YouGov plc (YOU) Earnings Call Transcript & Summary

Hello and welcome to the half year results -- financial results presentation. We are pleased -- I am pleased to report to you today robust underlying revenue growth and profit growth in line with expectations. We see in this half year revenue growth of 3%, which is 9% on an underlying basis, that is after taking into account the long-planned close in Kurdistan and the effects of currency. We've got a solid sales pipeline weighted towards the second half of the year. We've got record sales in December 2020. And since then, strong momentum continuing into our second half. Several multiyear contracts were secured in the last 3 months, underpinning our confidence in the future. Underlying profit is up by 15%, representing a margin of 14.2%, despite absorbing an increased noncash share-based payment charge. Adjusted earnings per share are up by 11% to 9.7p. Adjusted operating profit is down 7% because of the impact of the Kurdistan business. Net cash balances, we are still converting cash extremely well with a strong net cash balance of GBP 27.5 million, and this is despite increased investments of panel -- in panel and technology and the payment of dividends. Now we're continuing to invest in the investment -- in the business for further growth because, of course, we have a long-term plan that we are very much wanting to hit and spend and invest in. And we are, therefore, continuing to invest, with further growth supported by strong debt-free balance sheet. Now our underlying business does continue to deliver strong bottom line growth, in line with those long-term growth plans. For the last 5 years, we've emphasized that long-term growth. As you can see here, we have a very strong growth trajectory, which is continuing on into this year. We have 11% growth, 44% on an underlying basis. We are a very strategy-driven company. We've published our strategy. We've published our plans all out there, and we're continuing to execute against that stated strategy, which we think is becoming over time now, with the changes of COVID, hastening the movement towards digital and greater reliance on innovation that our strategy is increasing in relevance. We have a business proposition that really suits this time. A highlight of that is demand for more tactical, fast-turnaround projects resuming as our clients have adjusted to the pandemic. We've completed the transition to a client-centric account management structure in the U.S. and the U.K., leading to significant new contract wins towards the end of the period. That was the purpose of that change, that we were putting much more emphasis in major account management, and that is paying off. And we have seen a turnaround in Mainland Europe following the unification of the European teams, which was completed last year. So all of that doing really well. We're seeing continued investment as well in business with a simultaneous huge, actually biggest ever expansion of YouGov's panel into 15 new markets, allowing sales teams to target more global contracts. That's obviously costing us in terms of investment, but we believe that we need to have these markets if we are going to become a bigger and bigger player. We are winning contracts now for some of the most important and biggest and most innovative companies in the world that demands that we do make these investments. We've also developed YouGov Safe, a new tool, a new data -- form of data, which we'll look at more closely in a moment, that allows users to generate personal value from data portability, those GDPR changes, and gives them greater control of their data and more security in how their data is stored. Expanding YouGov Direct into new markets and integrating YouGov Chat is another important development. This goes together with Direct. They all fit together to create a new proposition, not only for panelists, for people who want to talk to us on different platforms, but also producing data that is more connected and richer and faster for clients. That is why we have expanded Direct into new markets, integrating with YouGov Chat. And we're continuing the evolution of our core data products and services into a single platform. We are truly becoming a platform business, which means that our connected data operates across the marketing flow, increasingly making it easier for people to carry out a wider range of their marketing functions using our rich and robust and detailed and authoritative data and, also at the same time, creating a simpler and more rewarding panelist experience. Now moving across to the financial updates with our CFO, Alex McIntosh.

Thank you, Stephan. Very pleasing to see another period of growth for the group. I'll take you through a few highlights. I just want to point your attention to the graphic on the bottom right of the screen, which shows our underlying growth rates. Our data products team, moderate growth delivered in the year compared to previous years as we've been moving our sales and account management teams to a client-centric model. We've really seen sales performance come at the latter half of the period, which -- that we will get the revenue benefit of that coming into the second half. Very encouraging to see significant growth in our Data Services business. We're seeing this in a number of our offices around the world and is in part due to a significant increase in sort of short term -- short turnaround work, tactical work that our clients are doing. Very much an encouraging sign that we're seeing continued optimism from our clients and continuing to spend. Stephan mentioned our -- the Kurdistan office impacting our -- which impacts our custom business. We've had a 2% growth in underlying growth in custom. Very pleased to report our Mainland Europe plans, which we had mentioned in previous reporting, that the plan to move to a single European region as opposed to operating sort of multi -- sort of single countries has really started to pay dividends for us. We've had some fantastic success from the Mainland Europe team. In the U.S., we had the benefit of the U.S. election. But as I've mentioned, sort of the impact of Kurdistan has dampened the sort of overall performance for the custom team. On this slide, we're setting out revenue performance by sector. We have talked in the past that we've had very little impact from COVID. Really, this is setting out for the first time where we make our money, in terms of which sector our clients are based. As you can see, we are continuing to hold steady or expand sectors, which may have been perceived as having a difficult time during COVID, particularly the sports sector, which has had sort of unprecedented disruption. We've continued to see very good progress, so we're very pleased that we've been able to continue supporting our clients. We're also very pleased that we've been diversified across a number of sectors, which has given us some good opportunities for growth in the period. We've made some progress against some new initiatives, particularly in gaming and e-sports, which we believe will be -- will continue to be a growth driver for us in the years to come. And just looking at our adjusted operating profit by division and geography. On the right-hand