get going. I'm Jeffrey Meuler, Baird's Information Solutions Analyst. Pleased to introduce NIQ, or NielsenIQ, which is a leading consumer spending intelligence company with a 360-degree view of the global consumer. The company provides must-have data and solutions for consumer products companies and retailers globally, with a subscription-centric revenue model. It's a transformation story under current management with significant proof points, and we think a lot of runway. To get into it, I have Mike Burwell, the company's CFO, on stage with me. Mike, thanks for being here. To start, for those that aren't familiar with NIQ, just help us understand, and I think this kind of goes a long way to AI defensibility and opportunity, but help us understand your information stories or sources, and why AI isn't a risk to you as the market appears to be pricing in.
Thanks, Jeff. Thanks for having me here. Look, when I think about us, we are a mission-critical system for the largest consumer brands and retailers overall. We are deeply embedded in our clients' decision processes, frankly, and many of them would tell you that they can't operate without us. We're very sticky for our 23,000 clients, and when I say sticky, I think about our NDR is 104%, and it's been in that 104, 105% range, and our GDR is at 99%. There's not a lot of customer churn that's in place that evidences that. Clients are increasingly engaging us in terms of how critical we are to their infrastructure and our information. I guess maybe to cut to the chase, when I look at our data moat, I think about us is scale. We're operating in 90 countries.
We have 4 trillion transactions, data transactions we process a week, and 253 million product solutions that we have. E-com, in terms of that we're having overall 9,000 retailers, 5.5 million panelists, and our data is such that you can make decisions based on it. We cannot have hallucinations associated with our data. People are making multi-million dollar decisions. We're in their workflows every single day. That's our company.
All right. As we think about, some of the data you're aggregating on your own, some of it you're getting through auditors in emerging markets. You also get information from retailers. What is the monetization with, or what is the relationship with retailers in terms of what are you providing them, or how are you getting the data from them? Then who else has access to that in terms of your primary competitors, and how do you differentiate from them?
Yeah. Think about in the retail world, as I said, 9,000 retailers we're getting data from. 90% of our data is proprietary. As you pointed out, Jeff, we're going out in bodegas in India and saying, "Here's beginning inventory, here's ending inventory, give me your purchases," and we're backing into sales. We're doing that in 90 countries around the world. That data is very proprietary in terms of being able to do that. With our retailers, they're our clients and customers, but we also trade and barter with them. That is that they're providing information to us, and we're ultimately providing them back information on their operations and their stores and are very key customers, particularly in the activation world. Look, it's a dual-sided relationship, it's a structural advantage from my standpoint, and it drives a business flywheel when I think about it overall.
There may be some investors in here that have a prior perception of the company from when it was owned by Nielsen Holdings. At that time, revenue had contracted three of the final four years of ownership. Within about a year of the change in control, NIQ revenue is growing 3% organically. It's grown 6% organically each of the last couple of years, and you've been expanding EBITDA margins. A lot of improvement. Just what were the most important operating changes or other changes at the company to kind of drive the beginning of that transformation?
One is that we spent about $1 billion putting in place a modern commerce intelligence platform. When I say that, about half of that was technology behind us, done, rolled out to 23,000 clients. It's happened. Second is that we acquired eight businesses in the e-commerce space, which was a gap that we really needed to fill overall. That really kind of accumulated that $1 billion. Second was we needed to improve the products that we had overall. We had done the GfK acquisition, so it really added tech and durables, where we had been doing fast-moving consumer goods. Tech and durables, batteries, tires, et cetera, GfK was the gold standard in that space, in our opinion, and now we've put it under our hood in terms of thinking about it. I would say the management group.
James Peck had assembled a group of people that he had worked with at TransUnion before. He brought in a few newbies like me as part of the team, but a lot of people that he had worked with before, and I wouldn't consider myself a newbie at this point, having been working with him for almost four years. I would also say that our operating efficiency is a key ingredient in terms of margin improvement. The margins have gone from 13% - 21% in terms of this last quarter. We see further opportunity to get to 25% in the midterm and 30% beyond that. We continue to see margin growth in this business overall.
What did you change in terms of consumer panel? Because I think that you're pretty unique relative to some others, not only on your geographic coverage and having global, but you're also unique on bringing consumer panel into the mix as a complement to the product information that you get from retailers.
