President and CEO Tom Harty opened Meredith Corp.’s quarterly earnings call Thursday morning by declaring the integration of the now two-year-old Time Inc. acquisition “largely complete,” leaving the company in “the strongest competitive position in its history.”
Performance in Meredith’s magazine and digital media business, known as its National Media Group, “significantly exceeded our expectations,” in its fiscal Q2 (which ended on December 31), he said, driven by a second consecutive quarter of growth in its combined print and digital advertising business.
While overall National Media Group revenue was down 3.1% compared to the same period last year, Meredith attributed those declines to numerous changes it made to its portfolio in recent months (outlined below), including the closure of Family Circle, which CFO Joe Ceryanec implied had been losing money but still had an impact on the group’s top line revenue when it was shut down.
Excluding these special items, Harty said, the National Media Group’s operating profit was $92 million and adjusted EBITDA was $141 million, nothing that both figures were second-quarter records for the company.
“If you look at calendar 2019 in its entirety, total comparable National Media Group advertising was up, meaning we achieved the inflection point of digital advertising revenue gains more than off-setting print advertising declines,” he added.
Harty summarized the changes the company has made to its magazine portfolio in greater detail than in previous investor updates, including:
› Divesting the remaining “non-core” assets from its Time Inc. acquisition, including FanSided, which was sold in January for a reported $15 million, and the OTT video platform Xumo, whose agreed-upon sale to Comcast is currently pending regulatory approval. “With that, we will have sold all of the non-core assets acquired in the Time Inc. transaction at very attractive multiples,” he said.
› Investing in its “key brands'” editorial and sales resources, as well as print redesigns with “higher-quality paper.”
› Launching new products, such as Reveal, a new quarterly tied to the “Property Brothers,” Drew and Jonathan Scott, as well as a yet-unnamed magazine launch starring Ayesha Curry.
› Shifting what Harty called “marginally profitable” magazines, such as Coastal Living and Traditional Home, from an ad-driven model to a quarterly, consumer-driven model with higher subscription and newsstand prices.
› Merging competing titles, like Time Inc.’s Cooking Light into Meredith’s EatingWell, “to create more profitable brands with broader reach.”
› And finally, shuttering magazines with “limited growth potential,” including Family Circle, Money and Martha Stewart Weddings.
“Comparable advertising revenues” (among titles that weren’t sold, merged, shuttered or transitioned to a newsstand model) grew, Harty said, adding, “Many of our magazines delivered print advertising revenue growth, including People, our largest brand, which was up double-digits” year-over-year.
In a follow-up email, Meredith chief communications officer Art Slusark declined to share specifics on People‘s growth, but added that seven additional titles—Allrecipes, Entertainment Weekly, Health, Parents, Rachael Ray Everyday, Real Simple, and Travel + Leisure—also posted year-over-year gains in print advertising in the second quarter.
“Our performance is significantly stronger than the industry as a whole,” Harty said, pointing to market share gains in print advertising.
Away from the print business, digital ad revenue in the National Media Group was up 7.6% year-over-year, with much of that growth coming from video; in the Q&A portion of the call, Harty indicated that Meredith’s primary challenge in video is producing enough inventory to meet advertiser demand.
Moving forward, Ceryanec said the company aims to pay down its debt, which as of December 31 stood at $2.4 billion, by an additional $150 to $175 million by the end of June. The company says its earnings outlook for fiscal 2020 remains unchanged from the guidance issued at the time of its fiscal 2019 report in September, ranging from $2.14 to $2.45 on a per-share basis.
As of 3 p.m. Thursday, the company’s stock had jumped nearly 15% to $34.75.