Nielsen's CEO Discusses Q3 2011 Results - Earnings Call Transcript

| About: Nielsen Holdings (NLSN)

Nielsen Holding NV (NYSE:NLSN)

Q3 2011 Earnings Call

October 27, 2011 08:30 a.m. ET

Executives

Liz Zale – SVP, Investor Relations

David Calhoun – CEO

Brian West – CFO

Analysts

Suzanne Stein – Morgan Stanley

Sara Gubins – BofA/Merrill Lynch

Ashwin Shirvaikar – Citi

Michael Meltz – JP Morgan

Bishop Cheen – Wells Fargo

Brian Karimzad – Goldman Sachs

William Bird – Lazard Capital Markets

Kelly Flynn – Credit Suisse

Matt Chesler – Deutsche Bank

Bill Warmington – Raymond James

Robert Riggs – William Blair

Operator

Ladies and gentlemen thank you for holding, and welcome to this conference call on third quarter 2011 results for Nielsen Holdings N.V. Please note all lines are on listen-only mode at this time. I will now turn the call over to the host Liz Zale, Senior Vice President of Investor Relations.

Ms. Zale, please proceed.

Liz Zale

Thank you. Good morning everyone and thanks for joining us to discuss Nielsen’s third quarter results. On the call with me this morning is David Calhoun, Chief Executive Officer and Brian West, Chief Financial Officer of Nielsen Holdings N.V.

Today’s discussion may contain forward-looking statements made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These and other statements that relates to future results and events are based on Nielsen’s current expectations as of October 27, 2011. Our actual results in future periods may differ materially from those currently expected because of the number of risks and uncertainties.

The risks and uncertainties that we believe are material are outlined in our disclosure filings and materials you can find on ir.nielsen.com or in the SEC’s website at sec.gov. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, expect as may be required by law. Our outlook is provided for the purpose of providing information about current expectations for 2011. This information may not be appropriate for other purposes.

A presentation is posted on our website ir.nielsen.com with summary information for this call. With that I will now turn the call over to David Calhoun.

David Calhoun

Thanks Liz, thanks everyone for joining us. Let me start with the financial picture.

I would characterize this as a high quality quarter. We had a good strong performance from pretty much everyone. Revenue grew at 10% on a reported basis, 6% on a constant currency basis. Adjusted EBITDA grew 10% and 7% on a constant currency basis, and as I have characterized in previous quarters we really remain fully invested funding all of the things that we would like to do and the opportunities we see ahead.

Brian will take you into a fair amount of more detail. Before that just a couple of comments on more of a macro basis. First with respect to the economy you know that recently we published a competence metric that was relatively low compared to many of the quarters previously. What is very interesting about this moment in time is that while confidence is low, and I attribute most of it to a lot of the political rhetoric and media coverage that accompanies it. Underlying retail performance is not so bad, and so as I survey and talk to clients in our world with respect to planning for next year, I don’t see much in the way of pulling back. What I do see is caution, I do see hedging, I do see those kinds of moves, but nothing like what we saw in the tail end of ’08 going into 2009.

With respect to macroeconomic trends, the two things that matter to us most are still going full speed ahead. We continue to expand our developing market coverage and the measurement of content viewing across both platforms and devices. These trends will continue for quite some time and offers us opportunities every step of the way.

If there is any geographic weakness or I would more refer to it as sluggishness, it’s Europe, Western Europe. Western Europe has continued to be a sort of a sluggish pattern for us and I expect it to stay that way for quite some time.

With respect to initiatives, like everyone knows we closed on the Wal-Mart Coop agreement and we are in full implementation mode. It is going very well. The program continues to deliver. The way I think you ought to think about economic models is roughly second quarter next year we will have numbers to report to manufacturers and then therefore revenue opportunities to be realized during that second quarter. Our view is that this gets to EBITDA positive by 12 month period from the start.

Nielsen Online campaign ratings were in over a 100 active campaigns being run on it. We have got 18 very significant, what I would refer to as sophisticated advertisers, are running these campaigns, and so far so good. Each and every one of these campaigns will build their own use case, meaning what do they do to adjust as they go forward based on the numbers that we track and report to them every day. Finally, we made an acquisition of a small company called Marketing Analytics.

