Nielsen Holdings' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Feb. 6.12 | About: Nielsen Holdings (NLSN)

Nielsen Holdings N.V. (NYSE:NLSN)

Q4 2011 Earnings Conference Call

February 06, 2012, 09:00 a.m. ET

Executives

Liz Zale - SVP, IR

David Calhoun - CEO

Brian West - CFO

Analysts

Suzy Stein - Morgan Stanley

Brian Karimzad - Goldman Sachs

Dave Lewis - JPMorgan Securities

Eric Boyer - Wells Fargo Advisors

Sara Gubins - Bank of America/Merrill Lynch

Bill Warmington - Raymond James

William Bird - Lazard Capital Markets

Doug Arthur - Evercore Partners

Matt Chesler - Deutsche Bank

Kelly Flynn - Credit Suisse

Operator

Ladies and gentlemen thank you for holding and welcome to this conference call on Fourth Quarter and Full-Year 2011 Results for Nielsen Holdings NV. Please note all lines are in listen-only mode at this time. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions)

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 welcome to Nielsen’s fourth quarter and full-year 2011 call. On the call with me today is David Calhoun, our Chief Executive Officer; and Brian West, our Chief Financial Officer.

Before we begin, I’ll call your attention to the Safe Harbor for forward-looking statements contain within our webcast presentation. The following discussion contains forward-looking statements including those about Nielsen’s outlook and prospects that relates to the Private Securities Litigation Reform Act of 1995. Forward-looking statements such as, which are not historical facts, these and other statements that relates to future results and events are based on Nielsen’s current expectations as of today February 6, 2012.

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, which you can find on ir.nielsen.com or the Securities and Exchange Commission’s website sec.gov. Please consult these documents for a more complete understanding of these risks and uncertainties. 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, except as may be required by law. Our outlook is provided for the purpose of providing information about current expectations for 2012. This information may not be appropriate for other purposes.

With that, I will turn the call over to David Calhoun. Dave?

David Calhoun

Thank you, Liz. Hope everyone enjoyed the Super Bowl last evening. I’m going to start with just a sketch of 2011 performance, our first year since we went out with the IPO at the beginning of 2011. Revenue for the year grew 8%, 6% on a constant currency basis. Adjusted EBITDA grew 10%, 8% on a constant currency basis. Net debt leverage declined to 4.0, again very strong performance given the fact that for at least Brian and I, we started at over 9.

We strengthened the balance sheet throughout the year and in addition Brian will share some treasury activities that bring additional strength here coming into 2012. Business conditions in Q4 relative to prior quarters were positive overall. Only trouble spots for us were really natural disaster related and or political, that was the Middle East and Taiwan and in the developing world side. [Taiwan] for us pretty much stopped in its tracks as a result of the flood, but net-net we were up 15% on the year in the developing markets.

On the developed markets clearly things are more cautious. Europe for certain is in the doldrums, it has been, it continues to be and we expect it will continue to be. So, I don’t expect much in terms of variance from any prior or forward periods as a result of that. U.S., most of the clash and a little self-induced as a result of Wal-Mart coming on board with us into the second quarter, such that some analytics that would benefit from deeper Wal-Mart data will be postponed until that moment, but net-net a positive market environment for us.

Our investments continued to be again robust and we continue to execute well. So expanding retail measurement coverage in two specific programs, first Wal-Mart, we’ve been absence for quite a while, but volumes of data are massive, the amount of coding that has to go on is massive. But it’s going on beautifully and we remain on-track for that program again for delivery in the second quarter. And then secondly, global reach and read, we just continue to expand our footprint in the rural parts to China, rural parts of India and across Africa.

Measurement across new platforms and devices and specifically online campaign ratings, I’ve lots of confidence that this change really change in industry approach to the measurement of online campaigns is in full swing and I feel good about that and I’ll talk a little bit about that on the next page. Again, it will be a little while before the financial models play out, but at least in terms of industry advocacy I feel great.

