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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2020

OR

 

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 001-35042

 

Nielsen Holdings plc

(Exact name of registrant as specified in its charter)

 

 

England and Wales

 

98-1225347

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

85 Broad Street

New York, New York 10004

(646) 654-5000

 

Nielsen House

John Smith Drive

Oxford

Oxfordshire, OX4 2WB

United Kingdom

+1 (646) 654-5000

(Address of principal executive offices) (Zip Code)(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary shares, par value €0.07 per share

NLSN

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No  

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      No  

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).    Yes      No  

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging Growth Company

 

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates as of June 30, 2020, the last business day our most recently completed second fiscal quarter, was $5,295 million, based on the closing sale price of the registrant’s common stock as reported on the New York Stock Exchange on such date of $14.86 per share.

There were 357,791,561 shares of the registrant’s Common Stock outstanding as of January 31, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement of the registrant to be filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2021 annual general meeting of shareholders of the registrant are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

 

 

 


 

Table of Contents

 

 

 

 

PAGE

PART I

 

 

 

Item 1.

 

Business

3

Item 1A.

 

Risk Factors

19

Item 1B.

 

Unresolved Staff Comments

33

Item 2.

 

Properties

33

Item 3.

 

Legal Proceedings

33

Item 4.

 

Mine Safety Disclosures

34

 

PART II

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

35

Item 6.

 

Selected Financial Data

37

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

67

Item 8.

 

Financial Statements and Supplementary Data

69

Item 9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

138

Item 9A.

 

Controls and Procedures

138

Item 9B.

 

Other Information

138

 

PART III

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

139

Item 11.

 

Executive Compensation

139

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

139

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

139

Item 14.

 

Principal Accounting Fees and Services

139

 

PART IV

 

 

 

Item 15.

 

Exhibits, Financial Statement Schedules

140

Item 16.

 

Form 10-K Summary

140

Signatures

149

 

 

 

1


 

The terms “Company,” “Nielsen,” “we,” “our” or “us,” as used herein, refer to Nielsen Holdings plc (formerly known as Nielsen N.V.) and our consolidated subsidiaries unless otherwise stated or indicated by context. The term “TNC B.V.,” as used herein, refers to The Nielsen Company B.V., the principal subsidiary of Nielsen.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “project,” “intend,” and other words of similar meaning. Such statements are not guarantees of future performance, events or results and involve potential risks and uncertainties. These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to the factors discussed in Item 1A. Risk Factors of this Form 10-K.

We caution you that the factors discussed in Item 1A. Risk Factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Annual Report on Form 10-K may not in fact occur or may prove to be materially different from the expectations expressed or implied by these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

 

 

2


 

PART I

 

Item 1.

Business.

Background and Business Overview

We are a leading global measurement and data analytics company that provides the most complete and trusted view available of consumers and markets worldwide. We provide clients with a comprehensive understanding of consumers’ media consumption and buying behavior and how those choices intersect. We deliver critical media and marketing information and analytics. We also provide manufacturer and retailer data and analytics about what and where consumers purchase. Our measurement and analytical services help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have operations in over 90 countries, covering approximately 80% of the world's population. We have significant investments in resources and associates all over the world, including in many emerging markets, and hold leading market positions in many of our services and geographies. Based on the strength of the Nielsen brand, our scale and the breadth and depth of our solutions, we believe we are the global leader in measuring and analyzing consumer behavior in the segments in which we operate.

Our Company was founded in 1923 by Arthur C. Nielsen, Sr., who invented an approach to measuring competitive sales results that made the concept of “market share” a practical management tool. For nearly a century, we have advanced the practice of market research and media audience measurement to provide our clients a better understanding of their consumers. In January 2011, we consummated an initial public offering of our common stock and our shares started trading on the New York Stock Exchange under the symbol “NLSN”. On August 31, 2015, Nielsen N.V., a Dutch public company listed on the New York Stock Exchange, merged with Nielsen Holdings plc, by way of a cross-border merger under the European Cross-Border Merger Directive, with Nielsen Holdings plc being the surviving company (the “Merger”). The Merger effectively changed the place of incorporation of Nielsen’s publicly traded parent holding company from the Netherlands to England and Wales, with no changes made to the business being conducted by Nielsen prior to the Merger.

Prior to February 2019, we were aligned into two reporting segments: what consumers buy (“Buy”) and what consumers read, watch and listen to (“Watch”). In February 2019, we realigned our business segments from Buy and Watch to Nielsen Global Connect (“Connect”) and Nielsen Global Media (“Media”). Each segment 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. Our Connect and Media segments are built on a foundation of proprietary data assets that are designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses. Our segments each consist of two product categories: Audience Measurement and Plan / Optimize in Media and Measure and Predict / Activate in Connect.  These categories are based on our core measurement platforms in both Media and Connect, while Plan / Optimize and  Predict / Activate are designed to build on our measurement capabilities to enhance client decision-making. These changes better align our external view to our go-forward internal view. Our reportable segments are stated on the new basis and such changes were applied retrospectively. The impact of these changes did not have a material impact on our consolidated financial statements or segment results.

We help our clients enhance their interactions with consumers and make critical business decisions that we believe positively affect their sales and profitability. Our data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflow. Our long-term client relationships are made up largely of multi-year contracts and high contract renewal rates. The average length of relationship with our top ten clients, which include NBC Universal/ Comcast Corporation, The Coca-Cola Company, Nestle S.A., The Procter & Gamble Company and CBS, is more than 30 years. Typically, before the start of each year, more than 70% of our annual revenue has been committed under contracts in our combined Media and Connect segments.

 

Our Media segment provides viewership and listening data and analytics primarily to media publishers and marketers and their advertising agencies for television, radio and digital viewing and listening platforms. Our Media data is used by our media clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content, and by our marketer and advertiser agency clients to plan and optimize their spending. By connecting clients to audiences, we fuel the media industry with the most accurate understanding of what people listen to and watch. We believe that only Nielsen provides a fair playing field for the business of media, under our unique approach AUDIENCE IS EVERYTHING™.

According to ZenithOptimedia, a leading global media services agency, total global spending on advertising, including Linear TV, print, radio, out-of-home, cinema, and digital (i.e., search, online video, social media, and mobile platforms) is projected to reach $620 billion by 2021. In our Media segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. television advertising marketplace. According to eMarketer, U.S. TV ad spending is expected to have been $60 billion in 2020. Including the U.S., our technology is used to measure television viewing in 34 countries. We also measure markets that account for approximately 70% of global TV ad spend and offer measurement and analytic services in 57 countries, including the U.S., where we are the market leader. Our digital ratings are used by 23 of the top 25 Global Advertisers for digital campaigns to help

3


 

determine the value of advertising in the premium Digital Video Marketplace. According to eMarketer, U.S. Digital ad revenues rose to approximately $129 billion in 2019. Lastly our ratings are also the primary metrics used to determine the value of programming and advertising in the U.S. radio advertising marketplace.  According to eMarketer, U.S. Radio ad spend is expected to be $10.4 billion in 2020. Our Media segment represented approximately 53% of our consolidated revenue in 2020.

Our Connect segment provides measurement services, which include our core tracking and scan data (primarily transactional measurement data and consumer behavior information), and analytical services to businesses in the consumer packaged goods (“CPG”) industry. According to Deloitte, the aggregate retail revenue of the Top 250 global retailers approached $4.7 trillion in 2018.  Our Connect services also enable our clients to better manage their brands, uncover new sources of demand, manage their supply chain issues, launch and grow new services, analyze their sales, drive merchandising efficiency and effectiveness in-store and improve their marketing mix and establish more effective consumer relationships. Our data is used by our clients to measure their market share, tracking billions of sales transactions per month in retail outlets around the world. Our extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. Our broad coverage focuses not only on this modern class of global retailer but also the thousands of traditional trade retailers that have significant presence in emerging markets. Within our Connect segment, we have two primary geographic groups, developed and emerging markets. Developed markets primarily include the United States (“U.S.”), Canada, Western Europe, Japan, South Korea and Australia while emerging markets primarily include Africa, Latin America, Eastern Europe, Russia, China, India and Southeast Asia. Our Connect segment represented approximately 47% of our consolidated revenues in 2020.

On October 31, 2020, Nielsen entered into an agreement (the “Connect Sale Agreement”) to sell its Global Connect business to affiliates of Advent International Corporation (the “Proposed Connect Transaction”), for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and a warrant to purchase equity interests in the company that will own the Global Connect business (the “Connect Warrant”). The Proposed Connect Transaction was unanimously approved by the Company’s Board of Directors and was approved by the Company’s shareholders at a special meeting on February 11, 2021. The Proposed Connect Transaction is subject to regulatory approvals, consultation with the works council and other customary closing conditions; and the Proposed Connect Transaction is expected to close in the next 90 days. Nielsen expects the Proposed Connect Transaction to result in the Global Connect segment being reported on a discontinued operations basis in the first quarter of 2021.

 

          Pursuant to the Connect Sale Agreement, Nielsen will enter into certain ancillary agreements at the closing of the Connect Sale pursuant to which, among other things, Nielsen and Advent will (i) provide certain transitional services to each other for periods of up to 24 months following the closing, and (ii) grant each other reciprocal licenses for certain data and corresponding services relating to that data for periods of up to five years following the closing.

 

          The Connect Sale Agreement contains customary representations, warranties and covenants by each party that are subject, in some cases, to specified exceptions and qualifications contained in the stock purchase agreement.

 

Services and Solutions

Nielsen Global Media

Our Media segment provides viewership and listening data and analytics primarily to media publishers and marketers and their advertising agencies for television, radio and digital viewing and listening platforms. For the year ended December 31, 2020, revenues from our Media segment represented approximately 53% of our consolidated revenues. This segment has historically generated stable revenue streams that are characterized by multi-year contracts and high contract renewal rates. At the beginning of each year, approximately 80% of the segment’s revenue base for the upcoming year is committed under existing agreements. Our top five clients represented approximately 15% of segment revenues for the year ended December 31, 2020 and the average length of relationship with these same clients is more than 30 years. No customer accounted for 10% or more of our Media segment revenues in 2020.

Our Media segment consists of two major product categories: Audience Measurement and Plan / Optimize.  Within those major product offerings, we have aligned our offerings around three essential solutions:  Audience Measurement, Audience Outcomes and Gracenote Content Services.  Audience Outcomes and Gracenote Content Services are within Plan / Optimize. Beginning in 2021, we will refer to Plan / Optimize as Outcomes & Content.     

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Audience Measurement

Nielsen Cross-Media Measurement

As audiences move seamlessly between linear, streaming and digital, advertisers are demanding a single, duplicated view of their audiences across all platforms and mediums. Concurrently, publishers want to provide more ad options for buyers and improve the overall viewer experience. In December 2020, we announced its plans to launch a single, cross-media solution to drive more comparable and comprehensive metrics across platforms. Our transformative cross-media solution, called Nielsen ONE, will evolve the current metrics that underpin the more than $100 billion video advertising ecosystem using a phased approach. We plan to launch its single measurement solution beginning in fourth-quarter 2022 with the intention to fully transition the industry to cross-media metrics by the Fall 2024 season.

          With Nielsen ONE, advertisers and publishers will be able to transact using a single metric across linear and digital that is trusted, independent and standardized across the industry. With a single, deduplicated number, marketers will have visibility into total video consumption regardless of platform or device. Marketers will also benefit from a better understanding of unique audiences, the ability to better understand frequency and reduce double counting, inflated metrics and advertising waste.  Nielsen ONE will also underpin our outcomes solutions, thus enabling the industry to optimize media plans and maximize performance across platforms.

          Television Audience Measurement

We are the global leader in television audience measurement. In the U.S., which is by far the world’s largest market for television programming, broadcasters and cable networks use our television audience ratings as the primary currency to establish the value of their airtime and more effectively schedule and promote their programming. Advertisers use this information to plan television advertising campaigns, evaluate the effectiveness of their commercial messages and negotiate advertising rates.

We provide two principal television ratings services in the U.S.: measurement of national television audiences and measurement of local television audience’s local television markets. We use various methods to collect the data from households including set-top-box data and electronic meters, which provide minute-by-minute viewing information for next day consumption by our clients. These households with electronic meters are meticulously identified using the U.S. Census as a model in order to properly and accurately model our national and local ratings. These methods enable us to collect not only television device viewing data but also the demographics of the audience (i.e., who in the household is watching), from which we calculate statistically reliable and accurate estimates of total television viewership. We have made significant investments over decades to build an infrastructure that can accurately and efficiently track television audience viewing, a process that has become increasingly complex as the industry has converted to digital transmission and integrated new technologies allowing for developments such as time-shifted viewing.

Our measurement techniques are constantly evolving to account for new television viewing behavior, increased fragmentation and new media technologies. For example, to help advertisers and programmers understand time-shifted viewing behavior, we created the Average Commercial Minute (ACM) ratings, which is a measure of how many people watch commercials during live and time-shifted viewing, through 3 days ("C3"), 7 days ("C7"), and up to 35 days (“C35”). The C3 and C7 ratings are the primary metrics for buying and selling advertising on national broadcast television.  With the announcement of Nielsen ONE, we will launch our single measurement solution beginning in fourth-quarter 2022 with the intention to fully transition the industry to cross-media metrics by the Fall 2024 season.  

Our technology is used to measure television viewing in 34 countries outside the U.S., including Sweden, Mexico, South Korea, Thailand, New Zealand, Australia, Indonesia, Italy and Poland. The international television audience measurement industry operates on a different model than in the U.S. In many international markets, a joint industry committee of broadcasters in each individual country selects a single official audience measurement provider, which is designated the “currency” through an organized bidding process that is typically revisited every several years. We have strong relationships in these countries and see a significant opportunity to expand our presence into additional countries around the world.

Digital Audience Measurement

We are a global provider of digital media and market research, audience analytics and social media measurement. We employ a variety of measurement offerings in the various markets in which we operate to provide digital publishers, internet and media companies, marketers and retailers with metrics to better understand the behavior of online audiences. Through a combination of patented panel and census data collection methods, we measure and study the internet surfing, online buying, and video viewing (including television content) of digital audiences. Nielsen’s Digital Ad Ratings are now in 35 countries, with Israel being the latest market to launch.

     Since 2010, Nielsen has been providing innovative census measurement in cooperation with third party data enrichment providers such as Facebook. Digital Ad Ratings provides age and gender audience demographics, with key metrics such as reach, frequency, Gross Rating Points (“GRP”) and on-target percentage. Our digital content metrics are consistent with TV and cover audience metrics such as reach and average audience, views, time spent and frequency.

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Mobile Measurement

To address the rapid growth of mobile internet consumption, we have deployed a combination of panel and census based measurement to capture internet, video and other media on mobile, smartphone, and tablet devices. In the U.S., Nielsen has deployed our mobile software development kit (SDK) to offer a comprehensive mobile advertising and content measurement for our media clients. In addition, our census demographic measurement uses the world's largest mobile demographic data set through our data enrichment providers. We offer mobile measurement and analytic services in 35 countries worldwide, including the U.S., where we are a leader in the market for mobile audience measurement, and are focused on expanding our presence in other markets.

Addressable TV Measurement

Industry trends support the growing demand for addressable measurement at scale across publishers and advertisers as media buyers look to engage with viewers in live, linear, on-demand and streaming environments. With the widespread adoption of connected TVs and advertising technology in place, the insertion of addressable ads in linear broadcast feeds continues to gain momentum. This allows advertisers to target specific audiences in live television. The addition of addressable to National TV measurement will help unlock new value and flexibility for publishers and advertisers to insert addressable ads in any commercial minute they choose. Through Nielsen’s measurement of both targeted and linear audiences, advertisers can better monetize advertising impressions without risking measurement of linear audiences.

Combined, Nielsen’s Advanced Video Advertising footprint and the integration of set top box data insights from DIRECTV, DISH, and Project OAR will expand the National TV panel to millions of U.S. homes offering greater demographic representation, higher quality and more actionable insights for better decision making. Nielsen will calibrate tune-in and exposure data from MVPDs and smart TV OEMs against its gold-standard panel to correct for bias and deliver robust persons-level data for more granular and stable measurement. With reconciled metrics from Nielsen, the industry can now transact on and better monetize all advertising impressions and further drive adoption of addressable advertising.

Advanced Video Advertising

At a time when linear TV viewership is experiencing seismic shifts, Nielsen intends to bring a complete addressable advanced video advertising platform to market, enabling real time targeted ad replacement in live linear TV across connected, enabled Smart TVs.      

We believe Nielsen’s Addressable TV Ad platform will provide benefits across the entire media chain, from ad detection and replacement, to campaign and inventory management and ad decisioning and forecasting tools aimed at yield optimization. The Nielsen Addressable TV Ad platform is intended to be integrated across all Smart TV brands and into all existing broadcast infrastructures and agency workflows to unlock the full value of linear.  

 

By unlocking addressable inventory, we believe media sellers will enable maximum delivery of return on investment (“ROI”) to advertisers across both linear and addressable TV impressions. Programmers should be able to establish whether certain addressable ad loads are open to single or multiple advertisers, and manage campaign pacing. Our open and flexible approach is intended to also allow brands and agencies to ingest various third-party data sets to create target audiences, upload ad creative and manage ad budgets, pricing, pacing and frequency capping through the platform.  

 

Audio Audience Measurement

We provide independent measurement and consumer research primarily servicing radio, advertisers and advertising agencies in the audio industry. We estimate the size and composition of radio audiences in local markets and of audiences to network radio programming and commercials in the U.S. We refer to our local and network radio audience ratings services, collectively, as our “syndicated radio ratings services.” We provide our syndicated radio ratings services in local markets in the U.S. to radio broadcasters, advertising agencies, and advertisers. Our national services estimate the size and demographic composition of national radio audiences and the size and composition of audiences of network radio programs and commercials. Broadcasters use our data primarily to price and sell advertising time, and advertising agencies and advertisers use our data in purchasing advertising time.

We have developed our electronic Portable People MeterTM (“PPM®”) technology, which we deploy across many of our customer offerings and have licensed to other media information services companies to use in their media audience ratings services in countries outside of the U.S. We have commercialized our PPM ratings service in 48 of the largest radio markets in the U.S. Nielsen's PPM technology is also used commercially for National TV Out-of-Home, as well as integrated into Local TV measurement in 2019 in 44 local markets.