Well, it’s small, it’s very important to us, because I think as you know Marketing Analytics is in the business of marketing mixed models. These are the models that advertisers use to allocate marketing funds from across different mediums and also across sales promotion. This is the way we affect movement of real money through different mediums, and for us that’s very important. Finally, we will reaffirm our 2011 guidance and I will turn it over to Brian to dig into the financials.

Brian West

Great, thanks Dave. I am going to turn to page seven to go through the total Nielsen results. For the third quarter revenue came in at $1.4 billion, that’s up 6% on a constant currency basis. Adjusted EBITDA came in at just over $400 million for the quarter, up 7% constant currency. And our adjusted margin rate came in just under 29% that’s up 34 basis points versus a year ago.

Adjusted net income was just over a $180 million and our earnings per share on a diluted basis was $0.48. Finally, free cash flow, just under $200 million more than 2X what that was a year ago. Very consistent themes in the quarter what we have been seeing all year on a year-to-date basis and as Dave mentioned it’s strong results just about across each one of the measurements.

I move on to page eight, a little deep dive into the revenue by segment. Our Buy segment revenue came in at just over $900 million that’s 7%, a very healthy number, driven by two things. One, developing markets grew 14% year-over-year on a constant currency basis, that’s very consistent. That year-to-date constant currency growth for developing market is 16%, so we continue to feel very good about those prospects.

Secondly, our Insights business. And it has been accelerating quarter on quarter as we continue to help clients look around the corner. On the Watch side, Watch revenue came in at just over $440 million that’s up 4%. Another very good steady performance for both our US and our international television audience measurement businesses. And our Expositions business came in at $64 million, that’s up 2% with continued growth momentum. All in all that gets you to $1.4 billion again up 6% year-over-year.

Turning to page nine, profitability. Adjusted EBITDA for the Buy business came in at just over a $190 million, that’s up 8%. Watch came in at $180 million that’s up 8%, and Expositions was $37 million up 3% for a total of just over $400 million and again 7%. I think what's important here is that on the quarter we had margin expansion across every segment and while we continue to invest, as Dave mentioned in some of the key priorities particularly developing markets, add effectiveness as well as cross platform efforts within the Watch business.

Moving on to page 10, a little bit on the cash flow in the balance sheet. So in the upper left, as I mentioned free cash flow came in just under $200 million, again more than two times versus last year. Really driven by the operating performance as well as the deleveraging.

Couple of components on cash. CapEx just over $70 million, cash tax is just under $30 million, and restructuring just under $20 million.

Moving to the bottom left of the page are the balance sheet gross debt. It was at just over $6.7 billion net debt at just over $6.3 billion and our net debt ratio were 4.2. So that net debt ratio the way to think about that is that year end 2010 the pro forma was 4.6 times, at the second quarter we are 4.4 times, now at 4.2 times we continue that path to de-lever.

On the cap table on the right, I think the important thing here is on the total debt basis the change of – end of September versus the end of June was $177 million less debt, and that was driven really by a $125 million of debt pay downs of which over a $100 million was voluntary prepayments. Weighted average interest rate I just pointed out is just under 5.6%.

Moving on to page 11, talks a little bit about reaffirming the 2011 guidance. On the revenue side we expect a midpoint of the full year range, 6% which is consistent with what has happened year-to-date. On margin expansion, we still expect margin expansion to be between 30 and 50 basis points and that is whether it is on a reported or a constant currency basis.

I will stop for a minute and just point out the foreign exchange impact that we see. As a reminder we run the business on a concurrency basis. We don’t try to guess FX rates. We are asking FX favorability all year. It's been 350 basis point on the revenue side year-to-date and almost 300 basis points on EBITDA.

I just want everyone to know that fourth quarter FX rates are the same as where they ended the third quarter, and even as recent as yesterday we are not going to have that favorability. There will be minimal FX impact on the fourth quarter reported results.

