june 6, 2017 · 2017-06-06 · local media group growth strategies o ... hh in the dma (m) dma...
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Investor Day PresentationJune 6, 2017
SAFE HARBOR
This presentation and management’s commentary relating thereto may contain certain forward-looking statementsthat are subject to risks and uncertainties. These statements are based on management’s current knowledge andestimates of factors affecting the Company and its operations. Statements in this presentation that are forward-looking include, but are not limited to, the Company’s estimates of future revenues, profits and earnings per share.
Actual results may differ materially from those currently anticipated. Factors that could adversely affect futureresults include, but are not limited to, downturns in national and/or local economies; a softening of the domesticadvertising market; world, national or local events that could disrupt broadcast television; increased consolidationamong major advertisers or other events depressing the level of advertising spending; the unexpected loss orinsolvency of one or more major clients or vendors; the integration of acquired businesses; changes in consumerreading, purchasing and/or television viewing patterns; increases in paper, postage, printing, syndicatedprogramming or other costs; changes in television network affiliation agreements; technological developmentsaffecting products or methods of distribution; changes in government regulations affecting the Company’sindustries; increases in interest rates; and the consequences of acquisitions and/or dispositions. The Companyundertakes no obligation to update any forward-looking statement, whether as a result of new information, futureevents or otherwise.
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MEREDITH’S INVESTMENT THESIS
Portfolio of highly rated television stations in large and fast-growing markets
Trusted national brands with an unrivaled female reach
Profitable and growing digital business
Growing consumer-generated revenue
Experienced management team with a proven record of operational excellence and shareholder value creation over time
Strong and consistent cash flow generation, driven by:
Commitment to delivering Top-Third Total Shareholder Return:
1.
2.
3.
Balanced capital allocation strategy
Dividend payer for 70 years; increases for 24 consecutive years
Share buyback program
Accretive strategic acquisitions
3
TODAY’S AGENDA
Balanced Portfolio Delivers Strong Cash Flowo Tom Harty, President and Chief Operating Officer
Local Media Group Growth Strategieso Paul Karpowicz, President
National Media Growth Strategieso Jon Werther, President
Total Shareholder Return Strategies o Joe Ceryanec, Chief Financial Officer
Q&Ao Steve Lacy, Chairman and CEO
4
National MediaRevenue: $1.1BOp. Profit: $140MEBITDA: $160M
MEREDITH AT A GLANCE
Local MediaRevenue: $625MOp. Profit: $210MEBITDA: $250M WORKING YOU
WSM V -TV WSM V-DT NASHVILL E
Wall Street Consensus for Fiscal 2017 ending June 30
Delivering Record Revenue and Profit in Fiscal 2017
5
LOCAL BRANDS IN LARGE AND GROWING MARKETS
#1 or 2SIGN-ON to SIGN-OFF RANK IN 7 MARKETS
17STATIONS IN PORTFOLIO
13STATIONS IN TOP 50 MARKETS
5DUOPOLY MARKETS
EAST & SOUTHEAST:ATLANTA, MKT 10NASHVILLE, MKT 29HARTFORD, MKT 30GREENVILLE, MKT 37MOBILE, MKT 60SPRINGFIELD, MKT 114
WEST & SOUTHWEST:PHOENIX, MKT 12PORTLAND, MKT 25LAS VEGAS, MKT 40
MIDWEST:ST. LOUIS, MKT 21KANSAS CITY, MKT 33SAGINAW, MKT 72
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NATIONAL BRANDS POSSESSES STRONG CONSUMER REACH
80MILLION UNIQUE
VISITORS
33%FY-17 EST DIGITAL
AD REVENUES
7
110MILLION
UNDUPLICATED WOMEN
70%REACH TO
MILLENNIAL WOMEN
7
SUCCESSFUL EXECUTION OF STRATEGIC PLAN OVER TIME
National Media Group
Local Media Group
Corporate
Built fast-growing and profitable digital business with a scale audience
Added leading digital ad technology companies Selectable, Qponix & ShopNation
Achieved inflection in advertising revenues with digital driving overall growth
Added Allrecipes, Shape and Martha Stewart brands targeting younger women