Plan / Optimize

         Planning

Nielsen has a portfolio of solutions that enable clients to create optimized media plans to reach their desired audiences.

 

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     Nielsen Ad Intel provides competitive advertising intelligence across traditional and digital media in 35 markets around the globe and can provide information for more than 80 markets globally.  By providing ad campaign brand details, audience exposure and estimated advertising spend data, we furnish clients with unique insights for competitive brand and advertising creative activity, for shifts in advertising spend among media types, channels and brands, and for advertising sales lead generation. In the U.S., Ad Intel determines the commercial minutes for the national television currency.  Internationally, clients utilize Ad Intel’s ad spend as a secondary measure to the television currency. Furthermore, Ad Intel’s brand schedules form the basis for many other Nielsen products and services.

 

Nielsen Media Impact is an omni-channel planning system, providing insights about target audiences across platforms and devices, to optimize media plans to achieve advertising campaign objectives.  Nielsen Media Impact is a tool for understanding how various media can be used together most effectively in a media plan to achieve reach, frequency and brand or sales KPIs. With Media Impact, clients can plan across the media consumers are utilizing the most, reach the right consumers and find cost efficiencies to improve their ROI. In the U.S., Nielsen Media Impact is fueled by Total Media Fusion, a granular, comprehensive data set of audiences and media behaviors across TV, SVOD, TV connected device, ad supported ctv, digital, radio and print, designed specifically for media planning and analytics.  Nielsen Media Impact is a tool for media agencies, advertisers and media owners and is currently available in 11 international markets, with more planned for 2021. Local Nielsen Media Impact, a local planning system, is available in 44 markets within the U.S. Local Nielsen Media Impact utilizes Local Media Fusion, a respondent level data set of audiences and media behaviors across TV, radio and digital at the local market level.

In addition to the services described above, we also provide qualitative information about consumers, including their lifestyles, shopping patterns, and use of media in local markets and across the U.S. We market these services to customers of our syndicated radio and television ratings services who wish to demonstrate the target ability and value of their audience. We also market our quantitative and qualitative audience and consumer information to customers outside of our traditional base, including newspapers; advertising agencies; the advertising sales organizations of local cable television companies; national cable and broadcast television networks; out-of-home media sales organizations; sports teams and leagues; marketers and advertisers.  

Qualitative media insights applications include marketing, cross-platform, prospecting, planning/buying, sales, news, promotions, programming and editorial.  Beyond demonstrating audience targeting, value and media planning, qualitative information provides advertiser insights into the areas of promotions, marketing, brand management, multiculturalism, product development, shopper insights and sponsorship.

We currently provide syndicated local qualitative measurement in 208 U.S. markets, as well as Puerto Rico.

         Marketing Effectiveness

          Nielsen’s outcome measurement solutions deliver the ROI metrics marketers need to improve strategic planning decisions and optimize tactics with data driven insights. Working across industries like CPG, Retail, Automotive, Travel, Financial Services, and more, Nielsen delivers the broadest and deepest coverage of ROI in the industry with unmatched speed, data access and channel coverage.

Nielsen Marketing Mix Modeling enables companies of all sizes to understand past trends, predict the future effect of marketing tactics on sales and optimize budget allocation across channels, brands and regions.

Nielsen Attribution collects person-level performance data from addressable marketing channels and devices. Advanced analytic models measure the influence of every addressable channel and granular tactic on multiple success metrics and key audience segments. With some models updated as often as daily, marketers use near real-time data to optimize marketing tactics and media spend allocation while campaigns are still in-flight.

Nielsen Campaign Lift makes a direct connection between the media people consume and the products they buy. We offer the only solution on the market that uses credit and debit sales data, loyalty card data and/or store data to measure campaign performance. Campaign Lift allows marketers to measure how exposure to advertising impacts consumer purchase behavior, including average spend, trip frequency and more, to maximize the revenue outcome of advertising initiatives.

Activation

 

We offer over 25,000 syndicated segments representing different demographics, psychographics, media consumption and buying behavior along with thousands of additional custom segments.  From top funnel insights, describing demographics, economic and job related parameters, to mid funnel insights describing content that viewers have expressed interest in, such as TV shows

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watched, restaurants dined at, stores shopped to insights on expressed intent.  These audiences describe individuals with high propensity of exhibiting future behaviors such as purchasing a specific car model, a financial product, airline tickets, and more.  

 

We enable these segments in a vast array of buying platforms currently connected to Nielsen’s Data Management Platform.  The Nielsen Marketing Cloud is Nielsen’s platform for the custom creation of audiences and activation of those audiences for campaign delivery.  The Nielsen Marketing Cloud empowers brands, agencies and media companies to connect more deeply with customers by combining Nielsen’s world-class data, analytics, media planning, marketing activation and data management platform capabilities in a single cloud platform.  

 

Our clients can connect directly to our Nielsen Marketing Cloud to identify desired syndicated targeting or created custom targets using their own first party data, unlocking the unique target combinations and using our insights as analytics and ROI tools.  Nielsen Marketing Cloud clients gain exclusive access to granular Nielsen data, which powers audience insights at a much higher degree of detail than is available anywhere else.      

    

          Nielsen Brand Effect

Nielsen Digital Brand Effect allows the entire digital media ecosystem, including advertisers, agencies and media owners, to collaborate to validate and optimize advertising spend in real time. We use brand lift metrics to quantify the effectiveness of advertising and determine “resonance” or the extent to which a specific campaign has shifted consumer perception against its primary marketing objective, including awareness, attitudes, favorability, intent and preference. Additionally, our Expanded View module provides in-depth creative diagnostics to understand the “why” behind the “what.” These services provide clients with a holistic assessment of their digital marketing and strategic insight into how to improve it.

NCSolutions & Nielsen Buyer Insights

Nielsen has the most comprehensive Advertising Effectiveness Measurement in the industry.  We have pioneered the transition of demographic only insights to purchase behavior enhanced metrics.  Through these industry leading ventures, Nielsen delivers the broadest and deepest coverage of ROI and Media Planning across various industries, including, but not limited to, CPG, Restaurant, Retail, Travel and Pharmacy. Nielsen delivers on the deepest granular insights down to the merchant and UPC level (where applicable) against single source matched, demographically accurate viewership data.  NCSolutions (“NCS”), our joint venture with Catalina Marketing Corporation (“Catalina”), and Nielsen Buyer Insights product suites are utilized by every major media company in the U.S. for Upfronts, research, industry events and everyday negotiations.  

NCS measures the effectiveness of advertising across all media.  NCS helps advertisers and agencies define their customer once and find them everywhere.  NCS enables the CPG industry to activate on their best customers based on actual prior purchases data and match that to the very same shopper's media exposure, then measure the sales impact of the campaign. NCS has conducted several thousand studies for 200 advertisers and 450+ brands to optimize ad performance and drive revenue growth and increase return on ad spend. In December 2018, Catalina and certain of its affiliates (the “Catalina debtors”) commenced a “prepackaged” case under chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware. On January 30, 2019, the Bankruptcy Court confirmed the joint chapter 11 plan of the Catalina debtors.  On February 15, 2019, the Catalina debtors emerged from bankruptcy following the amendment of the NCS Joint Venture agreement, which amendment reaffirms both parents’ commitment to NCS and also enhances both parents’ flexibility in going to market with effectiveness products and services.

Gracenote Content Services

Gracenote, a Nielsen company, is a leading entertainment data and technology provider. At its core, Gracenote helps connect people with digital entertainment. Its deep descriptive metadata across music, video and sports helps power advanced navigation, search and discovery experiences for media companies, consumer electronics manufacturers, automakers, cable and satellite TV operators and OTT services.

Gracenote’s best-in-class metadata, services and technologies let customers make media more accessible to and discoverable by audiences across all platforms, products and services. Applying a balance of AI-powered techniques and human editors, Gracenote creates, collects, normalizes and intelligently organizes the world’s entertainment data across TV shows, movies, celebrities, sports, teams, athletes, artists, albums and tracks. Its global entertainment data portfolio features descriptions of more than 100 million music tracks, TV listings across 87 countries plus factual data and imagery for tens of millions of video programs, as well as statistics across more than 70 sports and 300,000 games each year (pre Covid-19 pandemic). Additionally, Gracenote powers the infotainment experience in more than 120 million automobiles around the world.

 

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Nielsen Global Connect    

Our Connect segment provides retail transactional measurement data, consumer behavior information and analytics primarily to           consumer packaged goods manufacturers and retailers with accurate, actionable information and a complete picture of the complex and changing marketplace that brands need to innovate and grow their businesses. It also provides data and builds tools that use predictive models to turn observations in the marketplace into business decisions and winning solutions. The business's data and insights, combined with the only open, cloud native measurement and analytics platform that democratizes the power of data, continue to provide an essential foundation that make markets possible in the rapidly evolving world of commerce. Within our Connect segment, in 2020, 66% of revenues came from Developed markets and 34% came from Emerging markets. For the year ended December 31, 2020, revenues from our Connect segment represented approximately 47% of our consolidated revenues. This segment has historically generated revenue streams that are characterized by multi-year contracts, client diversity and high contract renewal rates. At the beginning of each year, approximately 60% of the segment’s revenue base for the upcoming year is typically committed under existing agreements. Our top five segment clients represented approximately 14% of our segment revenues for the year ended December 31, 2020 and the average length of relationship with these same clients is over 30 years. No single client accounted for 5% or more of our Connect segment revenues in 2020.

 

Our retail and manufacturing clients face a business environment that is constantly evolving. New channels are emerging and innovative, nimble competitors are taking advantage of new consumer trends to capture market share. Consumers have better access to information on products and pricing than ever before. Assets that were previously barriers to entry and sources of competitive advantage like scale, global reach and an estate of physical stores can turn into liabilities that hamper the ability to compete with new models.

The advancements in technology that underpin these changes also hold opportunities. There has been a proliferation in the amount of data to help understand consumers better, reach them in a more personal way and make smarter, more actionable decisions. Harnessing this complex and varied amount of data demands new approaches and connectivity. Our clients need to:

 

know their consumers and shoppers even better

 

move faster

 

align their teams and vendors

 

win in omni-channel

 

make smarter decisions and investments

 

To help our clients meet these challenges, we developed the Connect platform to link Connect’s data with powerful analytics that drive built-in applications. With these applications, clients can see how they are performing against competitors, measure internal objectives across products and markets, test how marketing moves may affect sales and schedule improvements to their workflow, all made possible by the platform’s defining characteristics:    

 

 

Open: The Connect platform integrates data from any source, extracts data to be used in other systems and keeps Connect’s team connected and in-synch.

 

Simple: Intuitive design and alerts makes the platform simple to use while focusing on the user’s key performance indicators.     

 

Flexible: Utilities in the platform allow clients to enrich data, produce customized views and plug in their own tools and applications.

 

Actionable: The Connect platform supports an ecosystem of applications developed by Nielsen and partners so that clients can focus on execution. Guided workflows make collaboration across teams quicker and smoother.

 

This allows Connect to provide clients “one truth” through integrated data, access to analytics that inform everyday decisions and valuable consumer insights across all channels of trade, resulting in profitable growth.

Connect’s analytical solutions allow clients to identify consumer demands, improve workflow, manage their supply chain, drive merchandising effectiveness and identify operational efficiencies, making their marketing expenses, like pricing and promotion, more efficient and effective.

                        

     Connect provides these trusted technology-driven products and services to over 20,000 clients:

 

          Retail Measurement

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          Connect combines detailed sales data with online and offline partner data, in-house expertise and the latest technology to produce the most accurate view of the marketplace. Clients across nearly every retail industry use Connect’s information and insights  to make manufacturing, marketing, distribution and sales decisions.

 

          Consumer Panel Measurement

          

          Connect’s consumer panels collect data from more than 250,000 household panelists across 24 countries, using a combination of in-home scanners and mobile applications to record purchases and to help its clients understand consumer purchasing trends.

 

         Analytics 

 

          Connect’s Connect platform provides a growing selection of automated consumer intelligence and actionable insights that help clients identify unmet consumer needs, improve workflow and make smarter decisions throughout their development and marketing cycles.

 

 

          Loyalty

          

          A global leader in loyalty data processing, Connect allows its retail clients to understand and act on consumer data sets. Connect’s technology also allows retailers to easily share customer data and analytics with their manufacturer partners for mutual growth.

 

          Advisory Services

 

          Connect provides its clients with a suite of customized research services as well as consumer and industry studies to better understand consumer attitudes and purchasing behavior, to elevate and understand why marketing campaigns succeed or fail, and to address issues such as promotion, pricing and marketing mix.

 

          Connect has two major product offerings: Measure and Predict/Activate. The Measure product offering consists of Connect’s Retail Measurement and Consumer Panel Measurement products, and the Predict/Activate product offerings includes Analytics, Loyalty and Advisory Services products.

          

Competitive Advantages

We are faced with a number of competitors in the markets in which we operate. Some of our competitors in each market may have substantially greater financial, marketing and other resources than we do and may benefit from other competitive advantages. See “Competitive Landscape” and “Risk Factors.” We face increasing competition, which could adversely affect our business, financial condition, results of operations and cash flow.  Notwithstanding the challenges presented by the competitive landscape, we believe that we have several competitive advantages, including the following:

Global Scale and Brand. We provide a breadth of information and insights about consumers covering approximately 90 percent of all population and GDP globally.  In our Media segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. television advertising marketplace. According to eMarketer, U.S. TV ad spend is expected to be $60 billion in 2020. In our Connect segment, we track billions of sales transactions per month in retail outlets in more than 90 markets around the world. We also have approximately 250,000 household panelists across 24 countries. We believe our footprint, independence, credibility and leading market positions will continue to contribute to our long-term growth and strong operating margins as the number and role of multinational companies expand. Our scale is supported by our global brand, which is defined by the original Nielsen code created by our founder, Arthur C. Nielsen, Sr.: impartiality, thoroughness, accuracy, integrity, economy, price, delivery and service.

Strong, Diversified Client Relationships. Many of the world’s largest brands rely on us as their information and analytics provider to create value for their business. We maintain long-standing relationships and multi-year contracts with high renewal rates due to the value of the services and solutions we provide. In our Media segment, our client base includes leading broadcast, radio, cable and internet companies such as CBS, Discovery Inc., Disney/ABC/Fox, Facebook, Google, Microsoft, NBC Universal/Comcast, Fox Corporation, Time Warner, Univision and Yahoo!; leading advertising agencies such as WPP, IPG, Omnicom, and Publicis; leading telecom companies such as AT&T, Verizon, and Sprint; and leading automotive companies such as Ford, Toyota and Renault. In our Connect segment, our clients include the largest CPG and merchandising companies in the world such as The Coca-Cola Company, Nestle S.A., and The Procter & Gamble Company, as well as leading retail chains such as Carrefour, Tesco, and Walmart. The average length of relationship with our top 10 clients across both our Media and Connect segments is more than 30 years. In

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addition, due to our growing presence in emerging markets, we have cultivated strong relationships with local market leaders that can benefit from our services as they expand globally. Our strong client relationships provide both a foundation for recurring revenues as well as a platform for growth.

Enhanced Data Assets and Measurement Science. Our extensive portfolio of transactional and consumer behavioral data across our Media and Connect segments enables us to provide critical information to our clients. For decades, we have employed advanced measurement methodologies that yield statistically accurate information about consumer behavior while having due regard for their privacy. Our particular expertise in panel measurement includes a proven methodology to create statistically accurate research insights that are statistically representative of designated audiences. This expertise is a distinct advantage as we extrapolate more precise insights from emerging large-scale census databases to provide greater granularity and segmentation for our clients. We continue to enhance our core competency in measurement science by improving research approaches and investing in new methodologies. We have also invested significantly in our data architecture to enable the integration of distinct large-scale census data sets including those owned by third parties. We believe that our expertise, established standards and increasingly granular and comprehensive data assets provide us with a distinct advantage as we deliver more precise insights to our clients.

Innovation. We have focused on innovation to deepen our capabilities, expand in new and emerging forms of measurement, enhance our analytical offerings and capitalize on industry trends across our Media and Connect businesses.  

In Media, as audiences move seamlessly between linear, streaming and digital, advertisers are demanding a single, deduplicated view of their audiences across all platforms and mediums. Concurrently, publishers want to provide more ad options for buyers and improve the overall viewer experience. In December 2020, Nielsen announced its plans to launch a single, cross-media solution to drive more comparable and comprehensive metrics across platforms. Nielsen’s transformative cross-media solution, called Nielsen ONE, will evolve the current metrics that underpin the more than $100 billion video advertising ecosystem using a phased approach. The Company plans to launch its single measurement solution beginning in fourth-quarter 2022 with the intention to fully transition the industry to cross-media metrics by the Fall 2024 season.

 

          With Nielsen ONE, advertisers and publishers will be able to transact using a single metric across linear and digital that is trusted, independent and standardized across the industry.

With a single, deduplicated number, marketers will have visibility into total video consumption regardless of platform or device. Marketers will also benefit from a better understanding of unique audiences, the ability to better understand frequency and reduce double counting, inflated metrics and advertising waste. Nielsen ONE will also underpin our outcomes solutions, thus enabling the industry to optimize media plans and maximize performance across platforms.

Nielsen is also incorporating large census-level data into all of its services and products.  We have been using Return Path Data in different areas of Nielsen over the last five years, for example, in Digital Ad Ratings along with our marketing effectiveness/ROI services.  Nielsen has incorporated Return Path Data for Local Television in 164 local markets, as well as the inclusion of PPM in 44 markets. This resulted in the retirement of the use of paper diaries for TV audience measurement in 2018. In 2019 Nielsen completed a multi-year effort to transform local TV measurement in all 208 markets. Due to the significant deficiencies in this data, Nielsen’s Data Science teams have created a number of statistical models to correct for all of the limitations of this data, including how to calibrate and validate against it which enables us to continue to produce quality person’s based ratings for the marketplace.

     On the planning side, Nielsen Media Impact, a state of the art cross media planning system that integrates reach, audience segments and effectiveness data, which provides the analytics capability tied to our audience measurement data to enable buyers and sellers to more effectively transact on advertising sales.  It helps agencies, media owners, and advertisers to better plan     and optimize the value of their media investments. The fuel for Media Impact is Nielsen Total Media Fusion, a respondent level planning dataset designed specifically for media planning and analytics.     