Moving on to adjusted income. We are moving the range up on adjusted net income growth from the 20% to 20% constant currency growth which you would have seen. Last time we talked to 26% to 30% as we stand here today, again as constant currency growth. Deleveraging the half a turn, we are very comfortable that we will deliver a half a turn and we expect additional debt repayment in the fourth quarter to not only address existing maturities but also to make additional pre-payments.

Couple of items on the left hand side of the chart, just to give everyone a view of some of the components we talked about. CapEx we expect it to be at the high end of the range. Cash restructuring we expect it to be around the midpoint and interest both on a book and cash basis to be right at the midpoint, and cash taxes we expect to be at the high end. All that factored into that deleveraging target.

So, with that as Dave mentioned quality quarter top to bottom and with that I will turn it over to Liz.

Liz Zale

So, thank you everyone. We are ready to start taking your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question today comes from the line of Suzy Stein with Morgan Stanley, please proceed.

Suzanne Stein – Morgan Stanley

Hi, I just wanted to clarify something that you said about Wal-Mart. You mentioned that it should be EBITDA positive within 12 months. Is that 12 months from when you begin to realize revenues or 12 months from now?

David Calhoun

Now.

Suzanne Stein – Morgan Stanley

Okay, all right. And then the other question was just on the Buy businesses. We think about the Insights component there. I think that 40% of that is not subscription, but how much of that do you really view as discretionary versus what your customers view as sort of necessary tools that they purchase from you?

David Calhoun

I think Insights by definition is that which is not under long term contract, just to be clear in the question. I hate your question Suzy, it is okay, but what are they going to buy because that’s what they do and they do it on a routine basis. It’s a pretty high percentage that Insights number. It’s a pretty high percentage. Because it’s really pretty much routine pricing work, routine marketing mix calculations, routine product forecasting. As we told you the one that tends to be most volatile is the forecasting business simply because it ties directly to the number of new products that they launch. And so we pretty much follow that trend.

As I think we’ve mentioned over the last six months we have seen a steady decline in that trend on new product launch. I don’t know if that continues or not, our experience has been while it's a little volatile it steadily increases over the years and I think we still have that level of competence. So, I think that’s the answer to your question.

Suzanne Stein – Morgan Stanley

Yeah, okay, great. Thank you.

Operator

Next question comes from the line of Sara Gubins with Bank of America/Merrill lynch, please proceed.

Sara Gubins – BofA/Merrill Lynch

Hi, thanks, good Morning. Just following up on the last comment. You mentioned that you are seeing some caution in hedging by clients but not really pulling back as I think about next year. Can you just give some color on where you see that caution? Is that the new product launches that you mentioned or is it something else?

David Calhoun

No, I think everybody has in the back of their head a notion that there could be a real slow down, if not a recession. There is nothing about the underlying retail trends frankly across both my Watch and by clients that suggest that that’s going to happen. And other than what they read and they hear they are pretty much trying to follow and support the retail trends that exist today. What I see is if you think about next year if there is European calamity or something along those lines they are discussing how would I hedge or how would I approach – whether it’s the holiday season or more, frankly it’s the calendar year next year with a little bit of caution so I don’t get caught. Clearly, yes, this probably doesn’t help you that much. But it’s very different than the ’08-09 timeframe.

Sara Gubins – BofA/Merrill Lynch

Okay. And then separately on the Nielsen Online Campaign Writings, at what point do the projects get out of pilot mode and into more of a contract mode giving you a sense of what kind of revenue it will generate?

David Calhoun

Yeah, well, I hope by the first quarter we will have a very clear picture of that. But I will also tell you my view is that we are going to run these used case campaigns as hard as we can because the more we know about how this product is used and how it affects their allocation of media the more informed we will be on pricing. So that’s where we are head step right now and that’s why I have been reluctant to give guidance, but I do generally hope by first quarter we will have a much clearer picture on that.

Sara Gubins – BofA/Merrill Lynch

Thank you.

Operator

Your next question comes from the line of Ashwin Shirvaikar with Citi. Please proceed.

Ashwin Shirvaikar – Citi

Thank you. And congratulations guys on a good quarter again.

David Calhoun

Thank you.