Grew brand licensing business at Walmart to 5,000+ SKUs at 5,000 stores
Acquired and integrated 5 strong stations, achieving 3 additional duopolies
Grew news programming by 50% across portfolio
Significantly grew retransmission revenues and contribution
Expanded digital and mobile platforms
Implemented and aggressively pursuing Total Shareholder Return program
Grew dividend at 10% average annual rate to $2.08; currently yielding 4%
2.9% weighted-average interest rate and 1.7x debt-to-EBITDA leverage
8
MEREDITH GENERATES STRONG AND GROWING EBITDA
FY2011 FY2013 FY2015 FY2017E
7% CAGR
$ in millionsAdjusted EBITDA before special itemsConsensus for Fiscal 2017 ending June 30
$265$268
$359
$319
$217
FY2009
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Net Income (Loss)
$(107) $127 $124 $137 $186
Record Local Media advertising revenue, led by political dollars
Retransmission contribution continues to grow
Achieved network affiliation renewal in important markets
Strong digital driving overall National Media advertising growth
Renewed highly profitable licensing agreement with Walmart
Rapid growth in consumer connection across media platforms
Strong cash flow fueling 24th-straight dividend increase
Highest earnings per share in Company’s 115-year history
STRONG ACHIEVEMENTS IN FISCAL 2017 TOWARD VISION
10
TODAY’S AGENDA
Balanced Portfolio Delivers Strong Cash Flowo Tom Harty, President and Chief Operating Officer
Local Media Group Growth Strategieso Paul Karpowicz, President
National Media Growth Strategieso Jon Werther, President
Total Shareholder Return Strategies o Joe Ceryanec, Chief Financial Officer
Q&Ao Steve Lacy, Chairman and CEO
11
HH in the DMA (M)
DMA #1-60
Average Revenue / Station: $51M
ATTRACTIVE STATIONS IN LARGE & GROWING MARKETS
Most Stations are Big 4 Affiliates and Ranked #1 or #2
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2.4
0.5
0
1
2
3
LOCAL MEDIA GROUP GROWTH STRATEGIES
13
Increase Viewership
Grow Revenue and Profit
Scale Digital Businesses
Increase Net Retransmission Contribution
Expand our Television Station Portfolio
9% CAGR
ADDING LOCAL NEWS PROGRAMMING STRENGTHENS MARGINS
700
14
CY06 CY11 CY16
300
400
$124 $113
$163 $158
$214
FY13 FY14 FY15 FY16 FY17E
$376 $403
$534 $548
$625
FY13 FY14 FY15 FY16 FY17E
GROWING REVENUES AND PROFIT
15
$ in millionsConsensus for Fiscal 2017 ending June 30, 2017
Revenues Operating Profit
14%CAGR
15%CAGR
$60
FY2013 FY2015FY2011 FY2017E
RECORD POLITICAL ADVERTISING REVENUES
$35
$44$39
Presidential Election Year
Mid-term Election Year
16$ in millionsConsensus for Fiscal 2017 ending June 30
9% CAGR
FISCAL 2019 POLITICAL ADVERTISING OUTLOOK
Senate Races Jeff Flake (R-AZ)Dean Heller (R-NV)Bob Corker (R-TN)Chris Murphy (D-CT)Bill Nelson (D-FL) Elizabeth Warren (D-MA)Debbie Stabenow (D-MI)Claire McCaskill (D-MO)Maria Cantwell (D-WA)
Governor Races Doug Ducey (R-AZ)Bruce Ranner (R-IL)Charlie Baker (R-MA)Dan Malloy (D-CT)Kate Brown (D-OR)Alabama (Open)Florida (Open)Georgia (Open)Kansas (Open)Michigan (Open)Nevada (Open)South Carolina (Open)Tennessee (Open)
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DIGITAL & MOBILE GROWTH STRATEGIES
18
Grow total LOCAL audience on all platforms – Local is our business and what our advertisers expect
– Sustained growth is reliant on improved local content– Meredith Content Hub generating increased page views
Increase digital engagement– App users are our most loyal and fastest-growing audience
– Social media, specifically Facebook, is our biggest referrer– Creating deep content to keep users engaged
Drive continued double-digit revenue growth– Creating local digital agencies– Increasing margins– Generate 10 percent of ad revenues from digital and mobile platforms
STATIONS RANK HIGH IN DIGITAL USER ENGAGEMENT
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Market Station comScore RankingPhoenix, AZ KPHO, KTVK 1
St. Louis, MO KMOV 1
Nashville, TN WSMV 1
Hartford, CT WFSB 1
Kansas City, MO KCTV, KSMO 1
Las Vegas, NV KVVU 1
Mobile, AL WALA 1
Flint, MI WNEM 1
Greenville, SC WHNS 2
Portland, OR KPTV, KPDX 3
Atlanta, GA WGCL, WPCH 4
