UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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5th Floor Endeavour House |
(
(Address of principal executive offices) (Zip Code) (Registrant’s telephone numbers including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
** The registrant has filed during the preceding 12 months all reports it was required to file by Section 13 or 15(d) of the Securities Exchange Act of 1934. On October 24, 2022, the registrant filed a Form 15 with the Securities and Exchange Commission. As a result, as of the date of this filing, the registrant is no longer subject to filing requirements and is a voluntary filer.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
Table of Contents
Contents
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PART I. |
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- 3 - |
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Item 1. |
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- 3 - |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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- 39 - |
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Item 4. |
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- 40 - |
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PART II. |
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Item 1. |
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- 41 - |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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- 44 - |
PART I. FINANCIAL INFORMATION
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Item 1. |
Condensed Consolidated Financial Statements |
Nielsen Holdings plc
Condensed Consolidated Statements of Operations (Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of revenues, exclusive of depreciation and amortization shown separately below |
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Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
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Depreciation and amortization |
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Restructuring charges |
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Operating income |
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Interest expense, net |
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Other expense/(income), net |
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( |
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Income from continuing operations before income taxes and equity in net income of affiliates |
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Provision for income taxes |
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Equity in net income of affiliates |
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— |
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( |
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Net income from continuing operations |
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Net income/(loss) from discontinued operations, net of income taxes |
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( |
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Net income |
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Net income attributable to noncontrolling interests |
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Net income attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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Net income per share of common stock, basic |
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Net income from continuing operations attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
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$ |
— |
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$ |
( |
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$ |
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$ |
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Net income attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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Net income per share of common stock, diluted |
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Net income from continuing operations attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
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$ |
— |
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$ |
( |
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$ |
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$ |
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Net income attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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Weighted-average shares of common stock outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -
Nielsen Holdings plc
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(IN MILLIONS) |
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2022 |
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2021 |
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2022 |
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2021 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss)/income, net of tax |
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Foreign currency translation adjustments |
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( |
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( |
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( |
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Changes in the fair value of cash flow hedges |
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Net unrealized pension and other post-retirement benefits, net of tax |
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Total other comprehensive (loss)/income |
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( |
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( |
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( |
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Total comprehensive income |
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Less: comprehensive (loss)/income attributable to noncontrolling interests |
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Total comprehensive income attributable to Nielsen shareholders |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -
Nielsen Holdings plc
Condensed Consolidated Balance Sheets
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September 30, |
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December 31, |
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(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) |
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2022 |
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2021 |
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(Unaudited) |
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Assets: |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Trade and other receivables, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Non-current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use asset |
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Goodwill |
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Other intangible assets, net |
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Deferred tax assets |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and equity: |
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Current liabilities |
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Accounts payable and other current liabilities |
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$ |
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$ |
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Deferred revenues |
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Income tax liabilities |
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Current portion of long-term debt, finance lease obligations and short-term borrowings |
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Total current liabilities |
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Non-current liabilities |
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Long-term debt and finance lease obligations |
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Deferred tax liabilities |
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Operating lease liabilities |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 10) |
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Equity: |
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Shareholders’ equity |
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Common stock, € |
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Additional paid-in capital |
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Retained earnings/(accumulated deficit) |
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( |
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Accumulated other comprehensive loss, net of income taxes |
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( |
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( |
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Total shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -
Nielsen Holdings plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
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Nine Months Ended |
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September 30, |
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(IN MILLIONS) |
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2022 |
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2021 |
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Operating Activities |
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Net income from continuing operations |
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$ |
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$ |
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Net income/(loss) from discontinued operations |
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( |
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Gain on disposal of Global Connect, net of tax, within discontinued operations |
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- |
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Net income |
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Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |
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Share-based compensation expense |
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Gain on sale of discontinued operations, net of tax |
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- |
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( |
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Currency exchange rate differences on financial transactions and other (gains)/losses |
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( |
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Equity in net income of affiliates, net of dividends received |
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( |
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- |
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Depreciation and amortization |
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Changes in operating assets and liabilities, net of effect of businesses acquired and divested: |
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Trade and other receivables, net |
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( |
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( |
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Prepaid expenses and other assets |
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( |
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Accounts payable and other current liabilities and deferred revenues |
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( |
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Other non-current liabilities |
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( |
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( |
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Interest payable |
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Income taxes |
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( |
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Net cash provided by operating activities |
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Investing Activities |
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Acquisitions of subsidiaries and affiliates, net of cash acquired |
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( |
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( |
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Proceeds from the sale of subsidiaries and affiliates, net |
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Additions to property, plant and equipment and other assets |
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( |
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( |
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Additions to intangible assets |
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( |
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( |
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Proceeds from the sale of property, plant and equipment and other assets |
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- |
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Other investing activities |
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- |
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Net cash (used in)/provided by investing activities |
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( |
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Financing Activities |
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Proceeds from the issuance of debt, net of issuance costs |
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- |
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Repayment of debt |
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- |
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( |
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Cash dividends paid to shareholders |
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( |
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( |
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Payments related to tax withholding for share-based payment arrangements |
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( |
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( |
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Proceeds from employee stock purchase plan |
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Finance leases |
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( |
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( |
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Other financing activities |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange-rate changes on cash and cash equivalents |
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( |
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( |
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Net increase/(decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental Cash Flow Information |
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Cash paid for income taxes |
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$ |
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$ |
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Cash paid for interest, net of amounts capitalized |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 6 -
Nielsen Holdings plc
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended September 30, 2022 (Unaudited)
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Accumulated Other Comprehensive Income (Loss), Net |
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Retained |
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Additional |
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Earnings |
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Currency |
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Cash |
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Post |
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Total Nielsen |
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Common |
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Paid-in |
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(Accumulated) |
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Translation |
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Flow |
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Employment |
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Shareholders’ |
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Noncontrolling |
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Total |
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(IN MILLIONS) |
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Stock |
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Capital |
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(Deficit) |
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Adjustments |
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Hedges |
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Benefits |
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Equity |
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Interests |
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Equity |
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Balance, June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Currency translation adjustments, net of tax of |
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— |
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— |
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— |
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( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash flow hedges, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net unrealized pension and other postretirement benefits, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Dividends to shareholders ($ |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Payments related to tax withholding for share-based payment arrangements |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance, September 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 7 -
Nielsen Holdings plc
Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2022 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss), Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Currency |
|
|
Cash |
|
|
Post |
|
|
Total Nielsen |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated) |
|
|
Translation |
|
|
Flow |
|
|
Employment |
|
|
Shareholders’ |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
|
(IN MILLIONS) |
|
Stock |
|
|
Capital |
|
|
(Deficit) |
|
|
Adjustments |
|
|
Hedges |
|
|
Benefits |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||
|
Balance, December 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
|
|
$ |
( |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash flow hedges, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net unrealized pension and other postretirement benefits, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Capital contribution by non-controlling partner |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Dividends to shareholders ($ |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
) |
|
Payments related to tax withholding for share-based payment arrangements |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Employee stock purchase plan |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance, September 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
0 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 8 -
Nielsen Holdings plc
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended September 30, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss), Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Currency |
|
|
Cash |
|
|
Post |
|
|
Total Nielsen |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated) |
|
|
Translation |
|
|
Flow |
|
|
Employment |
|
|
Shareholders’ |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
|
(IN MILLIONS) |
|
Stock |
|
|
Capital |
|
|
(Deficit) |
|
|
Adjustments |
|
|
Hedges |
|
|
Benefits |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||
|
Balance, June 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash flow hedges, net of tax of ( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net unrealized pension and other postretirement benefits, net of tax of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Dividends to shareholders ($ |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Common stock activity from share-based compensation plans |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Other |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance, September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 9 -
Nielsen Holdings plc
Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss), Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Currency |
|
|
Cash |
|
|
Post |
|
|
Total Nielsen |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated) |
|
|
Translation |
|
|
Flow |
|
|
Employment |
|
|
Shareholders’ |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
|
(IN MILLIONS) |
|
Stock |
|
|
Capital |
|
|
(Deficit) |
|
|
Adjustments |
|
|
Hedges |
|
|
Benefits |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||
|
Balance, December 31, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash flow hedges, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net unrealized pension and other postretirement benefits, net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income gain/(loss) on disposition net of tax of $( |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Dividends to shareholders ($ |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Common stock activity from share-based compensation plans |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Other |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Balance, September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 10 -
Nielsen Holdings plc
Notes to Condensed Consolidated Financial Statements
Note 1. Background and Basis of Presentation
Background
Nielsen Holdings plc (“Nielsen” or the “Company”), together with its subsidiaries, serves the world’s media and content ecosystem and is a global leader in audience measurement, data and analytics. Through Nielsen’s understanding of people and their behaviors across all channels and platforms, Nielsen empowers its clients with independent and actionable intelligence so they can connect and engage with their audiences—now and into the future.
Nielsen provides a holistic and objective understanding of the media industry to its various client segments. Nielsen’s data is used by its publishing clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content. Nielsen’s data is used by its marketer and advertiser agency clients to plan and optimize their spend and is used by its content creator clients to inform decisions and identify trends.