Ashwin Shirvaikar – Citi

My question was with regards to the pace of decision making, and does that extend to the ramp of insides type work that you may already have signed in (inaudible) or is this more with regards to new work?

David Calhoun

I am not sure – I am not sure, I understand the question.

Ashwin Shirvaikar – Citi

When you say that for example Western Europe is sluggish…

David Calhoun

Yes.

Ashwin Shirvaikar – Citi

With regards to some of the work that you’re doing in the decision making that follows, does that extend into a distinct work or are you just commenting about new work that you might sign?

David Calhoun

No. I am really thinking about new work. I will also tell you with respect to the European comment, I don’t expect a change in our trend line, it has been sluggish and I just expect it to stay sluggish. So, yeah, it’s really a forward comment more than anything else. But I don’t think you should expect anything precipitous either on our client side or our side.

Ashwin Shirvaikar – Citi

Understood. And in the, you know, over the last couple of years obviously you had delivered a range of growth rates, from the current 4% range to the upper single digits, but the nature of what you are doing kind of work that your clients ask you to do does change with the economy. Are you seeing a change in the nature of projects that your client is asking to do?

David Calhoun

Yeah, no. Actually not really. I expect a mix of our business to be fairly relative to insight versus information to be relatively consistent when we talk to you on the fourth quarter and next year as it is today. We will continue to have a much bigger developing market mix. But with respect to the insight versus information these things actually do go in more of a consistent pattern than you might my think.

Brian West

And I would add that even in ’09 it was a bit of a stress test. Our insights business grew, all right, so it didn’t grow quite as fast but it grew. That’s the point to realize it grew in the low single digits but it grew.

Ashwin Shirvaikar – Citi

Right. No that’s the point I was trying to get at. Okay, thank you guys.

Operator

Your next question comes from the line of Nadia Lovell with JPMorgan. Please proceed.

Michael Meltz – JP Morgan

Hi, it’s actually Michael here with a sneak attack.

David Calhoun

Go for it, well done Michael.

Michael Meltz – JP Morgan

Thanks, all right, talk to you next time. Two questions for you. Can you talk a bit about the M&A pipeline and just what you are seeing out there? And then secondly can you just clarify, Brian I appreciate the commentary on guidance in where you’re trending versus the full year. Can you just firm up for us the net income, adjusted net income growth, what is it actually predicated on? Can you give us a hard numbers for a range please?

David Calhoun

Let me hit the M&A pipeline. Of course we don’t talk on actual perspective kinds of deals. But the Marketing Analytics, this period we did Europe (ph) focused deal, which is a great technology deal. We did any MEMRP which was a geographic footprint expansion for us, and then we did Marketing Analytics, which is a wonderful analytics too. I just think you should expect a pace similar to what we did this year. The opportunities are out there, they are small they tend to bite size, and I think that’s the kind of pace you should expect from us. If I had my greatest hopes you’d see more developing market opportunities. They tend to be tougher to source, but at the same time that’s what we’re – that’s really the game we are on.

Brian West

And Michael in terms of the net income mechanics, you’re familiar probably with the number we’ve talked about before. For the 2010 pro forma net income number we talked about before was around 434. And if we normalize that for currency, add about 20 million for the events that have happened for the first three quarters. So that 454 and then you grow that 26% to 30% is what we’re kind of base lining ourselves on. And again that assume that the fourth quarter there is no FX impact.

Michael Meltz – JP Morgan

Okay. Thank you.

Operator

Your next question comes from the line of Bishop Cheen with Wells Fargo. Please proceed.

Bishop Cheen – Wells Fargo

Hi everyone. Thank you for the very detailed update in presentation. Can you talk a little bit more big picture about increasing world of competition. It just seems that internationally and certainly domestically a number of companies want to get into the Three Screen audience measurement to rate the new world, and how formidable is the competition, how much of this is just distraction?

David Calhoun

Well, competition is always distracting. Listen I – this is already a crowded space. But what we typically face in the space are custom oriented products, custom models that get build for either a particular agency and/or advertiser to help them allocate more effectively.