Nielsen is the premier global provider of analytics and insights in sport sponsorships.  Nielsen Sports America provides critical data about the value of sponsorships to help clients make better, smarter business decisions.  

While technology is changing the path to purchase and generating massive volumes of data to sift through, Nielsen is helping our clients navigate this changing landscape and answer critical questions through Nielsen Connect. Nielsen Connect is an open, cloud-based platform which allows clients to quickly determine what’s happened to their business, the reason behind sales and share changes and then what they should do next through analytic apps that support everyday decisions around innovation, distribution, price, promotion and media.  Retail and manufacturer clients will both have access to Nielsen Connect enabling a high degree of collaboration.  We have also further enhanced our information and analytics delivery platform, Nielsen Answers On Demand, to enable the management of consumer loyalty programs for retail clients.

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Nielsen is also on a path to measure the “Total Consumer,” which means offline and online purchases, all outlets, retail, and out of home consumption.  Nielsen’s e-commerce measurement solution is a combination of Nielsen retail data cooperators; multiple consumer-sourced data sets and demand related analytics that will provide the industry a leading measure of e-commerce channel performance for both retailers and manufacturers.  These data sources, married with Nielsen’s best in class data science will enable an integrated, calibrated and projectable measurement solution.  The retail data cooperators are across a spectrum of channels ranging from pure play, club, mass, specialty, drug, and food.  This solution will provide an integrated view of consumer insights, in addition to the market measurement, through consumer level purchase data.

 

Scalable Operating Model. Our global presence and operating model allow us to scale our services and solutions rapidly and efficiently. We have a long track record of establishing leading services that can be quickly expanded across clients, markets and geographies. Our global operations and technology organization enables us to achieve faster, higher quality outcomes for clients in a cost-efficient manner. Our flexible architecture allows us to incorporate leading third-party technologies as well as data from external sources, and enables our clients to use our technology and solutions on their own technology platforms. In addition, we work with various leading technology partners and providers, which allows for greater quality in client offerings and efficiency in our global operations.

Industry Trends

We believe companies, including our clients, require an increasing amount of data and analytics to set strategy and direct operations. This has resulted in a large market for business information and insight which we believe will continue to grow. Our clients are predominantly media, advertising and CPG companies in the large and growing markets, and we are focused on expanding into other verticals in the Media segment. We believe that significant economic, technological, demographic and competitive trends facing consumers and our clients will provide a competitive advantage to our business and enable us to capture a greater share of our significant market opportunity. We may not be able to realize these opportunities if these trends do not continue or if we are otherwise unable to execute our strategies. See “Risk Factors – Risks Related to Our Business and Industry - We may be unable to adapt to significant technological changes which could adversely affect our business” and “Risk Factors – Risks Related to Operating a Global Business- Our international operations are exposed to risks which could impede growth in the future.”

Emerging markets present significant expansion opportunities. Brand marketers are focused on attracting new consumers in emerging countries as a result of the fast-paced population growth of the middle class in these regions. In addition, the retail trade in these markets is quickly evolving from small, local formats toward larger, more modern formats with electronic points of sale, a similar evolution to what occurred in developed markets over the last several decades. We provide established measurement methodologies to help give CPG companies, retailers and media companies an accurate understanding of local consumers to allow them to harness growing consumer buying power in markets like Brazil, India and China.

Demographic shifts and changes in spending behavior are altering the consumer landscape. Consumer demographics and related trends are constantly evolving globally, leading to changes in consumer preferences and the relative size and buying power of major consumer groups. Shifts in population size, age, racial composition, family size and relative wealth are causing marketers continuously to re-evaluate and reprioritize their consumer marketing strategies. We track and interpret consumer demographics that help enable our clients to engage more effectively with their existing consumers as well as forge new relationships with emerging segments of the population.

The media landscape is dynamic and changing. Consumers are rapidly changing their media consumption patterns. The growing availability of the internet, and the proliferation of new formats and channels such as mobile devices, social networks and other forms of user-generated media have led to an increasingly fragmented consumer base that is more difficult to measure and analyze. In addition, simultaneous usage of more than one screen is becoming a regular aspect of daily consumer media consumption. Shifts in consumer behavior accelerated during the global Covid-19 pandemic due to stay at home orders in many markets around the world. We have effectively measured and tracked media consumption through numerous cycles in the industry’s evolution – from broadcast to cable, from analog to digital, from offline to online and from live to time-shifted, from in-home to out-of-home, and Video On Demand/Subscription Video On Demand. We believe our distinct ability to provide independent cross-media audience measurement and metrics helps clients better understand, adapt to and profit from the continued transformation of the global media landscape.

Consumers are more connected, informed and in control. More than three-quarters of the world’s homes have access to television and there are approximately 3.5 billion internet users around the globe. Advances in technology have given consumers a greater level of control of when, where and how they consume information and interact with media and brands. They can compare products and prices instantaneously and have new avenues to learn about, engage with and purchase products and services. These shifts in behavior create significant complexities for our clients. Our broad portfolio of measurement and analytical services enables

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our clients to engage consumers with more impact and efficiency, influence consumer purchasing decisions and actively participate in and shape conversations about their brands.

Increasing amounts of consumer information are leading to new marketing approaches. The advent of the internet and other digital platforms has created rapid growth in consumer data that is expected to intensify as more entertainment and commerce are delivered across these platforms. As a result, companies are looking for real-time access to more granular levels of data to understand growth opportunities more quickly and more precisely. This presents a significant opportunity for us to work with companies to effectively manage, integrate and analyze large amounts of information and extract meaningful insights that allow marketers to generate profitable growth.

Emerging markets present significant expansion opportunities. Brand marketers are focused on attracting new consumers in emerging countries as a result of the fast-paced population growth of the middle class in these regions. In addition, the retail trade in these markets is quickly evolving from small, local formats toward larger, more modern formats with electronic points of sale, a similar evolution to what occurred in developed markets over the last several decades. We provide established measurement methodologies to help give CPG companies, retailers and media companies an accurate understanding of local consumers to allow them to harness growing consumer buying power in markets like Brazil, India and China.

Consumers are looking for greater value. When it comes to the products consumers choose to buy, the consideration set has grown. Access to information and technology have transformed the way brands can build trust with and appeal to consumers, as exemplified by the rise in omnichannel shopping and the demand for personalized shopper experiences. Today, consumers desire products that meet very specific needs. This increased focus on product attributes is causing manufacturers, retailers and media companies to re-evaluate brand positioning, value propositions and factors that drive loyalty. We believe that companies will increasingly look to our broad range of consumer purchasing insights and analytics to more precisely and effectively measure consumer behavior and target their products and marketing offers to meet the right combination of needs.

The Rise of Online Brand Loyalists. The growth of online commerce has driven the need for fast-moving consumer goods to reshape consumers’ actual online experience around their online behavior.  The real promise in digital retail is the chance to go “beyond the self” to build brand loyalty with consumers.  It is the first time that brands and retailers can fulfill consumers’ needs for convenience and an overall good experience along the entire path to purchase, including clear, helpful production information, ensuring there is a place for customer reviews by product, easy checkout, simple returns, and quick responses to consumer feedback.  Getting the experience right and building those relationships with consumers now will be vital to securing subscriptions and automatic fulfillment, which will very soon become the norm.  

 

Clients are Under Pressure to Reduce Costs and Move Faster.  Global CPGs are challenged to achieve growth in certain markets with growing fragmentation in consumer demand, more competition from smaller and local players and increased commodity pricing. In addition, the growth of discount retailers, eCommerce players and subscription models is creating competitive pressure for CPGs and retailers. These factors have led clients to seek efficiencies in their business including reducing costs via zero-based budgeting to offset revenue pressure.  We believe clients are looking for decisions to be made in much shorter periods of time and the pace at which market share data and the linked explanatory analytics are delivered needs to increase. We see a growing opportunity to provide clients with fast and nimble data solutions to drive smarter decision-making.

Our Growth Strategy

We believe we are well-positioned for growth worldwide and have a multi-faceted strategy that builds upon our brand, strong client relationships and integral role in measuring and analyzing the global consumer. Our growth strategy is also subject to certain risks. For example, we may be unable to adapt to significant technological changes such as changes in the technology used to collect and process data or in methods of television viewing. In addition, consolidation in our customers’ industries may reduce the aggregate demand for our services. See “Risk Factors.”

 

Nielsen Global Media

          Nielsen Global Media’s growth strategy centers around our three strategic pillars: Audience Measurement, Audience Outcomes and Gracenote Content Services.

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Continue to develop innovative services

We intend to continue evolving our service portfolio to provide our clients with comprehensive and advanced solutions. In Nielsen Global Media, we are focused on driving new growth from new solutions across all of our end markets. For example, in Audience Measurement, we are transforming from different measurement systems for broadcast and digital to a single audience measurement solution that measures full coverage on a comparable basis, and we are innovating with new services in Audience Outcomes and Gracenote Content services.

Continue to attract new clients and expand existing relationships

We believe that substantial opportunities exist to both attract new clients and to increase our revenue from existing clients. Building on our deep knowledge, we expect to sell new and innovative solutions to our new and existing clients, increasing our importance to their decision making processes. We are delivering outcome solutions to advertisers and their agencies in new verticals beyond consumer packaged goods.

Continue to grow outside the U.S.  

          In Nielsen Global Media, international revenues comprised approximately 16% of 2020 segment revenues.  Nielsen Global Media has a presence in 60 countries, which creates an entry point to grow in many of these countries across all three essential solutions with Audience Measurement, Audience Outcomes and Gracenote Content Services. We expect the international businesses to grow faster than the US business over the next few years.

Continue to pursue strategic acquisitions to complement our leadership positions

We have increased our capabilities through investments and acquisitions in the U.S. and international audience measurement, and advertising effectiveness for digital media campaigns. Going forward, we will consider select acquisitions of complementary businesses that enhance our product and geographic portfolio and can benefit from our scale, scope and status as a global leader.

 

Nielsen Global Connect

Continue to grow in emerging markets

Our relationships with top, multi-national CPG companies make it vital for us to respond to client demands, often where population growth is most occurring. Clients expect us to expand coverage and services in emerging markets, where growth is most rapid. Increasing coverage in hard-to-reach channels, while increasing penetration among local clients who have never used market research data, will be a continued focus for us.

Emerging markets (measured in our Connect segment) comprised approximately 34% of our 2020 Connect segment revenues (16% of our 2020 consolidated revenues) and we believe represent a significant long-term opportunity for us given the growth of the middle class and the rapid evolution and modernization of the retail trade in these regions. Key elements of our strategy include:

 

Continuing to grow our existing services in local markets while simultaneously introducing into emerging markets new services drawn from our global portfolio;

 

Partnering with existing clients as they expand their businesses into emerging markets and providing the high-quality measurement and insights to which they are accustomed; and

 

Building relationships with local companies that are expanding beyond their home markets by capitalizing on the global credibility and integrity of the Nielsen brand.

Continue to develop innovative services

Investments will focus on our pursuit of 100% coverage, winning with retail and dramatically expanding analytic capabilities. Innovations in coverage will focus on filling blind spots with the help of our retail data partners, and expanding our omni-channel and e-commerce coverage. We will further expand its product suite for retailer and supplier collaborative needs, opening up new loyalty cases, and deepening retail analytics programs that increase our clients’ return on investment. Expanding our analytics solutions will require moving towards predictions and return on investment capabilities across product availability, placement, price and promotion

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Continue to attract new clients and expand existing relationships

The Connect platform democratizes our existing data sets to users across existing and new client bases. We have various opportunities to enter into near adjacent fields and is developing plans to do so. For existing clients, casual users now have access to intuitive, self-serve data and analytics. More technical, advanced users can also leverage our capabilities to internally develop new solutions unique to their own data enrichment and modeling needs. New clients now have a user-friendly entry point to experience the benefits that market research can bring to their business.

Continue to pursue strategic acquisitions to complement our leadership positions

Our strategic acquisitions will focus on accelerating profitable growth in coverage for existing or new markets, differentiating or complementing our core measurement business and speeding up our product roadmap. These three pillars all serve to increase our relevance with clients, and uncover growth for them at a more rapid rate than they could achieve themselves.

Technology Infrastructure

We operate with an extensive data and technology infrastructure utilizing five primary data centers in three countries around the world. We also use Amazon Web Services from Amazon and Azure from Microsoft for cloud based infrastructure. Our global database has unlimited capacity and we are currently housing approximately 1.4 petabytes of information, with our Connect segment processing approximately 125 billion purchasing data points each month in 2019, our Media segment processing approximately 200 billion tuning and viewing records (across panel and census data) each month in 2019 and our Nielsen Marketing Cloud platform processing 5 trillion events each month in 2017. Our technology infrastructure plays an instrumental role in meeting service commitments to global clients and allows us to quickly scale our services across practice areas and geographies. Our technology platform utilizes an open approach that facilitates integration of distinct data sets, interoperability with client data and technology, and partnerships with leading technology companies such as Tata Consulting Services and other technology providers. We have been focused on a technology transformation in both Media and Connect which will better position us to drive scale and growth.

Intellectual Property

Our patents, trademarks, trade secrets, copyrights and all of our other intellectual property are important assets that afford protection to our business. Our success depends to a degree upon our ability to protect and preserve certain proprietary aspects of our technology and our brand. To ensure that objective, we control and limit access to our proprietary technology. Our employees and consultants enter into confidentiality, non-disclosure and invention assignment agreements with us. We protect our rights to proprietary technology and confidential information in our business arrangements with third parties through confidentiality and other intellectual property and business agreements.

We hold a number of third-party patent and intellectual property license agreements that afford us rights to third-party patents, technology and other intellectual property. Such license agreements most often do not preclude either party from licensing our patents and technology to others. Such licenses may involve one-time payments or ongoing royalty obligations, and we cannot ensure that future license agreements can or will be obtained or renewed on acceptable terms, or at all.

Pursuant to the Connect Sale Agreement, we will enter into certain ancillary agreements at the closing of the Transaction.  We will grant Advent a license to brand its products and services with the “Nielsen” name and other Nielsen trademarks for 20 years following the closing of the Transaction.  Additionally, Nielsen and Advent will enter into agreements pursuant to which, among other things, Nielsen and Advent will (i) grant each other reciprocal licenses for certain data and corresponding services relating to that data for periods of up to five years following the closing and (ii) grant each other licenses to use certain patents and other intellectual property.

Competitive Landscape

There is no single competitor that offers all of the services we offer in all of the markets in which we offer them. We have many competitors worldwide that offer some of the services we provide in selected markets. While we maintain leading positions in many markets in which we operate, our future success will depend on our ability to enhance and expand our suite of services, provide reliable and accurate measurement solutions and related information, drive innovation that anticipates and responds to emerging client needs, strengthen and expand our geographic footprint, and protect consumer privacy. See “Risk Factors –Risks Related to Competition.” We believe our global presence and integrated portfolio of services are key assets in our ability to effectively compete in the marketplace. A summary of the competitive landscape for each of our segments is included below:

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Nielsen Global Media

While we do not have one global competitor in our Media segment, we face numerous competitors in various areas of our operations in different markets throughout the world. We are the clear market leader in U.S. television audience measurement; however, there are many emerging players and technologies that will increase competitive pressure. Numerous companies such as, Comscore are attempting to provide alternative forms of television audience measurement using, inter alia, set-top box data and panel-based measurement. Our principal competitor in television audience measurement outside the U.S. is Kantar, with companies such as GfK and Ipsos also providing competition in select individual countries.

Our primary competitor in the digital audience and campaign measurement solutions in the U.S. is Comscore. Globally (including the U.S.), we face competition from additional companies that provide analytics services such as Oracle, Google Analytics, and Adobe Analytics. In 2016, one of our former competitors, Rentrak merged into a wholly-owned subsidiary of Comscore and the combined companies focus on cross platform measurement.  We are the market leader in U.S. audio audience measurement. Our principal competitors globally are Kantar and GFK, and in the U.S. our principal competitor is Eastlan. Kantar developed technologies similar to our PPM ratings service outside the U.S. Additionally Triton, is a U.S.-based digital competitor which has developed a streaming Audio measurement service that uses server log technology. Triton was acquired by iHeartMedia in February 2021.

Nielsen Global Connect    

While we do not have one global competitor in our Connect segment, we face numerous competitors in different markets throughout the world. Such competitors include companies specializing in marketing research, in-house research departments of manufacturers and advertising agencies, retailers that sell information directly or through brokers, information management and software companies, and consulting and accounting firms. In retail measurement, our principal competitor in the U.S. is Information Resources, Inc., which is also present in some European and Asia/Pacific markets. Our retail measurement service also faces competition in individual markets from local companies. Our consumer panel services and analytics services have many direct and/or indirect competitors in all markets around the world including in selected cases, GfK, Numerator, Kantar and local companies in individual countries.

Regulation

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, many of which are still evolving, and could be interpreted in ways that could harm our business. These laws and regulations may involve privacy, data use, cross-border data transfers, data protection, intellectual property, securities law, COVID-19 related compliance, taxation, labor laws or other subjects. 

There is a trend toward regulations requiring companies to provide consumers with greater information regarding, and greater control over, how their personal data is used and shared, as well as requiring notification when unauthorized access to such data occurs.

These privacy and data protection laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, and may be applied, interpreted and enforced differently in different jurisdictions, and may be inconsistent with our current policies and practices.

Changes in and compliance with these laws and regulations may limit our access to, use and disclosure of data; may require increased expenditures by us; and may adversely affect or restrict the scope, nature and types of services we can offer. The European Union’s General Data Protection Regulation (“GDPR”), took effect in May 2018, and imposed new and more stringent requirements regarding the handling of personal data of persons in the EU. Failure to meet the GDPR requirements could result in penalties of up to 4% of worldwide revenue. Many jurisdictions considering new data protection laws are looking to GDPR as a starting point. Additionally, the California Consumer Privacy Act of 2018 (“CCPA”) took effect on January 1, 2020, and imposed new and more stringent requirements regarding the handling of personal data of persons in California. Because Nielsen does not typically segregate products and services on a state-by-state basis, Nielsen must generally adopt the requirements of CCPA across its U.S. business operations. Failure to meet CCPA requirements could result in penalties of up to $7,500 per violation. CCPA also provides individuals with a limited private right of action in the case of certain breaches of personal data. The proposed EU “ePrivacy” Regulation, if adopted, is expected to have potentially significant impacts for the online/mobile advertising industry as a whole. Nielsen is continuing to monitor the development of the ePrivacy Regulation and industry response and will determine whether to take further action, as needed, following its final adoption. Nielsen is participating in an industry-wide transparency and consent framework mechanism that facilitates users providing and companies passing consent to the advertising supply chain to address GDPR and ePrivacy notice and consent requirements.

