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Meredith Delivers 20% Growth In Fiscal 2014 Fourth Quarter Net Earnings

Monday 04. August 2014 - Fiscal 2014 Featured Television Station Expansions in Phoenix, St. Louis and Springfield Markets

Continued Successful Execution of Total Shareholder Return Strategy including 6% Dividend Increase
Meredith Corporation (NYSE: MDP; www.meredith.com) today reported fiscal 2014 fourth quarter net earnings increased 20 percent, and earnings per share rose 19 percent to $0.89 from $0.75 in the prior-year period. Excluding special items, fiscal 2014 fourth quarter earnings per share were $0.88 (See Tables 1-4). Revenues increased to $391 million.
“Our Local Media Group delivered another quarter of record performance,” said Meredith Chairman and Chief Executive Officer Stephen M. Lacy. “We were particularly pleased with the performance of KMOV in St. Louis in its first full quarter under Meredith’s ownership. We also completed the acquisition of KTVK in Phoenix, and announced an agreement to purchase WGGB, the ABC affiliate in Springfield, Mass.”
Lacy noted the following business highlights during the fourth quarter of fiscal 2014 when compared to the prior-year period:
Local Media Group revenues increased 20 percent to $111 million, and EBITDA grew 20 percent to $41 million (excluding special items), both records for a fiscal fourth quarter. Growth was driven by strong performance from Meredith television stations in Phoenix, Las Vegas and Greenville; the addition of KMOV in St. Louis; record digital/mobile advertising revenues; and higher retransmission-related revenues and profit.
National Media Group operating profit margins strengthened, driven by higher magazine advertising rates, increased contribution from circulation activities, and a 6 percent decrease in operating expenses. Operating profit was even with the prior year.
Consumer engagement grew across all of Meredith’s media platforms. Total traffic to Company websites grew to an average of more than 60 million unique visitors per month, a record high. Meredith magazine readership stands at an impressive 110 million. Also, Meredith’s television stations increased local programming hours and delivered a strong May ratings book.
FISCAL 2014 REVIEW
Fiscal 2014 earnings per share were $2.50, compared to $2.74 in the prior year. Excluding special items in both years, fiscal 2014 earnings per share were $2.80, compared to $2.91 (See Tables 1-4). Meredith recorded $34 million less of political advertising revenues in fiscal 2014 than in the prior year, as expected in an off-election year. Total revenues were $1.5 billion, even with the prior year.
“In fiscal 2014, we added great new television stations to our Local Media Group portfolio; executed a number of initiatives to strengthen and grow our National Media Group including the launch of Allrecipes magazine; and increased our dividend and expanded our share repurchase program,” Lacy said. “We aggressively executed on our Total Shareholder Return Strategy by deploying capital in high cash flow businesses and grew the amount of cash returned to our shareholders.”
Fiscal 2014 highlights included:
Significant expansion of Meredith’s television footprint including:
KTVK, an independent station in Phoenix, the nation’s 12th largest television market. This transaction closed on June 19, 2014. KTVK produces more hours of local news than any station in the market. Meredith now has a duopoly in Phoenix as it also owns KPHO, the CBS affiliate.
KMOV, the CBS affiliate in St. Louis, the nation’s 21st largest television market. This transaction closed on February 28, 2014, and the station has been successfully integrated into Meredith’s operations. KMOV consistently wins the important late news rating book. Meredith now operates the two largest CBS affiliates in Missouri, the other being KCTV in Kansas City.
WGGB, the ABC affiliate in Springfield, Mass. This transaction is expected to close in the first quarter of fiscal 2015. WGGB is also the Fox affiliate, airing it on a digital tier. This would be another duopoly for Meredith, as it currently owns WSHM, the CBS affiliate.
Portfolio and marketplace enhancements by Meredith’s National Media Group – Meredith successfully extended the Allrecipes brand to the magazine platform in what Media Industry Newsletter called the “Hottest Launch of the Year.” It also successfully integrated the Parenting and Baby Talk brands it acquired from Bonnier in late fiscal 2013. Meredith announced the Spring 2015 launch of Parents Latina, a magazine designed to serve English-speaking Hispanic moms. Additionally, Meredith was named “Advertisers’ Favorite Media Company” for the second time in four years by Advertiser Perceptions, which annually surveys thousands of leading advertising agencies and marketers. Google won in the prior year.