What I think will happen over time now is you will still have lot of custom development, the research industry tends to lend itself to that. But I do think you will begin to see some consolidation of that activity and some more standard methods and processes for advertising allocation questions. That’s really a bet we are making. We really do believe in it.

So, on one hand we are trying to cover more mediums in what we do, but on the other hand we are equally invested in the mix models that are used to then allocate. Our view is that as we get more standards developed, like in the online space or the mobile space in combination with TV and what we know about sales promotion, that the models that allocate across companies will also get more standardized and more informative and a lot more current than they are today. So, that’s how we think about sort of the big picture and we believe actually all of that spells opportunity and a lot of our investment on Three Screens and businesses like Marketing Analytics are all meant to seize that opportunity.

Bishop Cheen – Wells Fargo

Okay. And then on consolidation, any thoughts about how long it will take to see a more stable consolidated measurement in qualitative industry?

David Calhoun

Yeah, it’s going to take a long time. This is a slow steady path, lots of new entrants every step of the way. I don’t think consolidation takes the form of a big M&A puzzle. I actually think it just – it takes the form of sort of winners and losers over time, but this one takes quite a while.

Bishop Cheen – Wells Fargo

All right, thank you.

Operator

Your next question comes from the line of Brian Karimzad with Goldman Sachs. Pleas proceed.

Brian Karimzad – Goldman Sachs

Good morning, a couple of questions. I guess the first one is on Wal-Mart. So, thinking about the way you are going to approach pricing and then a bit more on the cadence of the timing, because I know this isn’t how you do those, just as a hypothetical, Wal-Mart I think is somewhere around 20%, 30% of grocery retail in the United States. Does that factor into the way you are going to approach pricing that additional measurement service for your clients? And then the other component on Wal-Mart is, how do you expect the case to play out over time and do you expect that the most of the big guys they won are going to be ready and have their contracts negotiated to go and be running, or do you think it's going to be more of a build over a couple of years? And then I have a follow up.

David Calhoun

Yeah. Well, I think, first of all, the desire to have the data is going to be very high needless to say because of what you said. You were accurate in your representation of their share. You got to remember every one of our major clients have these contracts that allow for the addition of certain services and/or coverage opportunities. They are all slightly different from one another. So we will be operating within already negotiated contracts to then sell an additional coverage or service. While they’re relatively consistent they’re not exactly the same and the timing won’t play out all on the first day. Needless to say we’re not going to tell you exactly how the pricing algorithms ultimately are going to work. But I will say there will be a – everybody will want this data as fast as they can get it. And then there is a period of months where we basically have to reconcile the data they have been working with, with the data that now is more informed as a result of the Wal-Mart data.

So it’s a bit of a sloppy process but it will be healthy, it will meet – I believe we’ll see a very active market pretty much right out of shoot with the manufacturers.

Brian Karimzad – Goldman Sachs

Okay. And then I hate asking these questions and hopefully we won’t have to too much in the future, we can glide through it. But, let’s say we use the ’09 stress test as a case if things blow up in Europe next year. You did the low single digit organic revenue growth. You had a lot of margin expansion in ’09, but you were private at that time and there were some unique things going on. How would you guys approach the expense side of the ledger and margins if you were to go into the year and say, you’re going to budget for low single digit organic growth?

David Calhoun

Yeah, well, we’d let them expand more than we do today is the way to think about it. Because we do have a lot of discretionary program money that we spend to get, as we say three years ahead in the developing markets to create some new technologies and Three Screen, while we would want to protect all of it we wouldn’t in a real downside scenario. We would elongate those programs, we would do them differently. So there's more room to manage than you might think there, and in addition we don’t have some of the – we still had a few real sinkers back in the ’09 timeframe that we don’t really have today. I think broadly speaking our portfolio stands up better.

Brian Karimzad – Goldman Sachs

All right. That’s very pretty helpful. Thank you.

Operator

Your next question comes from the line of William Bird with Lazard. Please proceed.

William Bird – Lazard Capital Markets

Thank you. Could you talk a bit about just what you’re seeing competitively in emerging markets right now?