Nielsen has operations in more than
Transaction with Consortium of Private Investment Funds
On March 28, 2022, Nielsen entered into a definitive agreement, as amended on August 19, 2022 (the “Transaction Agreement”) to be acquired by Neptune Intermediate Jersey Limited and Neptune BidCo US Inc. (collectively, the “Purchasing Entities”) by way of a scheme of arrangement (the “Scheme”) between the Company and the Scheme Shareholders (as defined in the Scheme) under Part 26 of the United Kingdom Companies Act 2006. The Purchasing Entities are controlled by a consortium of private investment funds led by Evergreen Coast Capital Corporation, an affiliate of Elliott Investment Management L.P., and Brookfield Business Partners L.P., together with institutional partners (collectively, the “Consortium”). The Transaction Agreement provided that at the effective time of the Transaction, all ordinary shares would be transferred from Nielsen’s shareholders to Neptune BidCo US Inc. in accordance with the provisions of the Scheme and the laws of England and Wales (the “Transaction”), and that Scheme Shareholders would receive the consideration of $
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the Company’s financial position and the results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States (“GAAP”) applicable to interim periods. For a more complete discussion of significant accounting policies, commitments and contingencies and certain other information, refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. All amounts are presented in U.S. Dollars (“$”), except for share data or where expressly stated as being in other currencies, e.g., Euros (“€”). The condensed consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. The Company has evaluated events occurring subsequent to September 30, 2022 for potential recognition or disclosure in the condensed consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided (See Note 13 – Subsequent Events).
- 11 -
Earnings per Share
Basic net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock primarily consist of employee stock options and restricted stock units.
|
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||
|
|
|
|
2022 |
|
2021 |
|
2022 |
|
|
2021 |
|
|||
|
Weighted-average shares of common stock outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Dilutive shares of common stock |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Weighted-average shares of common stock outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|||
The effect of
The effect of
Discontinued Operations
We consider assets to be held for sale when management, having the authority through shareholder approval, commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of an asset at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with GAAP, assets held for sale are not depreciated or amortized.
If the disposal of the component of an entity (or group of components) represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, it meets the criteria for discontinued operations. The results of discontinued operations, as well as any gain or loss on the disposal transaction, are presented separately, net of tax, from the results of continuing operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by the discontinued segment that may be reasonably segregated from the costs of the ongoing operations of the Company. Certain corporate costs directly attributable to the discontinued operations and transaction costs directly related to the sale are also presented within net income/(loss) from discontinued operations, net of income taxes. Beginning in the first quarter of 2021, Global Connect met the criteria set forth in ASC 205 – 20 “Presentation of Financial Statements – Discontinued Operations,” and has been presented on a discontinued operations basis for all periods presented. Given the Global Connect segment represented a separate segment and approximately
Note 2. Summary of Recent Accounting Pronouncements
Reference Rate Reform-Facilitation of the Effects of Reference Rate Reform on Financial Reporting
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
- 12 -
Note 3. Revenue Recognition
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a customer, which generally occurs over time. Substantially all of the Company’s customer contracts are non-cancelable and non-refundable.
Revenue is primarily generated from television, radio, digital and mobile audience measurement services and analytics, which are used by the Company’s clients to establish the value of airtime and more effectively schedule and promote their programming and the Company’s advertising clients to plan and optimize their spending. As the customer simultaneously receives and consumes the benefits provided by the Company’s performance, revenues for these services are recognized over the period during which the performance obligations are satisfied and control of the service is transferred to the customer.
The Company enters into cooperation arrangements with certain customers, under which the customer provides Nielsen with its data in exchange for Nielsen’s services. Nielsen records these transactions at fair value, which is determined based on the fair value of goods or services received, if reasonably estimable. If not reasonably estimable, the Company considers the fair value of the goods or services surrendered.
The table below sets forth the Company’s revenue disaggregated by major product offerings and timing of revenue recognition for the three and nine months ended September 30, 2022 and 2021.
|
(IN MILLIONS) (UNAUDITED) |
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Measurement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Impact/Content |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and services transferred over time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Products transferred at a point in time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Contract Assets and Liabilities
Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. While the Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied, under certain circumstances the related billing occurs in arrears, generally within one month of the services being rendered.
At the inception of a contract, the Company generally expects the period between when it transfers its services to its customers and when the customer pays for such services will be one year or less.
Contract liabilities relate to advance consideration received or the right to consideration that is unconditional from customers for which revenue is recognized when the performance obligation is satisfied and control transferred to the customer.
- 13 -
The table below sets forth the Company’s contract assets and contract liabilities from contracts with customers.
|
(IN MILLIONS) |
|
|
|
|
|||
|
Contract assets |
|
|
|
|
|
||
|
Balance December 31, 2021 |
|
$ |
|
|
|
||
|
Revenue recognized that was not billed for the period |
|
|
|
|
|
||
|
Contract assets included in December 31, 2021 balance that were invoiced and transferred to trade receivables for the period |
|
|
( |
) |
|
||
|
The effect of foreign currency translation and other |
|
|
( |
) |
|
||
|
Balance September 30, 2022 |
|
$ |
|
|
|
||
|
Contract liabilities |
|
|
|
|
|
||
|
Balance December 31, 2021 |
|
$ |
|
|
|
||
|
Advance consideration received or the right to consideration that is unconditional from customers for which revenue was not recognized for the period |
|
|
|
|
|
||
|
Revenue recognized for the period that was included in the contract liability balance as of December 31, 2021 |
|
|
( |
) |
|
||
|
The effect of foreign currency translation and other |
|
|
( |
) |
|
||
|
Balance September 30, 2022 |
|
$ |
|
|
|
||
Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2022, approximately $
The Company expects to recognize revenue on approximately
Deferred Costs
Incremental direct costs incurred to build the infrastructure to service new contracts are capitalized as a contract cost. As of September 30, 2022 and December 31, 2021, the balances of such capitalized costs were $
Expected Credit Losses
Nielsen is required to measure expected credit losses on trade accounts receivable. Nielsen considered the asset’s contractual life, the risk of loss and reasonable and supportable forecasts of future economic conditions. The estimate of expected credit losses reflects the risk of loss, even if management believes no loss was incurred as of the measurement date.
The following schedule represents the allowance for doubtful accounts roll forward incorporating expected credit losses as of September 30, 2022 and December 31, 2021, respectively.
|
(IN MILLIONS) |
|
Balance |
|
Charges to |
|
|
Deductions |
|
|
Effect of |
|
Balance at |
|||||||
|
Allowance for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2022 |
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Year ended December 31, 2021 |
|
$ |
|
|
$ |
|
( |
) |
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
- 14 -
Note 4. Other Intangible Assets
Other Intangible Assets
|
|
|
Gross Amounts |
|
|
Accumulated Amortization |
|
||||||||||
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names and trademarks |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Amortized intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names and trademarks |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Customer-related intangibles |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Covenants-not-to-compete |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Content databases |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Computer software |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Patents and other |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Other indefinite-lived intangible assets and goodwill are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. There were
During the first quarter of 2021, pursuant to Nielsen’s sale of its Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Advent”) on March 5, 2021, Nielsen granted Advent a license to brand its products and services with the Nielsen name and other trademarks for
There was
Amortization expense associated with the above intangible assets was $
Amortization expense associated with the above intangible assets was $
At September 30, 2022, the net book value of purchased software and internally developed software was $
- 15 -
Note 5. Changes in and Reclassification out of Accumulated Other Comprehensive Income/(Loss) by Component
The table below summarizes the changes in accumulated other comprehensive income/(loss), net of tax, by component for the nine months ended September 30, 2022 and 2021.
|
|
|
Currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
Post-Employment |
|
|
|
|
|
||
|
|
|
Adjustments |
|
|
Cash Flow Hedges |
|
|
Benefits |
|
|
Total |
|
||||
|
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive (loss)/income before Reclassifications |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive (loss)/income |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Net current period other comprehensive loss attributable to noncontrolling interest |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Net current period other comprehensive (loss)/income attributable to Nielsen shareholders |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Balance September 30, 2022 |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation |
|
|
|
|
|
|
Post-Employment |
|
|
|
|
|
||
|
|
|
Adjustments |
|
|
Cash Flow Hedges |
|
|
Benefits |
|
|
Total |
|
||||
|
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss before Reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive loss attributable to noncontrolling interest |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Net current period other comprehensive income attributable to Nielsen shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2021 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
- 16 -
The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three months ended September 30, 2022 and 2021, respectively.
|
|
|
Amount Reclassified from |
|
|
|
|||||
|
|
|
Accumulated Other |
|
|
|
|||||
|
(IN MILLIONS) |
|
Comprehensive Loss/(Income) |
|
|
|
|||||
|
Details about Accumulated |
|
|
|
|
|
|
|
|
|
Affected Line Item in the |
|
Other Comprehensive |
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Condensed Consolidated |
||
|
Income components |
|
September 30, 2022 |
|
|
September 30, 2021 |
|
|
Statement of Operations |
||
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
— |
|
|
$ |
|
|
|
Interest (income)/expense |
|
|
|
|
— |
|
|
|
( |
) |
|
(Benefit)/provision for income taxes |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Total, net of tax |
|
Post-Employment Benefits |
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss(1) |
|
$ |
|
|
|
$ |
|
|
|
Other expense, net |
|
|
|
|
( |
) |
|
|
( |
) |
|
(Benefit)/provision for income taxes |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total, net of tax |
|
Total reclassification for the period |
|
$ |
|
|
|
$ |
|
|
|
Net of tax |
|
|
(1) |
This accumulated other comprehensive loss component is included in the computation of net periodic pension cost. |
The table below summarizes the reclassification of accumulated other comprehensive loss by component for the nine months ended September 30, 2022 and 2021, respectively.