Rapid growth in Meredith’s digital, mobile, video and social platforms – Meredith grew its digital audience to more than 60 million monthly unique visitors, according to the most recent data from comScore. Highlights included expansion of its video library to more than 15,000 searchable videos; and strengthening the presence of Meredith brands across social media platforms such as Facebook and Pinterest. Better Homes and Gardens achieved 2 million followers on Facebook, making it the most popular brand among its peers on that platform.
Strong performance from Meredith’s non-advertising-related activities:
Meredith’s Local Media Group delivered significant growth in retransmission-related revenues, and has contractual agreements for its network affiliations in place through the next two to four years.
In Meredith’s National Media Group, brand licensing delivered excellent performance driven by strong sales of Better Homes and Gardens branded products at Walmart stores across the U.S., along with expansion of the Better Homes and Gardens real estate network. Meredith Xcelerated Marketing grew operating profit (excluding special items) by solidifying business with its Top 10 clients, including expansions with Chrysler, Mercer, Allergan and Kia.
Successful execution of Meredith’s Total Shareholder Return strategy – Meredith increased its dividend 6 percent to $1.73 on an annualized basis, a yield of approximately 4 percent. The Company repurchased 1.6 million shares of its stock and authorized an additional $100 million for its share repurchase program.
LOCAL MEDIA GROUP OPERATING DETAIL
Meredith’s Local Media Group includes 15 owned or operated television stations reaching 10 percent of U.S. households. Meredith’s portfolio is concentrated in large, fast-growing markets, including seven stations among the nation’s Top 25 and 13 in the Top 50. Meredith’s stations produce approximately 525 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 2014 fourth quarter Local Media Group operating profit was $25 million ($32 million excluding special items, a record for a fiscal fourth quarter), compared to $28 million in the prior-year period (See Tables 1-4). Revenues rose 20 percent to $111 million.
Fiscal 2014 Local Media Group operating profit was $113 million ($122 million excluding special items, a record for a non-political year), compared to $124 million ($126 million excluding special items) in the prior year (See Tables 1-4). Total Local Media Group revenues rose 7 percent to a record $403 million.
Looking more closely at fiscal 2014 performance before special items:
Non-political advertising revenues grew 8 percent to $291 million. Digital advertising revenues grew more than 15 percent to record levels, driven by increased traffic across the desktop and video platforms, the launch of new mobile apps, and the addition of KMOV.
Other revenues and operating expenses both increased, due primarily to growth in retransmission revenues from cable and satellite television operators, and higher programming fees paid to affiliated networks.
EBITDA grew to a record $151 million, and EBITDA margin was 38 percent.
Meredith’s connection with viewers also strengthened in fiscal 2014. Looking at the May 2014 rating book for the key 25-54 age group, Meredith stations in:
Portland, St. Louis and Las Vegas were ranked #1 in late news, while Nashville, Greenville and Saginaw were ranked second;
Portland, Hartford and Las Vegas were #1 in morning news, and Saginaw was ranked second;
Hartford and Las Vegas were #1 in evening news, and St. Louis and Saginaw were second; and
Nashville was #1 in sign-on to sign-off; and St. Louis, Kansas City and Saginaw were second.
Daytime Emmy Award-nominated The Better Show, the daily syndicated program produced by Meredith Video Studios, was renewed for an eighth season. It’s currently available in 80 percent of U.S. television households.
“We delivered record revenues and operating profit for a non-political year,” said Local Media Group President Paul Karpowicz. “We’re excited to add KTVK in Phoenix and KMOV in St. Louis to the Meredith portfolio, and look forward to having WGGB in Springfield join our group. The addition of these stations – along with increasing retransmission revenues, growing non-political advertising, rising digital advertising and the upcoming political advertising cycle – point to a strong fiscal 2015 for our business.”