Extending market effectiveness capabilities watching by, this is what started as a niche analytic capabilities that marry or watch in by data for the benefit of advertising campaigns and so forth, that can aid current measures in the hundreds of millions of dollars and we as part of our acquisition strategy with marketing analytics last year this continues to feel very good, very robust for us, it’s a strong double-digit gainer in the analytics space. And then finally, we will take you through our guidance in 2012 very much in line with the long-term framework if not towards the high-end of it.

Next I like to talk about the progress on these two major initiatives big investments on our part. U.S. retail expansion it really is the new Wal-Mart data, it will give us a much more comprehensive view of the U.S. market for both retailers and manufacturers and I would stress that retailers are very important segment for us. We are substantially complete with the commercial terms and agreements set, again, to be implemented in the second quarter and feel very good about that progress or plans we’re looking forward to getting the data.

We have completed the final stages of what we would refer to as a massive data refresh, anyway no hiccups to-date and again feel good about it. And we’ve got some real early signs, good signs about insight opportunities, which probably should not be unexpected by anybody, that’s why did in the first place certainly for our plans and for us and working with our retailers and specifically for Wall-Mart. And we remain on-track for that second quarter start up.

On the online campaign rating front, again, I’ll remind everyone this is a tough implementation, lest because of the technical requirements and product requirements, because we really have been through that. We are in the process of delivering everyday to a wide variety of participants. The challenges on this one is getting the industry lined up to accept and learn how to use and building these used cases has been our endeavor here. Anyway we feel great about it. We’ve got 35 advertisers, these are not small, they’re substantial big advertisers. We’ve got almost 400 campaigns now under our belt. We’ve got 151 running as we speak, 48 publishers are in, agencies have begun to talk to us about how they can use it with their players, very important cog in the wheel. And then finally, just the network and platform delivery of this metric is also making real progress.

So, again all of these elements in effect will turn the online campaign measurement approach to one that resembles television and then therefore can be compared across platforms. All of those things are beginning to fall in place and feel very good about that. Most importantly these used cases around campaign are generating real efficiencies for our clients. They either get more targeted audience or they get what they had for less money and that’s ultimately what it’s all about. So again, I feel very good about that progress.

So with that, I’m going to turn it over to Brian who is going to run you through the financials and first look at the Q&A. Brian?

Brian West

Thanks, Dave, and I’ll move on to page eight for the total Nielsen results. 2011 was another year proven out the consistency of this business model and our ability to deliver on our commitments. And it starts with the revenue lines, so revenue for the full-year came in at $5.532 billion, that’s up 6% year-over-year on a constant currency basis and in line with our guidance of 5 to 7 which we set out about a year ago.

Our adjusted EBITDA came in at a $1.546 billion, that’s up 8% and the adjusted EBITDA margin rate, it was just to touch on to 28% and that’s 57 bps of expansion, better than expected while still in full invested mode, that’s important because we continue to invest in all the programs Dave outlined and again, a little better than our range of 30 to 50 bps. Our adjusted net income came in at $590 million, that’s up 31%, slightly above what our guidance was primarily due to interest and cash taxes and our diluted earnings per share was $1.61.

Finally on the net debt, as Dave mentioned, we are very pleased with the performance of our deleveraging and export 4.0 times and just technically it’s actually 3.98 times, we’re pretty proud of that three point handle. Again, making full investments throughout the year and we deliver on our commitments.

And with that I’ll go a little bit deeper in to the fourth quarter. Page nine, fourth quarter revenue came in at 1.421 billion that’s a 5%, adjusted EBITDA at 432, that’s up 9% and adjusted margins over 30%, very healthy margin expansion, primarily driven from a combination of productivity and cost leadership actions, as well as a higher mix of the rich data products.

Adjusted net income came in at $190 million. The diluted earnings per share was $0.51 and the free cash flow was $148 million. I’ll talk more about that free cash flow picture and some of the drivers. Again, steady good margin expansion, the free cash flow was what we like to see and the earning power from that reduced leverage is evident.

