Acquisitions and digital revenue growth drives record revenue and profits at Meredith
DES MOINES, Iowa – April 23, 2015 — Meredith Corporation, the leading media and marketing company serving more than 100 million unduplicated American women, today reported fiscal 2015 third-quarter earnings per share of $0.56, compared to $0.41 in the prior-year period. Excluding special items in both periods, earnings per share were $0.71, compared to $0.70. Fiscal 2015 third-quarter revenues rose 8 percent to a record $398 million, including 13 percent growth in advertising revenues.
For the first nine months of fiscal 2015, Meredith’s earnings per share were $2.08, compared to $1.61 in the prior-year period. Excluding special items in both periods, earnings per share grew 23 percent to $2.36. Total revenues rose 8 percent to $1.2 billion, including 16 percent growth in advertising revenues.
Special items in both the third quarter and first nine months of fiscal 2015 were primarily integration expenses related to recent print, television and digital acquisitions, and performance improvement plans related to business realignments. (See Tables 1-2 for supplemental disclosures regarding non-GAAP financial measures).
“We’re pleased to deliver solid third-quarter results, including record digital performance, while aggressively integrating the newly-acquired Shape brand and our other recent portfolio additions,” said Meredith Chairman and CEO Stephen M. Lacy. “Equally important, we continued to demonstrate our ongoing commitment to Total Shareholder Return by raising our dividend 6 percent, our 22nd-straight annual dividend increase.”
Looking at Meredith’s fiscal 2015 third quarter compared to the prior-year period:
- Local Media Group revenues increased 26 percent to $123 million, an all-time high for a fiscal third quarter. Operating profit excluding special items and adjusted EBITDA grew to $32 million and $42 million, respectively. Growth was driven by the additions of television stations KMOV in St. Louis, KTVK in Phoenix, WALA in Mobile-Pensacola, and WGGB in Springfield, Mass. Meredith also posted higher net retransmission contribution.
- National Media Group revenues increased, led by 5 percent growth in advertising revenues. Growth was driven by the additions of the Martha Stewart media properties and the digital operations of the Shape brand, along with Allrecipes, mywedding.com and Selectable Media.
- Total Company digital advertising revenues grew more than 55 percent, driven by recent acquisitions and organic growth. National Media Group digital ad revenues increased more than 60 percent, while Local Media Group digital ad revenues grew over 30 percent. Traffic to Meredith’s digital and mobile sites is now averaging approximately 70 million unique visitors per month, ranking Meredith among the top 30 digital operators in the U.S.
- Aggressive integration initiatives continued across all business lines. In the National Media Group, these included the Martha Stewart and Shape brands; popular millennial site mywedding.com; and digital advertising platform Selectable Media. In the Local Media Group, efforts focused on Meredith’s new duopolies in Phoenix and Springfield, along with its new station in Mobile.
- Meredith continued to return significant cash to its shareholders, raising its dividend 6 percent to $1.83 per share on an annualized basis, and repurchasing 830,000 shares of its stock in fiscal 2015.
OPERATING GROUP DETAIL
LOCAL MEDIA GROUP
Meredith’s Local Media Group includes 17 owned or operated television stations reaching 11 percent of U.S. households. Meredith’s portfolio is concentrated in large, fast-growing markets, including seven stations in the nation’s Top 25 and 13 in Top 50 markets. Meredith’s stations produce approximately 650 hours of local news and entertainment content each week. Meredith expects to continue to grow its Local Media Group both organically and through strategic acquisitions.
Fiscal 2015 third-quarter Local Media Group operating profit grew 18 percent to $31 million. Excluding special items in both periods, operating profit grew 14 percent to $32 million, and adjusted EBITDA increased nearly 20 percent to $42 million. Adjusted EBITDA margin was 34 percent. Revenues increased 26 percent to $123 million. (See Tables 1-4).
For the first nine months of fiscal 2015, Local Media Group operating profit grew 40 percent to $123 million, a record for a nine-month period. Excluding special items in both periods, operating profit and adjusted EBITDA grew more than 40 percent each to $129 million and $156 million, respectively. Adjusted EBITDA margin was 39 percent. Revenues increased 39 percent to $404 million, an all-time high for a nine-month period. (See Tables 1-4).
Looking more closely at fiscal 2015 third-quarter financial performance compared to the prior-year period:
- Non-political advertising revenues grew 26 percent to $88 million. Results were led by newly acquired stations in Phoenix, St. Louis, Mobile-Pensacola and Springfield; and strong digital advertising revenue performance.
- Other revenues and operating expenses increased, due primarily to growth in retransmission revenues from cable and satellite television operators and higher programming fees paid to affiliated networks, along with contributions from recent acquisitions. Most of Meredith’s retransmission agreements with cable and satellite operators are scheduled for renegotiation over the next two years. Meanwhile, most of Meredith’s network affiliation agreements are in place into fiscal 2017 and 2018.
Meredith demonstrated its strong connection with viewers in the February ratings period, as seven of its stations were No. 1 or No. 2 in late news and eight were No. 1 or No. 2 in morning news.