NATIONAL MEDIA GROUP OPERATING DETAIL
Meredith’s National Media Group reaches 100 million unduplicated American women, including 60 percent of 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. The National Media Group 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 2014 fourth quarter National Media Group operating profit was $43 million, even with the prior-year period. Revenues were $280 million. Fiscal 2014 National Media Group operating profit was $113 million ($133 million excluding special items), compared to $138 million ($144 million excluding special items) in the prior-year period (See Tables 1-4). Revenues were $1.1 billion.
Looking more closely at fiscal 2014 performance:
Total advertising revenues were $483 million. Weighted average net revenue per magazine page increased approximately 2 percent. Meredith grew its share of magazine advertising revenues in its competitive set to more than 38 percent, according to the most recent data from Publishers Information Bureau. Digital advertising revenues accounted for 16 percent of total National Media Group advertising revenues.
Circulation revenues grew 2 percent to $327 million, driven by the launch of Allrecipes magazine and initiatives to grow the new title’s rate base, along with strong performance from Meredith’s parenthood and Hispanic brands. In addition, Meredith continued to develop its digital consumer marketing activities, increasing digital orders for print magazine subscriptions nearly 20 percent to 7 million. Digital orders now account for 40 percent of all Meredith magazine subscriptions.
Brand Licensing revenues increased 10 percent, led by continued strong sales of more than 3,000 SKUs of Better Homes and Gardens licensed products at more than 4,000 Walmart stores nationwide. The Better Homes and Gardens-branded real estate program with Realogy now features 8,300 agents in 26 states. Meredith’s brand licensing activities were recently ranked No. 3 in the world based on sales transactions by Global License! alongside licensing giants Disney and Hasbro.
Meredith Xcelerated Marketing grew operating profit (excluding special items) by solidifying business with its Top 10 clients, including significant expansions with Chrysler, Mercer, Allergan and Kia.
Meredith’s consumer engagement continued to grow in fiscal 2014. Readership for Meredith’s subscription titles grew 5 percent in fiscal 2014 and median reader income rose, according to the most recent data from Mediamark Research and Intelligence. Digital traffic averaged more than 50 million unique visitors in Fiscal 2014, according to comScore, and Allrecipes.com continues to lead in the Food category.
“We are pleased to have successfully grown non-advertising sources of revenue in fiscal 2014, particularly our very robust brand licensing arrangements,” said National Media Group President Tom Harty. “While the advertising environment is challenging, we are increasing our share of magazine advertising revenues; strengthening our digital business; and proving that advertising in Meredith brands delivers exceptional returns through our Meredith Sales Guarantee program.”
OTHER FINANCIAL INFORMATION
Consistent with its Total Shareholder Return (TSR) strategy, Meredith repurchased 1.6 million shares of its stock in fiscal 2014. At June 30, 2014, $108 million remained under the current repurchase authorization. Total debt was $715 million at June 30, 2014, and the weighted average interest rate was 2.3 percent. Meredith’s debt-to-EBITDA ratio for the 12 months ended June 30, 2014, was 2.7 to 1.
Key elements of Meredith’s TSR strategy are (1) An annual dividend of $1.73 per share, which reflects a 6 percent increase in the annual dividend over the prior year and a 70 percent increase since Meredith launched its TSR strategy in October 2011; (2) A renewed $100 million share repurchase program; and (3) Ongoing 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 2014 and fourth quarter comparisons are against the comparable prior-year periods.
OUTLOOK
Meredith expects full year fiscal 2015 earnings per share to range from $3.00 to $3.25. In fiscal 2015, Meredith expects a total of $28 million to $33 million of political advertising revenues at its television stations, with the majority being booked in the second fiscal quarter.
Looking more closely at the first quarter of fiscal 2015 compared to the prior-year period:
Total company revenues are expected to be up mid-single digits.
Total Local Media Group revenues are expected to be up 35 to 40 percent. Approximately one-third of total fiscal 2015 political advertising revenues are expected to be recorded in the first fiscal quarter.
Total National Media Group revenues are expected to be down mid-single digits.
Meredith expects fiscal 2015 first quarter earnings per share to range from $0.60 to $0.65, compared to $0.53 in the prior-year period.
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 2015. These and other uncertainties are referenced below under “Safe Harbor” and in certain filings with the U.S. Securities and Exchange Commission.