comScore User Engagement rank within each TV market
40%
Las VegasPortland
GreenvilleMobile
Springfield(FOX)
Fiscal2021
MVPD Renewal Schedule
Affiliation Renewal Schedule
Nashville(NBC)
RETRANSMISSION RENEWAL SCHEDULE
Fiscal2018
Fiscal2019
Fiscal2017
10%
Fiscal2020
25%
St. LouisHartford
Springfield(CBS)
Springfield(ABC)
50% of Meredith Subscriber Households Will be Renewed in FY2017 and 2018
AtlantaPhoenix
Kansas CitySaginaw
(CBS)
35%
20
EXPANDING OUR LOCAL MEDIA PORTFOLIO
Acquisition Criteria Mid-to-large-size markets
• Market # 10-60
Big 4 Affiliation• ABC, CBS, FOX, NBC
Leader in market• Rank # 1 or #2 in news
Fast-growing markets
21
Regulatory Environment
Certain duopolies allowed using qualified third party arrangements
Reinstated UHF discount
Review of media regulations
• 39% national cap
• Duopoly restrictions
• Cross-media ownership
• Rollout of ATSC 3.0
TODAY’S AGENDA
Balanced Portfolio Delivers Strong Cash Flowo Tom Harty, President and Chief Operating Officer
Local Media Group Growth Strategieso Paul Karpowicz, President
National Media Growth Strategieso Jon Werther, President
Total Shareholder Return Strategies o Joe Ceryanec, Chief Financial Officer
Q&Ao Steve Lacy, Chairman and CEO
22
MEREDITH NATIONAL MEDIA GROUP MISSIONDigital is adding to Meredith’s total audience, and is not cannibalizing print
23
meredithmissioncreate realopportunities for women to
achieve daily and dream big
CROSS-CHANNEL GROWTH STRATEGY
Growth & Diversification in Advertising Revenue
Growth & Diversification in Consumer Revenue
Audience & Engagement Growth
Best-In-Class Branded Experiences
Proprietary Technology Platforms
Proprietary First-Party Data, Insights & Analytics
1. 2. 3. 4.
24
PILLAR 1: BRANDED EXPERIENCES
25
Notification Email
Saved recipeFollow streams
and brands
User Comments (To Come)
25
MAGAZINE BRANDS: MAGNOLIA JOURNAL
Launched in fall 2016 as a newsstand title
Strongest-selling launch ever
Transitioned to quarterly subscription title with one million ratebase (May 2017)
On track to be most profitable title in first year of operation in Meredith history
26
CROSS-PLATFORM FOCUS
2727
PILLAR 2: CROSS-PLATFORM AUDIENCE GROWTH
Digital is adding to Meredith’s total audience, and is not cannibalizing print
50
75
100
125
150
175
200
2010 2011 2012 2013 2014 2015 2016
Tota
l Aud
ienc
e (i
n m
illio
ns)
Print Digital40% of audience 60% of audience
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HIGHLY ENGAGED LOYAL AUDIENCE...
29
capturehearts +minds
#brandsthatinnovate
millionloyalists110
65 + millionfollowers
80 + millionunique visitors
154 milliontotal audience
32 millionsubscribers
Source: 2016 ComScore Multi-platform/GfK MRI Fusion (12-16/S16); Publisher’s Estimate for non-measured titles (including estimate for SIMs based on FY16circulation); Google Analytics, Brightcove; average monthly cross-platform views
…ACROSS ALL KEY LIFE STAGES
30
…WITH A STRONG MILLENNIAL REACH
31Source: comScore Multi-platform, Dec. 2016
… AND CROSS-CHANNEL ENGAGEMENT
32
Live streaming
Augmented & virtual reality
Cross-platformprogramming
designed around
4 initiatives | 4 change
Content on emerging platforms
ArtificialIntelligence|
BOTS
wherever they areInspiring, engaging and activating consumers ...
Traditional channels
PILLAR 3: FIRST-PARTY DATA & ANALYTICS
125 MillionConsumer Database
80 MillionDigital Consumers
PROPRIETARY DATA>25,000
Attributesvisit register email follow subscribe
share search list watch buy
3 billion >6 million new >6 billion 25 million
'I made it''I did it' profiles
Add to Shopping ListPrint/Save/Build CollectionsVideo Views
7 'Shops'Local Offers
INTEREST
INTENT200 Million Monthly Actions
66 million
enter
50 million
33
interest + intent We understand her
DIFFERENTIATION: FULL-FUNNEL TARGETING
34
Understand Her Interests
Understand Her Intent
Understand When She’s In-market
Driven by ‘Visit’ data- Visits/ Content- Emails- Subscriptions
Driven by Action data- ‘I Made it’- Add to Shopping List- Share
Driven by Real-time data- Mobile – in-store recipes- Shopper Marketing- ShopNation Commerce
50% of Allrecipes visitors are in
store w/in 24 hrs.
