Meredith records strong revenue growth in quarter
DES MOINES, Iowa, July 25, 2013 /PRNewswire/ — Meredith Corporation (NYSE: MDP; www.meredith.com), the leading media and marketing company serving 100 million American women, today reported fiscal 2013 earnings per share grew 19 percent to $2.74. Excluding special items, fiscal 2013 earnings per share increased 16 percent to $2.91. Total revenues rose 7 percent to $1.5 billion, and advertising revenues increased 7 percent to $824 million.
Fiscal 2013 was a year of strong growth in revenues, profit and cash flow,” said Meredith Chairman and Chief Executive Officer Stephen M. Lacy. “Our Local Media Group achieved the highest revenue and profit performance in its 65-year history. Our National Media Group grew both advertising and circulation revenues. We strengthened our connection to consumers across media platforms. And importantly, we continued to deliver on our Total Shareholder Return strategy by growing free cash flow and returning more cash to shareholders through increased dividends and share repurchases.”
Lacy noted the following fiscal 2013 financial highlights:
- Local Media Group revenues grew nearly 20 percent to $376 million, a record high. Net political advertising revenues were $39 million and operating profit grew more than 40 percent to $124 million. All represent record highs.
- National Media Group revenues grew 3 percent. Advertising revenues increased 5 percent, boosted by the acquisitions of the Allrecipes, EveryDay with Rachael Ray and FamilyFun brands. On a comparable basis, advertising revenues declined 6 percent. Circulation revenues also increased, benefitting from growth at comparable titles; contributions from EveryDay with Rachael Ray and FamilyFun magazines; and tests of a magazine based on the Allrecipes brand. Additionally, brand licensing activities delivered stronger performance.
- Total Company digital advertising revenues grew more than 50 percent, reaching a record high. National Media Group digital advertising revenues increased 62 percent, while Local Media Group digital advertising revenues rose 8 percent. Advertising revenues generated from digital sources continued to grow, reaching an all-time high of 11 percent of Meredith’s total advertising revenues in fiscal 2013.
- Cash flow from operations grew to nearly $190 million. Consistent with Meredith’s Total Shareholder Return (TSR) strategy, Meredith returned $125 million to shareholders through increased dividends and share repurchases, a nearly 40 percent increase.
Fiscal 2013 fourth quarter earnings per share grew 12 percent to $0.75, and revenues rose 3 percent to $387 million. Results were driven by stronger performance from both Meredith’s National and Local media groups.
FISCAL 2013 BUSINESS HIGHLIGHTS
Lacy noted that Meredith continued to execute a series of well-defined strategic growth initiatives during fiscal 2013 to deliver revenue, profit and free cash flow growth, and increase shareholder value over time.
- Increasing its powerful consumer connection – Consumer engagement strengthened across Meredith’s media platforms as the Company executed initiatives to refresh and enhance its popular national and local brands. Meredith’s monthly magazine audience is an impressive 115 million, while its television stations continue to deliver strong ratings performances. The Company’s digital audience grew to nearly 53 million unique visitors per month.
- Strengthening its core magazine and television brands – Advertising rates grew in both businesses as Meredith executed a series of innovative sales programs, including the Meredith Sales Guarantee, which demonstrates quantitatively that advertising in Meredith magazines increases retail sales for clients. The Company also completed a number of initiatives to increase efficiencies, reduce costs and improve operating profit margins.
- Growing revenues from non-advertising-related activities – Meredith’s Brand Licensing activities delivered stronger performance, driven by an expansion of the Better Homes and Gardens line of branded products at Walmart stores across the U.S., along with growth in the Better Homes and Gardens real estate network with Realogy. All of Meredith Xcelerated Marketing’s major clients renewed for calendar 2013, and the new business pipeline is very robust. Additionally, retransmission revenues grew as Meredith renewed agreements with cable and satellite providers.
- Making strategic investments to scale the business – Meredith positioned itself for continued growth with the acquisition of the Parenting and BabyTalk brands, and the launch of a magazine based on the Allrecipes digital brand that will debut with the November/December 2013 issue.
- Expanding digital, mobile, video and social platforms – Meredith continued its rapid expansion across emerging platforms. Highlights included website relaunches; tablet edition expansions; development of new mobile apps; increased video creation; and growth across social media platforms such as Facebook and Pinterest. Meredith also agreed to expand the reach of its daily syndicated The Better Show through cable distribution on the Hallmark Channel.
- Executing its successful Total Shareholder Return strategy – Meredith’s stock price increased 49 percent in fiscal 2013, and its dividend yielded approximately 4 percent. That equates to a total return of 53 percent. Key elements of the strategy are (1) An annual dividend of $1.63 per share; (2) A $100 million share repurchase program; and (3) Ongoing investments to scale the business and increase shareholder value over time.
“We continue to take aggressive steps to grow our leading position serving American women,” Lacy said. “These strategic actions are enhancing our strong consumer connection and producing top-line revenue growth and margin improvement.”