If I move on to page 10, the segment revenue. I will start with total buy revenue, just came at $896 million, that’s up 5% year-over-year. And it was driven by a 6% growth in our information business and 4% increase in our insight business. Developing markets was up 10% year-over-year on a constant currency basis. Revenues for developing market in the quarter was $291 million and for the full-year, it’s a 1.125 billion, again up 15% year-over-year and a very big healthy franchise. Our developed markets had steady growth of 3%, as Dave mentioned Europe is still pressured, but pretty much as we expected.

Moving on to Watch. Revenues came in at $504 million, that’s up 3%. Our television business was up 3% for the quarter and 4% for the year. Very steady, very consistent and as expected. You know soft spot on our Watch side is a small product, it’s more discretionary in nature, which is Europe and it’s print related. So, it’s getting to the point where it doesn’t really matter much anymore and we planned for it. So, it’s a little bit of pressure for that particular segment. If you look at acquisitions, revenue came in at $21 million. That’s a 17% year-over-year that’s trade show timing in there. The underlying growth rate is closer to 10%.

A one final point, I’d make is that these numbers include $54 million recap of revenue from Buy to Watch, it’s a segment shift. And really we grew, for instance our Mobile business, we grew it up in leveraging our global footprint at 100 countries. When our Global Mobile Management Analytics, it’s so big and its growing fast, we’re recalling it out. We’re putting in Watch Group launch, and we’re resourcing it like crazy with leadership etcetera. So, better lines with how we run the business, something similar for ad solutions business.

Page 11, segment profitability, overall good margin expansion. Buy for the quarter came in at $222 million of adjusted EBITDA, up 2%. I’ll remind you that most of our investments come in our Buy side on the OpEx line and you see that particularly on our developing market expansion global reach in lead program.

On Watch, EBITDA came in at $210 million, that’s up 9%, very nice leverage, Expositions at 4, and then total of 432, up 9%. Again, good investments in the Buy side and we’re executing our global productivity programs.

Moving on to page 12, some cash flow and balance sheet items. Free cash flow for the fourth quarter came in at $148 million. CapEx for the quarter was $154 million. High in the quarter as expected and for the full-year it’s in the range, if you take out the impact of foreign exchange. Cash tax is $40 million, slightly lower than expected employer basis. The rate was 18% versus 19% largely driven by timing. Our restructuring of $20 million as expected.

Moving on to the balance sheet, net debt came in at $6.156 billion again the net debt ratio was touch under four times. We paid down $382 million of debt in the year and $229 million in the quarter and to get through the cap table on the right hand side by instrument where the debt pay downs came from.

Moving on to page 13, I’ll remind everyone that our financial policy isn’t has been to reduce risk and reduce leverage and increase our financial flexibility and we were very pleased with the way we de-risked it to over time and particularly this year. As I mentioned, we paid down $382 million of debt post IPO and just last month we took another meaningful step towards de-risking. We refinanced $1.2 billion of our existing 2013 term loan maturities with a new five year facility all of that is 100% pre-payable.

The transaction closed in early February, the initial rate is LIBOR plus 225 and that will step down as leverage reduces and is note LIBOR four. We’re very pleased with the transaction, we think it continues to move the stack out at a rate that’s very attractive. And I point out the debt maturity profile, before this transaction by 2013 had a big stack of 1.5 billion all that has being pushed out as again I mentioned very important transaction for us. And for the next four years there is no meaningful maturity in front of us give us more flexibility. And as Dave mentioned, our deleveraging over the course of time back in ‘06 it was over nine times feels also good to have actual 3.98 as we close the year. And that one last point is we did achieve rating upgrade S&P took us to BB in the last month or so.

With that I will go to page 14, and Dave will start off with a few of the guidance points.

David Calhoun

So this looks familiar, I think to everybody because again we cannot break within the long-term framework and we feel good about sort of the outlook and this doesn’t suggest that there is any big robust market out there. It’s just continuing development in the developing world and it is continuing to battle through the developed world in what we consider to be, probably positive environment in the U.S. and again very tough environment in Europe.

