Meredith reported fiscal Q3 2014 revenues of $98 million in its Local Media Group, up 14% from the same quarter in the previous year. Operating profit grew 11% to $27 million. Growth was driven by increased retrans revenues and strong performance from stations in Nashville, Phoenix and Las Vegas. In the quarter, Meredith began its ownership of KMOV-TV St. Louis.
Fiscal Q3 EPS was $0.41, compared to $0.65 in the prior-year period. Total company revenues were $367 million, compared to $370 million.
“Growth in retransmission, circulation, and brand licensing revenues partially offset a difficult ad environment for Meredith and our media industry peers,” said Meredith CEO Stephen Lacy. “However, our advertising outlook is significantly better for the fourth quarter of fiscal 2014, with expected gains in our television and digital businesses, and improving magazine advertising trends.”
Fiscal 2014 third quarter results include special items of $13 million after tax, or $0.29 per share. The special items include transaction-related expenses resulting from previously announced agreements to purchase broadcast assets; selected workforce reductions, including those associated with transitioning Ladies’ Home Journal to a special interest publication and closing the company’s sales force training practice; and certain other non-cash items.
Prior-year third quarter earnings per share included a special item of $3 million after tax, or $0.07 per share, for professional fees and expenses related to a transaction that didn’t materialize.
Fiscal Q3 Local Media Group operating profit was $27 million ($28 million excluding special items), compared to $24 million in the prior-year period, and EBITDA margin was 35 percent in the current period. Revenues increased 14 percent to $98 million.
Non-political advertising revenues grew 6 percent to $70 million. Results reflect strength from the restaurant, home and retail categories, along with one month of operations of KMOV.
Digital advertising revenues grew 27 percent, driven by increased traffic across the desktop and video platforms, the launch of new mobile apps and one month of operations of KMOV.
Other revenues and operating expenses both increased, due primarily to growth in retransmission revenues from subscription television operators and programming fees paid to affiliated networks.
Meredith’s connection with viewers strengthened in the third quarter of fiscal 2014. Nearly all of Meredith’s stations grew morning news viewership during the most recent February ratings period, with Hartford, Saginaw, Portland and Las Vegas leading their markets. St. Louis, Portland and Las Vegas were No. 1 in late news, while Hartford and Saginaw were No. 1 in sign-on to sign-off.
The Better Show, the daily syndicated program produced by Meredith Video Studios, was renewed for an eighth season in syndication. It’s currently available in 160 markets across the United States, and also airs in 90 million homes on the Hallmark Channel.
“We’re pleased to deliver another quarter of record operating results,” said Local Media Group President Paul Karpowicz. “We’re excited to have KMOV in St. Louis as part of the Meredith portfolio. KMOV’s addition – along with improving non-political advertising, growth in digital advertising and an anticipated robust political advertising cycle – point to a strong calendar 2014 for our business.”
Fiscal 2014 first nine month Local Media Group operating profit was $88 million, compared to $96 million in the prior-year period. Excluding special items in both periods, operating profit was $91 million, compared to $98 million, and EBITDA margin was 38 percent in the current period. Revenues increased 3 percent to $292 million. Meredith recorded $37 million less of political advertising revenues in the first nine months of fiscal 2014, as expected in an off-election year.
National Media Group non-advertising business performance was strong, as circulation and brand licensing revenues each grew in the mid-single-digits. Growth was driven by the launch of Allrecipes magazine and initiatives to grow its rate base, along with continued strong sales of Better Homes and Gardens’ licensed products at Walmart. This performance partially offset a weak ad environment.
Fiscal 2014 nine month EPS was $1.61, compared to $2.00 in the prior-year period. Excluding special items in both periods, fiscal 2014 nine month earnings per share were $1.92, compared to $2.17. Meredith recorded $37 million, or $0.49 per share, less of political ad revenues in the first nine months of fiscal 2014, as expected in an off-election year. Total revenues were approximately even at $1.1 billion for both periods.
Fiscal Q4 outlook:
Looking more closely at the fourth quarter of fiscal 2014 compared to the prior-year period, excluding operating results and transaction expenses related to the pending acquisition of KTVK and KASW in Phoenix:
–Total company revenues are expected to be up low-single digits.
–Total Local Media Group revenues are expected to be up high teens.
–Total National Media Group revenues are expected to be down mid-single digits.
Meredith expects fiscal 2014 fourth quarter earnings per share to range from $0.81 to $0.86, compared to $0.75 in the prior-year period.
When adding fourth quarter expected results to the $1.92 (before special items) generated in the first nine months, Meredith expects fiscal 2014 full year earnings per share to be approximately at the mid-point of the $2.60 to $2.95 range established at the beginning of fiscal 2014. These amounts are before special items, and exclude operating results and transaction expenses related to the Phoenix stations.