We're not a point solution. When we looked at it, we have panelists that tell us what was purchased and, well, measurement is telling us what was purchased. Panelists are telling why it was purchased and what else is in the basket. We have 5.5 million panelists. In particular, that solution, we're the only ones that have that baked into our Discover platform, that software to be able to tell you what was purchased and why it was purchased, so that you can make decisions, action points, to improve your operations, whether it's price, promotion, supply chain, et cetera, that we're providing you that insight.
You've generally been delivering on results, but your stock traded off last quarter in reaction to what I'll call a beat-and-hold quarter. I think it's because intelligence revenue growth decelerated. What drove the deceleration? Just anything else that you've been picking up on as you've had additional conversations with investors post the quarter where maybe there's some misunderstanding.
Yeah. Well, hey, look, we talked about contract renewals that timed up between Q1 and Q2. Q4, there is a little bit of ad hoc revenue that sits in our intelligence overall revenue stream that I look at as very normalized in terms of where we sit for our Q1. What we did see is a bit of slowness in our APAC business. Why? What we had focused on is that our coverage had dropped a little bit in APAC. We'd signed up two grocery retailers in Asia Pacific. You're going to see that improve, and it's already improved in April in terms of offsetting that. Second is that we signed an arrangement with INTAGE in Japan that allows us to deal with Japanese clients, both outbound and inbound clients, and we're going to see that as a further revenue stream.
The drop on that was really being driven by APAC, Jeff, and I think you're going to see that all the things and actions that we put in place, you're going to see that trend differently through the rest of the year.
What specifically is the contract renewal timing factor? Were there some clients that were on hiatus for a period of time, and they took a big step down in revenue? Is this more about the timing of onboarding upselling revenue? Just what's the timing factor?
We weren't going to give in just on pricing, because we believe our product is valuable. There's certain clients, they want to be a bit more difficult in terms of that timing. It flipped into April as opposed to have to have it done by March. We were just holding strong in terms of our view as to our value proposition and the pricing.
Okay. What you noted on the call, or I guess in the press release, like growth accelerated in April, that's the big factor that drove that acceleration and you've already kind of seen those contract renewals come through?
Absolutely the case.
Okay. On APAC, that's about a data expansion that you then later monetize, or I guess how quickly can?
So it takes-
data expansion partnerships improve monetization?
It takes a couple quarters because those contracts are in place. In the analytics side of the equation, now you're able to provide additional insight and information to that revenue stream. We were minus 3.5% for APAC in the first quarter. It's already positive in April, and we'll continue to see it move in a positive direction through the rest of the year.
What's your views on current market conditions in your end markets, and how impactful is that even to you? Obviously, there were concerns going into March on consumer health and geopolitical. EMEA's your largest geographic reporting segment. What's your view on the end market health, and to what degree does that even matter for your growth?
Yeah. It's a great question. When we look at the end markets themselves, yes, there has been challenges with some of those end markets. What we've seen in our business is that only intensifies the need for data. What we have not seen really any impact to it, when you look at the value proposition of us being to very small percentage of their spend to the value equation that the end market is getting from us. As they're seeing the market change, they really just want to know our analytics. They want to know our insights. We're not seeing any change in demand despite the changes in the end markets.
Okay. We talked a bit about the intelligence revenue. The other bucket of revenue is activation. I think some investors kind of think about intelligence as being more subscription centric, and they think about activation as being more variable. What are the big product offerings in activation, and how variable is it year-to-year?
The activation revenue itself, just to maybe demystify it a bit, and that is that 80% of it is what I call recurring. When I say recurring, why is that? It's revenue streams or clients that we're doing business with every single year, buying similar products in similar countries three years in a row. That's why I look at that 80%. Now, they're contracting that in one-year increments, but that's what we see happening. The product offerings in activation generally fall into three particular buckets. One is our analytics business, and analytics has another component called retail analytics, but I'll just call it analytics overall. That analytics is insight. You want real-time data to make decisions and insights in terms of what's happening. That business has been growing very well for us.
In particular, we just signed an arrangement we had announced with Wakefern, for additional analytics in that particular space, and been very, very positive. Second is AI, well, BASES. BASES is a well-known brand in terms of innovation and innovative products. Where I was going with it is that we've launched BASES AI Screener, where we've loaded up consumer data, and in that consumer data that we've had for years and years, you're now able to look at synthetic consumers and be able to launch and think about innovative new products. We've done that with over 70 clients so far in terms of BASES AI Screener. They've evaluated over 2,300 concepts in the marketplace. In fact, Reckitt has said that it's reduced their cycle time by 65% in terms of being able to take a concept and bring it to market.
