Meredith Corp. (MDP) Q2 2013 Earnings Call

corrected transcript StephenM. Lacy,Chairman, President & Chief Executive Officer MichaelAlan Lovell, Head Other Participants Corporate Participants MANAGEMENT DISCUSSION SECTION PARTICIPANTS revenuesgrew by9% advertising and total revenues were up astrong 15%. period,excluding a previously announced spe We increasedearnings per share by22% in the half first of fiscal2013 compared to theprior year detailingour results.pleasedI’m reportto a strong second quarter and half offirst our 2013. fiscal Good morning,everyone. hope I you’ve had achance tosee our news release issued earli todayandsome in of our SEC Andfilings. with that, Steve will begin. forecasts.Some of thereasons why are described theat end o remarksOur today will include forward investorwebsite, and a transcriptwill followthat. NationalMedia Group. Anarchive of today’s discussion wi Karpowicz,Paul who’s President ourof Local Media Group; and Harty,Tom President of our Ceryanec.And then we’ll turn thecall over to questions. also We’ve goton theline this morning commentsChairman from and Chief Executive Officer, SteveLacy; and Chief Financial Of Hi.Good morningand thanks, everyone, for joiningus. startWe’ll thecall this morningwith Lovell. Mike Pleasego ahead. thisconference isbeing recorded. And I’dnow to like turntheconference over yourto host, Mr. only mode.Later, there will be an opportunity questions.for [Operator Instructions]As areminder, Corporation’s2013 Fiscal Second Quarter Earni Operator: Ladies and gentlemen, thank you standing for byand welcome to theMeredith MichaelSchechter Barry L. Lucas EdwardJ. Atorino MattChesler T. A.Rich Ingrassia JasonBois CraigA. Huber JohnD. Crowther BillG.Bird A. Paul Karpowicz ThomasHartyH. JosephCeryanecH. StephenM. Lacy MichaelL.

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Analyst,Lazard Capital MarketsLLC

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Analyst, Gab Analyst,Huber Research Partners LLC – – Analyst,Deutsche Bank Securities, Inc. –

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Analyst,ROTH Capital Partners LLC

Analyst,Piper Jaffray, Inc.

Analyst, TheBenchmark Co.LLC President – Analyst,Mentor Partners

- ChiefFinancial Officer, TreasurerVP & InvestorRelations

– dent - InvestorRelations Analyst,Citigroup Global Markets(Broker) Inc. -

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1 corrected transcript educatemediabuyers and campaigns about our powerful localnews presence. expectation Andas I mentioned,political advertising was arecord $38 million, exceeding our initial performancewas strongest ourat stations in Las Vegas, Portlandand Hartford. quarterand the half offirst fiscal2013. allWhile As I mentioneda few momentsago, our Local Media Group reported record results thesecondfor Sonow, let’s review our progress detailin more starting with our Local Media Group. contentcreation and marke possessthat significant digital components, and throughactivities capitalizethat on our broad throughmulti andongoing strategic investmentsscaleto the business and include remainWe committed ourto totalshareholder return financialstrategy, key elements whichof increase over theprior year am generatedWe $80 ofmillion operating cashflow during the half first of fiscal2013, astrong ourdiverse multi very focusedon maximizing the valueof thesebusinesses, particular ourFourth, recent acquisitions are performing ahead ourof original expectations.financial We’re yearperiod. competitiveset theto recentmost data available from PublishersInformation Bureau. o Within far 2013,in fiscal we increased share overall of magazineadvertising to 11% 10.3%from according Third,our National Media Group continues to take marke brand compared thepriorto yearperiod. Local television continuesproveto its unique ability buildto enough theperiodfor followingtheelection, non thefor firstsix monthsof 2013, fiscal despite recorddemand politicalfor advertising. Interestingly Second,non racesConnecticut, in Arizonaand Nevada, as wellas record spending specialfrom interestgroups spending in thebattleground state Nevada,of we also benefited hotlyfrom contested statewide seasonand it’scertainly exceeded our i severalencouraging trends.Firstall, of we anticipated astrong television political advertising Steppingback now a momentfor to atlook thecurrent mediaand marketingenvironment, we see totaladvertising revenue during the half, first almost double where the reachingarecord high. Totalcompany digital advertising revenues accounted about 11% for ourof pleaseI’m theoperating group discussion. advertisingand performance at Meredith Xcelerated Marketing. I’ll cover those detailin more during our brandinto portfolio. also someWe faced challenges including comparable magazine continueWe to successfully integrateAllrecipes.com, EveryDay wit circulationrevenue in the firsthalf. Grouprevenues increased 3%,including 9% growth in advertisingrevenue and 9% growth in alsogenerated arecord $38 inmillion polit LocalOur Media Group delivered record revenue, operating profit and marginperformance. We