side, you'll see the majority of our profits are generated by the U.K. and the U.S. This has been a period of investment for us as we've been expanding out new countries and are augmenting some of our existing panels with additional panel recruitment. That additional investment has curtailed some of our margins in a few divisions. You'll see this on a reported basis, we're going from 15% to 13%, and this has very much to do with investing to continue driving growth into future years. And as Stephan alluded to at the beginning, the strong sales performance we've seen recently, it's certainly only been possible because of that investment. On the balance sheet, we continue to have a very robust balance sheet. The group has no debt. We continue to hold strong cash balances. Working capital continues to remain strong. We continue to support our clients where we need to during the pandemic, but overall, we're not seeing any material impact to our own working capital management due to clients' trading difficulties during the pandemic. During the period, very good cash conversion. We continue to use the cash that we generate to invest in the business in the period. We've increased our panel recruitment cost to GBP 6.1 million. As I mentioned, it's in part, adding more capability into our larger sort of research markets as well as beginning to roll out into new geographies. And we've also spent GBP 5.2 million in the year on technology development. So very much in line with technology. It's a key area that gives us a competitive advantage in the market, and we expect to see that level of expenditure continuing into the second half. In the period, we paid our dividend of GBP 5.5 million. And we've also purchased GBP 2.2 million of our own shares, which we are holding in treasury. In the period, the cash outflow -- we had a cash outflow of GBP 7.3 million. We end the period with cash in bank at GBP 27.5 million. Now I'd like to hand over to Sundip Chahal.

Thank you very much, Alex. So I'm going to take you through our 3 divisions. So starting with YouGov Data Products. So Data Products is our division that's comprised of our syndicated data products. Profiles and BrandIndex are the 2 that you probably know most well, but also we have newer sector-specific offerings such as SportsIndex and DestinationIndex, building on the sector expertise that we have in the business. Pleasingly, all geographies contributed to growth in the period. As Stephan and both Alex mentioned, in the period, we also implemented a new account management structure as planned. That's in line to meet our very ambitious growth targets that we've set ourselves. So we are constantly evolving and adapting. Performance was impacted due to the reshuffle in the first part of the period. That means that some of our larger contract wins have shifted to the second half of the period in question. We have a strong sales pipeline, and that pipeline, both with Data Products and for data products that augment client customer trackers. We did see a slight decline in the period on margin. This is due, and again, Stephan mentioned it, to our expansion into new territories, where we wait for revenue to catch up. YouGov Data Services is our division which consists of our fast-turnaround research, including, pleasingly what is still our market-leading service, the YouGov Omnibus. Very strong growth seen across most regions. Stephan mentioned it, we've definitely seen in this period release of clients' budgets for pent-up tactical pieces that were otherwise on hold whilst clients waited to see what was happening in uncertain times. Pleasingly, that's come back and it's come back really strongly in all regions. Mainland Europe has returned to double-digit growth. We saw some fantastic numbers in the U.S., which reported a growth of 33% on the period. And we also saw some significant growth in Asia Pac, which has adjusted well post COVID-19. Margin in the division has also improved. You saw that it came most likely last year. We're back up into 17%. This is on the back of strong revenue numbers and also increased efficiencies into what already was a very efficient research process. Our third division is YouGov custom. We have a wide range of quant and qual services in this team, and this is the team where our sector experts and expertise sits, and it's usually utilized to deliver tailored or bespoke solutions for our clients. Now of course, what we are doing is we're taking that bespoke approach and aligning it to our Data Products and our Data Services team and essentially able to offer our clients something that no one else can. Mainland Europe saw some very strong growth on the prior year, and this was because that those guys actually are really in the vanguard of taking our strategy forward and adopting a regional approach to our Cube-aligned tracking projects. Performance in the year was impacted by the plant closure of Kurdistan in the previous year. The U.S. saw stable growth on the back of election work, while U.K. was flat due to the reshuffle in the sales structure that we mentioned previously. As mentioned before, the planned closure of the Kurdistan business accounted for half of that margin decline that you're seeing on the right-hand side, whilst also the slight coming off on the top line growth also impacted the ability to absorb the central cost allocations. Here is an update on where we are on our progress on the strategic priorities in the period. So the expansion of our panel, Stephan mentioned it, but we've expanded hugely in this period. We've added 15 new markets across Europe, South America, the Middle East and North Africa. We're well on the way to unifying a simpler, more rewarding panelist experience for our members. So we do have members who are either in Chat or in Direct or in the panel. We're bringing that together. We continue to invest in technology, the products and the platform. We launched YouGov Direct into 2 new periods -- into 2 new markets, apologies, during the period, and we've also continued to develop YouGov Safe. Obviously, in the background, there's a lot going on there, but we're integrating our products and tools to help deliver that single YouGov platform that we've mentioned before. We've also launched our new B2B site, which is aligned much more closely to our sectorial expertise. CenX continues to be a cornerstone or a bedrock of our growth. So we continue to recruit both in Mumbai and in Bangalore. And obviously, the cost efficiencies are fantastic, but it's also the work efficiencies as well. So as we mentioned before, the ability to get everyone on the same workflow shouldn't be underestimated, and we're very pleased with the continued progress and the contribution of those CenXs to our business. We've also completed the shift to a new sales structure in the U.K., U.S. and in Europe. We're really seeing that feeding through, hopefully, even more so in our next results, into good sales. And we're also pleased to obviously announce 2 small acquisitions, which are bedding in, that's: Wizsight, which is a Turkish online market research company; and of course, Charlton Insights, augmenting our already strong sports offering in North America. Now I'm actually going to pass over to Stephan.