We're seeing great traction happening in that. Last is our consumer market insights, which is really looking at brand trackers, brand analysis that we're able to do overall. Those are really the components of activation. One last thing I would say, Jeff, when you think about our activation revenue itself, 78% of that activation revenue is coming from intelligence clients. Of the intelligence clients, only 40% are selling into activation clients. There's another 60% of opportunity that's there. Cross-sell, upsell is a very important opportunity that we still see in our activation business overall.
To what extent does activation solutions kind of leverage the core data assets and therefore you're really the only one, or maybe one of your few competitors can provide a similar solution versus something that like a broader consultancy or something could provide?
Yeah, we're the only ones. When you look at that data, that's what it's really relied on. Again, coming back to that 90% proprietary data. The clients want to know on a real-time basis, I use an example. A particular client had some changes happen in Mexico, given some of the challenges that were happening politically, and they needed to jump on it immediately in terms of looking at analytics information. We were able to do that very quickly given our insights, analysis, et cetera, and it was all based on that proprietary information in terms of how should they change their price promotion and manage their market share changes that they saw, which were double-digit declines in a very quick period of time, and they were able to stem that through the use of our data.
Just a broader competitive question we get asked from some investors about Circana as a name that they may know. Just who else do you see, and I guess where do you see Circana, like which parts of your market do you see them in and where do you not see them?
Yeah. We're the only ones that are operating in 90 countries. Again, I haven't done a latest analysis in the last week on Circana, but last time I looked, they were operating in 23 countries, and they were only doing panel information in the U.S. principally. When you look at us, we're the only ones that have the e-com data. We're the only ones that have the measurement data. We're the only ones that bring panel data together. Kantar, Numerator, are using panel information, but they have no measurement situation. From our standpoint, we're the only ones operating in 90 countries. We're the only ones that bring both panel measurement data together and ultimately bring it into our solution in Discover.
I guess the other point to me would be, EMEA and Americas have been some of your fastest growth geographies the last few years, and to the extent to which you have more direct competition, those are the markets that they would be in.
I appreciate you bringing that up, Jeff. In fact, we were 9.3% revenue growth in the Americas and a little over 4% in EMEA.
Help us understand where NIQ is harnessing AI today and talk through what your prior tech transformation was and to what extent is it a AI enabler?
Yeah. Let me start with the second question first. The prior technology that we put in place was NIQ Discover. NIQ Discover allowed our clients to be able to look at their information real time with a different UX and UI interface than they had previously. Before, it was a lot of spreadsheets, a lot of connect information, et cetera, it wasn't really easily accessible and not very easy to analyze. Where it really simplified all that, our competitor had a product in the marketplace called Liquid Data. From our perspective, it was a very good product, we wanted to take it to another level, I think we did that. Always technology can be a bit of an arms race, in our mind, we've moved ahead, at least in our opinion, to it. We've added to your first question back to AI.
We talked about AI-based screener, but what we've added to the platform today is AI analysts. We have 40 personas associated with AI analysts. With those personas, there's roughly around 227 questions that are normally asked because we sit at our clients, we understand what those key questions are, and then we can't be wrong, we can't have hallucinations. How could we analyze that better? These different personas or these 40 personas, we know the right questions, and we can then respond to particular clients' needs or asks. The other one is chat. With chat, you want to be able to have natural language questioning and querying of the data, and you're able to do that real time to be in place. Those are the things that we've enhanced as it relates to the platform and where it sits today.
Again, I think we took it a long ways to where it is, and we're going to continue to look at it. I would say 70% of our CapEx today is focused on growth, of which the platform is part of that, and 30% is keep the lights on or kind of consistent stuff.
How do you monetize those enhancements? Are they like discrete premium upsells? Is it value realization through the core subscription? Just how does AI monetization work?