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corrected transcript of 2013. fiscal number fourcategories respectively. Together, these categories posted 10% growthour in half first industrytaken as awhole. These include beauty and retail, which are now o Second,we’re also expanding other advertising categories havethat been outperforming the the in parenthood, thehome and theHispanic categories. arethenumber one digital and print advertising company in the fo our in industry. We’ve more thandoubled our marketshare over thepast decade. And today,we marketingclients access 100to unduplicatedmillion American women, areach that isunmatched First,we’ve added scale acquisition via and operational excellence. offer advertising We and strategies. magazineadvertising business remains our topcorporate priority, and we’re pursuing the following half first advertising revenues declined 9% TheNational Media Groupcontinues operateto in adifficult overall advertising marketplace,and 15%. ofaddition Allrecipes.com. Excluding recent acquisition, digital advertising revenuesgrew almost pageincreased approximately 2%.Digital advertising revenues grew than 110%more le Thehome and direct response categories were Ourweaker. average netrevenue per magazine sawWe strong recentacquisitions Allrecipes.com,of EveryDay with Rachael Ray,and theFamilyFun brands. half First totaladvertising revenues grew 9% compared to theyear ago period, driven by their fiscal2013. Now,let’s ourturnto National Media Groupperformance th for we’relooking forwardcontinuedto growth into the future. Onceagain, we’re pleased withour Local Media Group’scontinued excellent performance, and 360sales on integratedunit multi thecountry. 1,200thshow and added theDetroit market,expanding its reach to morethan 160 marketsacross Finally, TheBetter Show,our dailysyndicated women’s lifestyle program, last monthair continuedtheir leadershipposition newsfor viewership. theimportant November ratings period,our stations in Hartford, Portland,Las Vegas, and Saginaw consumer,combined with our ability aggressivelyto monetize audience.that ofPart thesuccess we’re enjoyingisbased on our strong very connection to the individual agreementsour andfor Fox CBS stations. programming feespaid affiliatedto networks. also We successf satellite televisionoperators, while operating expenses were up due primarily higher to revenuesOther increased due primarily to growth retransmission in revenues cable andfrom creatingnew advertising packages across both stationsites and rolling outpopular apps. mobile Importantly, we’re monetizing this growth by Broa theof last12 quarters. Automotive,our largest broadcast advertising category,grew 10%. Andhas it now increased 11 in

dcastadvertising digital grew 15%. continue We to focuson driving traffic byenhancing our

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corrected transcript Thanksgivingholiday. Novemberand trafficdoubled from mobiledev numberone global foodsite. Allrecipes served 30 millionunique visitorsduring the of month Allrecipes.comhad an outstanding holiday season, reaffirming itsclear leadershipposition as the whichlaunched its innovativedigital newsstand thefor iPadearlier in brandsare now across available thesix digitalmajor newsstands, including Next Issue Media, 500,0 thandoubled byled our and food parenthood sites. In addition, we now approximately have Looking closely more at thedigital side of our business, overall trafficourto digital properties more issueSiempre Mujer.of wedeveloped aSpanish language custom product for SCJohnson t raisedtheratebases Ser Padresof 850,000to and Siempre Mujer 550,000.to And recently,most oppo weFinally, continue expandto our industry and ever justrecently expanded reachits into Italy. front, Allrecipes.comreached thenumber one position for sites food in Australia thefor first time sweepstakeCampbell’s for that drove 2.5 millionreferrals back to thesite. On the internation Additionally,Allrecipes.com teamedwith Better Homes andGardens createto aPinterest recipe Allrecipes.comfrom in arecent TV commercial for Windows.8. Allrecipes.combrands. You have seenmay Carolina Panthersquarterback, Cam Newton, usin alsoWe withteamed Microsoft developto and launch Windows8apps theParentsfor and magazinesofand ourfive digital properties. launchof its Windows8phone. The multiplatformprogram Speakingof Microsoft,our corporatesales recently unit won pieceamajor businessof around the withseveralnew clients includingApple and Microsoft. Lookinginto calendar 2013, Better Homes and Garde creativeleader, Gayle Butler, into itsHallof Fame. BH&G itsHottest Women’sMagazine 2013for and Men inducted Better Homes and Gardens’ women’sservicecategory c in HomesBetter and Gardens finishednumberone advertising in revenue marketshare in the cement positionits as the soughtmost after magazine andadvertisers Asalike. an example, Bett We’reproud very of thestrength of our brands and theycontinue resonateto wellwith consumers Journal, TraditionalHome, Midwest and Living, theEatingWell magazinebrands. look Parents.com.for These come on theheels receof the half offirst 2013, fiscal we launched freshnew designs Fitnessfor and andFamilyFun anew ourconsumer connection and helps advance our advertising category diversification strategy. In we’reFourth, continuing enhanceto the creative side of our business. course,of This, st anticipatea largerprogram as we into calendarmove 2013. expecthaveto theresults thefrom firstyear of theMeredith Sales Guarantee verysoon and titlesdoes in fact increasesales retail. at had We’ve 13 brands participate in year guaranteesmarketers astrong return on their investmentbyproving that advertising Meredith in newmeasurement Third,we’re working aggressively proveto theeffectiveness print advertising of throughinnovative

rtunities ourfor clients reachto thisincreasingly importantdemographic. In calendar 2013, we 00consumers engaging withour national brands on thetablet platform. Morethan 20 of our

