Martha Stewart Living Omnimedia Inc. Q1 2010 Earnings Call Transcript

Martha Stewart Living Omnimedia Inc. Q1 2010 Earnings Call Transcript
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Martha Stewart Living Omnimedia Inc. (MSO)

Q1 2010 Earnings Call

April 28, 2010 11:00 am ET

Executives

Katherine Nash – AVP, Investor Relations and Corporate Communications

Charles A. Koppelman - Chairman of the Board

Robin Marino - Co-Chief Executive Officer

Kelli Turner - Chief Financial Officer, Executive Vice President

Analysts

Analyst for Michael Meltz - J.P. Morgan

Michael Kupinski - Noble Financial

David Bank - RBC Capital Markets

P

resentation

Operator

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Welcome to the Martha Stewart Living Omnimedia first quarter 2010 earnings conference call and webcast. (Operator Instructions) At this time, it is my pleasure to introduce Katherine Nash, AVP Investor Relations and Corporate Communications of Martha Stewart Living Omnimedia. Katherine, you may begin when ready.

Katherine

Nash

Thank you and good morning, everyone. Welcome to Martha Stewart Living Omnimedia’s 2010 first quarter earnings conference call.

Before we begin, let me remind you that our discussions will contain forward-looking statements which are made pursuant to the Private Securities Litigation Reform Act of 1995 as amended. These statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, many of which are described in our SEC filings. Also, non-GAAP numbers are reconciled to GAAP in an attachment to our press release which appears on our website, www.marthastewart.com.

Thank you and now I will turn the call over to Charles.

Charles Koppelman

Thank you Katherine. It was a solid quarter with year-over-year improvements in profitability across all of our business segments and a 6% increase in overall revenue. We also executed on a significant license agreement with Hallmark Channel for part of our vast television library which I will talk about in a moment.

With these developments we continue to build on last quarter’s overall positive direction. The quarter marked the launch of our new and exclusive Martha Stewart Living brand of home improvement products at The Home Depot stores in the U.S. and Canada. Robin will tell you about the launch and about our overall merchandising performance in a few minutes but I wanted to take a moment here to talk about the significance of this partnership in the context of our diversification and expansion strategy.

With The Home Depot, our Martha Stewart collection at Macy’s, our crafts business at Michaels and independent retailers and our forthcoming pets line at PetSmart we are confident we now have a strong presence across a range of categories where consumers seek our brand and in leading retail outlets where they expect to find us.

We are also undergoing a strategic shift in our broadcasting business as we broaden our presence on air to drive greater growth and profits on a platform that has previously served as a promotional vehicle for our brands. Our teams are working closely with the Hallmark Channel in anticipation of the September debut of season six of the Martha Stewart Show. We are also working on a new and original programming for the network that will showcase personalities and talent from within MSLO.

Just last month Hallmark Channel acquired the exclusive license for domestic television rights to extensive programming from our rich and evergreen library of how-to content some of which is already airing on the network. This agreement further extends our relationship with Hallmark Channel and underscores the value of our archives. With some of the classic programming already airing we are building awareness about our presence on the Hallmark Channel in advance of September when viewers will have new opportunities to watch and learn more from Martha and other MSLO experts.

Publishing ad revenue was up 11% in the quarter including the spring issue of Martha Stewart Weddings. The quarter ended on an encouraging note with the April issue of Martha Stewart Living up 20% in ad pages over the prior-year period. The issue was part of a terrific cross platform marketing program we developed for Showtime in the quarter. Living featured a triple cover on what was our “best of” issue which resonated with Showtime’s message of TV at its best. The program also included sponsorship of our “best of” gallery on MarthaStewart.com along with Showtime video and trailers on the website as well as television, radio integrations and more.

I would like to mention beginning with the June issue we will be publishing Body+Soul under the Whole Living part of the magazine’s title. This is the name of the magazine’s successful standalone website, wholeliving.com, where unique visitors grew 55% in the quarter year-over-year according to Comscore Panel Data. It is also a name of the related daily radio show on Martha Stewart Living Radio. By unifying the brand under one name we believe we are better able to capitalize on opportunities across more media platforms and in merchandising. The magazine and the brand are a terrific growth story. Newsstand sales of the magazine have consistently been strong and the June issue is already up just over 50% in ad revenue compared to the prior year.

We also published two new books in the quarter, both Everyday Food Fresh Flavor Fast and Martha Stewart’s Encyclopedia of Sewing and Fabric Crafts quickly landed on the New York Times best seller list. This is further evidence of our print offerings’ enduring appeal.

Our internet business delivered another strong performance in the quarter with a 17% increase in ad revenue year-over-year. Just this morning Media Industry Newsletter named us a “digital team of the year” and Martha was named Tweeter of the year. Traffic to our sites continue to grow. According to Comscore Panel Data, unique visitors increased 21% in the quarter compared to the prior year. Social media continues to be a growing source of referral traffic to our websites.

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