The AI monetization today is just, it's negotiations in terms of where we are. We're looking at five proofs of concepts that we have in place that we're working on, that we'll continue to discuss at our next earnings call how well we're doing on that. We look at those as real game changers in terms of where the conversations are going with our clients. We've bifurcated our clients into three buckets. We call them AI builders, AI buyers, AI beginners. The AI builders, we're working with them on infrastructure connections. We are not just data feeds. We're giving them solutions. Our data is proprietary, so we're not just giving that to an LLM in terms of thinking about it, but we're working with what that's going to look like in the future.
It's very clear to me, we're having different conversations with the AI buyers, different buying groups, CTOs, et cetera, as opposed to just brand managers and CMOs in terms of how valuable our data is and how important it is and the decision criteria going forward. That's the things that I'm seeing happen.
You've also been talking about how the world may be moving towards agentic commerce. What's the opportunity for you there?
Yeah, we see it as a pretty exciting opportunity. Agentic commerce, we announced NIQ Commerce Labs in a press release that we had done here in the last six weeks. What that is setting up the data sets such that agentic commerce can use it. We're the only ones that know if indeed, your son has a peanut allergy and you want to buy a protein bar, we understand all the ingredients that are in that product. We understand the supply chain in terms of where that product is. You're going to click on it, say, "That's what I'm interested in. That's what I want to buy." Ultimately, that's going to be a fee for us as part of that click fee, and today that's not in any of our numbers, in any of our revenue streams.
We only see it as upside as we are just starting on that journey.
Okay. If there's any audience questions, you can either raise your hand or you can email them in to session4@baird.com. Let's do the productivity side from AI. You have a lot of people. Some of this is because of emerging market data aggregation, but you also do a lot of data aggregation. Some of it's like a web scrape to complement some of your really proprietary data sets. What are the opportunities either in data aggregation or more broadly for the business from AI driving productivity or efficiency?
Yeah. On the data side, if I just look at last year, if we were sitting here, we were processing 3.4 trillion transactions a week. Today, we're processing 4 trillion transactions a week. That is being done and coded by AI. We have not added headcount to do that additional coding. That's driving additional productivity for us. As many companies in our back office, we're continuing to go after it. I think about it in my world, in the finance world. Our contracts are fairly complex. We have MSAs and LSAs in those contracts. I had people pulling out, this is what needs to be billed, this is the detailed components, et cetera. With AI, can put it and drop it almost in an Excel, looks like an Excel spreadsheet. I'm able to then summarize that very quickly.
I've taken 20 people out of our organization just as a small example in terms of productivity. I see further build in terms of productivity. We've said in a margin standpoint, we would be to 25% in the midterm. We guided to 23.8% at the high end of our range for this current year. AI is going to be a big contributor as we ultimately see us on a path to 30% margins. We're continuing to work on what all those building blocks are to get there.
What are the other outsized margin drivers that are still left to tap? I feel like you've made a lot of margin progress. You've generally been raising your margin targets since the IPO less than one year ago. I think there's still some transformation happening. There's an expense takeout program. I think there's still some synergies from a deal. Just help us with the other building blocks because the margin story could be differentiated in terms of order of magnitude of expansion relative to most information solutions companies in public markets the next few years.
Yeah. We have 38,000 people in our company today. We don't think that that's the right number going forward. That's going to be one of the biggest pieces of it. We'll be continuing to manage our attrition and continue to look at productivity. The GfK integration will be the last year this year, just a little bit in the beginning of next year, which has been driving the margin improvement. At mid-single-digit revenue growth and an 80% fixed cost base, you're driving 50 basis points of margin improvement every single year to be in place. The combination of AI and our revenue growth with our fixed cost base will continue to drive those margin improvements, and we'll continue to give guidance to you and others, Jeff, going forward in terms of what that looks like.
You provide some solutions for retailers. Some of that's monetization, some of that's bartering for data. You predominantly monetize consumer products companies, but you have a really rich view of the consumer that I think would be of interest to a lot of other user types. Just which of those have you started to see, or well, collectively, which other payers are meaningful to you or which payer types are you seeing the most meaningful growth in lately?
Yeah. We're seeing new end markets. We're seeing financial services is continuing to be a very target-rich environment for us. Packaging. You may say, "Well, what about packaging?" A lot of things are put into packaging. It's not much of the incremental expense for us, and we're able to enlighten people in terms of thinking about those things. Frankly, some of the governments we've been selling to have been out there in terms of thinking about it. I would really come back to this agentic AI is a really big opportunity for us, and we're very focused on it. The conversations that are happening there. The data itself we think has many, many use cases, but those are probably the biggest ones.