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corrected transcript JosephCeryanec,H. C acquisitions,which we willcontinue pursueto on a verystrategic basis. EBITDArat thelast18 months,deploying approximately $250 millioncapital.of At December 31,our debt increaseour shareholder over time. value completed We’ve five investmentsand acquisitions over And wefinally, continue to completeongo authorization. AndDecemberas of 31,we still had $62 remainingmillion under our current repurchase Year meetingat the 4.5%. over And as we’vehistorically done, we willreview thepayout ratioour at upcoming board remain focusedon executing our total shareholder return strategy. dividendOur iscurrently yielding highlight a in minute,we are starting seeto betteradvert Theintegration ourof acquisitions continues to meetor exceed our expectations. And as I’ll ourteamremains strong. very Andwhile advertising in quarterand the half offirst our fiscalyear. Our Local MediaGroup isperforming at record level Thanks,Steve, and good morning,everybody. As Steve mentioned,we feel verygood about the financialinformation and our outlook. Sonow, turn I’ll thediscussion over Chief to Financial Officer,Joe Ceryanec, somefor additional programswillhelp translate intogrowth MXMfor calendar in 2013 compared to theprior year. andtheNational Education Association. expect We our existing clients along with these new America,Hallmark and the Health Alliance. also We expanded existingprogram with Chrysler, Kraft We’velanded some great new clie haspickedup significantly. weisthat have renewed of our all clientsmajor calendar for 2013 and our new business pipeline grewcautious more spending in and reduced thescale someof of their programs. Thegood news sureI’m you recall, we experienced first weakness MXMearlyat in calendar 2012 as cliencertain close I’ll theNational Media Groupdiscussion with an update on Meredith Xcelerated Marketing. As fragrances,whichof all importantholiday shopping season, particularly gift in items, includingclothes, blankets and home HomesBetter and Gardens in Wal Thiswe fall, launched an exciting new programwith Wal acrossthecountry.Currently, thereare morethan 3,000 SKUs available every in Wal programof Better Homes and Gardens branded Home andGarden Products at Wal Thestrength ourof consumerconnection can also be seen retailat through our growin incremental$5 operating in profit per digital order over theaverage lifeasubscription.of othersell propertie Thisof courselowers our subscription acquisition cost, increases opportunity upto 60%from theyear ago period. magazines.generated We morethan 2 milliononline orders during the half offirst 2013, fiscal up Mostnotably, of course,we’re usingour digital channels generateto subscription orders t growingOur digital audience and capabilities are producing e

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corrected transcript Sowith that, we’d now be happy opento theup line anyfor questions y $2.95,to excluding thespecial charge we announced lastweek. areWe also reconfirming our original full fiscal year2013 earnings per share of expectation $2.60 therecent acquisitions and down the in lowsingle NationalMedia Group advertising revenues are expected beto up the in midsingle areexpected beto flat upto slightly. LocalMedia Group revenues will increaseth in look moreclosely at thethird quarter of fiscal2013 as compared to expectWe 2013 fiscal third quarter earnings per share rangeto $0.65from to $0.70. And as we outlook. Now,provide aI’ll look at thesecond of half our fiscal2013 andquarter third as wellas our full investorsthe in of form dividends and share repurchases. ma continueWe to have astrong commitment ourto shareholders, ahistory of prudent capital

nagement,and a longtrack record of returning a meaningfulportion ourof freecash flowto

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corrected transcript QUESTION ANDANSWERSECTION program moving forwardboth on thetrade, press, and with clients. incrementalROI to them. Andyou’re go thosebrands participatedthat showto theresults that wedrove actually incremental sales and Andwe somehave early reads, which we’re veryvery, optimisticabout that advertisingwith us thefor calendar full year. And now, we can mea had13 brands participating. coming We’re to theend of the measurementperiod where theyran

– – – – – – –

Tom Harty Tom Harty Tom SteveLacy SteveLacy SteveLacy BillBird BillBird tplacethat would I say isterribly concerning right now. weBut feel that leavingtheoriginal

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1 Right.Remember we launched that calendar in 2012 and we Yes. guardedly We’re optimistic that things are im Well, Well, Bill,you can imagine we had conversationsalotof Tom,you might also,while you’ve Tom,why don - ing seeto alot morewith us talkingabout thiswhole 877 ebalance of theyear. Andwe’ve got very, veryearly

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Q2 2013Q2 Earnings Call percent