What we see revenue growth between 5 and 7%, again EBITDA margin growth between 30 and 50% basis points remind everybody that the way we control this is typically through programs that we can time, we like to go fast but if we have to differ on occasion we do usually with very little competitive circumstance or difficultly. And then adjusted net income per share between a $1.70 and $1.76 and we will continue to deleverage, we would like to take this out another half a turn we believe we can and the range is on some of these more discrete numbers, I’ll let Brian walk you through.

Brian West

Sure and one point on the revenue and EBITDA, I think it’s important to remind everyone that there will be a reporting phenomena for 2012 given FX volatility. If FX rates stay throughout 2012 exactly where they were on January 1st, there is about 300 basis points impact on revenue lower and about 275 basis points on EBITDA lower. So, just keep that in mind and do your models again its reporting phenomena nothing to do with economics which is why we always talk about constant currency.

In the box a few other items CapEx at 340 to 360 will be no surprise maintain full investment mode consistent with what returned in 2011. D&A 5.30 to 5.40 reflective of the back-end waiting of CapEx particularly that fourth quarter that’ll start run-off the books as we go into 2012.

Net book interest at 4.30 to 4.40, cash taxes 1.50 to 1.60 that approximate 20% rate and a cash restructured at 75 to a 100 that one is probably 0.25 to 0.50 more than we contemplated. And quite frankly, we see more opportunities to leverage our technology investments and our lower cost base. We know this will move on forever but we see more opportunities and we’re going to do it just like we did when we were private and we think it’s healthy for the business long-term. And the weighted diluted share that’s gaining for full-year is going to be 377 million.

With that, I will turn it back over to Liz.

Liz Zale

Sure. Operator, we’re ready to take the first question.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question today comes from Suzy Stein of Morgan Stanley. Please go ahead.

Suzy Stein - Morgan Stanley

Hi. You mentioned that some of the analytics business was postponed as you incorporate the Wal-Mart data. Can you quantify this in any way in terms of how much it is impacted fourth quarter and I guess how much it should impact first half of ‘12?

David Calhoun

It’s very hard Suzy to do that, all I’ll tell you is that as I sort of went around the offices and we talked to clients, it became very clear that a bunch of apples is going to go on. I don’t think it was so much negotiating tactics as really just a genuine interest in having the bigger, more fulfilled data. But look, we probably on the insight side in the U.S. on a normal level running rate, we would had a couple of more points of growth and that’s just, again, I attribute it to this, I didn’t go account-by-account and add it up, but that’s clearly what it feels like.

Suzy Stein - Morgan Stanley

Okay. And then can you talk about how you’re pricing the OCR product?

David Calhoun

Not yet, but I’ll be happy to do that when we get on this call again. The use cases are planned out as I had hoped and I believe that the model will be robust. But I’m not going to lap a model yet until we get some real substantial sign-ups on that front and I believe that they’ll happen soon and I believe we’ll be able to talk this through more thoroughly in the next call.

Suzy Stein - Morgan Stanley

Okay. Thank you.

Liz Zale

Operator, I think we’re ready for the next question.

Operator

Absolutely. Our next question comes from Brian Karimzad of Goldman Sachs. Please go ahead.

Brian Karimzad - Goldman Sachs

I think you alluded to it here, but just to give us a sense. Within the guidance you’ve given, any sense for how much contribution you’re contemplating from OCR and from the Wal-Mart renegotiations, or is there some you’re still kind of waiting and seeing here to see how it plays out?

David Calhoun

Very little at OCR, very little, because we’re going to allow this industry to breathe as it tries to adopt the new measurement. So on the Wal-Mart side, it’s pretty definitive and it’s a good number for 2012.

Brian Karimzad - Goldman Sachs

Okay. And with regard to the ownership structure of the company, we haven’t seen much change on that since the offering. And I know you’re limited in what you can say and what control you might have, but maybe you could help us walk through the way you guys are thinking about that?