|
|
|
Amount Reclassified from |
|
|
|
|||||
|
|
|
Accumulated Other |
|
|
|
|||||
|
(IN MILLIONS) |
|
Comprehensive Loss/(Income) |
|
|
|
|||||
|
Details about Accumulated |
|
|
|
|
|
|
|
|
|
Affected Line Item in the |
|
Other Comprehensive |
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
Condensed Consolidated |
||
|
Income components |
|
September 30, 2022 |
|
|
September 30, 2021 |
|
|
Statement of Operations |
||
|
Currency Translation Adjustments |
|
|
|
|
|
|
|
|
|
|
|
Currency translation (gains)/losses on dispositions(2) |
|
$ |
— |
|
|
$ |
|
|
|
Net income/(loss) from discontinued operations |
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
|
|
|
$ |
|
|
|
Interest (income)/expense |
|
|
|
|
( |
) |
|
|
( |
) |
|
(Benefit)/provision for income taxes |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total, net of tax |
|
Post-Employment Benefits |
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss(1) |
|
$ |
|
|
|
$ |
|
|
|
Other expense, net |
|
|
|
|
( |
) |
|
|
( |
) |
|
(Benefit)/provision for income taxes |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total, net of tax |
|
Unrealized (gains)/losses on pension liability on dispositions(2) |
|
$ |
— |
|
|
$ |
|
|
|
Net income/(loss) from discontinued operations |
|
|
|
|
— |
|
|
|
( |
) |
|
(Benefit)/provision for income taxes |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Total, net of tax |
|
Total Post-Employment Benefits reclassified from accumulated other comprehensive (income)/loss |
|
$ |
|
|
|
$ |
|
|
|
|
|
Total reclassification for the period |
|
$ |
|
|
|
$ |
|
|
|
Net of tax |
|
|
(1) |
This accumulated other comprehensive loss component is included in the computation of net periodic pension cost. |
- 17 -
|
|
(2) |
The sale of Global Connect resulted in a total reclassification from accumulated other comprehensive income of $ |
Note 6. Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.
There are three levels of inputs that may be used to measure fair value:
|
Level 1: |
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
|
|
Level 2: |
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
|
|
Level 3: |
|
Pricing inputs that are generally unobservable and may not be corroborated by market data. |
- 18 -
Financial Assets and Liabilities Measured on a Recurring Basis
The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity method investments and long-term debt. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. In addition, the Company records changes in the fair value of equity investments with readily determinable fair values in net income rather than in accumulated other comprehensive income/(loss). Investments that do not have readily determinable fair values are recognized at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adjustments related to the observable price changes will also be recognized in net income.
The following table summarizes the valuation of the Company’s material financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:
|
|
|
September 30, |
|
|||||||||||||
|
(IN MILLIONS) |
|
2022 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets for deferred compensation (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Investment in mutual funds (2) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Interest rate swap arrangements (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Warrant (3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Other non-current liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Deferred compensation liabilities (5) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
December 31, |
|
|||||||||||||
|
|
|
2021 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets for deferred compensation (1) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Investment in mutual funds (2) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Warrant(3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Other non-current liabilities |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Deferred compensation liabilities (5) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
— |
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
- 19 -
|
(4) |
|
|
(5) |
|
Derivative Financial Instruments
Nielsen primarily uses interest rate swap derivative instruments to manage the risk that changes in interest rates will affect the cash flows of its underlying debt obligations.
To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions as well as the hedge effectiveness assessment, both at the hedge inception and on an ongoing basis. Nielsen recognizes all derivatives at fair value either as assets or liabilities in the consolidated balance sheets, and changes in the fair values of such instruments are recognized currently in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, Nielsen recognizes the changes in fair value of these instruments in accumulated other comprehensive income/(loss).
Nielsen manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that Nielsen has with any individual bank and through the use of minimum credit quality standards for all counterparties. Nielsen does not require collateral or other security in relation to derivative financial instruments. A derivative contract entered into between Nielsen or certain of its subsidiaries and a counterparty that was also a lender under Nielsen’s senior secured credit facilities at the time the derivative contract was entered into is guaranteed under the senior secured credit facilities by Nielsen and certain of its subsidiaries (See Note 7 – Long-term Debt and Other Financing Arrangements for more information). Since it is Nielsen’s policy to only enter into derivative contracts with banks of internationally acknowledged standing, Nielsen considers the counterparty risk to be remote.
It is Nielsen’s policy to have an International Swaps and Derivatives Association (“ISDA”) Master Agreement established with every bank with which it has entered into any derivative contract. Under each of these ISDA Master Agreements, Nielsen agrees to settle only the net amount of the combined market values of all derivative contracts outstanding with any one counterparty should that counterparty default. Certain of the ISDA Master Agreements contain cross-default provisions pursuant to which the Company could be declared in default on its derivative obligations if the Company either defaults in payment obligations under its credit facility or if such obligations are accelerated by the lenders. At September 30, 2022, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments.
Foreign Currency Exchange Risk
For the nine months ended September 30, 2022 and 2021, Nielsen recorded a net loss of $
Interest Rate Risk
Nielsen is exposed to cash flow interest rate risk on the floating-rate U.S. Dollar Loans, and uses floating-to-fixed interest rate swaps to hedge this exposure. For these derivatives, Nielsen reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income/(loss) and reclassifies it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the same income statement line item as the impact of the hedged transaction.
As of September 30, 2022, the Company had the following U.S. Dollar term loan floating-to-fixed rate outstanding interest rate swaps designated as hedges utilized in the management of its interest rate risk:
|
|
|
Notional Amount |
|
|
Maturity Date |
|
|
Interest Rates |
|
|
|
$ |
|
|
|
|
|
|
|
% |
|
|
$ |
|
|
|
|
|
|
|
% |
|
|
$ |
|
|
|
|
|
|
|
% |
|
|
$ |
|
|
|
|
|
|
|
% |
- 20 -
The effect of cash flow hedge accounting on the condensed consolidated statement of operations for the three and nine months ended September 30, 2022 and 2021 respectively is as follows:
|
|
|
|
Interest Expense |
Interest Expense |
|
|
|||||||||
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|
|||||||||
|
(IN MILLIONS) |
|
|
2022 |
|
|
2021 |
|
2022 |
|
|
2021 |
|
|
||
|
Interest expense, net (Location in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded) |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
|
Amount of loss reclassified from accumulated other comprehensive income into income, net of tax |
|
$ |
— |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
.
As of September 30, 2022, Nielsen expects to recognize approximately $
In anticipation of the closing of the Transaction, which occurred on October 11, 2022, Nielsen terminated all of the outstanding interest rate swaps on October 6, 2022 for net proceeds of $
Derivatives in Cash Flow Hedging Relationships
The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended September 30, 2022 and 2021, respectively, was as follows:
|
|
|
|
|
|
|
|
|
Amount of (Gain)/Loss |
|
||||||||||||||
|
|
|
Amount of (Gain)/Loss |
|
|
|
|
|
Reclassified from AOCI |
|
||||||||||||||
|
|
|
Recognized in OCI |
|
|
Location of (Gain)/ Loss |
|
|
into Income |
|
||||||||||||||
|
|
|
(Effective Portion) |
|
|
Reclassified from AOCI |
|
|
(Effective Portion) |
|
||||||||||||||
|
Derivatives in Cash Flow |
|
Three Months Ended |
|
|
into Income (Effective |
|
|
Three Months Ended |
|
||||||||||||||
|
Hedging Relationships |
|
September 30, |
|
|
Portion) |
|
|
September 30, |
|
||||||||||||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
|
|
|
|
2022 |
|
|
2021 |
|
||||||||
|
Interest rate swaps |
|
$ |
( |
) |
|
$ |
|
|
|
Interest expense |
|
|
$ |
|
|
|
$ |
|
|
||||
The pre-tax effect of derivative instruments in cash flow hedging relationships for the nine months ended September 30, 2022 and 2021, respectively, was as follows:
|
|
|
|
|
|
|
|
|
Amount of (Gain)/Loss |
|
||||||||||||||
|
|
|
Amount of (Gain)/Loss |
|
|
|
|
|
Reclassified from AOCI |
|
||||||||||||||
|
|
|
Recognized in OCI |
|
|
Location of (Gain)/ Loss |
|
|
into Income |
|
||||||||||||||
|
|
|
(Effective Portion) |
|
|
Reclassified from AOCI |
|
|
(Effective Portion) |
|
||||||||||||||
|
Derivatives in Cash Flow |
|
Nine Months Ended |
|
|
into Income (Effective |
|
|
Nine Months Ended |
|
||||||||||||||
|
Hedging Relationships |
|
September 30, |
|
|
Portion) |
|
|
September 30, |
|
||||||||||||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
|
|
|
|
2022 |
|
|
2021 |
|
||||||||
|
Interest rate swaps |
|
$ |
( |
) |
|
$ |
- |
|
|
Interest expense |
|
|
$ |
|
|
|
$ |
|
|
||||
- 21 -
Note 7. Long-term Debt and Other Financing Arrangements
Unless otherwise stated, interest rates are as of September 30, 2022.
Annual maturities of Nielsen’s long-term debt are as follows:
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
||||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
||||||
|
(IN MILLIONS) |
|
Carrying |
|
|
Interest |
|
|
|
Carrying |
|
Interest |
|
|
|
|||||||
|
Senior secured term loans |
|
Amount |
|
|
Rate |
|
|
|
Value |
|
Rate |
|
|
|
|||||||
|
Maturing in |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
||
|
Maturing in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Maturing in |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
|
Total (with weighted-average interest rate) |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|||
|
Senior debenture loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total (with weighted-average interest rate) |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
||
|
Total long-term debt |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
||
|
Finance lease and other financing obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total debt and other financing arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Less: Current portion of long-term debt, finance lease and other financing obligations and other short-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Non-current portion of long-term debt and finance lease and other financing obligations |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
||
The total fair value of senior secured term loans and debenture loans was approximately $
Annual maturities of Nielsen’s long-term debt are as follows:
|
(IN MILLIONS) |
|
|
|
|
|
For October 1, 2022 to December 31, 2022 |
|
$ |
— |
|
|
2023 |
|
|
|
|
|
2024 |
|
|
— |
|
|
2025 |
|
|
|
|
|
2026 |
|
|
— |
|
|
2027 |
|
|
— |
|
|
Thereafter |
|
|
|
|
|
|
|
$ |
|
|
In connection with, and contingent on the closing of the Transaction, Nielsen commenced a tender offer to purchase all of the $
In addition, on October 11, 2022, at the closing of the Transaction, the Purchasing Entities repaid the outstanding senior secured term loans. In connection with the repayment, Nielsen terminated the Sixth Amended and Restated Credit Agreement, dated July 21, 2020 and all commitment thereunder, including the senior secured revolving credit facility.