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For additional information about government regulation applicable to our business, see Part I, Item 1A, "Risk Factors- Risks Related to Cybersecurity and Privacy” and “-Risks Relating to Governmental or Regulatory Change" in this Annual Report on Form 10-K.

Global Responsibility and Sustainability

Through responsible, sustainable business practices and our commitment to giving back, we care for the communities and markets where we live and operate our business. Our Global Responsibility and Sustainability strategy includes all environmental, social and governance (ESG) issues that affect our business, operations, supply chain, and all internal and external stakeholders.

The Board of Directors’ Nomination and Corporate Governance Committee oversees these issues. In addition to our Global Responsibility and Sustainability team, we also manage relevant risks and opportunities through various internal engagement channels, including Global Citizenship and Sustainability Council, our Human Resources Sustainability Council and our Technology and Operations Sustainability Council. As part of our commitment to ongoing stakeholder engagement, Nielsen conducts a non-financial materiality assessment once every two years. This process is a critical part of our ESG strategy management to identify the ESG issues that are most critical to our stakeholders and business, as well as understand their impact on our economic, environmental and social value.

 

Human Capital Management

 

Our key human capital management objectives are to promote the health, wellness, and safety of our employees while building an inclusive and engaging culture where all of our employees have an equal opportunity to reach their full potential. We continue to develop plans and programs that are designed to attract, develop, and retain our workforce, facilitate internal talent mobility; create engaged teams, reward and support employees through compliant and market-competitive pay and benefit programs, foster inclusion, respect, and belonging for all employees in a diverse workforce, ensure compliance and integrity with the highest standards; and foster positive employee relations.

 

Employees and Labor Relations

 

As of December 31, 2020, we employed approximately 43,000 people worldwide with approximately14,000 people in our Media business and 29,000 people in the Connect business.

 

In the Media business, approximately 4% of our employees are covered under collective bargaining agreements. Approximately 7% are covered under works council agreements in Europe.

 

In the Connect business, approximately 19% of our employees are covered under collective bargaining agreements. Approximately 12% are covered under works council agreements in Europe.

 

We consider employee relations to be an on-going area of importance and discussion in order to ensure we are headed in the right direction and we actively invest in it.

 

Health and Safety

 

We maintain a commitment to health and wellbeing. Nielsen’s benefit offerings are designed to meet the varied and evolving needs of a diverse workforce across businesses and geographies. We have enhanced the ways we help our employees care for themselves and their families, especially in response to COVID-19. Our Whole You health and wellbeing program focuses not just on physical health, but also on the emotional, financial, social and environmental well-being of our associates. The Whole You online interactive platform provides associates with self-assessments, tools, resources and guides to holistic wellness in areas such as nutrition, exercise, stress management and work-life balance.

 

We employ several strategies intended to address issues arising during the COVID – 19 pandemic, including  COVID-19 safety protocols for all employees, remote working arrangements where possible, company-provided personal protective equipment (PPE) and training, facilities management policies, workplace safety committees, supplemental paid sick leave (US) and ongoing health benefits reviews. In addition, Nielsen offers employee emergency financial support through the Nielsen Global Support Fund, associates can donate to fellow associates in need and apply for grants in times of personal hardship or natural disaster.

 

We have a significant population of field associates who recruit and maintain relationships with our research panelists, visit retail stores for inventory tracking and/or service Nielsen equipment. These associates are critical to our success as a company, and we

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strive to ensure that they stay safe on the job. Nielsen has developed safety guidelines and protocols for field associates who feel unsafe or otherwise uncomfortable during their day-to-day work, for any reason. The most common health and safety issues they face are slip-and-fall injuries and traffic accidents. We track all relevant incidents to determine causes and trends, and then develop preventative steps to minimize those occurrences through adoption of additional safety measures and training.  During the COVID-19 pandemic, Nielsen made adjustments to its data collection procedures where possible without compromising the integrity of our data to reduce the number of in-person interactions. Where in-person interactions are still required, Nielsen provided company issued personal protective equipment (PPE), extensive training, and detailed safety guidelines to these field-based employees. Protocols were developed and implemented in consultation with professional medical advisors.  

 

Diversity, Equity and Inclusion

 

Nielsen’s business is built on understanding the diversity of individuals and embraces diversity within its own organization. We value our employees’ individual and collective capabilities. We employ, train, promote and compensate individuals based on job-related qualifications and abilities, without regard to, for example, race, color, religion, national origin, gender, sexual orientation, age, marital status or physical or mental disability. We have a strong commitment to maintaining a bias-free environment where discrimination, harassment, retaliation and unfair treatment are not tolerated. In 2020, our Chief Executive Officer also held the role of Chief Diversity Officer.

 

In 2020, Nielsen focused on driving impact by increasing diverse representation among associates, enacting global diverse slates, hiring from diverse talent pools and expanding its inclusive hiring practices. We have also had bolder and more candid conversations about issues that are important in building a more inclusive culture. Nielsen’s global non-discrimination policy covers every market in which we do business. Nielsen is committed to reflecting the diversity of the clients, communities and markets we measure within our own workforce.

 

Talent Development and Employee Engagement

  

We work to integrate associates into the company from day one by helping new hires understand our culture, be clear on their roles and feel connected to their new team and to the broader Nielsen community. Our talent development strategy seeks to engage and develop associates to support their personal and professional development and drive better business outcomes for Nielsen. We believe that managing one’s career development and growth should be an ongoing collaboration between each associate, their manager and the broader Nielsen community. We are committed to ensuring that our people feel valued and know their work matters, and to empowering them to learn, grow, make a difference and reach their full potential. We also offer mentoring programs that provide valuable learning, development and networking experiences, matching associates with mentors who can support their personal and professional development objectives. We enable these mentoring relationships both within and beyond an associate’s business unit, country or region through our global myMentor program.

 

Our policy is to maintain well-developed communications and consultation programs with all employees and employee representative bodies, including via email communication or regular updates of our employee website and internal social media channels. We also inform and consult with recognized unions and works councils as appropriate.  We continually seek feedback from our employees through Leadership Townhalls, pulse surveys, and an annual engagement survey conducted through a third-party provider.

 

Compensation and Benefits

 

Nielsen is committed to providing appropriate, competitive and equitable pay and benefits for all associates, commensurate with the work being performed and in accordance with applicable laws and regulations. Our associates are rewarded and promoted based on performance against priorities and how they live the Nielsen values.  Our pay philosophy is to provide a total compensation package that is market-competitive based on data provided by independent third parties and that also provides an opportunity for pay growth and role progression based on individual contribution and company performance. We regularly review our compensation practices to ensure they are equitable and support our pay-for-performance philosophy and culture of diversity and inclusion.

 

Available Information

We file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and any amendments to these reports and statements with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy and information statements and other information at http://www.sec.gov. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports are made available free of charge on our website at http://www.nielsen.com as soon as reasonably practicable after we

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electronically file such reports with, or furnish them to, the SEC. Information on our website is not incorporated by reference herein and is not a part of this report.

From time to time, Nielsen may use its website and social media outlets as channels of distribution of material company information.  Financial and other material information regarding the company is routinely posted and accessible on our website at http://www.nielsen.com/investors.

 

 

Item 1A.

Risk Factors

 

The risks described below are not the only risks facing us. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.

Risks Related to the Pending Sale of our Connect Business

 

Our pending sale of the Global Connect business to affiliates of Advent International Corporation is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all.  Failure to complete the transaction with Advent could have a material and adverse effect on us.  Even if completed, the sale of Global Connect may not achieve the intended benefits.

 

On October 31, 2020, we entered into an agreement to sell our Global Connect business to affiliates of Advent International Corporation (the “Proposed Connect Transaction”).  The Proposed Connect Transaction is subject to a number of conditions, including certain regulatory approvals and other customary closing conditions; and the Proposed Connect Transaction is expected to close in the next 90 days. We and Advent may be unable to satisfy such conditions to the closing of the Proposed Connect Transaction in a timely manner or at all and, accordingly, the Proposed Connect Transaction may be delayed or may not be completed.  Failure to complete the Proposed Connect Transaction could have a material and adverse effect on us, including by delaying our strategic and other objectives relating to the separation of the Global Connect business and adversely affecting our plans to use the proceeds from the Proposed Connect Transaction to reduce debt.  Even if the Proposed Connect Transaction is consummated, we may not realize some or all of the expected benefits.  For example, we may be unable to utilize the proceeds from the Proposed Connect Transaction as anticipated or capture the value we expect from our plans to reduce debt.

 

Whether or not the Proposed Connect Transaction is completed, the announcement and pendency of the Proposed Connect Transaction may be disruptive to our businesses (including our Global Connect business) and may adversely affect our existing relationships with current and prospective employees and business partners. Uncertainties related to the Proposed Connect Transaction may also impair our ability to attract, retain and motivate key personnel and could divert the attention of our management and other employees from its day-to-day business and operations in preparation for and during the Proposed Connect Transaction. If we are unable to effectively manage these risks, the business, results of operations, financial condition and prospects of our businesses would be adversely affected. This may in turn adversely affect our results of operations and financial condition and the trading price of our ordinary shares if the Proposed Connect Transaction is not completed.

 

We have and could be subject to litigation related to the Proposed Connect Transaction.

 

       We have been and could be subject to time-consuming and costly litigation related to the Proposed Connect Transaction. For example, as previously disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 1, 2021, five lawsuits were filed relating to the Transaction, including one purported class action lawsuit, by purported Nielsen shareholders against Nielsen and the members of our Board of Directors. The lawsuits generally alleged that the proxy statement filed by Nielsen in connection with the Transaction misrepresented and/or omitted certain purportedly material information and asserted violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated thereunder or negligent and fraudulent misrepresentation and concealment in violation of New York common law and breach of duty of disclosure under the laws of England and Wales. In exchange for certain supplemental disclosures that Nielsen voluntarily made in its Current Report on Form 8-K filed on February 1, 2021, plaintiffs in each of the lawsuits agreed to voluntarily dismiss their actions in their entirety, with prejudice as to the named plaintiffs only and without prejudice to any other members of any putative class. We have and may continue to incur additional costs in connection with the defense or settlement of any shareholder litigation in connection with the Transaction, which may adversely affect our ability to complete the Transaction and require substantial commitments of time and resources by our management, which could result in the distraction of management from ongoing business operations and refraining from pursuing other opportunities that could have been beneficial to us.

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If the Proposed Connect Transaction is completed, Nielsen will be a smaller, less diversified company than as it exists today.

 

The Proposed Connect Transaction will result in Nielsen being a smaller, less diversified company with more limited businesses concentrated in its areas of focus.  For example, following the Proposed Connect Transaction, Nielsen will be significantly more reliant on our remaining business segments.  As a result, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operation.  The diversification of revenues, costs and cash flows will diminish as a result of the Proposed Connect Transaction, such that Nielsen’s results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility and its ability to fund capital expenditures, investments and service debt may be diminished.  If the Proposed Connect Transaction is completed, we will incur ongoing costs and retain certain legal claims that were previous allocated to the Global Connect business.  Those costs may exceed our estimate or could diminish the benefits we expect to realize from the Proposed Connect Transaction.

 

If the Proposed Connect Transaction is completed, Nielsen may need to restructure its processes, systems and operation and/or renegotiate certain contracts.

 

A number of employees, processes, systems and operations support both the Media and Connect businesses, and under the terms of the sale to Advent, many of these will remain Connect assets and no longer be available to support the Media business.  Accordingly, Media has had to hire some new employees, as well as recreate and/or build new processes, systems and operations, and some of these may, despite our thorough planning, not be sufficient to support the Media business.  In addition, some of the transitional services which Media will continue to purchase from Connect after the sale will ultimately need to be re-cast as long term supply arrangements or will need to be purchased from other third parties. Lastly, certain customer contracts include both the Connect and Media businesses, and in separating the contracts as a result of the sale of Connect, Media may need to renegotiate new agreements with certain customers, which could be on more or less favorable terms and conditions, or in some instances customers may alter or even cease purchasing services from Media.

 

Risks Related to Our Business and Industry

 

We may be unable to adapt to significant technological changes, which could adversely affect our business.

We operate in businesses that require sophisticated data collection, processing systems, software and other technology. Some of the technologies supporting the industries we serve are changing rapidly. We have been and will be required to adapt to changing technologies and industry standards, either by developing and marketing new services investing in new services or by enhancing our existing services to meet client demand.

Moreover, accelerating technology turn-over in businesses, the introduction of new services embodying new technologies and the emergence of new regulatory and industry standards could render existing services technologically or commercially obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process ever-increasing amounts of data and information and improve the performance, features and reliability of our existing services in response to changing client, regulatory and industry demands. We may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of our services. New services, or enhancements to existing services, may not adequately meet the requirements of current and prospective clients or achieve any degree of significant market acceptance.

Traditional methods of television viewing continue to change as a result of fragmentation of channels and digital and other new television and video technologies; devices such as video-on-demand, digital video recorders, game consoles, tablets, other mobile devices; and the increasing prevalence of alternative distribution systems, such as Internet viewing/OTT (“over-the-top”) delivery. In addition, consumption of consumer packaged goods is growing in new and different channels such as discount stores and e-commerce. Traditional methods of shopping are evolving and the emergence and growth of Omni-Channel ecommerce as well as direct to consumer continues to grow. This fragmentation requires us to develop new methodologies to procure, cleanse, enrich, and connect data at the individual level.

In addition, certain companies are utilizing sophisticated forms encryption and other techniques to protect their consumer's privacy.  This requires us to work with the wall gardens to find mutually acceptable approaches to measurement that protect consumer's privacy and need the walled gardens to implement these approaches. If we are unable to partner with these companies, our measurement of the walled gardens could be adversely affected.

If we are unable to continue to successfully adapt our media and consumer measurement systems to new viewing and consumption habits, our business, financial position and results of operations could be adversely affected.

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Consolidation in the industries in which our clients operate could put pressure on the pricing of our services, thereby leading to decreased earnings and cash flows.

Consolidation in the industries in which our clients operate could reduce aggregate demand for our services in the future and could limit the amounts we earn for our services. When companies merge, the services they previously purchased separately are often purchased by the combined entity in the aggregate in a lesser quantity than before, leading to volume and price compression and loss of revenue. While we are attempting to mitigate the revenue impact of any consolidation by expanding our range of services, there can be no assurance as to the degree to which we will be able to do so as industry consolidation continues, which could adversely affect our business, financial position and results of operations.

Client procurement strategies could put additional pressure on the pricing of our services, thereby leading to decreased earnings and cash flows.  

Certain of our clients may seek price concessions from us in the regular course of negotiations similar to any other Commercial relationship. Although this could put pressure on the pricing of our services, which could in turn limit the amounts we earn, we work very creatively to underscore the value proposition inherent in our offerings and have a strong track record of protecting our cost/value relationship. While we attempt to mitigate the revenue impact of any pricing pressure through effective negotiations and by providing services to individual businesses within particular groups, there can be no assurance as to the degree to which we will be able to do so, which could adversely affect our business, financial position and results of operations.

Adverse economic conditions, a reduction in client spending particularly in the consumer packaged goods and retailing industries, or a delay in client payments could have a material adverse effect on our business, results of operations and financial position.

Adverse economic conditions could affect markets both in the U.S. and internationally, impacting the demand for our customers’ products and services. Those reduced demands could adversely affect the ability of some of our customers to meet their current obligations to us, hinder their ability to incur new obligations until the economy and their businesses strengthen or cause them to reduce or cease using our services. The inability of our customers to pay us for our services and/or decisions by current or future customers to forego or defer purchases may adversely impact our business, financial condition, results of operations, profitability and cash flows and may present risks for an extended period of time. We cannot predict the impact of economic slowdowns on our future financial performance.

To the extent that the businesses we service, especially our clients in the media, entertainment, telecommunications, consumer packaged goods and technology industries, are subject to the financial pressures of, for example, increased costs or reduced demand for their products, the demand for our services, or the prices our clients are willing to pay for those services, may decline.

We expect that revenues generated from our measurement and analytical services will continue to represent a substantial portion of our overall revenue for the foreseeable future. During challenging economic times, clients, typically advertisers, within our Media segment may reduce their discretionary advertising expenditures and may be less likely to purchase our analytical services, which would have an adverse effect on our revenue.

The success of our business depends on our ability to recruit sample participants to participate in our research samples.

Our business uses scanners and surveys to gather consumer data from sample households as well as meters (e.g., Set Meters, People Meters, Active/Passive Meters, PPM’s) and other technologies to gather television and audio audience measurement data from sample households. It is increasingly difficult and costly to obtain consent from households to participate in the surveys, and increased focus by consumers on privacy could result in a greater reluctance to participate in research, which could impact our continued ability to recruit participants. Further, it is increasingly difficult and costly to ensure that the selected sample of households mirrors the behaviors and characteristics of the entire population and covers all of the demographic segments requested by our clients. The COVID-19 pandemic, political changes and trends such as populism, economic nationalism, immigration and sentiment towards multinational companies have made recruiting a sample that mirrors the entire population more difficult.  In addition, if the 2020 U.S. Census is not reliable due to underfunding, under participation, new technologies being used, or otherwise, the data we rely on for our panels and statistical breakdowns in the U.S. may not be accurate.  Additionally, as consumers adopt modes of telecommunication other than traditional telephone service, such as mobile, cable and internet calling, it may become more difficult for our services to reach and recruit participants for consumer purchasing and audience measurement services. If we are unsuccessful in our efforts to recruit appropriate participants, maintain the sample sizes and representation in our panels, maintain adequate participation levels or properly model the sample data, our clients may lose confidence in our ratings services and we could lose the support of the relevant industry groups. If this were to happen, our consumer purchasing and audience measurement services may be materially and adversely affected.

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Criticism of our audience measurement service by various industry groups and market segments could adversely affect our business.