David Calhoun

Well, it’ll reflect what I believe is the attitude of our board and more importantly the way Brian and I operate the company. I still look and it still looks and feels like a long-term hold on the part of our owners, because everything we do in terms of operating investments and all the things that we want to do to continue to run this business are fully supported and we move that way. On the other hand, there is no question they recognize the difficulties with a little float. So you can try to figure out on your own just like I do, but I think we’ve got very savvy investors, operating attitudes are fantastic and I do think some along the way they’ll do something to support better float.

Brian Karimzad - Goldman Sachs

Okay. Thank you.

Liz Zale

Thank you, Brian. Operator, next question?

Operator

Our next question comes from Dave Lewis of JPMorgan. Please go ahead.

Dave Lewis - JPMorgan Securities

David Lewis from Michael Meltz’s team. Just one quick question, can you update us on the Facebook partnership, please?

David Calhoun

Well, again, that is OCR. And so it continues to go very well in the sense that the product has been very well received in the marketplace. The technical dimension of the partnership, which is really what it is, has gone sort of flawlessly, and they still represent a big opportunity for Nielsen, more importantly, the measurement represents a big opportunity for Facebook, as it can begin to sell its audience in an accountable way, similar to the way the media interests do in television. So I think that all parties see this as real opportunity and upside if the industry adopts some changes, which, again, as I think I’ve expressed, I’m getting increasingly confident it will.

Dave Lewis - JPMorgan Securities

Thank you.

Liz Zale

Thank you, Dave. Operator, next question please?

Operator

Our next question comes from Eric Boyer of Wells Fargo. Please go ahead.

Eric Boyer - Wells Fargo Advisors

Dave, I think you mentioned natural disasters and some political impact, which probably negatively impacted your developing markets, any way to quantify how much of an impact it had on the growth rate?

David Calhoun

Yes. Well, I’m getting very used to the developing world in a very sort of consistent way growing around 18% for us. And so, as I mentioned to you, we were 15% on a year-on-year, and you really can attribute it to, again, Arab Spring that happened to move across all the seasons and Thailand, which as I said just literally stopped in its tracks. But those things I think we’re going to feel better in the year ahead. And I don’t have an accountant sitting next to me with this one, but to me I think it’s around that two to three points.

Eric Boyer - Wells Fargo Advisors

Okay. So mid-teens rate should be going forward do you think?

David Calhoun

It’s certainly been performing that way and there’s no reason for me to think it won’t.

Eric Boyer - Wells Fargo Advisors

Okay, great. And then just on your leverage ratio, you’re at four times today, you got your upgrade in your credit rating. Any comments you can have as far as your long-term comfort or where you’d want to see that ratio?

David Calhoun

We still like going down. We think it’s healthy. We have always said investment grade is a good goal, and we’re just going to keep running our play.

Eric Boyer - Wells Fargo Advisors

Okay. Thanks a lot.

Liz Zale

Thanks Eric. Operator, next question?

Operator

Our next question comes from Sara Gubins of Bank of America Merrill Lynch. Please go ahead.

Sara Gubins - Bank of America/Merrill Lynch

Could you give us some more color on your discussions with clients, what types of projects they are spending on, where are they pulling back?

David Calhoun

Well, pricing continues to be, I’ll start with the U.S. market price, because that’s where I think lots of change in terms of the brand dynamics and thoughts are. But there’s no question in the pricing world, you’ve got this market moving in two directions. You’ve got a high end and a low end, the middle just seems to getting smaller and smaller and smaller. And I know you here most of our brand folks on the client side talking about this, but it’s real, and the analytics are to try to support that. How do we appeal to sort of the low end of the economic chain and then how do we run towards the high end. And that’s a big challenge for all of them, it really is. And so I would say pricing continues to be an important part of our work. And then the second one is mix models, everybody’s trying to incorporate more digital mix into their advertising model. And those models and analytics to support that move is probably going to be the most robust analytic framework we have for the next several years, not just next year or this year.