David Calhoun

You know, it’s not a really big change for us competitively. But I’ll – again I’ll remind everyone. We are mostly in a market penetration game in the developing markets. In other words this is GDP related things, a crowded environment. You don’t actually bump head-to-head into people that much in the work that you do. For us on the big coverage expansions and the new footprints that we developed our objective is to get out ahead which we believe we are and to invest heavily, which we are. Then put enough space between us and the other folks that – that hopefully they’re not going to be the same.

Honestly not much has changed on that front for me over the last year and I feel if anything we’ve sort of expanded our lead on that front. So I’m not expecting surprises on that front.

William Bird – Lazard Capital Markets

Separately, could you talk about just how Answers-On-Demand is developing anything to update in terms of new client adds, and just also maybe a little bit of color around how that might impact your pricing prospectively?

David Calhoun

Yeah. Well, AOD as you know is a very important platform for us. We are up, live, Kraft uses in across their business, Procter & Gamble will in effect be completely dependent on AOD starting I think the 1st November. And everything is going to well with respect to the startup we had, sort of parallel paths going on for quite some time. So very optimistic that it’ll meet the needs of that client. And then we have a slightly different application in the retail space with Safeway that continues to go well. As I said on previous calls, I’ll repeat it this time, we are purposely going to go slow so that we understand all of the change management that has to go on inside our clients. I mean the touch points on this product are measured in the thousands. And all of that is going very well. I want to take the best practices and real user case opportunities that we see here as we then subsequently rollout to other clients.

My hope is that you’ll begin to two, three clients a year elect to make this switch, it has to be price positive for us, more importantly I’d say it’s a big value added to their business, and that’s we’re working forward to that embarkation.

William Bird – Lazard Capital Markets

Thank you.

Operator

Next question comes from the line of Kelly Flynn with Credit Suisse. Please proceed.

Kelly Flynn – Credit Suisse

Thank you. Thanks for all the color on everything including Wal-Mart, it's great. I just wanted to revisit the cons about the macro environment. If the current environment keeps up, if you will, do you think it's conducive to the mid single digit long term revenue growth or do you think things needs to improve in the next year or so to make that realistic?

David Calhoun

No, no, the current environment would lend itself to that. Yeah, I have a high level confidence to that.

Kelly Flynn – Credit Suisse

Okay, great. And then can you just talk quickly about DNA. I don’t know if you addressed this, I didn’t hear it, if you did. The depreciation and amortization came down a lot versus last quarter is that the new level?

David Calhoun

No, there was a little bit of true up in the prior quarter. I think that what you are going to see is that number is going to come back to a more normal state as we go into fourth quarter.

Kelly Flynn – Credit Suisse

Okay, perfect. Thanks a lot, I will leave it that, appreciate it.

Operator

Your next question comes from the line of Matt Chesler with Deutsche Bank. Please proceed.

Matt Chesler – Deutsche Bank

Good morning, thanks for taking my call. So, some of the themes we are all getting familiar with in terms of your growth longer term, online emerging markets and now Wal-Mart, is there a way – should we be connecting the dots between the Wal-Mart theme and the emerging markets theme or should we be thinking about Wal-Mart primarily as a domestic opportunity.

David Calhoun

Yeah, I think you have to think about it as a domestic opportunity. I mean we do work with every single one of Wal-Mart’s international retail businesses. So, this domestic one, we are always on a hunt for improved coverage even in the developed markets. Not many of the developed markets offer the kind of upgrade that Wal-Mart offers in the U.S. market. So, this was obviously very important, but I don’t think you can necessarily – we don’t think about them in those same buckets.

Matt Chesler – Deutsche Bank

Okay. And just to revisit the big items, I have to recheck my math on this still, forgive me if I misspeak here. But, it does look as though to get to your margin growth guidance for the year that you are expecting – the growth in the fourth quarter in terms of bps is, is it the largest of the quarter so far this year. Is there anything in particular about the timing of your expense bills or you CapEx plan that it sort of results in that pattern throughout the year.