In October 2022, the Purchasing Entities entered into debt financing of approximately $
- 22 -
Note 8. Shareholders’ Equity
Common stock activity is as follows:
|
|
|
Nine Months Ended |
|
|
|
|
|
September 30, 2022 |
|
|
|
Actual number of shares of common stock outstanding |
|
|
|
|
|
Beginning of period |
|
|
|
|
|
Shares of common stock issued through compensation plans |
|
|
|
|
|
End of period |
|
|
|
|
Dividends and Share Repurchase Program
On January 31, 2013, the Company’s Board of Directors (the “Board”) adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. Under this plan, Nielsen has paid consecutive quarterly cash dividends since 2013. Nielsen paid cash dividends of $
On February 26, 2022, the Board authorized the repurchase of up to $
Note 9. Income Taxes
The effective tax rates for the three months ended September 30, 2022 and 2021 were
The effective tax rates for the nine months ended September 30, 2022 and 2021 were
The estimated liability for unrecognized tax benefits as of September 30, 2022 is $
The Company files numerous consolidated and separate income tax returns in the U.S. Federal jurisdiction and in many state and foreign jurisdictions. The Company is no longer subject to U.S. Federal tax examination for periods prior to 2017. The tax positions and related attributes from 2017 onward are open to examination. In addition, the Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 2011 through 2021, and the tax positions and related attributes in those particular years are also open to examination.
To date, the Company is not aware of any material adjustments not already accrued related to any of the current Federal, state or foreign audits under examination.
- 23 -
Note 10. Commitments and Contingencies
Legal Proceedings and Contingencies
In August 2018, a putative shareholder class action lawsuit was filed in the Southern District of New York, naming as defendants Nielsen, former Chief Executive Officer Dwight Mitchell Barns, and former Chief Financial Officer Jamere Jackson. Another lawsuit, which alleged similar facts but also named other Nielsen officers, was filed in the Northern District of Illinois in September 2018 and transferred to the Southern District of New York in December 2018. The actions were consolidated on April 22, 2019, and the Public Employees’ Retirement System of Mississippi was appointed lead plaintiff for the putative class. The operative complaint was filed on September 27, 2019, and asserts violations of certain provisions of the Securities Exchange Act of 1934, as amended, based on allegedly false and materially misleading statements relating to the outlook of Nielsen’s Buy segment (now “Global Connect,” which was sold in the first quarter of 2021), Nielsen’s preparedness for changes in global data privacy laws and Nielsen’s reliance on third-party data. Nielsen moved to dismiss the operative complaint on November 26, 2019. On January 4, 2021, certain of the allegations against Nielsen and its officers were dismissed, while others were sustained. On February 3, 2022, the parties reached a settlement in principle to resolve this litigation for $
In addition, in January 2019, a shareholder derivative lawsuit was filed in New York Supreme Court against a number of Nielsen’s current and former officers and directors. The derivative lawsuit alleged that the named officers and directors breached their fiduciary duties to the Company in connection with factual assertions substantially similar to those in the putative class action complaint. The derivative lawsuit further alleged that certain officers and directors engaged in trading Nielsen stock based on material, nonpublic information. An amended complaint was filed on May 7, 2021, which Nielsen moved to dismiss on July 16, 2021. After a series of stays, the parties filed a stipulation and order of dismissal, which the Court granted on October 5, 2022.
A series of five lawsuits were filed in federal court and one lawsuit was filed in state court by purported Nielsen shareholders against Nielsen and members of our Board of Directors (collectively, the “Actions”) relating to the Transaction. The plaintiffs in three of the Actions filed notices of voluntary dismissal and sent demand letters to Nielsen making substantially the same allegations as were included in the complaints. Five additional demand letters subsequently were sent to Nielsen on behalf of purported Nielsen shareholders, each alleging similar deficiencies in the proxy statement as the Actions. Before the vote on the Transaction, Nielsen filed a supplemental 8-K disclosure addressing the plaintiffs' claims, and the lawsuits were then dismissed. The lone state court action has been settled and fully resolved. Nielsen will now discuss with plaintiffs' attorneys for the remaining claims payment of legal fees to finalize resolution. Based on present information, such payments are not likely to have a material adverse effect on Nielsen’s business, financial position, or results of operations.
Nielsen is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the ultimate disposition of these matters will have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.
Note 11. Segments
As discussed in Note 12 – Discontinued Operations, the Global Connect segment has been classified as discontinued operations beginning with the first quarter of 2021. The Company evaluated segment reporting in accordance with ASC 280 “Segment Reporting” and beginning with the first quarter of 2021, the Company concluded that it operates as a single operating segment and a single reportable segment consisting principally of television, radio, online and mobile audience and advertising measurement and corresponding analytics. Nielsen aligns its operating segment in order to conform to management’s internal reporting structure. Nielsen operates as a complete unit - from the conception of a product, through the collection of the data, into the technology and operations, all the way to the data being sold and delivered to the client. The reporting structure of Nielsen is and has historically been centralized under one Chief Operating Decision Maker (“CODM”), who evaluates Nielsen’s operating financial results to assess its performance.
- 24 -
Business Segment Information
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|
||||||||||||
|
(IN MILLIONS) |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
||
|
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
||
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Restructuring charges (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Other items (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Adjusted EBITDA (3) |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of September 30, 2022 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
||
|
|
(1) |
|
|
|
(2) |
|
|
|
(3) |
|
- 25 -
Note 12. Discontinued Operations
On October 31, 2020, Nielsen entered into the Stock Purchase Agreement to sell its Global Connect business to affiliates of Advent, for $
The Connect Transaction closed on March 5, 2021. The Company received net proceeds of $
On March 16, 2021, Nielsen completed the partial prepayment of $
In connection with the Connect Transaction, Nielsen and Global Connect entered into a Transition Services Agreement for services that primarily relate to technology functions such as infrastructure and cybersecurity, which continues to run for up to
- 26 -
The following table summarizes the major classes of line items constituting net income from discontinued operations, net of tax:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|||||||||
|
(IN MILLIONS) |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
2021 |
|
|
||
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
|
|
|
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
Restructuring charges |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
Operating income/(loss) |
|
|
|
|
|
|
|
|
- |
|
|
( |
) |
|
|
|
Other income and expenses (1) |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
Income/(loss) from discontinued operations before income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
Benefit/(provision) for income taxes |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
Net income/(loss) from discontinued operations |
|
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
( |
) |
|
|
|
Disposal |
|
|
|
|
|
|
|
|
|
|
|||||
|
(Loss)/gain on disposal before income taxes |
|
$ |
- |
|
$ |
( |
) |
$ |
- |
|
$ |
|
|
|
|
|
Benefit/(provision) for income taxes |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
(Loss)/gain on disposal, net of taxes |
|
|
- |
|
|
( |
) |
|
- |
|
|
|
|
|
|
|
Net income/(loss) from discontinued operations |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net income/(loss) from discontinued operations attributable to noncontrolling interests |
|
|
- |
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
|
$ |
|
|
$ |
( |
) |
$ |
|
|
$ |
|
|
|
|
|
|
(1) |
Net income of $ |
The Company’s Sixth Amended and Restated Credit Agreement entered into in July 2020 and the Credit Agreement entered into in June 2020, as amended by Amendment No. 1 thereto in July 2020, which has since been terminated, required $
The Company has incurred $
As of September 30, 2022, the consolidated balance sheet included $
- 27 -
The following table provides operating and investing cash flows for Nielsen’s discontinued operations for the nine months ended September 30, 2021 (in millions):
|
|
|
|
September 30, |
|
|
|
(IN MILLIONS) |
|
|
2021 |
|
|
|
|
|
|
(Unaudited) |
|
|
|
Net cash flows used in operating activities |
|
$ |
( |
) |
|
|
Net cash flows used in investing activities |
|
|
( |
) |
|
There was
Note 13. Subsequent Events
Transaction with Consortium of Private Investment Funds
On October 11, 2022, Nielsen completed the transactions contemplated by the Transaction Agreement by and among Nielsen and the Purchasing Entities. At the closing of the Transaction, the Purchasing Entities acquired all ordinary shares of Nielsen for consideration of $
- 28 -
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Introduction
The following discussion and analysis supplements management’s discussion and analysis of Nielsen Holdings plc (the “Company” or “Nielsen”) for the year ended December 31, 2021 as contained in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on February 28, 2022, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the accompanying Condensed Consolidated Financial Statements and related notes thereto. Further, this report includes information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as "will," "intend," "expect," "anticipate," "should," "could" and similar expressions. These statements are subject to risks and uncertainties, and actual results and events could differ materially from what presently is expected, including regarding Nielsen ONE. Factors leading thereto may include, without limitation, the risks related to Ukraine conflict or the COVID-19 pandemic on the global economy and financial markets, the uncertainties relating to the impact of the Ukraine conflict or the COVID-19 pandemic on Nielsen's business, the failure of Nielsen's new business strategy in accomplishing Nielsen's objectives, economic or other conditions in the markets Nielsen is engaged in, impacts of actions and behaviors of customers, suppliers and competitors, technological developments, as well as legal and regulatory rules and processes affecting Nielsen's business, risks related to disruption of management time from ongoing business operations due to the transaction, the risk of any unexpected costs or expenses resulting from the transaction, the risk of any litigation relating to the transaction, the risk that the transaction and its announcement could have an adverse effect on the ability of Nielsen to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, shareholders and other business relationships and on its operating results and business generally, the risk the pending transaction could distract management of Nielsen, and other specific risk factors that are set forth in this Item 2 or Part II, Item 1A, if any, and those outlined in Nielsen's disclosure filings and materials, which you can find available on http://www.nielsen.com, such as its Annual Reports of Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC. Please consult these documents for a more complete understanding of these risks and uncertainties. This list of factors is not intended to be exhaustive. Such forward-looking statements only speak as of the date of this report or as of the date they were made, and Nielsen assumes no obligation to update any written or oral forward-looking statement made by Nielsen or on its behalf as a result of new information, future events or other factors, except as required by law.