Thank you very much, Sunny. Our strategy continues to be -- to become a platform business. And as such, we are bringing together, fusing all the different kinds of data collection and data. To that, we're adding an exciting new strand of data, YouGov Safe. This comes out of GDPR portability because nowadays, it's possible for people who are on various platforms -- there are hundreds of platforms that people find themselves basically giving huge amounts of their personal data, and that can now be ported. That is to say, people can get a download of their recent data, their behavioral history on a site, and give it to us. The panelists, of course, are very trusting of us. Rightly so, we have a huge emphasis on security and privacy and control. And as a consequence, a significant part of our panel is prepared, not only to tell us all about themselves in terms of demographics, but also to give us their behavioral data histories. And this allows us to create a unique data set, a data set that actually nobody else can produce, which is to bring together lots of different behavioral data alongside all of the profiling data that YouGov has. We think this is going to be an extremely powerful proposition, first, to the panelist who now has this control over their data and gets value from their data and knows that they have a secure receipt for every single use of that data and that they can change the permission -- their permissioning settings and so forth. And also, they are contributing hugely to value -- the data value for the world. It is very powerful for this data to increase transparency for markets, for companies, for individuals. What this creates in terms of customers is better-connected data because it integrates existing data products with cross-referenced reported opinions and verified consumer actions. It now allows granular ad targeting, enabling feed marketing on a hyper-targeted audience -- to a hyper-targeted audience and to essentially carry out marketing experiments that can't be done in any other context. It increases our reach because we -- our highly engaged and expanding global panel has now more ways to share data with us. And of course, we're in a lot more countries. And it provides as well a lot of data that can be analyzed by our extremely powerful analytical tools, Crunch and so forth. All of this together, we think, creates a unique data proposition as well as a positive experience for our panelists. There's a lot of talk these days about ESG, quite rightly. When we think about our social value that YouGov produces, we feel very proud of the fact that our core mission as a data company is to empower individuals, is to make their personal data safer, to make their personal data in their control and to make it benefit themselves and society and also pays them a reward for it. So we believe that the core mission of this company, the core data mission of it is enhanced by YouGov Safe. It's enhanced by other technological advances that we've been shepherding through this year and that this is the fundamental growth driver of our future strategy. So where does that leave in terms of the well publicized by us targets that we have for growth? If you remember, we have this 5-year growth plan from '19 -- from 2019 to 2023: one, to double revenue; secondly, to double adjusted profit margin; and therefore, to achieve an earnings per share compound annual growth rate in excess of 30%. Now that's not easy. It's not easy after COVID. It's not easy with all the difficulties that have been produced in the economy. Having said all of that, we think we proved very resilient, and we have used this year to really grow the fundamentals of our business in terms of -- as we've heard, in terms of how we sell, how we deal with our clients, how we service our clients, how we relate to our panelists so that we have 2 years ahead of us that are going to be very strong, we believe, that we have a very positive outlook and that we still believe we are going to hit these difficult targets. That leads us to the current trading and outlook. We've had a good first half. But the second half is -- a lot of sales are weighted towards the second half. We've had a strong sales pipeline, which gives us confidence as we look towards the end of this year. Current trading is in line with Board expectations for the full year. A strong balance sheet enables further investment in our strategic initiatives, in our technology and panels. We have a resilient business model proven in these difficult last 12 months that we -- allows us to remain confident of meeting those long-term targets. We continue to see no material impact to date from the COVID-19 pandemic. Extensive measures to ensure the safety of our employees and the phased return-to-office plans are being maintained, with no employees furloughed nor any government support needed in any part of the business. What we think has happened in this period is that clients have become increasingly ready to change how they do things. They expect their marketing budgets now to deliver a better return on investment, and that bodes well for our data-driven research approach. That is why we are confident as we look to the future and look to our ambitious plans and our difficult targets. We do feel confident. We feel the investment in strategic areas is paying off, and we'll continue with our sufficient cash reserves, no debt balances. We think we're in a good place. Thank you very much.