How far out does it feel? I know this is a guess, but where you're going to be able to more discreetly talk about AI impacts on consolidated revenue from AI-ready data that's selling at a premium, or AI native products, or I don't know what the right metric's going to be. Is that like a year out?
No. We'll start talking about it at our next earnings call, and then we'll continue to build on that going forward. It's not a side of the desk project inside our company. We're very focused on it. We've taken some of our best talent to focus on it. These five proofs of concepts that we have are live and active today. Jim and I are very focused on delivering that and delivering what we consider to be, I'll call them pilots, and being able to extrapolate from those pilots going forward and giving our investors insight in terms of where we're going and what's happening.
Just what can you say about who your customer base is, and which are the customers that are customer types or any sort of qualitative commentary on who you're starting to do some of the most innovative proofs of concepts with?
Yeah. I would say the most innovative right now is, like I said, I kind of bifurcated our 23,000 clients into these buckets. I'll call AI Builders, Buyers, and Beginners. The Builders are really the more sophisticated clients. Think about them as Fortune 500 companies that have their own data lakes and their own views. This is not about just hooking up a hose and a data feed. We're giving them real insights and decision criteria to be in place. That's what we're continuing to work with them on in terms of what that's going to mean going forward. It is how do we connect our infrastructure? How it is that we give them those insights? How do we monetize this in the right way? No one always wants to pay you more.
Nonetheless, that's the negotiation that's happened, and that's based on the value proposition.
Yeah. Your customer base includes the world's largest consumer products companies, and some of them have been with you for a century.
100 years since the beginning.
Your client concentration.
No
would imply that you have a customer that does $100 million of business with you per year.
I have no one customer more than 5%.
Okay.
Yep. No one actually more than three.
Talk us through free cash flow. It's been a good margin story. You went through a CapEx cycle related to the tech transformation that you're now on the other side of. It should become a really good free cash flow story. Just talk us through that the next couple of years and what it could look like.
Yeah. In 2025, we delivered a small amount of free cash flow, call it less than $50 million. This year, we've guided to $235 million-$250 million of free cash flow. On a TTM basis, we're $130 million through the first quarter. First quarter is our low point. We pay bonuses, we pay more of our IT payments, and we pay some more of our data costs in the first quarter. That's the low point, and it's just going to build out through the rest of the year. As you look into 2027, you're going to only continue to see it accelerate by margin improvement, by our overall reduction in one-time items that we've continued to have, and to continue to see a real inflection point in terms of free cash flow.
We said we would have our leverage down below three by the end of 2026.
The company has acquired or done several acquisitions since the change in control, and it seems like those acquisitions have gone well. What's the current landscape? Are there any holes left to plug, or what's the M&A strategy?
Yeah. We're in 90 countries. We have no geographic gaps. We have no data gaps with the e-commerce acquisitions that we had done, the deals that we had done. We did do a deal last year, Mtrix. Mtrix really is a supply chain business in Latin America, and we also did an ingredients business that we acquired. In all cases, we look at these and bring them into our distribution channel, that they should be accretive within a year. These are not big, giant deals. We don't see a big transformation deal on the horizon for us. We continue to see these types of deals that we can bring into our distribution network, make sure they're accretive literally within the first year, and continue to drive incremental revenue and profitability to the company.
Okay, I think it's a good margin and free cash flow story. Revenue growth, you've brought it up a lot, I think to a lot of people, 5%-6% revenue growth is solid for a subscription business where you're an industry standard. Some people look for a little bit more as we financial analysts always do. What do you view as kind of the few biggest potential factors that could accelerate your growth the next few years?
Yeah. I think our pricing is continued opportunity for us. Overall in the business, just based on the value proposition that we continue to deliver to the marketplace. I think what we're seeing in e-commerce, e-commerce growth continues to be very, very strong. I think we still have untapped possibilities in our SMB business that we see out there. Agentic commerce, as I said, we haven't even started to layer that in yet. Lastly, the supercharge is really what we're seeing in AI. We're going to get this pricing right for sure in terms of setting this up. AI with the proprietary data that we have is going to be a catalyst for us, not a detraction.
All right. I think that's a good place to wrap up. Please join me in thanking Mike for his insights on NIQ.