Background and Executive Summary
We serve the world’s media and content ecosystem and are a global leader in audience measurement, data and analytics. Through our understanding of people and their behaviors across all channels and platforms, we empower our clients with independent and actionable intelligence so they can connect and engage with their audiences—now and into the future.
We provide a holistic and objective understanding of the media industry to our various clients. Our data is used by our publishing clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content. Our data is used by our marketer and advertiser agency clients to plan and optimize their spend and is used by our content creator clients to inform decisions and identify trends.
We believe that only Nielsen provides a fair playing field for the business of media, under our unique approach AUDIENCE IS EVERYTHING®, and we believe that we are the only provider with data that’s representative of the entire media ecosystem. All of our products have been reviewed to ensure they are representative of diverse populations and we have launched intelligence into the marketplace on the value of audience representation. We are the currency of choice in the U.S. media market and essential to the global media and content ecosystem. We believe that we are uniquely positioned to deliver the most reliable deduplication metrics across linear and digital platforms. We offer measurement and analytics service in more than 55 countries.
We believe that important measures of our results of operations include revenue, operating income and Adjusted EBITDA (defined below). Our long-term financial objectives include consistent revenue growth and expanding operating margins. Accordingly, we are focused on geographic market and service offering expansion to drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage and overhead cost management.
Our business strategy is built upon a model that has traditionally yielded consistent revenue performance. Our measurement, data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflows. Typically, before the start of each year, approximately 80% of our annual revenue has been committed under contracts, which provides us with a greater degree of stability for our revenue and allows us to more effectively manage our profitability and cash flows. We continue to look for growth opportunities through global expansion, specifically within emerging markets, as well as through the cross-platform expansion of our analytical services and measurement services.
Achieving our business objectives requires us to manage a number of key risk areas. Our growth objective of geographic market and service expansion requires us to maintain the consistency and integrity of our information and underlying processes on a global scale, and to effectively invest our capital in technology and infrastructure to keep pace with our clients’ demands and our competitors.
- 29 -
Core to managing these key risk areas is our commitment to data privacy and security as it drives our ability to deliver quality insights for our clients in line with evolving regulatory requirements and governing standards across all the geographies and industries in which we operate. Our operating footprint in over 55 countries requires disciplined global and local resource management of internal and third-party providers to ensure success. In addition, our high level of indebtedness requires active management of our debt profile, with a focus on underlying maturities, interest rate risk, liquidity and operating cash flows.
Transaction with Consortium of Private Investment Funds
On March 28, 2022, we entered into the Transaction Agreement, as amended on August 19, 2022, to be acquired by Neptune Intermediate Jersey Limited and Neptune BidCo US Inc. (collectively, the “Purchasing Entities”) by way of a scheme of arrangement (the “Scheme”) between the Company and the Scheme Shareholders (as defined in the Scheme) under Part 26 of the United Kingdom Companies Act 2006. The Purchasing Entities are controlled by a consortium of private investment funds led by Evergreen Coast Capital Corporation, an affiliate of Elliott Investment Management L.P., and Brookfield Business Partners L.P., together with institutional partners. The Transaction Agreement provided that at the effective time of the Transaction, all ordinary shares would be transferred from our shareholders to Neptune BidCo US Inc. in accordance with the provisions of the Scheme and the laws of England and Wales (the “Transaction”), and that Scheme Shareholders would receive the consideration of $28.00 in cash, without interest, per ordinary share. On October 11, 2022, the Transaction was completed.
COVID-19
Global economic conditions will continue to be volatile as long as the COVID-19 pandemic remains a public health threat because of various factors including, as a result of new information concerning the severity of the pandemic, government actions to mitigate the effects of the pandemic in the near-term, the severity and spread of new variants of the virus and their resistance to current vaccines and treatments, the approval of new treatments and vaccines, and the resulting impact on our business and operations and sales and customer demand. We expect global economic performance and the performance of our businesses to vary by geography and discipline until the impact of the COVID-19 pandemic on the global economy subsides.
Please refer to Part I—Item 1—Business, Part I—Item 1A—Risk Factors and Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K for a description of the measures taken in response to COVID-19, which had a significant impact on our operations and performance in fiscal year 2021, and for further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company.
Critical Accounting Estimates
Please refer to the Critical Accounting Estimates within management’s discussion and analysis of financial condition and results of operations of the Company for the year ended December 31, 2021 as contained in the Annual Report on Form 10-K filed by the Company with the SEC on February 28, 2022.
Factors Affecting Our Financial Results
Foreign Currency
Our financial results are reported in U.S. dollars and are therefore subject to the impact of movements in exchange rates on the translation of the financial information of individual businesses whose functional currencies are other than U.S. dollars. Our principal foreign exchange revenue exposure is spread across several currencies, primarily the Euro. The table below sets forth the profile of our revenue by principal currency.
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
U.S. Dollar |
|
|
84 |
% |
|
|
84 |
% |
|
Euro |
|
|
5 |
% |
|
|
5 |
% |
|
Other Currencies |
|
|
11 |
% |
|
|
11 |
% |
|
Total |
|
|
100 |
% |
|
|
100 |
% |
Fluctuations in the value of foreign currencies relative to the U.S. dollar impact our operating results. Impacts associated with fluctuations in foreign currency are discussed in more detail under “Item 3—Quantitative and Qualitative Disclosures about Market Risk.” In countries with currencies other than the U.S. dollar, assets and liabilities are translated into U.S. dollars using end-of-period exchange rates, while revenues, expenses and cash flows are translated using average rates of exchange. The average U.S. dollar to Euro exchange rate was $1.07 to €1.00 and $1.20 to €1.00 for the nine months ended September 30, 2022 and 2021, respectively.
- 30 -
Constant currency growth rates used in the following discussion of results of operations eliminate the impact of year-over-year foreign currency fluctuations.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. This calculation may differ from similarly-titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP nor should such amounts be considered in isolation.
Inflation Reduction Act of 2022
In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which includes a 15% book-income alternative minimum tax on corporations with average applicable financial statement income over $1 billion for any 3-year period ending with 2022 or later and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S. corporations or their specified affiliates. The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022. Currently, we are not subject to the alternative minimum tax.
Results of Operations – Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
The following table sets forth, for the periods indicated, the amounts included in our Condensed Consolidated Statements of Operations:
|
|
|
Three Months Ended September 30, |
|
|||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Revenues |
|
$ |
888 |
|
|
$ |
882 |
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
|
324 |
|
|
|
307 |
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
|
213 |
|
|
|
218 |
|
|
Depreciation and amortization |
|
|
129 |
|
|
|
129 |
|
|
Restructuring charges |
|
|
4 |
|
|
|
6 |
|
|
Operating income |
|
|
218 |
|
|
|
222 |
|
|
Interest expense |
|
|
70 |
|
|
|
68 |
|
|
Other expense, net |
|
|
7 |
|
|
|
2 |
|
|
Income from continuing operations before income taxes and equity in net income of affiliates |
|
|
141 |
|
|
|
152 |
|
|
Provision for income taxes |
|
|
32 |
|
|
|
33 |
|
|
Equity in net income of affiliates |
|
|
- |
|
|
|
(1 |
) |
|
Net income from continuing operations |
|
|
109 |
|
|
|
120 |
|
|
Net income/(loss) from discontinued operations, net of taxes |
|
|
1 |
|
|
|
(17 |
) |
|
Net income |
|
|
110 |
|
|
|
103 |
|
|
Net income attributable to noncontrolling interests |
|
|
2 |
|
|
|
3 |
|
|
Net income attributable to Nielsen shareholders |
|
$ |
108 |
|
|
$ |
100 |
|
Net Income from Continuing Operations to Adjusted EBITDA Reconciliation
We report information in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Internally, management uses Adjusted EBITDA, a non-GAAP measure to monitor and evaluate our financial performance, as a metric in our incentive compensation programs and to compare our results to those of our competitors. We present Adjusted EBITDA to provide useful supplemental information that will allow investors to evaluate the Company’s results using the same measures that management uses to monitor and measure performance. Adjusted EBITDA should not be considered in isolation or as an alternative to financial information presented in accordance with GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
- 31 -
We define Adjusted EBITDA as net income or loss from continuing operations of our condensed consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, impairment of goodwill and other long-lived assets, share-based compensation expense and other non-operating items from our condensed consolidated statements of operations, as well as certain other items that arise outside the ordinary course of our continuing operations specifically described below. Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.
Impairment of goodwill and other long-lived assets: We exclude the impact of charges related to the impairment of goodwill and other long-lived assets. We believe that the exclusion of these impairments, which are non-cash, allows for a meaningful measure that increases period-to-period comparability.
Share-based compensation expense: We exclude the impact of costs relating to share-based compensation. Share-based compensation expense can vary significantly based on the timing, size and nature of awards granted. We believe that the exclusion of share-based compensation expense, which is typically non-cash, allows for a meaningful measure that increases period-to-period comparability.
