Capital Markets -- Analyst

Okay. Thank you.

Operator

And your next question comes from Matthew Thornton with Truist Securities. Please go ahead.

Matthew Thornton -- Truist Securities -- Analyst

Hey. Good morning everybody. Maybe just a quick side note, I think the increased disclosures around panel and the use of big data is extremely helpful. So I appreciate that. Two quick ones, if I could. David, when you think about the delivery or build up to Nielsen ONE next year, I'm curious how you think that -- how that goes. Is that a very iterative process, a back-and-forth process with your key stakeholders throughout the year, and so there'll be a lot of feedback? Or is this, we deliver this by 4Q next year and hope that everyone rallies around it or worst case, obviously, there's a lot of pushback? So I'm curious to your thoughts as to how that kind of plays out and what you would do to kind of control that process. And then just secondly, could you remind us, the revenue split, when we think about buy side versus sell side, kind of what the revenue split is currently and where you envision that going if you're successful with your kind of medium-term outlook.

David Kenny -- Chief Executive Officer

Great. So to be clear, there are clients we're engaging with today, agencies, digital platforms, advertisers and, of course, publishers and networks because this affects everybody. So we are certainly getting feedback today, not just on the estimates which we produce, but also improving the workflow. And as Karthik talked about earlier, the ecosystem really matters because we're -- Nielsen is so uniquely and deeply embedded into the transactional systems, the invoicing containment systems, if you will, that -- and reconciliation that we need to make sure that all evolves with us. And so that's happening. And we will continue to hit key milestones on big data. So some of that we're sharing right now. We started with the MRC, and we shared it with clients so they can see as big data is in the national measurement, what that looks like and how it feels more stable and robust. So we'll continue to share it. It will continue to be iterative. And this is why earlier, we talked to you about 24. We hope to have everything -- I would say we really plan to have everything operational by Q4 of next year. It will come throughout the year.

And once that happens, then people will be able to use it and they'll also have the legacy system to compare so that they can manage. But our hope is to move everything to the new system and not maintain an old and a new version as of next year. I'd say the other thing that we're engaging with the industry on is getting everybody to a common data set. That actually will help. That was a big lift for the local market to make sure that we could add all the broadband-only homes in there. Those are homes that have neither a cable subscription nor an antenna. So it's not producing a lot of local volume, but it needed to be there to be able to measure everything off the same system and quite honestly, in order to move to impressions for local. So we're getting there across the board. And I think that announcement was indicative of where we'll be in the future. When we announced, we had two of the big station owners and two of the big agencies endorse it. And we're going to continue to work that way, more arm-in-arm with the industry in the rollout of Nielsen ONE throughout next year. So that's part one. In terms of the mix, I'll remind you where we were at Investor Day, and it hasn't changed much and that 49% of our revenue was from global media companies, and that includes the digital pure plays; another, I guess, 26% was from the local players, audio and video.

So that would add up to about 3/4 of the revenue coming from the supply side or the publisher side. However, and I think this is important for people to remember, that's the revenue, but that's not the leverage in the system. To be clear, advertisers decide what currency they want to transact on. You've seen people put out press releases that they've got some new measurement system that you can now use. That can be done. But what really matters is what measurement system the buyer chooses to use. So I would say our focus as a company is focused on adding value to the industry with the best measurement. And the advertisers and agencies have an enormous role in our economics because they're the ones who are demanding the currency that best serves their purposes and quite honestly, the currency that best gives them the answer they need. So we have to continue to work with both sides on an equal basis. Thanks for the question, Matt. Very insightful.

Operator

This is all the time that we have for today's questions. I will turn the call back over to David Kenny for closing remarks.

David Kenny -- Chief Executive Officer

Listen, I want to thank all of you for joining us this morning. I hope you see that our goal is to be as transparent as possible. And I really hope we answered all your questions today. I hope you also share the enthusiasm and confidence that Linda, Karthik and I and the rest of our team have in what we're doing here at Nielsen. We're very excited. We're not getting distracted by external noise. We're constantly focused on delivering the best product to the market, and we totally believe that we'll continue to deliver for our clients, for the industry and for you as our shareholders. So thank you. See you next quarter.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Sara Gubins -- Senior Vice President Head of Investor Relations And Treasury

David Kenny -- Chief Executive Officer

Linda Zukauckas -- Chief Financial Officer

Karthik Rao -- Chief Operating Officer

Tim Nollen -- Macquarie -- Analyst

Andrew Steinerman -- JMP -- Analyst

Dan Salmon -- BMO Capital Markets -- Analyst

George Tong -- Goldman Sachs -- Analyst

Greg Parrish -- Morgan Stanley -- Analyst

Doug Arthur -- Huber Research -- Analyst

Jeff Meuler -- Baird -- Analyst

John [Phonetic] -- RBC Capital Markets -- Analyst

Matthew Thornton -- Truist Securities -- Analyst

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