OPERATING GROUP DETAIL
NATIONAL MEDIA GROUP
Meredith’s National Media Group includes leading national consumer media brands delivered over multiple platforms that offer clients access to 100 million unduplicated American women every month – a reach unmatched in the industry. It also features robust brand licensing activities and innovative business-to-business marketing products and services.
Fiscal 2013 National Media Group revenues grew 3 percent to $1.1 billion. Operating profit grew 4 percent to $138 million.
Looking more closely at advertising performance in fiscal 2013:
- Total advertising revenues grew 5 percent. On a comparable basis, advertising revenues declined 6 percent, with performance better in the second half of fiscal 2013 than in the first half.
- Digital advertising revenues grew 62 percent, boosted by the addition of Allrecipes.com. On a comparable basis, digital advertising revenues grew 12 percent.
- The food and beverage (+14%), apparel (+22%), and media and entertainment (+25%) categories were stronger, and the weighted average net revenue per magazine page increased approximately 3 percent.
- Meredith successfully completed the first year of its innovative Meredith Sales Guarantee. Participating brands experienced an average return on investment (ROI) of $7.81 for every $1 invested in advertising in Meredith magazines.
Circulation revenues were higher in fiscal 2013 due to growth from existing, or comparable, titles, and the addition of EveryDay with Rachael Ray, FamilyFun, and the Allrecipes magazine tests.
Digital traffic was a strong 43 million unique visitors in fiscal 2013, helped by the acquisition of Allrecipes and aggressive digital marketing initiatives. In addition, Meredith generated 5.5 million digital orders for print magazine subscriptions during fiscal 2013, an increase of nearly 70 percent over the prior year.
“We’re pleased that our strategic initiatives to strengthen our businesses – including magazine and digital media, circulation and brand licensing – are delivering top-line growth,” said National Media Group President Tom Harty. “Meanwhile, our acquired brands are exceeding expectations and have improved our competitive position in the marketplace.”
Other revenues were $257 million in fiscal 2013, compared to $283 million in the prior year. This was due primarily to lower revenues at Meredith Xcelerated Marketing, partially offset by stronger performance from Meredith’s brand licensing activities.
As previously communicated, Meredith Xcelerated Marketing experienced reductions in programs from certain clients in calendar 2012. However, performance has strengthened in calendar 2013, driven by renewals of all major clients, program expansions and new business wins. As a result, Meredith Xcelerated Marketing delivered better performance in the second half of fiscal 2013 than in the first half. Meredith expects to deliver revenue and profit growth from Meredith Xcelerated Marketing in calendar 2013.
Fiscal 2013 fourth quarter National Media Group revenues rose 2 percent to $295 million. Operating profit grew 15 percent to $43 million, driven by stronger performance from brand licensing activities, Allrecipes and Meredith Xcelerated Marketing.
OTHER FINANCIAL INFORMATION
Consistent with its TSR strategy, Meredith raised its dividend in February 2013 by 7 percent to an annual rate of $1.63 per share, the 20th straight year of an increase. In addition, Meredith repurchased 1.5 million shares of its stock in fiscal 2013. At June 30, 2013, $32 million remained under the current repurchase authorization.
Total debt was $350 million at June 30, 2013, and the weighted average interest rate was 3.6 percent. Meredith’s debt-to-EBITDA ratio for the 12 months ended June 30, 2013, was 1.3 to 1.
Corporate expenses increased $16 million in fiscal 2013 compared to the prior year due primarily to professional fees related to a strategic transaction that did not materialize, along with higher performance-based incentive accruals, consulting expenses and higher investment spending on Next Issue Media.
All earnings per share figures in the text of this release are diluted. Both basic and diluted earnings per share can be found in the attached Condensed Consolidated Statements of Earnings. All fiscal 2013 and fourth quarter financial comparisons are against the prior-year periods. Information on the special items in both fiscal 2013 and fiscal 2012 is available in Tables 1-4.
Meredith currently expects full year fiscal 2014 earnings per share to range from $2.60 to $2.95. The Local Media Group will be cycling against a record $39 million in net political advertising revenues recorded in fiscal 2013, partially offset by increased retransmission fees.
Looking at the first quarter of fiscal 2014, compared to the prior-year period:
- National Media Group total advertising revenues are expected to be up slightly.
- Local Media Group total revenues are expected to be up slightly, with non-political advertising revenues up in the low-single-digit range. Meredith will be cycling against $12 million in net political advertising revenues recorded in the prior-year period.
- Meredith currently expects fiscal 2014 first quarter earnings per share to range from $0.48 to $0.53.
A number of uncertainties remain that may affect Meredith’s outlook as stated in this press release for the first quarter and full year fiscal 2014. These and other uncertainties are referenced below under “Safe Harbor” and in certain filings with the U.S. Securities and Exchange Commission.