Restructuring charges: We exclude restructuring expenses, which primarily include employee severance, office consolidation and contract termination charges, to allow for a meaningful measure that increases period-to-period comparability. Furthermore, we exclude these expenses as we believe these expenses in any specific period may not directly correlate to the underlying performance of our business.
Other non-operating income/(expense), net: We exclude foreign currency exchange transaction gains and losses, primarily related to intercompany financing arrangements, as well as other non-operating income and expense items, such as gains and losses recorded on business combinations or dispositions, sales of investments, net income/(loss) attributable to noncontrolling interests and early redemption payments made in connection with debt refinancing. We exclude these non-operating income and expense items as we believe these items in any specific period may not directly correlate to the underlying performance of our business.
Other items: We exclude certain expenses and gains that arise outside the ordinary course of our continuing operations. Such costs primarily include legal settlements and related fees, acquisition related expenses, business optimization costs and other transaction costs. We believe excluding these items allows for a meaningful measure that increases period to period comparability.
The below table presents a reconciliation from net income from continuing operations to Adjusted EBITDA for the three months ended September 30, 2022 and 2021:
|
|
|
Three Months Ended September 30, |
|
|||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Net income from continuing operations |
|
$ |
109 |
|
|
$ |
120 |
|
|
Less: Net income attributable to noncontrolling interests |
|
|
2 |
|
|
|
3 |
|
|
Net income from continuing operations attributable to Nielsen shareholders |
|
|
107 |
|
|
|
117 |
|
|
Interest expense, net |
|
|
70 |
|
|
|
68 |
|
|
Provision for income taxes |
|
|
32 |
|
|
|
33 |
|
|
Depreciation and amortization |
|
|
129 |
|
|
|
129 |
|
|
EBITDA |
|
|
338 |
|
|
|
347 |
|
|
Equity in net income of affiliates |
|
|
- |
|
|
|
(1 |
) |
|
Other non-operating expense, net |
|
|
9 |
|
|
|
5 |
|
|
Restructuring charges (1) |
|
|
4 |
|
|
|
6 |
|
|
Share-based compensation expense |
|
|
10 |
|
|
|
10 |
|
|
Other items (2) |
|
|
16 |
|
|
|
15 |
|
|
Adjusted EBITDA |
|
$ |
377 |
|
|
$ |
382 |
|
|
|
|
(1) |
For the three months ended September 30, 2022 restructuring charges primarily consists of real estate consolidation as well as employee severance costs. For the three months ended September 30, 2021 restructuring charges primarily consist of real estate consolidation. |
|
(2) |
For the three months ended September 30, 2022, other items primarily consists of business optimization costs and transaction related costs, including costs associated with the Transaction. For the three months ended September 30, 2021, other items primarily consist of business optimization costs and transaction related costs. |
- 32 -
Results from Continuing Operations for the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
Revenues
The table below sets forth our revenue for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, both on an as-reported and constant currency basis:
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
|
% Variance 2022 vs. 2021 Reported |
|
|
2021 Constant Currency |
|
|
% Variance 2022 vs. 2021 Constant Currency |
|
|||||
|
Measurement |
|
$ |
652 |
|
|
|
637 |
|
|
|
2.4 |
% |
|
|
631 |
|
|
|
3.3 |
% |
|
Impact / Content |
|
|
236 |
|
|
|
245 |
|
|
|
(3.7 |
)% |
|
|
236 |
|
|
|
0.0 |
% |
|
Total |
|
$ |
888 |
|
|
$ |
882 |
|
|
|
0.7 |
% |
|
$ |
867 |
|
|
|
2.4 |
% |
Revenues increased 0.7% to $888 million in 2022 from $882 million in 2021 or an increase of 2.4% on a constant currency basis. Revenue growth was driven by growth in Measurement, which increased 2.4%, or an increase of 3.3% on a constant currency basis, driven by strength in National measurement products in the US, and in international markets. Impact / Content revenues decreased 3.7%, or flat on a constant currency basis.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues increased 5.5% to $324 million in 2022 from $307 million in 2021, or an increase of 7.6% on a constant currency basis. The increase in costs were primarily due to our continued investments in our products and services and higher revenue.
Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
Selling, general and administrative expenses decreased 2.3% to $213 million in 2022 from $218 million in 2021, or an increase of 0.5% on a constant currency basis. The increase in costs on a constant currency basis were primarily due to costs associated with the Transaction.
Depreciation and Amortization
Depreciation and amortization expense was $129 million, inclusive of depreciation and amortization expense associated with tangible and intangibles assets acquired in business combinations of $37 million, for each of the periods presented.
Operating Income
Operating income was $218 million in 2022 as compared to $222 million in 2021. The decrease was driven by the revenue and expense factors noted above.
Interest Expense, Net
Interest expense, net was $70 million in 2022, as compared to $68 million in 2021. This increase was primarily due to higher interest expense attributable to rising LIBOR rates.
Other Expense/(Income), Net
Other expense, net was $7 million in 2022, primarily related to the reduction in value of the warrant to purchase equity interests in the company that, following the sale of our Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation, owns Global Connect (See Note 6 to the Consolidated Financial Statements), and the reduction in value of an equity investment. Other expense, net was $2 million in 2021, primarily related to certain non-service related pension costs and fluctuations in certain foreign currencies associated with intercompany transactions.
Income from continuing operations before Income Taxes and equity from net income of affiliates
Income was $141 million in 2022 compared to income of $152 million in 2021 due to the consolidated results mentioned above.
- 33 -
Income Taxes
The effective tax rates for the three months ended September 30, 2022 and 2021 were 23% ($32 million tax expense) and 22% ($33 million tax expense), respectively. The decrease in our income tax expense for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 was primarily driven by the favorable impact of a decrease in earnings in higher taxed jurisdictions in the current period, offset by the absence of the favorable impact of amended tax returns and audit settlements recognized in the prior period.
The estimated liability for unrecognized tax benefits as of September 30, 2022 is $174 million. If the balance of our tax positions is sustained by the taxing authorities in our favor, our effective tax rate would be reduced in future periods by $26 million.
Adjusted EBITDA
|
(IN MILLIONS) |
|
Three Months Ended September 30, 2022 |
|
|
Three Months Ended September 30, 2021 |
|
|
% Variance 2022 vs. 2021 Reported |
|
|
Three Months Ended September 30, 2021 Constant Currency |
|
|
% Variance 2022 vs. 2021 Constant Currency |
|
|||||
|
Adjusted EBITDA |
|
$ |
377 |
|
|
$ |
382 |
|
|
|
(1.3 |
)% |
|
$ |
379 |
|
|
|
(0.5 |
)% |
Adjusted EBITDA decreased 1.3% to $377 million in 2022 from $382 million in 2021 due primarily to the consolidated results mentioned above.
Results from Discontinued Operations for the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
The Connect Transaction closed on March 5, 2021. The Company received net proceeds of $2.4 billion on March 5, 2021 and recorded a gain of $489 million net of tax, inclusive of closing adjustments, during the year ended December 31, 2021. Proceeds from the sale were primarily utilized for debt repayment. Prior to final closing adjustments, we recorded a gain of $542 million net of tax during the three months ended March 30, 2021. The results of operations of Global Connect have been classified as discontinued operations for all periods presented.
Net loss from discontinued operations was $1 million and $17 million for the three months ended September 30, 2022 and 2021, respectively. Both periods reflected an adjustment to the liability under the tax indemnification arrangement associated with the Connect Transaction that closed on March 2021.
