Meredith Reports Fiscal 2020 First Quarter Results

DES MOINES, Iowa, Nov. 7, 2019 /PRNewswire/ -- Meredith Corporation (NYSE: MDP; meredith.com) – the leading media and marketing company with national brands serving 185 million Americans including 115 million unduplicated American women and nearly 90 percent of U.S. millennial women; 150 million digital monthly unique visitors; a paid subscription base of 42 million; and 30 million viewers via 17 local television stations in fast-growing markets – today reported fiscal 2020 first quarter results:

• Total Company revenues from continuing operations were $725 million, compared to the prior year of $774 million. The prior year included $33 million more of cyclical high-margin political spot advertising in Meredith's Local Media Group.
• Earnings from continuing operations, which included special items in both periods, were $12 million, compared to $16 million. Meredith recorded $9 million of net after-tax special items in the first quarter of fiscal 2020, primarily related to restructuring and integration costs. The loss per share from continuing operations was $0.17 compared to a loss per share of $0.07.
• Excluding special items, earnings from continuing operations were $21 million, compared to $30 million. Earnings per share from continuing operations were $0.03 compared to $0.22. (See Tables 1-2 for supplemental disclosures regarding non-GAAP financial measures.)
• Adjusted EBITDA was $122 million, compared to $143 million in the prior year. The prior year included $33 million more of adjusted EBITDA contribution related to cyclical political advertising. Adjusted earnings per share were $0.99.

"Our Local Media Group delivered record revenue for a first quarter in a non-political year, driven by growth in non-political related advertising and consumer revenues," said Meredith Corporation President and Chief Executive Officer Tom Harty. "Our National Media Group results reflect advertising performance which met our long-term expectations on a comparable basis, including high-single digit growth in digital advertising revenues. We also continued our track record of strong expense control. These factors helped drive a 55 percent increase in National Media Group operating profit in the quarter."

Looking more closely at Meredith's fiscal 2020 first quarter:

• National Media Group revenues were $533 million. Operating profit was $28 million, compared to $18 million in the prior year. Excluding special items, operating profit was $41 million. Adjusted EBITDA was a fiscal first quarter record $91 million, compared to $88 million in the prior year. (See tables 1-2 for supplemental disclosures regarding non-GAAP financial measures.)
• Local Media Group revenues were $193 million. Operating profit was $38 million. Adjusted EBITDA was $49 million.
• Total Company digital advertising revenues were a fiscal first quarter record. National Media Group digital advertising revenues grew 8 percent and accounted for 34 percent of total National Media Group advertising revenues, up from 30 percent in the prior year. Local Media Group digital advertising revenues also increased 8 percent.

While Total Company adjusted EBITDA was within the outlook range Meredith previously communicated, the protracted retransmission dispute with DISH Network negatively impacted Local Media Group performance during the first quarter of fiscal 2020. However, Meredith expects to more than offset those revenues over the term of the multi-year agreement.

NATIONAL MEDIA GROUP DETAIL

Fiscal 2020 first quarter National Media Group operating profit increased 55 percent to $28 million. Excluding special items, operating profit was $41 million, up from $32 million, and adjusted EBITDA was $91 million, up from $88 million. Revenues were $533 million. (See Tables 1-2 for supplemental disclosures regarding non-GAAP financial measures.)

Looking more closely at fiscal 2020 first quarter performance compared to the prior year:

• Total advertising related revenues were $271 million, down in the mid-single digits.
• Digital advertising revenues grew 8 percent, driven by growth in Meredith's programmatic platform.
• Print advertising revenues were down in the low-teens. Meredith has made changes to its portfolio including transitioning Coastal Living and Traditional Home to premium newsstand titles; merging Cooking Light into Meredith's popular EatingWell title; and closing the MONEY and Martha Stewart Weddings magazines.
• On a comparable basis, print advertising performance was down in the mid-single digits compared to the prior year, in-line with Meredith's historical performance. The EatingWell, Southern Living, Real Simple and InStyle brands all generated growth in print advertising.
• Consumer related revenues were $244 million, compared to $254 million. Results reflect the portfolio changes described above.
• Expenses declined 7 percent as Meredith continued to realize savings related to the acquisition of Time Inc., along with ongoing expense discipline.

Meredith expects to grow revenue and profit at its National Media Group organically and through strategic acquisitions. In support of that goal, Meredith has completed or announced a series of changes to its National Media Group portfolio in fiscal 2020. These include:

• The launch of new products, including a partnership with globally recognized home renovation and interior design experts Drew and Jonathan Scott for a new lifestyle magazine expected to launch in early 2020. The Scotts are stars of the popular Property Brothers television show.
• Realignments to its portfolio to improve efficiency, including plans to transition the Rachael Ray Every Day subscription magazine to a premium newsstand title published on a quarterly basis beginning January 2020. This strategy has proven successful with other Meredith brands, including Coastal Living, Cooking Light and Traditional Home.
• Asset sales to reduce leverage, including the recent sales of the MONEY brand and Meredith's majority interest in Viant.