Sara Gubins - Bank of America/Merrill Lynch

And then just one other question, is your expectation for margin expansion next year that Watch should help fund potentially deteriorating margins in Buy, given the investments, or should we start to actually see margin expansion in Buy?

David Calhoun

Well, we don’t think about deterioration. We just think about reinvestment. It’s important, because they are very deliberate decisions we make around Buy business. And yes, 2012 will be another year where we are going to invest in our programs, particularly Global Reach and Read, to continue to extend the footprint. And that model is very consistent and robust and we feel good about the prospect. So, yes, the margin expansion of 30, 50 bps is a full investment mode number.

Sara Gubins - Bank of America/Merrill Lynch

Thank you.

Liz Zale

Thanks, Sara. Operator, next question please?

Operator

Our next question comes from Bill Warmington of Raymond James. Please go ahead.

Bill Warmington - Raymond James

Wanted to ask how you’d characterize the competitive environment around renewals for the Buy business and are you finding that pricing is becoming more or less rational?

David Calhoun

I’m not sure how to frame that. I think the best way for me to say it is look we always face competitive battles. Our track record continues to be very good. We continue to make progress. In general, we come out ahead in every year’s renewal and I don’t forecast any change on that front. So nothing significant is happening on that front in terms of change year-over-year.

Bill Warmington - Raymond James

Okay. And a question on, if you could give us an update on Nielsen Catalina Solutions, how that’s going?

David Calhoun

Yes, actually, I’m very enthused about it. It’s part of our advertising solutions toolkit. As I mentioned, we now have a couple of $100 million of business in this arena, not just that product, but in that suite. And the Catalina Solutions product will really come into full force here in the second half of 2012. And I believe that that will be a significant part of our ad solutions growth. So, again, I feel very good about it. It took us longer to hatch than I probably originally contemplated, but for good reasons. And we have good business with it now and I expect the second half for it to be robust.

Bill Warmington - Raymond James

And a last question, a housekeeping question. With the new debt facility in place, what does the blended cost of debt look like going forward?

Brian West

Well, as we closed the year, it was at 5.68%, and over time, as we continue to delever, we don’t see that moving around a lot. Our focus actually is going to be going after the high coupon notes. And every day that passes, the economics get better and better with the ones that are callable. So we think it’s in that zip code and it’s going to only get better as we opportunistically seek to take out the high coupon notes.

Bill Warmington - Raymond James

Excellent. Thank you very much.

Liz Zale

Thank you, Bill. Operator, next question?

Operator

Our next question comes from William Bird of Lazard. Please go ahead.

William Bird - Lazard Capital Markets

For your Watch business, I was wondering if you could just talk about how soon could the upfront market move to three-screen and what would it mean for your business?

David Calhoun

It would mean a lot. It’s not going to move there real soon. I believe that three-screens is still what everyone is after, for all the good reasons. The upfront and the dynamics around all those instant negotiations, in my view, present a hurdle for it, because I don’t think the analytic community has yet fully accepted it. It’s just going to take some time for it.

Look, I think last night’s experience is going to educate an awful lot of folks on just what that means. And I’m looking forward to sort of whatever comes as a result of that. But I think the screaming dimension with the media is, number one, property. And I think all that gets learned and then ultimately all that’s been commercially implemented from it is going to be a great experience for everybody, including Nielsen.

William Bird - Lazard Capital Markets

Thank you.

Liz Zale

Thank you, Bill. Operator, next question, please?

Operator

Our next question comes from Doug Arthur of Evercore. Please go ahead.

Doug Arthur - Evercore Partners

Well, just following-up on Bill’s question. As the TV device gets more sophisticated, moves more towards smart TVs, which seems to be a very slow evolution, broadly speaking, do you see that as an opportunity or a threat to the watch business?