Results of Operations – Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
The following table sets forth, for the periods indicated, the amounts included in our Condensed Consolidated Statements of Operations:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Revenues |
|
$ |
2,647 |
|
|
$ |
2,606 |
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
|
965 |
|
|
|
876 |
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
|
650 |
|
|
|
642 |
|
|
Depreciation and amortization |
|
|
386 |
|
|
|
382 |
|
|
Restructuring charges |
|
|
18 |
|
|
|
12 |
|
|
Operating income |
|
|
628 |
|
|
|
694 |
|
|
Interest expense |
|
|
203 |
|
|
|
217 |
|
|
Other (income)/expense, net |
|
|
(1 |
) |
|
|
32 |
|
|
Income from continuing operations before income taxes and equity in net income of affiliates |
|
|
426 |
|
|
|
445 |
|
|
Provision for income taxes |
|
|
98 |
|
|
|
129 |
|
|
Equity in net income of affiliates |
|
|
(4 |
) |
|
|
(1 |
) |
|
Net income from continuing operations |
|
|
332 |
|
|
|
317 |
|
|
Net income from discontinued operations, net of taxes |
|
|
6 |
|
|
|
440 |
|
|
Net income |
|
|
338 |
|
|
|
757 |
|
|
Net income attributable to noncontrolling interests |
|
|
14 |
|
|
|
8 |
|
|
Net income attributable to Nielsen shareholders |
|
$ |
324 |
|
|
$ |
749 |
|
- 34 -
Net Income from Continuing Operations to Adjusted EBITDA Reconciliation
The below table presents a reconciliation from net income from continuing operations to Adjusted EBITDA for the nine months ended September 30, 2022 and 2021:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Net income from continuing operations |
|
$ |
332 |
|
|
$ |
317 |
|
|
Less: Net income attributable to noncontrolling interests |
|
|
14 |
|
|
|
8 |
|
|
Net income from continuing operations attributable to Nielsen shareholders |
|
|
318 |
|
|
|
309 |
|
|
Interest expense, net |
|
|
203 |
|
|
|
217 |
|
|
Provision for income taxes |
|
|
98 |
|
|
|
129 |
|
|
Depreciation and amortization |
|
|
386 |
|
|
|
382 |
|
|
EBITDA |
|
|
1,005 |
|
|
|
1,037 |
|
|
Equity in net income of affiliates |
|
|
(4 |
) |
|
|
(1 |
) |
|
Other non-operating expense, net |
|
|
13 |
|
|
|
40 |
|
|
Restructuring charges (1) |
|
|
18 |
|
|
|
12 |
|
|
Share-based compensation expense |
|
|
28 |
|
|
|
26 |
|
|
Other items (2) |
|
|
60 |
|
|
|
26 |
|
|
Adjusted EBITDA |
|
$ |
1,120 |
|
|
$ |
1,140 |
|
|
|
|
|
(1) |
For the nine months ended September 30, 2022 and 2021, restructuring charges primarily consist of real estate consolidation. |
|
|
(2) |
For the nine months ended September 30, 2022, other items primarily consist of business optimization costs and transaction related costs, including costs associated with the Transaction. For the nine months ended September 30, 2021, other items primarily consist of business optimization costs and transaction related costs. |
Results from Continuing Operations for the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
Revenues
The table below sets forth our revenue for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, both on an as-reported and constant currency basis:
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
|
% Variance 2022 vs. 2021 Reported |
|
|
2021 Constant Currency |
|
|
% Variance 2022 vs. 2021 Constant Currency |
|
|||||
|
Measurement |
|
$ |
1,941 |
|
|
|
1,898 |
|
|
|
2.3 |
% |
|
|
1,882 |
|
|
|
3.1 |
% |
|
Impact / Content |
|
|
706 |
|
|
|
708 |
|
|
|
(0.3 |
)% |
|
|
689 |
|
|
|
2.5 |
% |
|
Total |
|
$ |
2,647 |
|
|
$ |
2,606 |
|
|
|
1.6 |
% |
|
$ |
2,571 |
|
|
|
3.0 |
% |
Revenues increased 1.6% to $2,647 million in 2022 from $2,606 million in 2021 or an increase of 3.0% on a constant currency basis. Revenue growth was primarily driven by growth in Measurement, which increased 2.3%, or an increase of 3.1% on a constant currency basis, with overall solid growth, driven by strength in national measurement products in the US, and in international markets. Impact / Content revenues decreased 0.3%, or an increase of 2.5% on a constant currency basis. This constant currency increase was driven in part by growth in Content and the Sports business in Impact.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues increased 10.2% to $965 million in 2022 from $876 million in 2021, or an increase of 11.9% on a constant currency basis. The increase in costs were primarily due to the higher revenue performance discussed above, the return of temporary costs savings realized in the prior year from actions taken in response to the COVID-19 pandemic, and our continued investments in our products and services.
- 35 -
Selling, general and administrative expenses
Selling, general and administrative expenses increased 1.2% to $650 million in 2022 from $642 million in 2021, or an increase of 3.7% on a constant currency basis. The increase in costs were primarily due to the return of temporary costs savings realized in the prior year from actions taken in response to the COVID-19 pandemic and the costs associated with the Transaction in 2022.
Depreciation and Amortization
Depreciation and amortization expense was $386 million in 2022 as compared to $382 million in 2021, inclusive of depreciation and amortization expense associated with tangible and intangibles assets acquired in business combinations of $110 million and $115 million, respectively.
Operating Income
Operating income was $628 million in 2022 as compared to $694 million in 2021. The decrease was primarily driven by the revenue and expense factors noted above.
Interest Expense, Net
Interest expense was $203 million in 2022, as compared to $217 million in 2021. This decrease was primarily due to lower loan balances, partially offset by higher interest expense attributable to rising LIBOR rates.
Other (Income)/Expense, Net
Other income, net was $1 million in 2022, primarily related to a gain from the sale of an equity investment, partially offset by a reduction in value of the warrant to purchase equity interests in the company that following the Connect Transaction, owns Global Connect (see Note 6 to the Consolidated Financial Statements), and a reduction in value of an equity investment. Other expense, net was $32 million in 2021, primarily related to the write-off of certain previously capitalized deferred financing fees in conjunction with the May 2021 debt refinancing and a loss from a business disposition.
Income from continuing operations before Income Taxes and Equity in Net Income of Affiliates
Income was $426 million in 2022 compared to income of $445 million in 2021 due to the consolidated results mentioned above.
Income Taxes
The effective tax rates for the nine months ended September 30, 2022 and 2021 were 23% ($98 million tax expense) and 29% ($129 million tax expense), respectively. The decrease in our income tax expense for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily driven by a decrease in earnings in higher taxed jurisdictions in the current period and the absence of the unfavorable impact of deferred tax revaluation offset by the favorable impact of amended tax returns and audit settlements recognized in the prior period.
The estimated liability for unrecognized tax benefits as of September 30, 2022 is $174 million. If the balance of our tax positions is sustained by the taxing authorities in our favor, our effective tax rate would be reduced in future periods by $26 million.
Adjusted EBITDA
|
(IN MILLIONS) |
|
Nine Months Ended September 30, 2022 |
|
|
Nine Months Ended September 30, 2021 |
|
|
% Variance 2022 vs. 2021 Reported |
|
|
Nine Months Ended September 30, 2021 Constant Currency |
|
|
% Variance 2022 vs. 2021 Constant Currency |
|
|||||
|
Adjusted EBITDA |
|
$ |
1,120 |
|
|
$ |
1,140 |
|
|
|
(1.8 |
)% |
|
$ |
1,134 |
|
|
|
(1.2 |
)% |
Adjusted EBITDA decreased 1.8% to $1,120 million in 2022 from $1,140 million in 2021, or a decrease of 1.2% due primarily to the consolidated results mentioned above.
- 36 -
Results from Discontinued Operations for the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
The Connect Transaction closed on March 5, 2021. The Company received net proceeds of $2.4 billion on March 5, 2021 and recorded a gain of $489 million net of tax, inclusive of closing adjustments, during the year ended December 31, 2021. Proceeds from the sale were primarily utilized for debt repayment. Prior to final closing adjustments, we recorded a gain of $542 million net of tax during the nine months ended September 30, 2021. The results of operations of Global Connect have been classified as discontinued operations for all periods presented.
Net income from discontinued operations from Global Connect for the nine months ended September 30, 2022 and 2021 was $6 million and $440 million, respectively. Results for the nine months ended September 30, 2021 included a net loss from Global Connect of $85 million, which reflects operating results through March 5, 2021 and a gain of $534 million, net of tax from the Connect Transaction.
Consolidated Liquidity and Capital Resources
Overview
We provide for additional liquidity through several sources including maintaining an adequate cash balance, access to global funding sources and a committed revolving credit facility. The following table provides a summary of the major sources of liquidity as of and for the nine months ended September 30, 2022 and 2021:
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Net cash from operating activities |
|
$ |
738 |
|
|
$ |
439 |
|
|
Cash and cash equivalents |
|
$ |
766 |
|
|
$ |
542 |
|
|
Availability under Revolving credit facility |
|
$ |
839 |
|
|
$ |
838 |
|
Of the $766 million in cash and cash equivalents, approximately $300 million was held in jurisdictions outside the United States and as a result, there may be tax consequences if such amounts were moved out of these jurisdictions or repatriated to the United States. We regularly review the amount of cash and cash equivalents held outside of the United States to determine the amounts necessary to fund the current operations of our foreign operations and their growth initiatives and amounts needed to service our U.S. indebtedness and related obligations.
Our contractual obligations, commitments and debt service requirements over the next several years are significant. We believe we will have available resources to meet both our short-term and long-term liquidity requirements, including our senior secured debt service. We expect the cash flow from our operations, combined with existing cash and amounts available under the revolving credit facility, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, restructuring obligations, dividend payments and capital spending over the next year. In addition, we may, from time to time, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly issued debt securities) in privately negotiated or open market transactions, by tender offer or otherwise.
In connection with, and contingent on the closing of the Transaction, we commenced a tender offer to purchase all of the $3,460 million outstanding senior debentures loans. The tender offer was completed on October 11, 2022 at the time of the closing of the Transaction. $44 million remained untendered and outstanding subsequent to the closing and settlement of the tender offer.
In addition, on October 11, 2022, at the closing of the Transaction, the Purchasing Entities repaid the outstanding senior secured term loans. In connection with the repayment, we terminated the Sixth Amended and Restated Credit Agreement, dated July 21, 2020 and all commitment thereunder, including the senior secured revolving credit facility.
In October 2022, the Purchasing Entities entered into debt financing of approximately $10.5 billion to fund a portion of the Transaction, of which certain of our subsidiaries are guarantors.
We have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
- 37 -
Consolidated Cash Flows for the Nine Months Ended September 30, 2022 Versus the Nine Months Ended September 30, 2021.
|
(IN MILLIONS) |
|
2022 |
|
|
2021 |
|
||
|
Net cash from operating activities |
|
$ |
738 |
|
|
$ |
439 |
|
|
Net cash from investing activities |
|
$ |
(232 |
) |
|
$ |
2,021 |
|
|
Net cash from financing activities |
|
$ |
(107 |
) |
|
$ |
(2,519 |
) |
Operating activities. The increase in net cash provided by operating activities was primarily due to lower working capital outflows in 2022.
Investing activities. The primary drivers for the decrease from investing activities were the proceeds from the sale of our Global Connect business during the nine months ended September 30, 2021. (See Note 12 – Discontinued Operations). Excluding those sales proceeds, cash used in investing activities was $248 million in 2021, primarily related to capital expenditures.
Financing activities. The decrease in net cash used in financing activities was primarily due to the partial repayment of our Senior secured term loans and our Senior notes during the nine months ended September 30, 2021.