Meredith continues to add content for viewers in its 11 television markets. It recently added a 4 p.m. newscast at its FOX affiliate in Greenville, SC, and a 9 p.m. newscast at its FOX affiliate in Portland. Additionally, Meredith agreed to carry networks from NBC Universal and Katz Broadcasting on its digital channels in many of its markets.
“Our television expansion strategy is producing strong revenue and profit growth,” said Meredith Local Media Group President Paul Karpowicz. “We continue to make excellent progress integrating the four stations acquired in the last year. We are actively looking for opportunities to strategically add to our broadcasting portfolio, as well as drive growth by both expanding programming and growing rates.”
NATIONAL MEDIA GROUP
Meredith’s National Media Group reaches a multi-channel audience of 220 million consumers monthly, including 100 million unduplicated women and 60 percent of American millennial women. Meredith is a leader at creating content across media platforms and life stages in key consumer interest areas such as food, home, parenthood and health. It also features robust brand licensing activities and innovative business-to-business marketing services. Meredith expects to continue to grow its National Media Group organically and through strategic acquisitions.
Fiscal 2015 third-quarter National Media Group operating profit was $23 million. Excluding special items in both periods, operating profit was $34 million compared to $33 million in the prior-year period. Revenues grew 2 percent to $275 million. (See Tables 1-2).
Looking more closely at fiscal 2015 third-quarter advertising performance compared to the prior-year period:
- Total advertising revenues grew 5 percent to $118 million. Performance was driven by recent acquisitions, along with Meredith’s parenthood and food brands, including Parents, Family Circle and Allrecipes. The prescription drug, food and retail categories were stronger.
- Digital advertising revenues increased more than 60 percent, accounting for 21 percent of total National Media Group advertising revenues. Growth was driven by Allrecipes.com, along with the addition of Marthastewart.com, Shape.com, mywedding.com and Selectable Media.
Circulation revenues were $96 million and contribution margin increased, boosted by the addition of Martha Stewart Living magazine. Meredith continued to expand its digital consumer marketing activities, driving approximately one-third of magazine subscription acquisitions via digital sources over the last 12 months.
Additionally, Meredith’s consumer engagement continues to grow. According to the most recent six-month Magazine Media 360 audience report, Better Homes and Gardens was the second-largest brand in the industry, with a total monthly audience average of 51 million, and Allrecipes was No. 3, with a total monthly audience average of 46 million.
Meredith continued to execute on its strategy to grow businesses not dependent on advertising. For example, Brand Licensing revenues grew, driven by sales of more than 3,000 SKUs of Better Homes and Gardens licensed products at more than 4,000 Walmart stores nationwide, and Meredith Xcelerated Marketing delivered significantly higher operating profit.
“We were pleased to deliver improved results during the quarter, particularly 5 percent advertising revenue growth, along with stronger performance from our brand licensing activities and Meredith Xcelerated Marketing,” said Meredith National Media Group President Tom Harty. “We were excited to publish our first issues of Martha Stewart Living magazine, and began working on the first issue of an expanded Shape magazine. These strong brands – along with recent digital acquisitions – have solidified our leadership position with American women, and offer advertisers additional ways to reach them.”
For the first nine months of fiscal 2015, National Media Group operating profit was $78 million. Excluding special items in both periods, operating profit grew 3 percent to $93 million. Revenues were $764 million, compared to $786 million in the prior-year period. (See Tables 1-2).
OTHER FINANCIAL INFORMATION
Consistent with its Total Shareholder Return (TSR) strategy, Meredith repurchased 830,000 shares of its stock in the first nine months of fiscal 2015, and $97 million remained under the current repurchase authorization. Total debt was $826 million and the weighted average interest rate was 2.5 percent, with $450 million effectively at a fixed rate. Meredith’s debt-to-EBITDA ratio for the trailing 12 months was 2.7 to 1. All metrics are as of March 31, 2015.
Key elements of Meredith’s TSR strategy are (1) An annual dividend of $1.83 per share (yielding approximately 3.5 percent), which reflects a 6 percent increase in the annual dividend over the prior year and a nearly 80 percent increase since Meredith launched its TSR strategy in October 2011; (2) An ongoing share repurchase program; and (3) Strategic investments to scale the business and increase shareholder value.
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 2015 third-quarter and first nine-month comparisons are against the comparable prior-year period unless otherwise stated.
Looking more closely at the fourth quarter of fiscal 2015 compared to the prior-year period before special items:
- Total Company revenues are expected to be up high-single digits.
- Total Local Media Group revenues are expected to be up mid-teens.
- Total National Media Group revenues are expected to be up mid- to high-single digits.
When adding fiscal 2015 fourth-quarter expected results to the $2.36 per share before special items generated in the first nine months, Meredith expects fiscal 2015 full year earnings per share to range from $3.26 to $3.31 before special items, an increase of 16 percent to 18 percent over fiscal 2014 results.
A number of uncertainties remain that may affect Meredith’s outlook as stated in this press release for the fourth quarter and full year fiscal 2015. These and other uncertainties are referenced below under “Safe Harbor” and in certain filings with the U.S. Securities and Exchange Commission.