Due to the high-profile nature of our services in the media, internet and entertainment information industries, we could become the target of criticism in the media and in other venues by various industry groups and market segments. We strive to be fair, transparent and impartial in the production of audience measurement services, and the quality of our U.S. ratings services is voluntarily subject to review and accreditation by the Media Rating Council, a voluntary trade organization whose members include many of our key client constituencies. However, criticism of our business by special interests, and by clients with competing and often conflicting demands on our measurement service, could result in government regulation. While we believe that government regulation is unnecessary, no assurance can be given that legislation will not be enacted in the future that would subject our business to regulation, which could adversely affect our business.

A loss or decrease in business of one or more of our largest clients could adversely impact our results of operations.

Our top ten clients collectively accounted for approximately 20% of our total revenues for the year ended December 31, 2020. We cannot assure you that any of our largest clients will continue to use our services to the same extent, or at all, in the future but we work very hard to enter into multiyear, comprehensive Multi Service Agreements and we stagger them across the calendar, by duration, to minimize risk of any material risk in a given calendar year. A loss or decrease in business of one or more of our largest clients, if not replaced by a new client or an increase in business from existing clients, would adversely affect our prospects, business, financial condition and results of operations.

We may be unable to realize our new business strategy of driving growth by leveraging a single media platform across a global digital-first footprint.

This is a transformative time for Nielsen. We have redesigned our products, our business platform, and our operating model. We are now fully aligned around three essential solutions that are designed to drive growth by leveraging a single media platform across a global digital-first footprint. We cannot assure you that our new business strategy will be successful in accomplishing our objectives. The failure to achieve the goal of driving growth could have a material adverse effect on our business.

We rely on third parties for the performance of a significant portion of our worldwide information technology and operations functions. A failure to provide these functions in a satisfactory manner could have an adverse effect on our business.

We are dependent upon third parties for the performance of a significant portion of our information technology and operations functions worldwide. The success of our business depends in part on maintaining our relationships with these third parties and their continuing ability to perform these functions in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, or at all, and our business could be adversely affected.

Design defects, errors, failures or delays associated with our products or services, could negatively impact our business.

Despite testing, software, products and services that we develop, license or distribute may contain errors or defects when first released or when major new updates or enhancements are released that cause the product or service to operate incorrectly or less effectively. Many of our products and services also rely on data and services provided by third-party providers over which we have no control and may be provided to us with defects, errors or failures. In addition, our data integrity and quality relies on human-led, manual data collection and management processes which may be vulnerable due to human error and complexity of systems, resulting in the need for increased field support to ensure sample representation and prevent unauthorized or excessive access. We may also experience delays while developing and introducing new products and services for various reasons, such as difficulties in licensing data inputs or adapting to particular operating environments. Defects, errors or delays in our products or services that are significant, or are perceived to be significant, could result in rejection or delay in market acceptance, damage to our reputation, loss of revenue, a lower rate of license renewals or upgrades, diversion of development resources, product liability claims or regulatory actions, or increases in service and support costs. We may also need to expend significant capital resources to eliminate or work around defects, errors, failures or delays. In each of these ways, our business, financial condition or results of operations could be materially adversely impacted.

If our clients experience financial distress, or seek to change or delay payment terms, it could negatively affect our own financial position and results.

We have a large and diverse client and partner base and, at any given time, one or more of our clients or partners may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions could result in an increase in client financial difficulties that affect us. The direct impact on us could include reduced revenues and write-offs of accounts receivable and expenditures billable to clients, and if these effects were severe, the indirect impact could include impairments

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of intangible assets, credit facility covenant violations and reduced liquidity.  That being said we have an excellent track record of payment from our clients due to the strict adherence of our payment term and data suspension policies.  Our clients, in many situations, require our data to inform their own billings, collections and reconciliations and therefore they prioritize our payment out of their own self-interest.

We rely, in part, on acquisitions, joint ventures and other alliances to grow our business and expand our access to technology. If we are unable to complete or integrate acquisitions into our existing operations or successfully develop and maintain joint ventures and other alliances, our growth may be adversely impacted. In addition, the acquisition, integration or divestiture of businesses by us may not produce the expected financial or operating results.

We have made and expect to continue to make acquisitions or enter into other strategic transactions to strengthen our business and grow our Company. Such transactions present significant challenges and risks.

 

The market for acquisition targets and other strategic transactions is highly competitive, especially in light of industry consolidation, which may affect our ability to complete such transactions.

 

If we are unsuccessful in completing such transactions at all or within the anticipated time frame or if such opportunities for expansion do not arise, our business, financial condition or results of operations could be materially adversely affected.

 

If such transactions are completed, the anticipated growth and other strategic objectives of such transactions may not be fully realized, and a variety of factors may adversely affect any anticipated benefits from such transactions. For instance, the process of integration may require more resources than anticipated, we may assume unintended liabilities, there may be unexpected regulatory and operating difficulties and expenditures, we may fail to retain key personnel of the acquired business, we may fail to efficiently combine our business with the business of the acquired company in a manner that permits cost savings to be realized or such transactions may divert management’s focus from base strategies and objectives.

 

Acquisitions outside of the U.S. increase our exposure to risks associated with foreign operations, including fluctuations in foreign exchange rates and compliance with foreign laws and regulations.

 

The anticipated benefits from an acquisition or other strategic transaction may take longer to realize than expected or may not be realized fully. As a result, the failure of acquisitions and other strategic transactions to perform as expected could have a material adverse effect on our business, financial condition or results of operations.

 

Despite our past experience, opportunities to grow our business through acquisitions, joint ventures and other alliances may not be available to us in the future.  In addition, as a result of our proposed separation of Nielsen Global Connect and the resources and management attention required in connection therewith, there may be more limited resources available for strategic transactions and management’s attention is likely to be diverted away from sourcing and developing potential acquisitions and joint venture opportunities, resulting in decreased growth.

We have suffered losses due to goodwill and indefinite-lived asset impairment charges in the past and could do so in the future.

Goodwill and indefinite-lived intangible assets are subject to annual review for impairment (or more frequently should indications of impairment arise). In addition, other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The closing of the Proposed Connect Transaction will lead to an interim impairment assessment. As of December 31, 2020, we had goodwill and intangible assets of $10,510 million. Any downward revisions in the fair value of our reporting units or our intangible assets could result in impairment charges for goodwill and intangible assets that could materially affect our financial performance.

 

Risks Related to Our Indebtedness and Financing

Our substantial indebtedness could adversely affect our business, results of operations, and financial health.

We have and will continue to have a significant amount of indebtedness. As of December 31, 2020, we had total indebtedness of $8,307 million.

Our substantial indebtedness could have important consequences. For example, it could:

 

increase our vulnerability to general adverse economic and industry conditions;

 

require us to dedicate a substantial portion of our cash flow from operations to interest and principal payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, service development efforts, dividends, share repurchases and other general corporate purposes;

 

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;

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restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;

 

limit our ability to obtain additional financing for working capital, capital expenditures, service development, debt service requirements, dividends, share repurchases, acquisitions and general corporate or other purposes;

 

limit our ability to adjust to changing market conditions;

 

place us at a competitive disadvantage compared to our competitors that have less debt; and

 

potentially limit our ability to service future dividends and/or stock repurchases due to covenant restrictions.

In addition, the indentures governing our outstanding notes and our secured credit facility contain financial and other restrictive covenants that could limit the ability of our operating subsidiaries to engage in activities that may be in our best interests, including by limiting the ability to make acquisitions, pay dividends or repurchase shares.  Moreover, the failure to comply with any of those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt. See Note 12 to our consolidated financial statements – “Long Term Debt and Other Financing Arrangements,” for a description of our debt arrangements and related covenants.

Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

We require a significant amount of cash as well as continued access to the capital markets to service our indebtedness, fund capital expenditures and meet our other liquidity needs. Our ability to generate cash and our access to the capital markets depend on many factors beyond our control.

Our ability to make payments on our indebtedness (both interest and principal) and to fund planned capital expenditures and other liquidity needs will depend on our ability to generate cash in the future and our ability to refinance our indebtedness. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We may not be able to generate sufficient cash flow from operations to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness, including our senior secured credit facilities, on commercially reasonable terms or at all. See Note 12 to our consolidated financial statements – “Long-term Debt and Other Financing Arrangements,” for a description of our debt arrangements and related maturities.

A substantial portion of our indebtedness is at variable rates, and we are exposed to the risk of increased interest rates.

Our cash interest expense for the years ended December 31, 2020, 2019 and 2018 was $358 million, $386 million and $380 million, respectively. On December 31, 2020, we had $4,971 million of floating-rate debt under our senior secured credit facilities of which $1,300 million was subject to effective floating-fixed interest rate swaps. A one percent increase in interest rates applied to our floating rate indebtedness would therefore increase annual interest expense by approximately $37 million ($50 million without giving effect to any of our interest rate swaps). We periodically review our fixed/floating debt mix, and the volume, rates and duration of our interest rate hedging portfolio are subject to changes, which could adversely affect our results of operations.

 

In July 2017, the Financial Conduct Authority (“FCA”) (the authority that regulates LIBOR) announced it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. Further, on November 30, 2020 the ICE Benchmark Administration Limited (“ICE”) announced its plan to extend the date that most USD-LIBOR values would cease being computed to June 30, 2023. The Alternative Reference Rates Committee (“ARRC”) and the International Swaps and Derivatives Association (“ISDA”) have identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for USD-LIBOR in debt, derivatives, and other financial contracts. Even if financial instruments are transitioned to alternative benchmarks, such as SOFR, successfully, the new benchmarks are likely to differ from LIBOR, and our interest expense associated with our outstanding indebtedness or any future indebtedness we incur may increase. Further, transitioning to an alternative benchmark rate, such as SOFR, may result in us incurring significant expense and legal risks, as renegotiation and changes to documentation may be required in effecting the transition. Any alternative benchmark rate may be calculated differently than LIBOR and may increase the interest expense associated with our existing or future indebtedness.

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Risks Related to Cybersecurity and Privacy

We are exposed to risks related to cybersecurity and protection of confidential information.

In the ordinary course of our business, we rely extensively on our people, technology and business operations as well as trusted strategic partners and vendors to provide us with access to data and technology as well as related professional services.  We use several third-party service providers, including cloud providers, to access, store, transmit and process sensitive data. We receive, store and transmit large volumes of proprietary information and data that may contain personal information of our customers, employees, consumers and suppliers or sensitive client data entrusted to us. Our sensitive data may include our or a client’s intellectual property, financial information and business operations data.

An actual or perceived security or privacy breach may affect us in many ways, including:

 

risk of loss of Nielsen and/or client proprietary data or data protected by law, statute or regulation;

 

loss of control of how Nielsen and/or client proprietary data or data protected by law, statute or regulation is re-purposed, shared or disseminated;

 

expose us to potential litigation;

 

expose us to liability;

 

harm our reputation;

 

cause loss of confidence in security and accuracy of products;

 

deter customers from using our products or services;

 

deter retailers from sharing their sales data;

 

make it more difficult and expensive to effectively recruit panelists and survey respondents;

 

cause loss of investor confidence;

 

result in official sanctions or statutory penalties; and

 

cause significant increases in cyber security costs.

 

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or stock price.

Owing to new and emerging technology risks, hackers or unauthorized users who successfully breach our network security, could misappropriate or misuse our proprietary information or cause interruptions in our services. Given the relatively fast pace of changes in new and emerging technology risks, we may not be able to effectively anticipate and/or respond in a timely manner to all foreseeable and/or unforeseeable cyber security risks and events, thereby resulting in a potentially significant loss of client and investor confidence.

Notwithstanding our due diligence for new hires and employee training initiatives, we are at risk for employee malfeasance, inadvertent employee errors and other “insider risks” that may breach one or more of our information security provisions or policies. Our response in remediation of these data breaches or interruptions of service may require substantial commitments of resources and we may incur additional, unbudgeted operating and/or capital expenses, such as for specialized cyber security vendors as part of our response.

Similar to other companies, we have been the subject of attempts at unauthorized access to our systems, however, none were material. We have taken and are taking reasonable steps to prevent future unauthorized access to our systems, including implementation of system security measures, information back-up and disaster recovery processes. However, these steps may not be effective and there can be no assurance that any such steps can be effective against all possible risks.

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Our services involve the receipt, storage and transmission of proprietary information. If our security measures are breached and unauthorized access is obtained, our services may be perceived as not being secure and regulators, panelists and survey respondents may hold us liable for disclosure of personal data, and clients and venture partners may hold us liable or reduce their use of our services.

We receive, store and transmit large volumes of proprietary information and data, including data that contain personal information about individuals. Similar to other companies, Nielsen is a target of cyber attacks, however, none were material. We have continued to invest in tools, technology and people to safeguard the enterprise. Security breaches could expose us to a risk of loss or misuse of this information, regulatory fines and penalties, litigation and possible liability and our reputation could be damaged. It may also make it more difficult to recruit panelists and survey respondents.  For example, hackers or individuals who attempt to breach our network security could, if successful, misappropriate proprietary information or cause interruptions in our services. If we experience any breaches of our network security or sabotage, we might be required to expend significant capital and resources to protect against or to alleviate problems and to respond to regulators’ inquiries. We may not be able to remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target and, as a result, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose current and potential clients. In addition, we may be subject to investigation and fines by jurisdictions that have data protection laws.

Data protection laws and self-regulatory codes may restrict our activities and increase our costs.

Various statutes and rules regulate conduct in areas such as privacy and data protection which may affect our collection, use, storage and transfer of information both abroad and in the U.S. The definitions of “personally identifiable information” and “personal data” continue to evolve and broaden, and new laws and regulations are being enacted (for example, recently passed data protection laws in Brazil and California, U.S., and proposed laws in India and Indonesia), so that this area remains in a state of flux. Changes in these laws (including newly released interpretations of these laws by courts and regulatory bodies) may limit our data access, use and disclosure, and may require increased expenditures by us or may dictate that we may not offer certain types of services. In addition, some of our products and services are subject to self-regulatory programs relating to digital advertising. Compliance with these laws and self-regulatory codes may require us to make certain investments or may dictate that we not offer certain types of services or only offer such services after making necessary modifications. Failure to comply with these laws and self-regulatory codes may result in, among other things, civil and criminal liability, negative publicity, restrictions on further use of data and/or liability under contractual warranties.

The European Union’s General Data Protection Regulation (“GDPR”), took effect in May 2018 and imposed new and more stringent requirements regarding the handling of personal data of persons in the EU.  Failure to meet the GDPR requirements could result in penalties of up to 4% of worldwide revenue. Many jurisdictions considering new data protection laws are looking to GDPR as a starting point.

The California Consumer Privacy Act of 2018 (“CCPA”) took effect on January 1, 2020, and imposed new and more stringent requirements regarding the handling of personal data of persons in California. Because Nielsen does not typically segregate products and services on a state-by-state basis, Nielsen must generally adopt the requirements of CCPA across its US business operations. Failure to meet CCPA requirements could result in penalties of up to $7,500 per violation. CCPA also provides individuals with a limited private right of action in the case of certain breaches of personal data.

The proposed EU “ePrivacy” Regulation, if adopted, is expected to have potentially significant impacts for the online/mobile advertising industry as a whole. Nielsen is continuing to monitor the development of the ePrivacy Regulation and industry response and will determine whether to take further action, as needed, following its final adoption. Nielsen is participating in an industry-wide  transparency and consent framework mechanism that facilitates users providing and companies passing consent to the advertising supply chain to address GDPR and ePrivacy notice and consent requirements.

We rely on third parties to provide or allow us to access certain data and services in connection with the provision of our current services. The loss or limitation of access to that data could harm our ability to provide our products and services.

We rely on third parties to provide access to certain data and services for use in connection with the provision of our current services and our reliance on third-party data providers is growing. For example, both our Media and Connect segments enter into agreements with third parties to obtain data or facilitate the access to data from which we create products and services.

In the digital measurement business, publishers, browsers and platforms are making changes, often citing the increased attention on consumer privacy, which may result in our inability to collect the data we need to create our services. This may impact our ability

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to measure the Web and provide our clients with reporting at the rate of granularity that we do so today, in which case our business and/or potential growth may be affected adversely.  We may need to modify or enter into additional agreements with third parties to continue to measure certain types of media. In the event we are unable to use such third party data and services, access the necessary data, or if we are unable to enter into agreements with third parties when necessary, our business and/or our potential growth could be adversely affected. In the event that such data and services are unavailable for our use or the cost of acquiring such data and services increases, our business could be adversely affected.

Other suppliers of data may increase restrictions on our use of such data due to factors such as the increasing attention on consumer privacy, the increased rigor of privacy regulation or cybersecurity risk, failure to adhere to our quality control standards or otherwise satisfactorily perform services, increasing the price they charge us for this data or refusing altogether to license the data to us (in some cases because of exclusive agreements they may have entered into with our competitors). Supplier consolidation could put pressure on our cost structure.

 

Risks Related to the COVID-19 Pandemic and Other External Factors

 

The COVID-19 pandemic has subjected our business, operations and financial condition to a number of risks, including, but not limited to, those discussed below:

 

COVID-19 Risks Related to Operations

 

Due to the COVID-19 pandemic, there has been a substantial curtailment of business activities in many countries around the world, which is affecting and may continue to affect our ability to conduct fieldwork, operate call centers, and provide other services that require or were conducted via face to face interactions. Early in the COVID-19 pandemic we pivoted to a work from home stance that remains in place for the vast majority of our global workforce, which is and may continue to affect overall business performance. The risk is particularly pronounced in the Connect business where our teams need to visit traditional stores to collect information where electronic data transmission is not possible or an in-person data collection method for our custom research studies, and where we need to conduct face to face consumer research interviews. With respect to the Media business, because our measurement services require Nielsen to interact with panelists in order to recruit new panelist households and install metering equipment for existing panelists, over time the pandemic, actions taken to protect employee health and related social distancing requirements and “stay at home” orders may adversely affect Nielsen’s audio and television ratings and measurement services.

 

COVID-19 Risks Related to Third-Party Providers

 

The COVID-19 pandemic has also caused operating challenges and discontinuity for some vendors, suppliers, partners and other third parties which has affected and may continue to affect their ability to provide us essential products or services. For example, if any of our third-party providers suffer from limited solvency because of the pandemic, it could negatively impact our operating model and our business. It is not possible to estimate the potential impact at this time.

 

COVID-19 Risks Related to Demand for Products & Services

 

The COVID-19 pandemic has had and could continue to have a negative impact on our business as clients cut back on services that are not already contracted, delay their spending, or declare bankruptcy in light of poor business performance due to the pandemic.  If the pandemic is not contained or otherwise continues, it will continue to have an adverse effect on our business, results of operations and financial position. 

