Nielsen Holdings (NLSN) Tops Q3 Earnings; Lags Revenues
Nielsen Holdings N.V. NLSN reported adjusted third-quarter 2015 earnings of 67 cents per share, beating with the Zacks Consensus Estimate of 66 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expenses.
Revenues
Nielsen reported revenues of $1.53 billion, down 1.8% sequentially and 2.6% year over year. The year-over-year decrease resulted from unfavorable foreign currency impact. Revenues missed the Zacks Consensus Estimate of $1.54 billion.
On a constant currency basis, revenues increased 5%.
Revenues by Segment
Buy business revenues were $816 million (53% of total revenue), down 7.1% year over year but up 4.1% on a constant currency basis. Excluding the foreign currency impact, revenues in the emerging markets grew 6.3%.
Watch business revenueswere $715 million (47%), up 3% year over year or 6.1% on a constant currency basis. The increase came on the back of continued strength in Audience Measurement and marketing effectiveness, which improved 7% and 7.9%, respectively, on a constant currency basis. The Audio business witnessed a seasonally strong quarter.
Operating Results
Reported gross margin was 59.8%, up 105 basis points (bps) from the year-ago quarter.
Nielsen’s operating expenses of $618.0 million, were up 0.81% from the year-ago figure of $613.0 million. Operating margin of 19.5% was down 30 bps from third-quarter 2014.
Net Income
On a GAAP basis, Nielsen recorded a net profit of $142 million or 38 cents per share compared with $91 million or 24 cents last year.
On a non-GAAP basis, adjusted net profit per share came in at 67 cents as against 64 cents a year ago.
Balance Sheet & Cash Flow
Nielsen exited the quarter with cash balance of approximately $358 million versus $331 million in the last quarter. Gross debt was $7.4 billion, flat sequentially.
Net debt (gross debt excluding cash and cash equivalents) was $7.1 billion and net debt leverage ratio was 3.83x at the end of the quarter.
Cash flow from operations increased to $452.0 million from $392.0 million in the second quarter. Capex was $107 million versus $103 million in the year-ago period. Free cash flow increased to $345 million from $289 million in third-quarter 2014. The increase in free cash flow and cash flow from operations was driven by stronger operating performance.
Dividend and Share Repurchases
Nielsen repurchased $173 million of its stock during the quarter. The company has a total of $530 million remaining under the existing repurchase program, which it expects to utilize by mid-2016.
Our Take
Nielsen Holdings is an information and measurement company which provides clients with media and marketing information about what consumers watch and buy on a global and local basis. The company reported mixed third-quarter results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same.
The continuous dividend payment and share repurchase reflect Nielsen’s financial strength and commitment to return value to shareholders. Also, the company's product launches are progressing well and should drive revenues in the near term.
However, continued investments in technology and infrastructure could weigh on margins and profitability in the near term and beyond.
Currently, Nielsen has a Zacks Rank #3 (Hold). Other stocks in the same space that investors may consider are JD.com, Inc. JD, Expedia Inc. EXPE and Travelport Worldwide Limited TVPT. While JD.com holds a Zacks Rank# 1 (Strong Buy), Expedia and Travelport sport a Zacks Rank #2 (Buy).
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