Meredith Differentiates
(in food)
DATA ENABLES PERSONALIZED EXPERIENCES
35
PROPRIETARY INSIGHTS & ANALYTICS ANCHOR LARGE PARTNERSHIPS
36
PROGRAMMATIC& BRANDED MEDIA VIDEO
Major Food Client
PILLAR 4: TECHNOLOGY PLATFORMS
37
Recent platform-centric acquisitions
• Social platform for food
• Native and engagement-based video
• Shopper marketing
• eCommerce and affiliate marketing
• Lead generation / performance marketing
Existing / Home-Grown Technology Platforms
+
DRIVING PREMIUM MONETIZATION GROWTH & REVENUE DIVERSIFICATION
38
PREMIUM MONETIZATION
UNITS
NATIVE VIDEO SPONSORSHIPS INFLUENCER SHOPPER MARKETING
SOCIAL
Traditional Display vs. Premium Monetization
Traditional Display Premium Monetization
eCPM Ranges: $10 – $30+
eCPM Ranges: < $10
82%
18%
52%48%
INNOVATION FUELING ENGAGEMENT AND MONETIZATION
Native Shopper Meal Cards
OWNED CHANNELS
OWNED EXPERIENCES
EXTERNAL PLATFORMS ANALYTICS
Food Brand’promotions within “Breakfast Foods” category…
Native Shopper
Shoppable Pin
Real-Time Dashboards
Shoppable Email
Facebook Live
Product Card
Beacon Technology
39
0
100
200
300
400
500
600
2012 2017E
RESULTS: TOTAL AD REVENUE GROWTH FUELED BY DIGITAL CHANNELS...
$ in millionsFiscal years ended June 30
PrintDigital
$492$520
10% 30%
$
$
91% 70%
5-YEAR CAGRDigital: 30%
40
...AND SHARE GAINS IN PRINT ADVERTISING
Meredith Share vs. Competitive SetMeredith Share vs. Industry
Source: Company management and Publishers Information Bureau.
35.8%
38.1%
40.3% 40.8%
2011 2013 2015 2016
41
11.1% 11.1%11.8%
13.0%
2011 2013 2015 2016
RESULTS: CONSUMER REVENUE DIVERSIFICATION
42
Magazine subscriptions: stable revenue source
Auto-renewal has large upside (2x profit)
Launch promising new products
World’s No. 2 licensor behind Disney
Renewed Walmart relationship
Several new programs launched
Circulation & New Paid Products
Brand licensing
e-Commerce Newer, fast-growing revenue source
Turning inspiration to action
43
CREATING CONTENT WITH COMMERCE IN MIND
= content that leads to commerce
Scale + engagement
$23 billion beauty
$28 billion prescription drugs
$517 billion automotive
$868 billion food
$552 billion home
Meredith consumers account for $1 out of every $2 spent across categories
$134 billion travel
Brand Licensing, e-CommerceCirculation
$ in millionsConsensus for Fiscal 2017 ending June 30 44
GROWING CONSUMER-GENERATED REVENUE
2011 2013 2015 2017
86% 88% 85% 83%
$308
$365 $367$388
ACQUISITIONS IN LINE WITH STRATEGY
45
Branded Experiences
Audience Development
First-Party Data, Insights & Analytics
Technology Platforms
Ad Revenue Diversification & Growth
Consumer Revenue Diversification & Growth
• Allrecipes.com• Shape• Martha Stewart
• Allrecipes.com• Shape• Martha Stewart• Shop Nation
• Allrecipes.com• Shape• Martha Stewart• Selectable Media• Qponix• Shop Nation• Yawkey
• Allrecipes.com• Selectable Media• Qponix• Shop Nation• Yawkey
Our strategy will continue to guide our acquisition and partnership activities – as well as our organic investments
TODAY’S AGENDA
Balanced Portfolio Delivers Strong Cash Flowo Tom Harty, President and Chief Operating Officer
Local Media Group Growth Strategieso Paul Karpowicz, President
National Media Growth Strategieso Jon Werther, President
Total Shareholder Return Strategies o Joe Ceryanec, Chief Financial Officer
Q&Ao Steve Lacy, Chairman and CEO
46
COMMITMENT TO DELIVERING TOP 3RD TSR
Balanced capital allocation strategy
Consistent and growing dividend
Opportunistic share buyback program
Accretive strategic acquisitions
47
USE OF CASH PRIORITIES
48
Strong commitment to returning cash and maintaining dividend growth
Tuck-in acquisitions to strengthen existing portfolio
Larger acquisitions only if extremely strategic at attractive valuation with strong synergies
Selective share repurchases enabling shareholders to benefit from dips in price – current authorization of $100 million with $70 million remaining
Target maintaining current conservative net debt levels
Prio
rity
This strategy seeks to optimize free cash flow driving Total Shareholder Return while pursuing organic growth in its core businesses
ACQUISITION AND INVESTMENT PRIORITIES
Local media brands in large faster-growing markets that add network and geographic diversity
Multi-platform national media brands that provide access to new audiences and advertising categories
Digital businesses that support growth strategy
49
OUR CRITERIA FOR ACQUISITIONS AND INVESTMENTS
Strategic Benefit– Will target drive growth faster than we can achieve organically?