 

It is possible that COVID-19 could exacerbate any of the other risks described in this 2020 Form 10-K as well.  

 

At this time, we cannot predict the full extent of the negative impact in the future that the COVID-19 pandemic will have on our business, financial condition, results of operations and/or cash flows.

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The presence of our Global Technology and Information Center in Florida, our data centers in high property value facilities such as in Hong Kong, as well as the global nature of our panels, heightens our exposure to climate-change related risks, including hurricanes, cyclones and tropical storms, which could disrupt our business.

The technological data processing functions for certain of our U.S. operations are concentrated at our Global Technology and Information Center (“GTIC”) at a single location in Florida. Our geographic concentration in Florida heightens our exposure to a hurricane, tropical storm or other severe weather events specific to this region. The data centers in locations such as Hong Kong, also face high physical risks such as cyclones and sea level rise. These weather events could cause severe damage to our property and technology and could cause major disruptions to our operations, including our ability to produce and deliver ratings information. For example, a hurricane or other similar event could lead to business interruption and other adverse consequences such as penalty fees, business interruption claims, or lost business. While we continue to ensure identified physical risks to our facilities are addressed through the business continuity and our enterprise risk management plans (including ensuring that our GTIC is built in anticipation of severe weather events and we have insurance coverage), if we were to experience a catastrophic loss, we may exceed our policy limits and/or we may have difficulty obtaining similar insurance coverage in the future. As such, hurricanes, cyclones or tropical storms could have an adverse effect on our business. In addition, our panels rely on field staff traveling to panelists’ homes for onboarding and troubleshooting; therefore, worsening or more frequent climate change-related weather events could disrupt the size and quality of our panels. With the increased occurrence of climate change-related natural disasters globally, such as droughts, record snowfalls, sea-level rise, heat waves and fires, we recognize the wide-ranging risks this poses to our business continuity in certain locations as well as on a global scale.

 

Hardware and software failures, delays in the operations of our data gathering procedures, our computer and communications systems or the failure to implement system enhancements may harm our business.

Our success depends on the efficient and uninterrupted operation of our computer and communications systems and our data gathering procedures. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client orders and day-to-day management of our business and could result in the corruption or loss of data. While many of our services have appropriate disaster recovery plans in place, we currently do not have full backup facilities everywhere in the world to provide redundant network capacity in the event of a system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our various computer facilities, or delays in our data gathering or panel maintenance operations due to weather events, including those related to climate change, other acts of nature, or public health crises, such as pandemics and epidemics, could result in interruptions in the flow of data to our servers and to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a delay in the delivery of data, we could be required to transfer our data collection operations to an alternative provider. Such a transfer could result in significant delays in our ability to deliver our services to our clients and could be costly to implement. Additionally, significant delays in the planned delivery of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation and harm our business. Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism (particularly involving cities in which we have offices) could adversely affect our services. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

Risks Relating to Intellectual Property and Litigation and Regulatory Proceedings

If we are unable to protect our intellectual property rights, our business could be adversely affected.

 

Our business relies on a combination of patented and patent-pending technologies, systems, processes, and methodologies; trademarks; copyrights; other proprietary rights; and contractual arrangements, including licenses, to establish and protect our technology and intellectual property. We believe our proprietary technologies and intellectual property rights are important to our continued success and our competitive position. Any impairment of any such intellectual property could adversely impact the results of our operations or financial condition.

We rely on a combination of contractual and confidentiality provisions and procedures, licensing arrangements, and the intellectual property laws of the U.S. and other countries to protect our intellectual property, as well as the intellectual property rights of third parties whose content, data and technology we license. These legal measures afford only limited protection and may not provide sufficient protection to prevent the infringement, misuse or misappropriation of our intellectual property. Although our employees, consultants, clients, and collaborators all enter into confidentiality agreements with us, our trade secrets, data and know-how could be subject to unauthorized use, misappropriation or unauthorized disclosure.

28


 

Our business success depends, in part, on:

 

obtaining patent protection for our technology and services;

 

enforcing and defending our patents, copyrights, trademarks, service marks and other intellectual property;

 

preserving our trade secrets and maintaining the security of our know-how and data; and

 

operating our business without infringing intellectual property rights held by third parties.

Our ability to establish, maintain and protect our intellectual property and proprietary rights against theft or infringement could be materially and adversely affected by insufficient and/or changing proprietary rights and intellectual property legal protections in some jurisdictions and markets. Intellectual property law in several foreign jurisdictions is subject to considerable uncertainty. Our pending patent and trademark applications may not be allowed in certain jurisdictions and inadequate intellectual property laws may limit our rights and ability to detect unauthorized uses or take appropriate, timely and effective steps to remedy unauthorized conduct, to protect or enforce our rights. Such limitations may allow competitors to design around our intellectual property rights, to independently develop non-infringing competing technologies, products, or services similar or identical to ours, thereby potentially eroding our competitive position, enabling competitors greater opportunity to capture market share, and consequently negatively impacting our revenues and operating results. The expiration of certain of our patents may also lead to increased competition. As such, our patents, copyrights, trademarks, and other intellectual property may not adequately protect our rights, provide significant competitive advantages, or prevent third parties from infringing or misappropriating our proprietary rights.

The growing need for global data, along with increased competition and technological advances, puts increasing pressure on us to share our intellectual property for client applications with others. In this way, competitors may gain access to our intellectual property and proprietary information. Third parties that license our intellectual property and proprietary rights may take actions or create incidents that may diminish the value of our rights, harm our business, reduce revenue, increase expenses, and/or harm our reputation.  

 

To prevent or respond to unauthorized uses of our intellectual property, we may be required to enforce our intellectual property rights to protect our confidential and proprietary information by engaging in costly and time-consuming litigation or other proceedings that may be distracting to management, could result in the impairment or loss of portions of our intellectual property rights, and we may not ultimately prevail.  

Third parties may claim that we are infringing their intellectual property and we could suffer significant litigation or licensing expenses, or be prevented from selling products or services, which may adversely impact our operating profits.

We cannot be certain that we do not and will not infringe the intellectual property rights of others in operating our business. In the ordinary course of business, third parties may claim, with or without merit, that one or more of our products or services infringe their intellectual property rights and may engage in legal proceedings against us. In some jurisdictions, plaintiffs can also seek injunctive relief that may limit the operation of our business or prevent the marketing and selling of our services that allegedly infringe a plaintiff’s intellectual property rights.

Certain agreements with suppliers or clients contain provisions where we indemnify, subject to certain limitations, the counterparty for damages suffered as a result of claims related to intellectual property infringement based on our data or technology. Infringement claims covered by such indemnity provisions could be expensive to litigate and may result in significant settlement payments. In certain businesses, we rely on third-party intellectual property licenses, and depending upon the outcome of any intellectual property dispute, we cannot ensure that these licenses will be available to us in the future on favorable terms or at all.

Any such claims of intellectual property infringement, even those without merit, could:

 

be expensive and time-consuming to defend;

 

result in our being required to pay possibly significant damages;

 

cause us to cease providing our products or services that allegedly incorporate a third party’s intellectual property;

 

require us to redesign or rebrand our services and;

29


 

 

require us to enter into potentially costly royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property, although royalty or licensing agreements may not be available to us on acceptable terms or at all.

Any of the above could have a negative impact on our operating results and could harm our financial condition and prospects.

We analyze and take action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our business and technology and the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations.  

If we do not resolve these claims in advance of a trial, there is no guarantee that we will be successful in court.  A claim of intellectual property infringement could compel us to enter into a license agreement with restrictive terms and/or significant fees, which may or may not be available under acceptable terms or at all, and an adverse judgment could subject us to significant damages or to an injunction against development and/or sale of certain of our products or services. We may be required to implement costly redesigns to the affected product or services, or pay damages to satisfy contractual obligations to others.

 

Inadvertent use of certain open source software could impose unanticipated limitations upon our ability to commercialize our products and services or subject our proprietary code to public disclosure if not properly managed.

We use certain open source software in our technologies, most often as small components supporting a larger product or service and it is also contained in some third-party software that we license. We also contribute to the open source community in certain circumstances, which then may make it difficult or impossible to maintain proprietary rights in such contributions. There are many types of open source licenses, some of which are quite complex, and most have not been interpreted or adjudicated by U.S. or other courts. Although we do have an open source use policy and practice, inadvertent use of certain open source licenses could impose unanticipated limitations upon our ability to commercialize our products and services or subject our proprietary code to public disclosure if not properly managed. Remediation of such issues may involve licensing the software on less than unfavorable terms or require remedial actions including a need to re-engineer our products and services, either of which could have a material adverse effect on our business.

We are currently subject to shareholder litigation, and may become subject to additional shareholder litigation, antitrust litigation or government investigations in the future, any of which may result in an award of money damages or force us to change the way we do business.

 

In the past, certain of our business practices have been investigated by government antitrust or competition agencies, have been the subject of shareholder litigation, and we have been sued by private parties for alleged violations of the antitrust and competition laws of certain jurisdictions. We have changed certain of our business practices to reduce the likelihood of future litigation. Although each of these material prior legal actions have been resolved, there is a risk based upon the leading position of certain of our business operations that we could, in the future, be the target of investigations by government entities or actions by private parties challenging the legality of our business practices. We are subject to allegations, claims and legal actions arising in the ordinary course of business.  In addition, we are currently subject to securities litigation, which we discuss in greater detail below under “Item 3. Legal Proceedings” and Note 17–Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The outcome of many of these proceedings cannot be predicted.  If any proceedings, inspections or investigations were to be determined adversely against us or result in legal actions, claims, regulatory proceedings, enforcement actions, or judgments, fines, or settlements involving a payment of material sums of money, or if injunctive relief were issued against us, we may be required to change the way we do business and our business, financial condition and results of operations could be materially adversely affected.  Even the successful defense of legal proceedings may cause us to incur substantial legal costs and may divert management’s attention and resources.

Risks Relating to Governmental or Regulatory Change

Future legislation, regulations, or policy changes under the new U.S. administration and Congress as well as other countries could have a material effect on our business and results of operations.

Future legislation, regulatory changes or policy shifts under the new U.S. administration, could impact our business. Trade issues between the U.S. and several countries could continue and provide a changing and sometimes challenging landscape. Existing trade tensions with China and other countries could continue under the new Administration and provide challenges and marketplace uncertainty to Nielsen and Nielsen’s clients. Nielsen has been granted an exclusion from tariffs on certain products by the Office of the United States Trade Representative, but cannot guarantee the continuation of such exemptions or additional grants of exemptions based on future legislation, regulatory changes or policy shifts in the United States or abroad.  

30


 

Other possible U.S. legislation and regulation that could have an impact on Nielsen includes comprehensive state and federal privacy legislation and regulation, artificial intelligence policy, government restrictions on manufacturers within Nielsen’s existing supply chain, and accuracy of the decennial Census count and the American Community Survey, which provides a touchstone for Nielsen’s demographics.

The new Administration may implement new rules and regulations both emanating from the U.S. Tax Cuts and Jobs Act (“TCJA”) and the tax code generally.  For example, during his campaign, President Biden indicated a desire to increase the corporate rate from 21% to 28%.  It is still uncertain to what extent these changes could impact Nielsen.  

Abroad, France has passed a proposal to tax digital services. Its impact to Nielsen's services remains unclear.  While France initially delayed its implementation until an agreement is reached among the Organization for Economic Cooperation and Development (“OECD”), if an agreement is not made soon, France and other states could begin to implement the tax in their markets.  

Late 2020, the U.K. announced that they will require companies to report on Climate Change by 2025, becoming the first country to make the disclosures mandatory as investors and governments demand corporations curb their greenhouse gas emissions. This means a mandate to report the financial impacts of climate change on our business within the next four years, in addition to the greenhouse gas emissions the current regulation requires reporting on. Also, the new government in the U.S. is expected to move closer to requiring environmental, social and governance disclosures from companies.

Market access issues for Nielsen may also arise in some international markets.  Various countries are actively considering changes to the structure of their domestic media measurement regimes for both broadcast and digital services.  This can take the form of proposed government audits and/or ownership.  This activity also may include stringent regulatory policies on digital content and delivery.  The success of such onerous proposals remains uncertain.

Policy issues, such as trade, privacy, tax, and market access, will be risks that span the globe.  At this time we cannot predict the scope or nature of these changes or assess what the overall effect of such potential changes could be on our results of operations or cash flows.

Changes in tax laws and the continuing ability to apply the provisions of various international tax treaties may adversely affect our financial results and increase our tax expense.

 

We operate in over 90 countries, and changes in tax laws, international tax treaties, regulations, related interpretations and tax accounting standards in the United States, the United Kingdom and other countries in which we operate may adversely affect our financial results, particularly our income tax expense, liabilities and cash flow. Our effective tax rate could also be affected by changes in our business (including acquisitions or dispositions), intercompany transactions, the applicability of special tax regimes, and the relative amount of foreign earnings in jurisdictions with high statutory tax rates or where losses are incurred for which we are not able to realize tax benefits.

 

Governments are resorting to more aggressive tax audit tactics and are increasingly considering changes to tax law regimes or policies as a means to cover budgetary shortfalls resulting from the current economic environment.  We are subject to direct and indirect taxes in numerous jurisdictions and the amount of tax we pay is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. We have taken and will continue to take tax positions based on our interpretation of tax laws, but tax accounting often involves complex matters and judgment.  Although we believe that we have complied with all applicable tax laws, we have been and expect to continue to be subject to ongoing tax audits in various jurisdictions and tax authorities have disagreed, and may in the future disagree, with some of our interpretations of applicable tax law. We regularly assess the likely outcomes of these audits to determine the appropriateness of our tax provisions. However, our judgments may not be sustained on completion of these audits, and the amounts ultimately paid could be different from the amounts previously recorded, which could have a material adverse effect on our results of operations and financial condition.

Risks Related to Competition

We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.

We are faced with a number of competitors worldwide in the markets in which we operate. Some of our competitors in our markets may have substantially greater financial, marketing, technological and other resources than we do and may in the future engage in aggressive pricing action to compete with us or develop products and services that are superior to or that achieve greater market acceptance than our products and services. Although we believe we are currently able to compete effectively in each of the

31


 

various markets in which we participate, we may not be able to do so in the future or be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations and cash flow.

Risks Related to Operating a Global Business

Our international operations are exposed to risks which could impede growth in the future.

We continue to explore opportunities in major international markets around the world, including China, Russia, India and Brazil. International operations expose us to various additional risks, which could adversely affect our business, including:

 

costs of customizing services for clients outside of the U.S.;

 

reduced protection for intellectual property rights in some countries;

 

the burdens of complying with a wide variety of foreign laws;

 

difficulties in managing international operations;

 

longer sales and payment cycles;

 

exposure to foreign currency exchange rate fluctuation;

 

exposure to local economic conditions;

 

limitations on the repatriation of funds from foreign operations;

 

exposure to local political conditions, including adverse tax and other government policies and positions, civil unrest and seizure of assets by a foreign government;

 

the risks of an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate;

 

the risks of outbreaks of pandemic or contagious diseases, such as Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, Zika virus and COVID-19; and

 

the risk of maintaining subscribers because there has been no historical practice of using consumer packaged goods retail information or audience measurement information in the buying and selling of advertising time.

Our international operations expose us to regulatory risks, which could have an adverse effect on our business, financial results and operations.

We are subject to complex U.S., European and other regional and local laws and regulations that are applicable to our operations abroad, including trade sanctions laws, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, anti-bribery laws, anti-money laundering laws, and other financial crimes laws.  Although we have implemented a compliance program that includes internal controls, policies and procedures and employee training to deter prohibited practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regulations. Given our operations in the United Kingdom and Continental Europe, we face uncertainty surrounding the United Kingdom’s exit from the European Union in January 2020, commonly referred to as “Brexit.” Despite the implementation of the EU-U.K. Trade and Cooperation Agreement beginning on January 1, 2021, it is still unclear how Brexit will ultimately impact relationships within the U.K. and between the U.K. and other countries on many aspects of fiscal policy, cross-border trade and international relations. It is likely that Brexit will cause increased regulatory and legal complexities and create uncertainty surrounding our business, including our relationships with existing and future clients, suppliers and employees, which could have an adverse effect on our business, financial results and operations.

Currency exchange rate fluctuations may negatively impact our business, results of operations and financial position.

We operate globally, deriving approximately 41% of revenues for the year ended December 31, 2020 in currencies other than U.S. dollars, with approximately 11% of revenues deriving in Euros. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while our European operations earn revenues and incur expenses primarily in Euros. Outside the U.S. and the Euro Zone, we generate revenues and expenses predominantly in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates, we are subject to currency translation exposure on the revenues and profits of these operations, as well as on the value of balance sheet items (including cash) not denominated in U.S. dollars. In addition, we are subject to currency transaction exposure in those instances where transactions are not conducted in the relevant local currency. In certain instances, we may not be able to freely convert foreign currencies into U.S. dollars due to governmental limitations placed on such conversions.

32


 

Of our $610 million in cash and cash equivalents as of December 31, 2020, approximately $355 million was held in jurisdictions outside the U.S. We regularly review the amount of cash and cash equivalents held outside of the U.S. 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.

Risks Related to Human Capital Management

Our ability to successfully manage ongoing organizational changes could impact our business results.  

As we have in prior years, we continue to execute a number of significant business and organizational changes, including operating reorganizations, acquisition integration and divestitures to improve productivity and create efficiencies to support our growth strategies. We expect these types of changes, which may include many staffing adjustments as well as employee departures, to continue for the foreseeable future. Successfully managing these changes, including the identification, engagement and development and retention of key employees to provide uninterrupted leadership and direction for our business, is critical to our success. This includes developing organization capabilities in specific markets, businesses and functions where there is increased demand for specific skills or experiences. Finally, our financial targets assume a consistent level of productivity improvement. If we are unable to deliver expected productivity improvements, while continuing to invest in business growth, our financial results could be adversely impacted.

If we are unable to attract, retain and engage employees, we may not be able to compete effectively and will not be able to expand our business.