David Calhoun

Total opportunity. Look, we think about our metric, ultimately including all or what we refer to as best available screen for any family or any household. Believe it or not, it’s rarely the technologies that represent hurdles in the implementation of this. It’s really alignment of industry interest. And that’s always been the case, and it continues to be the case. All that said, I believe that is exactly where we’re going. And for us, every one of these additional screens, every one of these new forms of distribution, represent opportunities that are complementary to our currency. So at any rate, I view this as opportunity-rich.

Doug Arthur - Evercore Partners

Okay, great. Thank you.

Liz Zale

Thank you, Doug. Operator, next question?

Operator

Our next question comes from Matt Chesler of Deutsche Bank. Please go ahead.

Matt Chesler - Deutsche Bank

I have a few questions. The first is one more follow-up to the multi-screen measurement issue. The London Olympics, I believe, are going to be a big petri dish for cross-platform measurement, as NBC is streaming it live, as well. I’m wondering if you could talk about your role, if any, that you’re going to have in measuring the Olympics with NBC? And if you’ve got any partners there, as well. I guess the second question would be a clarification on the EPS guidance range, in terms of the constant the FX assumption. Is that based off the FX rate, the January 1 rate? How should we think about that?

David Calhoun

Why don’t you do the back one, because that’s an easy answer?

Brian West

Yes. It’s just like the 1/1 rate.

David Calhoun

So, with respect to the Olympics, again, I believe last night is going to teach the industry a lot on this subject. We are definitely going to use the London Olympics as a huge test case and both with advertisers, with the Olympic committee and all involved. So this is always an opportunity for Nielsen to sort of showcase its global reach. More importantly, its reach across screens.

I will remind everyone on the multi-screen. The first thing you have to do before you do multi-screen is you’ve got to get a great metric on the second screen. And that’s what OCR is all about. You have to have some level of accountability and you have to have some high level of accuracy with respect to demographics in order to be able to combine it with what’s in television. So these are definitely in step, and we feel very good about sort of both. First, just the second screen. And then secondly, the ability to integrate.

Matt Chesler - Deutsche Bank

Yes. I guess my understanding is that, certainly you would want to use that as a test case to prove out your capabilities. One other thing I was trying to drive at with the question is should we just be thinking about it as that? Or is this a commercial relationship where it might actually contribute to revenue growth in 2012? Then the follow-up would be can you talk about your M&A pipeline? Thanks.

David Calhoun

Well, the answer to first question is both. So yes, there’ll be commercial arrangements. Is it going to move the needle in a really significant way? No, but it will be a positive influence. And yes, you’re right. That case and the reach that we can ultimately achieve and what we do for these big multinational advertisers that should, we hope, present a case for then very big and ongoing relationships. And the second question was?

Matt Chesler - Deutsche Bank

It was around your M&A pipeline, in terms of what’s your focus? What areas or capabilities do you think you want to bolster? Can you size that at all, in terms of what you think is a realistic range of spend this year?

David Calhoun

No. We told everyone and we continue to try to stay on track with sort of what we spent, we will continue to spend and look for. Last year was a perfect, in my view, indication of what we’re trying to do. We had a acquisition built around geographic expansion when we bought MEMRB, and it covered Eastern Europe and covered parts of Russia, which are very complementary to what we do. There are still some of those left in the world, and we will continue to look for those. Great analytics platform that we bought called Marketing Analytics, which is where watch and buy data meet. In effect, marketing mix for most campaign managers.

And then we invested in a great new research tool called NeuroFocus, where they are just doing groundbreaking work in reading the brain. Believe it or not, that one is off to a fantastic start with us. And I feel very good about what that will contribute to Nielsen. And it will keep us on the leading edge of research. So each of those in their own way demonstrated sort of potential avenues for us to tuck-in acquisitions, bring in real entrepreneurs with real talent into the company. And again, I hope this year ends up looking exactly like that.

Matt Chesler - Deutsche Bank

Thank you.

Liz Zale

Thank you, Matt. Operator, next question?