– Does it meaningfully move the business forward?
Financial Attractiveness– Does it meet our IRR hurdle rate of >15%?– Are there revenue and/or cost synergies?– Prefer quickly TSR accretive deals
Leadership expertise and fit– Proven management teams and good cultural match
Opportunistic and selective– Significant in-bound and out-bound activities ensure
we are well-positioned to view potential deals
50
MEREDITH’S GOAL: TOP-THIRD TSR
TSR (%)
5
15
10
0S&P 500 Median TSR S&P 500 top 3rd TSR
S&P 500 TSR Benchmarks – expected returns
51
6-7%
10-11%
Multiple sources including BCG Investor Survey and Value Line
TOP-THIRD TSR EXPECTATIONS
Organic revenue growth
Margin expansion
Dividend yield
Buybacks
TSR Drivers through FY19:
+3-4%
+3-4%
+3-4%
+0-1%
Organic TSR 9-13%
Acquisitions and/or multiple expansion +++
Robust digital strategy with range of monetization options fueled by leading brands, content and scale
Stronger broadcasting revenue upside from political year, retransmission uplift, and non-political advertising
Planned annual dividend increases to deliver peer-leading, stable yield, and floor on stock
Aggressive buyback program that capitalizes on current undervaluation and returns excess cash
Total TSR At Least Top Third 52
MEREDITH’S INVESTMENT THESIS
Portfolio of highly rated television stations in large and fast-growing markets
Trusted national brands with an unrivaled female reach
Profitable and growing digital business
Growing consumer-generated revenue
Experienced management team with a proven record of operational excellence and shareholder value creation over time
Strong and consistent cash flow generation, driven by:
Commitment to delivering Top-Third Total Shareholder Return:
1.
2.
3.
Balanced capital allocation strategy
Dividend payer for 70 years; increases for 24 consecutive years
Share buyback program
Accretive strategic acquisitions
53
TODAY’S AGENDA
Balanced Portfolio Delivers Strong Cash Flowo Tom Harty, President and Chief Operating Officer
Local Media Group Growth Strategieso Paul Karpowicz, President
National Media Growth Strategieso Jon Werther, President
Total Shareholder Return Strategies o Joe Ceryanec, CFO
Q&Ao Steve Lacy, Chairman and CEO
54
APPENDIX I: SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL MEASURES
55
Year Ending June 30, 2017E1
Local Media Group
National Media Group
Operating profit 213$ 154$ Depreciation and amortization 35 18 EBITDA 248 172 Fiscal 2017 special items
Write-down of contingent consideration payable - (20) Severance and related benefit costs - 8 Write-down of impaired assets 2 - Total special items 2 (12)
Adjusted EBITDA 250$ 160$ 1 Wall Street Consensus for Fiscal 2017 ending June 30
APPENDIX II: SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL MEASURES
56
Years ended June 30, 2009 2011 2013 2015 2017E1
(In millions)
Net earnings (loss) (107)$ 127$ 124$ 137$ 186$ Net interest expense 20 13 13 19 19 Income taxes (53) 81 74 86 110 Discontinued operations 5 4 - - - Operating profit (loss) (135) 225 211 242 315 Depreciation and amortization 43 40 45 58 54 EBITDA (92) 265 256 300 369 Special items 309 - 12 19 (10) Adjusted EBITDA 217$ 265$ 268$ 319$ 359$ 1 Wall Street Consensus for Fiscal 2017 ending June 30
Investor Day PresentationJune 6, 2017