Our success and ability to grow is dependent, in part, on our ability to hire, retain and engage sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. Competition for highly qualified, specialized technical, managerial, and particularly consulting personnel is intense. Changes to U.S. or other immigration policies that restrain the flow of professional talent may also inhibit our ability to staff our offices or projects. Further, as a result of our review of strategic alternatives, we may suffer increased attrition.  Recruiting, training and retention costs and benefits place significant demands on our resources. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us, including our ability to execute on growth initiatives as well as obtain and successfully complete important client engagements and partnerships and thus maintain or increase our revenues.

Our results of operations and financial condition could be negatively impacted by our U.S. and non-U.S. pension plans.

The performance of the financial markets and interest rates impact our plan expenses, plan assets and funding obligations.  Changes in market interest rates, decreases in our pension trust assets or investment losses could increase our funding obligations, which would negatively impact our operations and financial condition. In addition we may be subject to potential pressure from pension regulators to accelerate contribution funding in light of the proposed separation of our Global Connect business.

 

 

Item 1B.

Unresolved Staff Comments

None.

 

 

Item 2.

Properties

 

We lease property in over 400 locations worldwide. As of December 31, 2020, we also owned three properties worldwide consisting of vacant land in Oldsmar, Florida (subsequently sold in February 2021); Sao Paulo Brazil; and Athens, Greece. Our leased property includes offices in New York, New York; Oldsmar, Florida; Chicago, Illinois; and Markham, Canada. We are subject to certain covenants including the requirement that we meet certain conditions in the event we merge into or convey, lease, transfer or sell our properties or assets as an entirety or substantially as an entirety to, any person or persons, in one or a series of transactions.

 

 

Item 3.

Legal Proceedings

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,

33


 

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 (now “Connect”) segment, 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. Discovery is in its early stages and is ongoing. 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 alleges 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 alleges that certain officers and directors engaged in trading Nielsen stock based on material, nonpublic information. By agreement dated June 26, 2019, the derivative lawsuit was stayed pending resolution of Nielsen’s motion to dismiss the aforementioned securities litigation. Nielsen anticipates an amended complaint will be filed in the coming months. Nielsen intends to defend these lawsuits vigorously. Based on currently available information, Nielsen believes that the Company has meritorious defenses to these actions and that their resolution is not likely to have a material adverse effect on Nielsen’s business, financial position, or results of operations.

 

As previously disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 1, 2021, five lawsuits were filed relating to the Proposed Connect Transaction in federal and state courts, including one purported class action lawsuit, by purported Nielsen shareholders against Nielsen and the members of our Board of Directors (collectively, the “Actions”). The Actions generally alleged that the proxy statement filed by Nielsen in connection with the Transaction misrepresented and/or omitted certain purportedly material information and asserted violations of Sections 14(a) and 20(a) of the Exchange Act and the rules promulgated thereunder or negligent and fraudulent misrepresentation and concealment in violation of New York common law and breach of duty of disclosure under the laws of England and Wales. The alleged material misstatements and omissions related to, among other topics, certain forecasted financial information for the Global Connect business prepared by Nielsen’s management, the opinion of J.P. Morgan Securities LLC (“J.P. Morgan”), Nielsen’s financial advisor, in connection with the Proposed Connect Transaction, the interests of Nielsen’s directors and officers in the Transaction and certain background events that occurred in connection with the Proposed Connect Transaction. The plaintiffs in each of the Actions sought, among other things, an injunction against the consummation of the Transaction or, in the alternative, rescission damages, as well as an award of costs and expenses (including attorneys’ and experts’ fees and expenses). On February 1, 2021, Nielsen filed a Current Report on Form 8-K with the SEC voluntarily making supplemental disclosures related to the Proposed Connect Transaction. In light of the supplemental disclosures, the plaintiffs in the Actions agreed to dismiss their claims with prejudice as to the named plaintiffs only and without prejudice to all other members of the putative class. As of February 25, 2021, the four Actions filed in federal court have been voluntarily dismissed and the parties in the state court action have filed a stipulation and proposed order of voluntary discontinuance with the court.

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 expect that the ultimate disposition of these matters will not 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.

.

 

Item 4.

Mine Safety Disclosures

Not Applicable.

 

 

34


 

PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange and is traded under the symbol “NLSN.” At the close of business on February 1, 2021, there was one shareholder of record. We believe that the number of beneficial owners is substantially greater than the number of record holders because a large portion of our common stock is held in “street name” by brokers.

 

Dividends

 

On January 31, 2013, our Board of Directors (the “Board”) adopted a cash dividend policy with the intent to pay quarterly cash dividends on our outstanding common stock. Any decision to declare and pay dividends is made at the discretion of our Board and is subject to the Board’s continuing determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our shareholders and are in compliance with all laws and agreements to which we are subject.

 

On February 4, 2021, the Board declared a cash dividend of $0.06 per share on our common stock. The dividend is payable on March 18, 2021 to shareholders of record at the close of business on March 4, 2021.

 

Purchases of Equity Securities by the Issuer

 

Our Board has approved a share repurchase program, as included in the below table, for up to $2 billion in the aggregate of our outstanding common stock. The primary purpose of the program is to return value to shareholders and to mitigate dilution associated with our equity compensation plans.

 

Board Approval

 

Share

Repurchase

Authorization

($ in millions)

July 25, 2013

 

$

500

October 23, 2014

 

$

1,000

December 11, 2015

 

$

500

Total Share Repurchase Authorization

 

$

2,000

 

Repurchases under this program will be made in accordance with applicable securities laws from time to time and depending on our evaluation of market conditions and other factors. This program has been executed within the limitations of the authority granted us on August 6, 2015 and which has been extended by the authority approved by our shareholders at our annual general meeting of shareholders held on May 12, 2020, which authority will expire on May 12, 2025.

 

For the year ended December 31, 2020, there were no share repurchases.

 

Unregistered Sales of Company Securities

None

 

United Kingdom tax consequences for holders of common stock

The United Kingdom tax consequences discussed below do not reflect a complete analysis or listing of all the possible United Kingdom tax consequences that may be relevant to holders of our common stock. Furthermore, the statements below only apply to holders of our common stock who are resident for tax purposes outside of the United Kingdom.

Investors should consult their own tax advisors in respect of the tax consequences related to receipt, ownership, purchase or sale or other disposition of our common stock.

United Kingdom withholding tax

Under current law, the Company is not required to make any deduction or withholding for or on account of United Kingdom tax from dividends distributed on our common stock, irrespective of the tax residence or individual circumstances of the recipient shareholder.

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United Kingdom income tax on dividends

A non-United Kingdom tax resident holder of our common stock will not be subject to United Kingdom income taxes on dividend income and similar distributions in respect of our shares, unless the shares are attributable to a permanent establishment or a fixed place of business maintained in the United Kingdom by such non-U.K. holder.

Disposition of Nielsen Shares

Holders of our common stock who are neither resident for tax purposes in the United Kingdom nor holding the common stock in connection with a trade carried on through a permanent establishment in the United Kingdom will not be subject to any United Kingdom taxes on chargeable gains as a result of any disposals of their common stock.

Common stock held outside the facilities of The Depository Trust Company ("DTC") should be treated as U.K. situs assets for the purpose of U.K. inheritance tax.

Stamp duty and stamp duty reserve tax ("SDRT")

Stamp duty and/or SDRT are imposed in the United Kingdom on certain transfers of securities (including shares in companies which, like us, are incorporated in the United Kingdom) at a rate of 0.5% of the consideration paid for the transfer. Certain transfers of shares to depositaries or into clearance systems are charged a higher rate of 1.5%. Transfers of interests in shares within a depositary or clearance system, and from a depositary to a clearance system, are generally exempt from stamp duty and SDRT.

Transfers of our common stock held in book entry form through the facilities of DTC will not attract a charge to stamp duty or SDRT in the United Kingdom provided no instrument of transfer is entered into (which should not be necessary).

Any transfer of, or agreement to transfer, our common stock that occurs outside the DTC system, including repurchases by us, will ordinarily attract stamp duty or SDRT at a rate of 0.5%. This duty must be paid (and where applicable the transfer document stamped by Her Majesty's Revenue and Customs (“HMRC”)) before the transfer can be registered in our books. Typically this stamp duty or SDRT would be paid by the purchaser of the common stock.

A transfer of title in our common stock from within the DTC system out of the DTC system will not attract stamp duty or SDRT if undertaken for no consideration. If that common stock is redeposited into DTC (which may only be done via a deposit of the common stock first with an appropriate offshore depositary followed by a transfer of the common stock from the offshore depositary into DTC), however, the redeposit will attract stamp duty or SDRT at a rate of 1.5%.

Investors should therefore note that the withdrawal of our common stock from the DTC system, or any transfers outside the DTC system, are likely to cause additional costs and delays in disposing of their common stock than would be the case if they hold our common stock in book entry form through the DTC system.

 

 

36


 

Item 6.

Selected Financial and Other Data

The following table sets forth selected historical consolidated financial data as of the dates and for the periods indicated. The selected consolidated statement of operations data for the years ended December 31, 2020, 2019 and 2018, and selected consolidated balance sheet data as of December 31, 2020 and 2019 have been derived from our audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The selected consolidated statement of operations data for the years ended December 31, 2017 and 2016 and selected consolidated balance sheet data as of December 31, 2018, 2017 and 2016 have been derived from our audited consolidated financial statements, which are not included in this annual report on Form 10-K.

The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The audited consolidated financial statements, from which the historical financial information for the periods set forth below have been derived, were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K.

 

(IN MILLIONS, EXCEPT

PER SHARE AMOUNTS)

 

Year Ended December 31,

 

 

2020(1)

 

 

2019(2)

 

 

2018(3)

 

 

2017(4)

 

 

2016(5)

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

6,290

 

 

$

6,498

 

 

$

6,515

 

 

$

6,572

 

 

$

6,309

 

Depreciation and amortization(6)

 

 

864

 

 

 

756

 

 

 

675

 

 

 

640

 

 

 

603

 

Operating income/(loss)

 

 

466

 

 

 

(93

)

 

 

(475

)

 

 

1,214

 

 

 

1,130

 

Interest expense

 

 

371

 

 

 

397

 

 

 

394

 

 

 

374

 

 

 

333

 

Income/(loss) from continuing operations

 

 

7

 

 

 

(403

)

 

 

(700

)

 

 

440

 

 

 

507

 

Income/(loss) from continuing operations attributable to Nielsen shareholders

 

 

(6

)

 

 

(415

)

 

 

(712

)

 

 

429

 

 

 

502

 

Income/(loss) from continuing operations per common share (basic) attributable to Nielsen shareholders

 

 

(0.02

)

 

 

(1.17

)

 

 

(2.00

)

 

 

1.20

 

 

 

1.40

 

Income/(loss) from continuing operations per common share (diluted) attributable to Nielsen shareholders

 

 

(0.02

)

 

 

(1.17

)

 

 

(2.00

)

 

 

1.20

 

 

 

1.39

 

Cash dividends declared per common share

 

 

0.24

 

 

 

1.11

 

 

 

1.39

 

 

 

1.33

 

 

 

1.21

 

 

 

 

December 31,

 

(IN MILLIONS)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

14,135

 

 

$

14,319

 

 

$

15,179

 

 

$

16,866

 

 

$

15,730

 

Long-term debt including finance leases

 

 

8,307

 

 

 

8,309

 

 

 

8,387

 

 

 

8,441

 

 

 

7,926

 

 

 

(1)

Loss for the year ended December 31, 2020 included $144 million in restructuring charges, $88 million in non-cash impairment charges associated with an indefinite-lived intangible asset within the Connect reporting unit and non-cash impairment charges of $96 million associated with other long-lived assets. See Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Goodwill and Indefinite-Lived Intangible Asset” and “Long-Lived Assets”.  See Note 10 “Restructuring Activities” for further discussion on the restructuring charges.

(2)

Loss for the year ended December 31, 2019 included $1,004 million in non-cash impairment charges associated with our Connect reporting unit, a non-cash expense of $170 for the settlement of certain pension plans and $80 million in restructuring charges. See Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Goodwill and Indefinite-Lived Intangible Asset”. See Note 11 “Pensions and Other Post-Retirement Benefits” for further discussion on the pension settlement charge.

(3)

Loss for the year ended December 31, 2018 included a non-cash impairment charge of $1,411 million associated with our Connect reporting unit and $139 million in restructuring charges. See Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Goodwill and Indefinite-Lived Intangible Assets”.

(4)

Income for the year ended December 31, 2017 included $80 million in restructuring charges.

(5)

Income for the year ended December 31, 2016 included $105 million in restructuring charges.

(6)

Depreciation and amortization expense included charges for the depreciation and amortization of tangible and intangible assets acquired in business combinations of $197 million, $205 million, $220 million, $219 million and $210 million for the years ended December 31, 2020, 2019, 2018, 2017 and 2016, respectively.

 

 

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion and analysis should be read together with the accompanying consolidated financial statements and related notes thereto. Further, this report may contain material that includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, Nielsen’s current views with respect to current events and financial performance. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those described in “Item 1A. Risk Factors.” Statements, other than those based on historical facts, which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to Nielsen’s operations and business environment that may cause actual results to be materially different from any future results, express or implied, by such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this Annual Report on Form 10-K. The terms “Company,” “Nielsen,” “we,” “our” or “us,” as used herein, refer to Nielsen Holdings plc and each of its consolidated subsidiaries unless otherwise stated or indicated by context.

Background and Executive Summary

We are a leading global measurement and data analytics company that provides the most complete and trusted view available of consumers and markets worldwide. Our approach marries our proprietary data with other data sources to help clients around the world understand what’s happening now, what’s happening next, and how to best act on this knowledge. An S&P 500 company, we have operations in over 90 countries, including many emerging markets, covering approximately 80% of the world’s population, and hold leading market positions in many of our services and geographies.

 

We believe that important measures of our results of operations include revenue, operating income/(loss) 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. Typically, before the start of each year, more than 70% of our annual revenue has been committed under contracts in our combined Nielsen Global Connect and Nielsen Global Media segments, which provides us with a greater degree of stability for our revenue and allows us to more effectively manage our profitability and cash flows. See “Business Segment Overview” below for further discussion. 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.

On October 31, 2020, we entered into an agreement to sell our Global Connect business to Advent for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items, working capital, and a warrant to purchase equity interests in the company that will own the Global Connect business (the “Warrant”). On February 11, 2021, our shareholders approved the Transaction. The Transaction was unanimously approved by the Board.  The Transaction is subject to regulatory approvals and other customary closing conditions; and the Proposed Connect Transaction is expected to close in the next 90 days.

For further discussion regarding the potential risks relating to the Proposed Connect Transaction on the Company, see “Item 1A—Risk Factors- Risks Related to the Pending Sale of our Connect Business”.

Our restructuring and other productivity initiatives have been focused on a combination of improving operating leverage through targeted cost-reduction programs, business process improvements and portfolio restructuring actions, while at the same time investing in key programs to enhance future growth opportunities.

On June 30, 2020, we announced a broad-based optimization plan (the “Restructuring Plan”) to drive permanent cost savings and operational efficiencies, as well as to position us for greater profitability and growth. The Restructuring Plan was substantially completed in 2020 and we expect restructuring actions and other permanent cost-savings initiatives to drive approximately $250 million in pre-tax annual run-rate savings.  Pre-tax restructuring charges for the year ended December 31, 2020 were $144 million.

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 invest effectively our capital in technology and infrastructure to keep pace with our clients’ demands and our competitors. 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 90 countries requires disciplined global and local resource

38


 

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.

 

COVID-19

 

Impact of the COVID-19 Pandemic

 

          In March 2020, the global outbreak of the novel coronavirus (“COVID-19”) was categorized as a pandemic by the World Health Organization and has negatively affected the global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

 

          We have established a global task force to ensure execution of our key priorities during the COVID-19 pandemic-- the health and safety of our global workforce, maintaining our financial position with ample liquidity, and continuity of critical business processes.

       

Employees

 

          We have taken measures to protect the health and safety of our employees, their families and our clients, with a large majority of our worldwide workforce working from home. We halted in-person store field research and in-person client engagements in all markets at the outset of the COVID-19 pandemic and only began to reinstitute those activities after adopting processes with innovative solutions and the proper protections in place for our associates.

 

Business & Operations

 

          We have implemented business continuity plans designed to minimize potential business disruption from the COVID-19 pandemic and to protect our data input operations, infrastructure, and ability to meet customer demands.

 

Sales and Customer Demand

 

          We continue to face increased pressure in both Nielsen Global Media and Nielsen Global Connect. For Nielsen Global Media, this pressure was primarily due to the impact of COVID-19 on sports, auto, and non-contracted revenue. For Nielsen Global Media, the health of our consumer panels which are a very important source of measurement data have and will continue to be impacted because our field workers are constrained from their activities relating to recruiting, metering and monitoring the panelist homes. For Nielsen Global Connect, this was primarily due to the impact of COVID-19 on retail measurement services in markets that are heavy in traditional trade as well as pressures on custom insights and physical work conducted in stores innovation. These pressures are expected to continue, primarily due to non-contracted revenues in both Nielsen Global Media and Nielsen Global Connect.

 

Liquidity and Balance Sheet

 

          We believe we have a sound plan in place to mitigate the financial impacts of the COVID-19 pandemic in the face of ongoing economic uncertainty. We have taken aggressive cost actions to date and continue to closely monitor the situation. We remain well- capitalized, have sufficient liquidity to satisfy our cash needs and will take additional actions as required. On October 31, 2020, we entered into an agreement to sell our Global Connect business to Advent for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and the Warrant. The Transaction was unanimously approved by the Board. On February 11, 2021, our shareholder’s approved the Transaction. The Transaction is subject to regulatory approvals and other customary closing conditions; and the Proposed Connect Transaction is expected to close in the next 90 days.

 

Community    

 

          In response to COVID-19, Nielsen launched a virtual volunteering campaign called “In It Together” to encourage our employees to volunteer safely and virtually in three ways: helping our neighbors, fighting hunger, and using our skills and expertise. Each year, Nielsen associates can dedicate up to 24 hours to volunteering. With stay-at-home orders around the world, through “In It Together,” associates can still use those 24 hours virtually. Many associates have stepped up to help with needs that have emerged since the COVID-19 crisis began—everything from making masks for local frontline workers to analyzing food pantry data to help food banks meet growing demand. Nielsen also continues to dedicate $10 million in pro bono work, skills-based volunteering and in-kind giving of our data and services each year. For example, using our data, we worked with several governments to understand how COVID-19 food shortages have affected different geographies and supply chains.