Operator

Our next question comes from Kelly Flynn of Credit Suisse. Please go ahead.

Kelly Flynn - Credit Suisse

Couple questions. First one, sorry to go back to currency, but I want to ask another clarification question. The slide you have on guidance says that everything is in constant currency, but obviously, you’re assuming January 1 rate. So I just want to clarify on that EBITDA margin expansion of 30 to 50, is that actually what you expect net of the currency impact? Or are you saying it’s going to be less than that when you layer in currency?

Brian West

Well, that number is what it’s going to be, if you assume rates were the same year-over-year. Rates probably aren’t going to be the same year-over-year. They’re going to go one way or the other. And that’s going to naturally move to that number. So we don’t try to guess at that. It’s just when you look year-over-year, that will be consistent.

Kelly Flynn - Credit Suisse

But your EPS, I mean you have to guess somewhat your EPS implies the January 1 rate?

Brian West

That’s the EPS number, because I have to.

Kelly Flynn - Credit Suisse

Yes, so it’s basically the EPS number reflects the currency, but the other two don’t?

Brian West

Exactly.

Kelly Flynn - Credit Suisse

No. Okay.

Brian West

I don’t know any other way to do it.

Kelly Flynn - Credit Suisse

Yes, no, that’s helpful. Okay. Thank you. And then just secondly on OCR, I know Suzy got an update in her question. But just to clarify, are you still in pilot mode, i.e. not charging? Or have you actually started charging clients yet?

David Calhoun

No, we’ve got a few examples where we’ve charged clients. But I consider our program to be in pilot mode. In other words, we are going to continue to build out a broad array of used cases, so that our model can reflect the value that it’s delivering to the industry. And the longer we wait on that front, given the momentum we see on the use cases, the better off we are and the more comfortable our clients are going to be making these early rounds of investment.

So that’s exactly the mode we’re in. That’s the way we continue to operate it. And what we’re not going to do is try to put too much pressure on ourselves to jump before the use cases play out. At any rate, that’s the mode. But we’re further ahead than I thought we would be. I told you at the last call we had that I was going to start to feel good about the momentum here in this quarter. And if I were to guess then, I’d tell you I’m probably even more confident at this moment.

Kelly Flynn - Credit Suisse

Okay, great. And then can I ask you a third one on Wal-Mart? I think you said in your prepared remarks that the terms were complete. And you also said you’re modeling some impact or positive impact this year. So just to clarify, is all or most of the financial impact this year resulting from an effective price increase for the data in the second half? Or are there other significant things that we should be thinking about? And then I mean would you give us a sense of what the price increase is? It sounds like you already know.

David Calhoun

Yes, we do, but I can’t. But let me suggest it this way. Remember, this is a second quarter kind of implementation. So yes, there is additional revenue that is built into all the manufacturers who want the data. And as I said, substantially complete, as in really substantially complete. What implications are, for five or six months, we run mostly cost with nothing on the top-line. So we’ve been running a sort of a, as Brian calls it, investment mode. But we’ve been running on a sort of a tight basis because we are doing nothing more today than spending money to build the technical platform, cull the data, and implement it. And then we begin to catch up to that as we move throughout the second half of the year. And on balance, for the year, it definitely add to the top-line, it won’t add much to the bottom-line, simply because of the first half, second half phenomenon.

Kelly Flynn - Credit Suisse

Okay. But when you say the terms are complete, just to clarify, we will not start seeing revenue impact until the second half, is that right?

David Calhoun

Exactly.

Kelly Flynn - Credit Suisse

Okay, great. Thanks a lot.

Liz Zale

Thank you, Kelly. With that, I think we’ve finished the question-and-answer. So I wanted to thank everyone for participating and turn it back over to the operator.

Operator

Thank you. This concludes Nielsen Holdings N.V., fourth quarter and full-year 2011 call. A replay of this call will be available on the Nielsen Investor Relations website shortly. Thank you and have a great day.

Liz Zale

Thanks, everyone.

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