Meredith Corp. (MDP) F3Q12 Earnings Call April 25, 2012, 11:00 a.m. ET Executives Mike Lovell - Director, IR Steve Lacy - Chairman & CEO Joe Ceryanec – CFO Paul Karpowicz - President, Local Media Group Tom Harty - President, National Media Group Analysts Mark Zgutowicz - Piper Jaffray William Bird – Lazard Capital Markets Jason Bazinet – Citi Rich Ingrassia (Cody)– ROTH Capital Matt Chesler – Deutsche Bank Michael Corty – Morningstar Barry Lucas – Gabelli & Co. Edward Atorino – Benchmark Co. Presentation Operator
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Steve LacyThank you very much, Mike, and good morning everyone. We appreciate you joining our call. I’ll start this morning with a review of the business highlights for our third quarter and fiscal 2012 to-date and explain the special charge that we announced earlier this morning. Then I’ll detail National Media Group operating performance. Joe Ceryanec will discuss our Local Media Group performance and our guidance. Then we’ll open up the question-and-answer period. Looking briefly at business performance highlights in the third quarter of our fiscal 2012, our Local Media Group continues to perform very well. The group delivered its 10 th straight quarter of year-over-year growth in non-political advertising revenue, and achieved record operating profit for our fiscal third quarter. National Media Group total advertising revenues grew 2% and circulation revenues increased 15%. This growth reflects the inclusion of the recent acquisition, strong digital performance and the successful implementation of the Meredith Engagement Dividend. As some of you may recall, that’s a program guaranteeing results from advertising in Meredith Magazines, and it has been very well received in the marketplace. Our digital initiatives across the company are flourishing with both consumers and advertisers, highlighted by the addition of Allrecipes.com to our brand portfolio. Traffic to our national websites more than doubled, to a record 40 million monthly unique visitors in March, reflecting the addition of Allrecipes.com. Digital advertising revenues grew 70% in both our national and in our local media groups. Back at the start of fiscal 2012, I outlined a series of strategic initiatives that we planned to execute against. These included strengthening our core businesses, expanding our digital and video activities and growing our brand licensing businesses. We also told you we would pursue acquisitions and investments to grow our scale and our capabilities. Finally, we pledged to reward our shareholders by increasing the amount of cash returned to them.
I believe we’ve done an excellent job executing against this plan. We’ve purchased Allrecipes.com, the world’s largest digital food brand, doubling our national digital presence. We acquired “Every Day with Rachael Ray,” an anchor food brand, and “Family Fun,” a popular parenthood category brand. We executed an ongoing major expansion of our digital, mobile, video and social media platform, including creating a tablet edition of our magazines across multiple delivery platforms, developing many mobile apps that have generated millions of downloads and expanding our video content creation capability.We extended and expanded our very successful brand licensing arrangement for “Better Homes and Gardens” and the line of home and garden products with Wal-Mart stores throughout the country, which now extends through 2016. We expanded our daily syndicated better shows reach to more than 80% of households across the country, and finally, invested in Iris, a leading global marketing services company, to serve the global needs of our domestic clients and open the doors to international client opportunities as well. In addition, last fall we implemented our total shareholder return financial strategy that has been very well received by the investment community. Key elements include a current annual dividend of $1.53 per share that’s currently yielding more than 5%, a $100 million share repurchase program, and ongoing strategic investments to drive incremental revenue and profit growth over time. Turning now to today’s earnings release, you’ll see that we took a special charge in the third quarter of fiscal 2012, and it’s made up of two components. First there’s the transaction cost related to our acquisition of Allrecipes.com, and second, as I just outlined, in recent months we’ve executed a series of acquisitions and business expansions. We’ve increased our scale and capabilities with a strong emphasis on the digital space. Now we’re in the process of integrating these acquisitions and realigning our organizational structure so that the entire business can reach its full potential. This includes eliminating certain redundancies, improving efficiencies, and selected workforce reductions.
Now let’s turn to the National Media Group operating performance in the third quarter. Fiscal 2012 third quarter National Media Group advertising revenues grew 2%. The over-the-counter drug and media and entertainment categories were quite strong, helping offset weakness in the prescription drug category, which was down nearly 20% in the quarter. We also delivered growth in our largest advertising category, food and beverage. Digital advertising revenue grew 70%, reflecting very strong food-related advertising as well as one month of contribution from our Allrecipes.com acquisition.Read the rest of this transcript for free on seekingalpha.com