 

39


 

         On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.  The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification significantly increases the allowable interest expense deduction of the Company and resulted in significantly less taxable income for the year-ended 2019, resulting in less utilization of net operating losses and foreign tax credits in that year. 

          In addition, the CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. The impact of those provisions was reflected in the first quarter of 2020.

 

          For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company, see "Item 1A—Risk Factors."

Business Segment Overview

We are divided into business units: Nielsen Global Media (“Media”) and Nielsen Global Connect (“Connect”). Media provides media and advertising clients with unbiased and reliable metrics that create the shared understanding of the industry required for markets to function, enabling its clients to grow and succeed across the $600 billion global advertising market. Media helps clients to define exactly who they want to reach, as well as optimize the outcomes they can achieve. Our cross-platform measurement strategy brings together the best of TV and digital measurement to ensure a more functional marketplace for the industry.

Connect provides consumer packaged goods manufacturers and retailers with accurate, actionable information and a complete picture of the complex and changing marketplace that brands need to innovate and grow their businesses. Connect provides data and builds tools that use predictive models to turn observations in the marketplace into business decisions and winning solutions. The business's data and insights, combined with the only open, cloud native measurement and analytics platform that democratizes the power of data, continue to provide an essential foundation that makes markets possible in the rapidly evolving world of commerce.

Certain corporate costs, other than those described above, including those related to selling, finance, legal, human resources, and information technology systems, are considered operating costs and are allocated to our segments based on either the actual amount of costs incurred or on a basis consistent with the operations of the underlying segment.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. The most significant of these policies relate to: revenue recognition; business combinations including purchase price allocations; accruals for pension costs and other post-retirement benefits; accounting for income taxes; and valuation of long-lived assets including goodwill and indefinite-lived intangible assets, computer software and share-based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the valuation of assets and liabilities that are not readily apparent from other sources. We evaluate these estimates on an ongoing basis. Actual results could vary from these estimates under different assumptions or conditions. For a summary of the significant accounting policies, including the critical accounting policies discussed below, see Note 1 – “Description of Business, Basis of Presentation and Significant Accounting Policies” – to our consolidated financial statements.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, using the modified retrospective method. The ASC has been applied to all contracts as of the date of adoption. There was no impact on our financial statements as a result of this adoption.

Revenue is measured based on the consideration specified in a contract with a customer.  We recognize 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 our customer contracts are non-cancelable and non-refundable.

40


 

The following is a description of principal activities, by reportable segment, from which we generate revenues.

Revenue from the Connect segment consists primarily of measurement services, which include our core tracking and scan data (primarily transactional measurement data and consumer behavior information) to businesses in the consumer packaged goods industry. Our data is used by its clients to measure their market share, tracking billions of sales transactions per month in retail outlets around the world. Revenues for these services are recognized over the period during which the performance obligations are satisfied as the customer receives and consumes the benefits provided by us and control of the services are transferred to the customer.

We also provide consumer intelligence and analytical services that help clients make smarter business decisions throughout their product development and marketing cycles. Our performance under these arrangements do not create an asset with an alternative use to us and generally include an enforceable right to payment for performance completed to date, as such, revenue for these services is typically recognized over time. Revenue for contracts that do not include an enforceable right to payment for performance completed to date is recognized at a point in time when the performance obligation is satisfied, generally upon delivery of the services, and when control of the service is transferred to the customer.

Revenue from our Media segment is primarily generated from television, radio, digital and mobile audience measurement services and analytics which are used by our media clients to establish the value of airtime and more effectively schedule and promote their programming and our advertising clients to plan and optimize their spending. As the customer simultaneously receives and consumes the benefits provided by our 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.

We enter into cooperation arrangements with certain customers, under which the customer provides us with its data in exchange for our services. We record 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, we consider the fair value of the goods or services surrendered.

Share-based Compensation

Expense Recognition

Our share-based compensation programs are comprised of stock options, performance-based stock options, restricted stock units (“RSUs”) and performance restricted stock units. We measure the cost of all share-based payments, including stock options, at fair value on the grant date and recognize such costs within the consolidated statements of operations. We recognize expense associated with share-based payments that vest upon a single date using the straight-line method. For those that vest over time, an accelerated graded vesting is used. We recorded $53 million, $50 million and $35 million of expense associated with share-based compensation for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the aggregate grant date fair value of all outstanding vested and unvested options was $17 million and $1 million, respectively. As of December 31, 2020, the aggregate grant date fair value of all outstanding vested and unvested performance stock options was $2 million and $2 million, respectively.

As of December 31, 2020, the following amounts of unearned share-based compensation (net of estimated forfeitures) are expected to be recognized: approximately zero related to stock options over the next year, approximately $1 million related to performance stock options over the next three years, approximately $28 million related to unvested RSUs over a weighted average period of 2.3 years and approximately $4 million related to performance restricted stock units over the next two years.

41


 

Fair Value Measurement

Determining the fair value of share-based awards at the grant date requires considerable judgment. Share-based compensation expense for time-based stock options is primarily based on the estimated grant date fair value using the Black-Scholes option pricing model, which considers factors such as estimating the expected term of stock options, expected volatility of our stock, and the number of share-based awards expected to be forfeited due to future terminations. For the years ended December 31, 2020 and December 31, 2019, there were no time-based only stock options issued. Some of the critical assumptions used in estimating the grant date fair value are presented in the table below:

 

 

Year Ended December 31,

 

 

 

 

2018

 

Expected life (years)

 

 

 

6.00

 

Risk-free interest rate

 

 

 

2.87

%

Expected dividend yield

 

 

 

4.97

%

Expected volatility

 

 

 

25.96

%

Weighted-average volatility

 

 

 

25.96

%

 

Under the Nielsen Stock Incentive Plan, we granted 200,000, zero and 2,524,176 time and performance based stock options to purchase shares during the three years ended December 31, 2020, 2019 and 2018, respectively. Share-based compensation expense for the time and performance based stock options is based on the Monte Carlo simulation model which considers factors such as estimating the expected term of stock options, expected volatility of our stock, and the number of share-based awards expected to be forfeited due to future terminations. Some of the critical assumptions used in estimating the grant date fair value are presented in the table below:

 

 

 

 

Year Ended December 31,

2020

2019

2018

Expected life (years)

5.00

 

 

5.00

 

Risk-free interest rate

0.49-1.34

%

 

2.83-2.92

%

Expected dividend yield

1.16-1.62

%

 

4.85- 5.54

%

Expected volatility

28.99-31.40

%

 

27.11-27.27

%

Weighted average volatility

30.20

%

 

27.13

%

 

 

We consider the historical option exercise behavior of our employees in estimating the expected life of our options granted, which we believe are representative of future behavior. For 2020 and 2018, expected volatility was based on our historical volatility. For the year ended December 31, 2019, there were no time and performance based stock options issued.

In addition, for share-based awards where vesting is dependent upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals. For the performance restricted stock units granted in 2020, the total number of performance restricted stock units to be earned is subject to achievement of cumulative performance goals for the period ending December 31, 2020. For the performance restricted stock units granted in 2019, the total number of performance restricted stock units to be earned is subject to achievement of cumulative performance goals for the two year period ending December 31, 2020.  For the performance restricted stock units granted in 2018, the total number of performance restricted stock units to be earned is subject to achievement of cumulative performance goals for the three year period ending December 31, 2020. For the 2020 award, fifty percent of the target award was determined based on our revenue target and fifty percent of the award was determined based on adjusted earnings per share achievements. Our revenue target was not achieved and fifty percent of the adjusted earnings per share targets were achieved. For the 2019 award, fifty percent of the target award was determined based on our revenue compounded annual growth rate achievements and fifty percent of the award was determined based on adjusted earnings per share achievements. Our revenue compounded annual growth rate target was not achieved and the adjusted earnings per share target was achieved. There is a relative total shareholder return modifier that can increase or decrease the payout. For the 2018 award, twenty five percent of the target award was determined based on our revenue compounded annual growth rate achievements, twenty five percent of the target award was based on our relative total shareholder return and fifty percent of the award was determined based on free cash flow achievements.  None of the targets for the 2018 awards were achieved.  The fair value of the target award related to free cash flow was

42


 

the fair value on the date of the grant, and the fair value of the target awards related to relative shareholder return was based on the Monte Carlo model.  

The assumptions used in calculating the fair value of share-based awards represent our best estimates and, although we believe them to be reasonable, these estimates involve inherent uncertainties and the application of management’s judgment. If factors change and we employ different assumptions in the application of our option-pricing model in future periods or if we experience different forfeiture rates, the compensation expense that is derived may differ significantly from what we have recorded in the current year.

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with an original maturity date of three months or less. Cash and cash equivalents are carried at fair value.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any.

Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and trademarks, 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. We review the recoverability of our goodwill by comparing the estimated fair values of reporting units with their respective carrying amounts. We have designated October 1st as the date in which the annual assessment is performed as this timing corresponds with the development of the Company’s formal budget and business plan review.

We established, and continue to evaluate, our reporting units based on our internal reporting structure and define such reporting units at our operating segment level or one level below. The estimates of fair value of a reporting unit are determined using a combination of valuation techniques, primarily by an income approach using a discounted cash flow analysis and supplemented by a market-based approach.

A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates and tax rates in developing the present value of future cash flow projections. Many of the factors used in assessing fair value are outside of the control of management, and these assumptions and estimates can change in future periods. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential impairment. The following assumptions are significant to our discounted cash flow analysis:

 

Business projections – expected future cash flows and growth rates are based on assumptions about the level of business activity in the marketplace as well as applicable cost levels that drive our budget and business plans. The budget and business plans are updated at least annually and are frequently reviewed by management and our Board of Directors. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions and a slower or weaker economic recovery than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future. Should such events or circumstances arise, management would evaluate other options available at that time that, if executed, could result in future profitability.

 

Long-term growth rates – the assumed long-term growth rate representing the expected rate at which a reporting unit’s earnings stream, beyond that of the budget and business plan period, is projected to grow. These rates are used to calculate the terminal value, or value at the end of the future earnings stream, of our reporting units, and are added to the cash flows projected for the budget and business plan period. The long-term growth rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit such as the maturity of the underlying services. The long-term growth rates we used for each of our reporting units in our 2020 evaluation were between 1.5% and 2.5%.

 

Discount rates – the reporting unit’s combined future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that is likely to be used by market participants. The weighted-average cost of capital is our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. The discount rates we used in our 2020 evaluation of our reporting units were between 11.50% and 12.75%.

These estimates and assumptions vary between each reporting unit depending on the facts and circumstances specific to that unit. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period.

43


 

We also use a market-based approach in estimating the fair value of our reporting units. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings, next year’s revenue and earnings as well as recent comparable transactions.

To validate the reasonableness of the reporting unit fair values, we reconcile the aggregate fair values of our reporting units to our enterprise market capitalization. Enterprise market capitalization includes, among other factors, the market value of our common stock and the appropriate redemption values of our debt.

During the first quarter of 2020, we determined that the significant decline in Nielsen’s market capitalization and impacts of the COVID-19 pandemic indicated that there was a triggering event for an interim assessment.  As a result of this, we performed an interim goodwill impairment analysis and determined that the estimated fair values of the reporting units exceeded their carrying values (including goodwill). As such, there was no impairment.

There was no impairment or indicators of impairment noted in the October 1, 2020 assessment. The fair values exceeded carrying values by more than 20% for each of our reporting units.

 

We perform sensitivity analyses on our assumptions, primarily around both long-term growth rate and discount rate assumptions. Our sensitivity analyses include several combinations of reasonably possible scenarios with regard to these assumptions, including a one percent movement in both our long-term growth rate and discount rate assumptions. When applying these sensitivity analyses, we noted that the fair value was greater than the carrying value for both of our reporting units. While management believes that these sensitivity analyses provide a reasonable basis on which to evaluate the recovery of our goodwill, other facts or circumstances may arise that could impact the impairment assessment and therefore these analyses should not be used as a sole predictor of impairment.

The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. As a result of this analysis, we concluded that the fair value was less than the carrying amount for one of our indefinite-lived trade names and recorded a non-cash impairment charge of $88 million within the Connect reporting unit.  The impairment was primarily a result of change in market comparable data inputs utilized in establishing the discount rate, which resulted in a higher discount rate in the valuation, as well as slightly downward revisions of management’s forecasts of future revenues.  There was no impairment noted in any period presented with respect to the Company’s other indefinite-lived intangible assets.  

Pension Costs

We provide a number of retirement benefits to our employees, including defined benefit pension plans and post-retirement medical plans. Pension costs, in respect of defined benefit pension plans, primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. Differences between this expected return and the actual return on these plan assets and actuarial changes are not recognized in the statement of operations, unless the accumulated differences and changes exceed a certain threshold. The excess is amortized and charged to the statement of operations over, at the maximum, the average remaining term of employee service. We recognize obligations for contributions to defined contribution pension plans as expenses in the statement of operations as they are incurred.

The determination of benefit obligations and expenses is based on actuarial models. In order to measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, the expected return on plan assets and the assumed rate of compensation increases. We provide retiree medical benefits to a limited number of participants in the U.S. Therefore, retiree medical care cost trend rates are not a significant driver of our post retirement costs. Management reviews these critical assumptions at least annually. Other assumptions involve demographic factors such as turnover, retirement and mortality rates. Management reviews these assumptions periodically and updates them as necessary.

The discount rate is the rate at which the benefit obligations could be effectively settled. For our U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with an Aa rating, or equivalent, from a major rating agency. For the non-U.S. plans, the discount rate is set by reference to market yields on high-quality corporate bonds. We believe the timing and amount of cash flows related to the bonds in these portfolios are expected to match the estimated payment benefit streams of our plans.

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To determine the expected long-term rate of return on pension plan assets, we consider, for each country, the structure of the asset portfolio and the expected rates of return for each of the components. For our U.S. plans, a 50 basis point decrease in the expected return on assets would increase pension expense on our principal plans by approximately $1 million per year. We assumed that the weighted-averages of long-term returns on our pension plans were 4.7% for the year ended December 31, 2020, 4.3% for the year ended December 31, 2019 and 4.4% for the year ended December 31, 2018. The expected long-term rate of return is applied to the fair value of pension plan assets. The actual return on plan assets will vary year to year from this assumption. Although the actual return on plan assets will vary from year to year, it is appropriate to use long-term expected forecasts in selecting our expected return on plan assets. As such, there can be no assurance that our actual return on plan assets will approximate the long-term expected forecasts.

During 2019, certain of our pension plans contracted with insurance companies and transferred $632 million of outstanding defined benefit pension obligations and related pension assets for approximately 6,000 retirees and beneficiaries in the Netherlands and UK to these insurance companies. These insurance companies are now required to pay and administer the retirement benefits owed to these retirees and beneficiaries. These transactions have no impact on the amount, timing, or form of the monthly retirement benefit payments to the covered retirees and beneficiaries. These transactions resulted in a non-cash charge to other income/expense of $170 million in our consolidated statements of operations and did not impact cash flows in 2019.

Income Taxes

We have a presence in more than 90 countries, and our effective tax rate is subject to significant variation due to several factors including variability in our pre-tax and taxable income or loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in where or how we do business, acquisitions or dispositions, audit-related developments, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. Additionally, our effective tax rate can fluctuate based on the level of pre-tax income or loss. For example, the impact of non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

We have completed a number of material acquisitions and divestitures which have generated complex tax issues requiring management to use its judgment to make various tax determinations. We have sought to organize the affairs of our subsidiaries in a tax efficient manner, taking into consideration the jurisdictions in which we operate. Although we are confident that tax returns have been appropriately prepared and filed, there is risk that additional tax may be assessed on certain transactions or that the deductibility of certain expenditures may be disallowed for tax purposes. Our policy is to estimate tax risk to the best of our ability and provide accordingly for those risks and take positions in which a high degree of confidence exists that the tax treatment will be accepted by the tax authorities. The policy with respect to deferred taxation is to provide in full for temporary differences using the liability method.

Deferred tax assets and deferred tax liabilities are computed by assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The carrying value of deferred tax assets is adjusted by a valuation allowance to the extent that these deferred tax assets are not considered to be realized on a more likely than not basis. Realization of deferred tax assets is based, in part, on our judgment and various factors including reversal of deferred tax liabilities, our ability to generate future taxable income in jurisdictions where such assets have arisen and potential tax planning strategies. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future.

We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Long-Lived Assets

We are required to assess whether the value of our long-lived assets, including our buildings, improvements, technical and other equipment, and amortizable intangible assets have been impaired whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. We do not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Recoverability of assets that are held and used is measured by comparing the sum of the future undiscounted cash flows expected to be derived from an asset (or a group of assets) to their carrying value. If the carrying value of the asset (or the group of assets) exceeds the sum of the future undiscounted cash flows, impairment is considered to exist. If impairment is considered to exist based on undiscounted cash flows, the impairment charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. The

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identification of impairment indicators, the estimation of future cash flows and the determination of fair values for assets (or groups of assets) requires us to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows and applicable discount rates. These estimates are subject to revision as market conditions and our assessments change.

We capitalize software development costs with respect to major internal use software initiatives or enhancements. The costs are capitalized from the time that the preliminary project stage is completed, and we consider it probable that the software will be used to perform the function intended until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are generally amortized over periods of three to seven years. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as our assessments change.  

The Company’s other long-lived asset impairment assessments resulted in the recognition of a non-cash impairment charge of $96 million for the year ended December 31, 2020. No impairment indicators were noted for other long-lived assets for the year ended December 31, 2019.

Factors Affecting Nielsen’s Financial Results

Acquisitions, Dispositions and Investments in Affiliates

Acquisitions

For the year ended December 31, 2020, we paid cash consideration of $30 million associated with current period acquisitions, net of cash acquired. Had these 2020 acquisitions occurred as of January 1, 2020, the impact on our consolidated results of operations would not have been material.

For the year ended December 31, 2019, we paid cash consideration of $61 million associated with current period acquisitions, net of cash acquired. Had these 2019 acquisitions occurred as of January 1, 2019, the impact on our consolidated results of operations would not have been material.

For the year ended December 31, 2018, we paid cash consideration of $43 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these 2018 acquisitions occurred as of January 1, 2018, the impact on our consolidated results of operations would not have been material.

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.

 

 

Year ended
December 31,
2020