"We are encouraged by advertising trends across our powerful and diversified portfolio," said Harty. "To that point, we are currently forecasting year-over-year growth in comparable print advertising revenues for the second quarter of fiscal 2020. At the same time, we continue to innovate, be it launching a new title based on the Property Brothers; repositioning popular brands as consumer-driven newsstand products; or creating sophisticated targeted digital advertising programs for clients. Additionally, we are driving growth in our consumer driven business lines, particularly e-commerce and performance marketing, key pieces of our revenue diversification strategy."

LOCAL MEDIA GROUP DETAIL

Fiscal 2020 first quarter Local Media Group operating profit was $38 million. Adjusted EBITDA was $49 million. Revenues were $193 million. (See Tables 1-2 for supplemental disclosures regarding non-GAAP financial measures.)

Looking more closely at fiscal 2020 first quarter performance compared to the prior year:

• Non-political spot advertising revenues grew 3 percent to $77 million, led by growth in the Kansas City, Atlanta, and St. Louis markets. From a category standpoint, the professional services, home services and organizations categories were stronger, partially offset by softer results in the automotive category.
• Combined third party sales and digital advertising revenues grew 6 percent, both driven primarily by MNI Targeted Media.
• As expected in a non-political year, political spot advertising revenues were lower – $3 million – compared to $36 million in the prior year.
• Consumer related revenues increased 9 percent to $80 million due to growth in retransmission fees from cable and satellite television operators. These increases were offset by higher payments to affiliated networks. During the first quarter, Meredith entered into a new multi-year retransmission consent agreement with DISH Network across all of its markets. Meredith expects to renew MVPD contracts representing an additional 45 percent of its subscriber base in fiscal 2020.

"Non-political advertising performance has been up for three consecutive quarters," Harty said. "While it is still early, we expect this trend to continue as fiscal 2020 second-quarter non-political spot advertising is currently pacing up in the mid-single digit-range. Additionally, we expect to see political advertising revenue start to build in our early primary states, particularly Nevada and South Carolina."

Recently, Meredith announced plans to launch a television show based on its Southern Living brand. It will start with four specials this holiday season before expanding to weekly syndication across Meredith's geographically diverse station group.

"The Southern Living Show represents another outstanding collaboration between Meredith's Local and National Media Groups," said Patrick McCreery, Meredith Local Media Group President. "Southern Living's award-winning content – featuring recipes, home and gardening and Southern culture – will strike a chord with viewers all over the country."

Earlier in this year, Meredith committed to launching its People Now weekend show in daily syndication beginning in Fall 2020 with distribution across all 12 of its local television markets, and is actively engaged in discussions with other broadcast television owners to carry the show.

Meredith delivered strong performance during the July ratings period, when stations in 7 of its 12 markets ranked No. 1 or No. 2 from sign-on to sign-off.

OTHER FINANCIAL INFORMATION

Meredith recently announced the sale of MONEY.com and its equity interest in Viant. Since its January 2018 acquisition of Time Inc., Meredith has sold former Time Inc. assets viewed as non-core to Meredith's business strategy at attractive multiples, including TIME, FORTUNE, Sports Illustrated, MONEY, Time Inc. UK and Viant. Proceeds have been used to pay down debt. Meredith continues to market Xumo and FanSided.

Meredith remains committed to strong capital stewardship and its Total Shareholder Return strategy, which balances investments in the business with cash returned to shareholders.

Meredith raised its regular dividend by 5.5 percent to $2.30 on an annualized basis in February 2019. This marked the 26th straight year of dividend increases for Meredith and the 72nd consecutive year of dividend payments. Since launching its Total Shareholder Return strategy in October 2011, Meredith has increased its dividend 125 percent. As of November 6, 2019, Meredith's annualized dividend yielded approximately 6 percent.

Meredith adopted the Financial Accounting Standards Board's new standard for lease accounting on July 1, 2019. As a result, assets and liabilities related to operating leases greater than 12 months in length have been recorded on Meredith's consolidated balance sheet.

All earnings per share amounts in the text of this release are on a diluted basis per common share. Both basic and diluted earnings per common share can be found in the attached Condensed Consolidated Statements of Earnings. All fiscal 2020 first quarter comparisons are against the comparable prior-year period unless noted.

OUTLOOK

For full-year fiscal 2020, Meredith continues to expect:

• Total Company revenues to range from $3.0 billion to $3.2 billion, unchanged from original guidance communicated on September 5, 2019.
• Earnings from continuing operations to range from $188 million to $203 million, and from $2.38 to $2.69 on a per share basis, including a net after-tax charge for first quarter special items of $9 million. Actual results may include additional special items that have not yet occurred and are difficult to predict with reasonable certainty at this time. (See Tables 3-4 for supplemental disclosures.)
• Excluding special items, earnings from continuing operations to range from $197 million to $212 million, and from $2.58 to $2.88 on a per share basis. Both are unchanged from original guidance communicated on September 5, 2019.
• Adjusted EBITDA to range from $640 million to $675 million, and adjusted earnings per share to range from $5.75 to $6.20, unchanged from original guidance communicated on September 5, 2019. This includes approximately $50 million of planned strategic investments.