Brian West

No, I guess they start with our margin expense year-to-date is about 36 bps and the fourth quarter tends to be a higher margin quarter naturally and for a variety of reasons. That would be within expense base, just more revenue opportunities at the close of the year. But it generally tend to be that way but it’s really nothing to do with the expense base per se. And the CapEx is definitely back end loaded to the second half, and in the fourth quarter as you could see as we reaffirmed it at the high end. So we are going to have a busy fourth quarter in that area.

Matt Chesler – Deutsche Bank

All right, thanks a lot, congratulations!

Operator

(Operator Instructions) Your next question comes from the line of Bill Warmington with Raymond James. Please proceed.

Bill Warmington – Raymond James

Good morning. I wanted to ask about the Nielsen Catalina Solutions and how that’s progressing and what needed to be done on either the technology side or other areas to move forward with that project?

David Calhoun

Yeah, glad you asked actually. I love this product. I still have a lot of confidence that this will help us in the match of watch and buy for the benefit of our clients. As people may recall, this is an opportunity for us to use Catalina real time retail data on an overnight basis in combination with our media data so that we can begin to introduce real return on investment metrics to the marketing world.

Most of the development work left to be done is the incorporation of some set top box data into the media side of that match which we have, and so the development efforts probably entail another three to six months. We are actually working with advertisers with products that represent what this will then ultimately deliver, so that we are building used cases at the same time. But I really do feel good about that partnership and the direction, and I am looking forward to scale off sometime in the middle of this year or this coming year.

Bill Warmington – Raymond James

Okay. And another question for you. Coupon and Shared Mail company, Valassis, mentioned on their earnings call yesterday that CPG clients had pretty much exhausted their promotions budgets for the year as a result of unusually high coupon redemptions in the second and third quarters. I just wanted to ask whether you are seeing any change in the CPG client base in terms of the mix of services, dollar amount of services. And then what are you advising your CPG clients to do to try to offset what’s probably going to be a likely share loss to private label coming in the second half of the year as a result of cutting back on the promotions.

David Calhoun

You know, I don’t want to – I really honestly would be guessing on the coupon. In many ways that crowd probably has a deeper insight than I do on that front. So I don’t want to speculate on it. We are always advising our clients by way of analytics to reinforce brand investments, longer term investments, try to minimize sales promotion, but, you know, the view that sales promotion tends not to be a great return on investment, that doesn’t mean they’ll always follow it. There are current needs and current retail performances, net that’s required for their business models. So, I don’t want to speculate on store brand equity or what you refer to as private label. That battle is going to continue for quite some time. What I will say is that you clearly see retail investing more in store brand equity and the use of it not just for what is typically viewed as value clients but also upscale. I really think that’s where the opportunity lies and that’s where the competition will get the most ferocious.

Bill Warmington – Raymond James

Okay. Well, thank you very much.

Operator

Our final question today comes from the line of Robert Riggs with William Blair, please proceed.

Robert Riggs – William Blair

Hi, thanks for taking my question. Just one final one on the long term opportunity in the developing markets, and thinking about when you enter a market with more of your local customers I’m assuming there is an education time period, a maturation time period before those customers are really willing to take on kind of more products, more services, more higher level products or services. Is there any way to kind of bracket typically how long that takes in a particular market? Is there another kind of two-three year investment period before you hit that inflection point?

David Calhoun

That’s a great question, I think it's different in different developing markets. I think probably for us we were actually surprised at the uptick in China on some of our more sophisticated insight products like BASES and other things. So, I probably would have said that it would lag three plus years. I’m not necessarily in that mode right now, maybe it's just that’s where China is on the development cycle. But they are really going to run at insights in my view and I think they are going to exercise us in every way on analytics. So that mix I think will – is already actually favoring our growth picture. I think that will take longer in India by a long shot, and I think it will take even longer in Africa.

So, it's a little different in each developing market. I still think probably if you aggregate it all, yes, there is a lag, I probably wouldn’t put it outside of two years.

Robert Riggs – William Blair

Great, thank you.

Operator

This concludes the Nielsen Holdings N.V. third quarter 2011 call. A replay of this call will be available on the Nielsen Investor Relations website shortly. Thank you.

Liz Zale

Thanks everyone.

David Calhoun

Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!