The operating, investing and financing activities above include Global Connect through the Connect Transaction close date in 2021.
Financial Debt Covenants Attributable to The Nielsen Company B.V.
Our Sixth Amended and Restated Credit Agreement, dated July 21, 2020 (the “Amended Credit Agreement”) contains a financial covenant consisting of a maximum leverage ratio applicable to our indirect wholly-owned subsidiary, Nielsen Holding and Finance B.V. and its restricted subsidiaries. The leverage ratio requires that we not permit the ratio of total net debt (as defined in the Amended Credit Agreement) at the end of any calendar quarter to Consolidated EBITDA (as defined in the Amended Credit Agreement) for the four quarters then ended to exceed a specified threshold. The maximum permitted ratio is 5.50 to 1.00.
Failure to comply with this financial covenant would result in an event of default under our Amended Credit Agreement unless waived by our senior credit lenders. An event of default under our Amended Credit Agreement can result in the acceleration of our indebtedness under the facilities, which in turn would result in an event of default and possible acceleration of indebtedness under the agreements governing our debt securities as well. As our failure to comply with the financial covenant described above could cause us to default under the agreements governing our indebtedness, management believes that our Amended Credit Agreement and this covenant are material to us. As of September 30, 2022, we were in full compliance with the financial covenant described above.
Pursuant to Regulation S-X Rule 13-01, which simplifies certain disclosure requirements for guarantors and issuers of guaranteed securities, we are no longer required to provide condensed consolidating financial statements for us and our subsidiaries, including the guarantors and non-guarantors under our credit agreement and the indentures governing our senior notes. Nielsen Holding and Finance B.V., the parent covenant party under our credit agreement and the indentures governing our senior notes, and its restricted subsidiaries together comprise substantially all of our assets, liabilities and operations, and there are no material differences between the consolidating information related to us, on the one hand, and Nielsen Holding and Finance B.V. and its restricted subsidiaries on a standalone basis, on the other hand.
Revolving Credit Facility
The Amended Credit Agreement contains a senior secured revolving credit facility with aggregate revolving credit commitments of $850 million and a final maturity of July 2023 under which Nielsen Finance LLC, TNC (US) Holdings, Inc., and Nielsen Holding and Finance B.V. can borrow revolving loans. The revolving credit facility can also be used for letters of credit, guarantees and swingline loans.
The senior secured revolving credit facility is provided under the Amended Credit Agreement and so contains covenants and restrictions as noted above with respect to the Amended Credit Agreement. Obligations under the revolving credit facility are guaranteed by the same entities that guarantee obligations under the Amended Credit Agreement.
We had zero borrowings outstanding and had outstanding letters of credit of $11 million for each of the nine months ended September 30, 2022 and 2021. As of September 30, 2022, we had $839 million available for borrowing under the senior secured revolving credit facility.
Dividends and Share Repurchase Program
- 38 -
On January 31, 2013, our Board of Directors (the “Board”) adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. Under this plan, Nielsen has paid consecutive quarterly cash dividends since 2013. We paid cash dividends of $65 million in each of the nine months ended September 30, 2022 and 2021, respectively. On February 26, 2022, the Board authorized the repurchase of up to $1 billion of our ordinary shares. There were no share repurchases for the nine months ended September 30, 2022 or 2021.
Summary of Recent Accounting Pronouncements
Reference Rate Reform-Facilitation of the Effects of Reference Rate Reform on Financial Reporting
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Commitments and Contingencies
Legal Proceedings and Contingencies
For information about our legal proceedings, see Note 10 – Commitments and Contingencies.
Other Contractual Obligations
Our other contractual obligations include capital lease obligations (including interest portion), facility leases, leases of certain computer and other equipment, agreements to purchase data and telecommunication services and the payment of principal and interest on debt and pension fund obligations.
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Market risk is the potential loss arising from adverse changes in market rates and market prices such as interest rates, foreign currency exchange rates, and changes in the market value of equity instruments. We are exposed to market risk, primarily related to foreign exchange and interest rates. We actively monitor these exposures. Historically, in order to manage the volatility relating to these exposures, we entered into a variety of derivative financial instruments, mainly interest rate swaps, cross-currency swaps and forward rate agreements. Currently, we only employ basic contracts, that is, without options, embedded or otherwise. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings, cash flows and the value of our net investments in subsidiaries resulting from changes in interest rates and foreign currency rates. It is our policy not to trade in financial instruments.
Foreign Currency Exchange Risk
We operate globally and predominantly generate revenues and expenses in local currencies. Approximately 16% of our revenues and 21% of our operating costs were generated in currencies other than the U.S. Dollar for the nine months ended September 30, 2022. Because of fluctuations (including possible devaluations) in currency exchange rates or the imposition of limitations on conversion of foreign currencies into our reporting currency, we are subject to currency translation exposure on the profits of our operations, in addition to transaction exposure. Typically, a one percent change in the U.S. Dollar/Euro exchange rate, holding all other currencies constant, will impact revenues by approximately $2 million annually, with an immaterial impact on our profitability.
For the nine months ended September 30, 2022 and 2021, we recorded a net loss of $4 million and $1 million, respectively, associated with foreign currency derivative financial instruments within other expense/(income), net in our condensed consolidated statements of operations. As of September 30, 2022 and December 31, 2021, the notional amounts of outstanding foreign currency derivative financial instruments were $23 million and $29 million, respectively.
The table below details the percentage of revenues and expenses by currency for the nine months ended September 30, 2022:
|
|
|
|
U.S. Dollar |
|
|
|
Euro |
|
|
|
Other Currencies |
|
|
Revenues |
|
|
84 |
% |
|
|
5 |
% |
|
|
11 |
% |
|
Operating costs |
|
|
79 |
% |
|
|
6 |
% |
|
|
15 |
% |
- 39 -
Interest Rate Risk
We continually review our fixed and variable rate debt along with related hedging opportunities in order to ensure our portfolio is appropriately balanced as part of our overall interest rate risk management strategy. Through this process, we consider both short-term and long-term considerations in the U.S. and global financial markets in making adjustments to our tolerable exposures to interest rate risk. At September 30, 2022, we had $2,096 million in carrying value of floating-rate debt under our senior secured credit facilities of which $800 million was subject to effective floating-fixed interest rate swaps. These derivatives have been designated as interest rate cash flow hedges and fix the LIBOR-related portion of interest rates of a corresponding amount of our variable-rate-debt. A one percent increase in interest rates applied to our floating rate indebtedness would therefore increase annual interest expense by approximately $13 million ($21 million without giving effect to any of our interest rate swaps).
In anticipation of the closing of the Transaction, which occurred on October 11, 2022, we terminated all of the outstanding interest rate swaps on October 6, 2022 for net proceeds of $10 million.
Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments, as these transactions were executed with a diversified group of major financial institutions with a minimum investment-grade or better credit rating. Our credit risk exposure is managed through the continuous monitoring of our exposures to such counterparties.
Equity Price Risk
We are not exposed to material equity price risk.
|
Item 4. |
Controls and Procedures |
|
(a) |
Evaluation of Disclosure Controls and Procedures |
The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the reports that the Company files or submits to the SEC under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2022 (the “Evaluation Date”). Based on such evaluation and subject to the foregoing, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.
|
(b) |
Changes in Internal Control over Financial Reporting |
There have been no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
- 40 -
PART II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
For information about our legal proceedings, see Note 10–Commitments and Contingencies.
|
Item 1A. |
Risk Factors |
There have been no material changes to our Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our Form 10-Q for the quarter ended March 31, 2022, which, along with the Risk Factors previously disclosed, could materially adversely affect our business, financial condition and results of operations. Additional risks and uncertainties that are not presently known to us or that we deem immaterial may also impair our business operations and financial condition.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
There were no unregistered sales of our common stock during the three months ended September 30, 2022.
Purchases of Equity Securities by the Issuer
There were no share repurchases during the three months ended September 30, 2022.
Our Board authorized the repurchase of up to $1 billion of our outstanding ordinary shares on February 26, 2022 as described under Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Liquidity and Capital Resources—Dividends and Share Repurchase Program.
|
Item 3. |
Defaults Upon Senior Securities |
Not applicable.
|
Item 4. |
Mine Safety Disclosures |
Not applicable.
|
Item 5. |
Other Information |
Not applicable
|
Item 6. |
Exhibits |
- 41 -
EXHIBIT INDEX
|
Exhibit Number |
|
Description of Exhibits |
|
|
|
|
|
2.1√ |
|
|
|
|
|
|
|
2.2√ |
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
4.2 |
|
|
|
|
|
|
|
4.3 |
|
|
|
|
|
|
|
4.4 |
|
|
|
|
|
|
|
4.5 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
101* |
|
The following financial information from Nielsen Holdings plc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in iXBRL includes: (i) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2022 and 2021, (ii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2022 and 2021, (iii) Condensed Consolidated Balance Sheets at September 30, 2022 (Unaudited) and December 31, 2021, (iv) Condensed Consolidated Statements of Cash Flows (Unaudited) for the three and nine months ended September 30, 2022 and 2021, (v) Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and nine months ended September 30, 2022 and 2021, and (vi) the Notes to Condensed Consolidated Financial Statements. |
- 42 -
|
|
|
|
|
104* |
|
Cover Page Interactive Data File (embedded within the Inline XBRL and included in Exhibit 101) |
|
* |
Filed or furnished herewith |
|
√ |
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the U.S. Securities and Exchange Commission upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. |
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
- 43 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
Nielsen Holdings plc (Registrant) |
|
|
|
|
|
Date: October 27, 2022 |
|
/s/ Henry Iglesias |
|
|
|
Henry Iglesias Senior Vice President and Corporate Controller (Duly Authorized Officer and Principal Accounting Officer) |
- 44 -