Looking more closely at the second quarter of fiscal 2020, Meredith expects:

• National Media Group revenues to range from $570 million to $590 million.
• Local Media Group revenues to range from $215 million to $220 million.
• Earnings from continuing operations to range from $54 million to $60 million, and from $0.73 to $0.86 on a per share basis. This includes non-cash depreciation and amortization of approximately $58 million and net interest expense of approximately $38 million. These amounts do not include special items. Actual results may include special items that have not yet occurred and are difficult to predict with reasonable certainty at this time.
• Adjusted EBITDA to range from $173 million to $181 million, and adjusted earnings per share to range from $1.59 to $1.72. (See Tables 3-4 for supplemental disclosures.)

CONFERENCE CALL WEBCAST

Meredith will host a conference call on November 7, 2019, at 8:30 a.m. EST to discuss fiscal 2020 first quarter results and its outlook for the second quarter and full year of fiscal 2020. A live webcast will be accessible to the public on the Company's website, and a replay will be available for two weeks. A transcript will be available within 48 hours of the call at meredith.com.

RATIONALE FOR USE AND ACCESS TO NON-GAAP RESULTS

Management uses and presents GAAP and non-GAAP results to evaluate and communicate its performance. Non-GAAP measures should not be construed as alternatives to GAAP measures. Adjusted earnings per share, adjusted EBITDA, and adjusted EBITDA margin are common supplemental measures of performance used by investors and financial analysts. Management believes that adjusted earnings per share and adjusted EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends. Adjusted earnings per share are defined as net earnings per share from continuing operations before depreciation, amortization and special items. Management has removed these costs as they are deemed to be non-operational in nature.  Adjusted EBITDA is defined as earnings from continuing operations before interest expense, income taxes, depreciation, amortization, and special items. Management does not use adjusted EBITDA as a measure of liquidity or funds available for management's discretionary use because it excludes certain contractual and non-discretionary expenditures.

Results excluding special items are supplemental non-GAAP financial measures. While these adjusted results are not a substitute for reported results under GAAP, management believes this information is useful as an aid in further understanding Meredith's current performance, performance trends and financial condition. Reconciliations of GAAP to non-GAAP measures are attached to this press release and available at www.meredith.com. 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements that are subject to risks and uncertainties. These statements are based on management's current knowledge and estimates of factors affecting the Company and its operations. Statements in this release that are forward-looking include, but are not limited to, the Company's successful implementation of its strategies; the Company's financial outlook for full year and second quarter of fiscal 2020; the expected benefits of the acquisition of Time Inc.; and the Company's expectations with respect to profit, growth and increasing shareholder value.

Actual results may differ materially from those currently anticipated. Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss or insolvency of one or more major clients or vendors; the integration of acquired businesses; changes in consumer reading, purchasing and/or television viewing patterns; increases in paper, postage, printing, syndicated programming or other costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the Company's industries; increases in interest rates; the consequences of acquisitions and/or dispositions; the risks associated with the Company's acquisition of Time Inc., including the Company's ability to comply with the terms of its debt and equity financings; and the risk factors contained in the Company's most recent Form 10-K filed with the Securities and Exchange Commission, which are available on the SEC's website at www.sec.gov. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT MEREDITH CORPORATION

Meredith Corporation has been committed to service journalism for more than 117 years. Today, Meredith uses multiple distribution platforms-including broadcast television, print, digital, mobile and video-to provide consumers with content they desire and to deliver the messages of its advertising and marketing partners.

Meredith's National Media Group reaches over 185 million unduplicated American consumers every month, including nearly 90 percent of U.S. millennial women. Meredith is a leader in creating content across media platforms and life stages in key consumer interest areas such as entertainment, food, lifestyle, parenting and home. Meredith is the No. 1 magazine operator in the U.S., and owner of the largest premium content digital network for American consumers. Meredith's leading national brands include PEOPLE, Better Homes & Gardens, InStyle, Allrecipes, REAL SIMPLE, SHAPE, Southern Living and Martha Stewart Living. Meredith also features robust brand licensing activities including more than 3,000 SKUs of branded products at 4,000 Walmart stores across the U.S. and at walmart.com. Meredith's National Media Group also includes leading affinity marketer Synapse, and The Foundry, the company's state-of-the-art creative lab and content studio.

Meredith's Local Media Group includes 17 television stations reaching 11 percent of U.S. households and 30 million viewers. Meredith's portfolio is concentrated in large, fast-growing markets, with seven stations in the nation's Top 25 markets-including Atlanta, Phoenix, St. Louis and Portland-and 13 in the Top 50. Meredith's stations produce more than 700 hours of local news and entertainment content each week, and operate leading local digital destinations. Meredith also owns MNI Targeted Media, which delivers targeted advertising solutions to more than 1,200 clients on a local, regional and national level.

SOURCE Meredith Corporation

Related Links

http://www.meredith.com

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