Strong circulation and advertising revenues along with
increased readership and online traffic led
) to deliver first-quarter 2013 earnings of 55 cents a share that
came ahead of the Zacks Consensus Estimate by a penny and jumped
14.6% from the prior-year quarter's earnings of 48 cents.
Going forward, management stood by its earlier guidance and
expects earnings between $2.60 and $2.95 per share for fiscal
2013. Moreover, for the second quarter, earnings are projected in
the range of 80 cents to 85 cents. The current Zacks Consensus
Estimates for the second quarter and fiscal 2013 are 83 cents and
$2.82 per share.
Total revenue for the quarter strengthened 8% year over year
to $354.2 million, reflecting an increase of 12.4% in advertising
revenue to $207.1 million coupled with a rise of 13.4% in
circulation revenue to $75.5 million, partially offset by a
decline of 7.1% in other revenue to $71.5 million.
However, total revenue fell short of the Zacks Consensus
Estimate of $358 million. Meredith now projects second-quarter
fiscal 2013 total advertising revenues to grow in the high
Operating expenses for the quarter rose 6.6% to $308.9
million, reflecting an augmentation of 2.7% in production,
distribution and editorial costs, 9.3% in SG&A expenses and
21.3% in depreciation and amortization.
Operating profit grew 18.5% to $45.3 million, whereas
operating margin expanded 110 basis points to 12.8%.
National Media Group
revenue increased 3.2% to $267 million, attributable to a 6.6%
growth in advertising revenue and a 13.4% rise in circulation
revenue, partially offset by a decline of 12.9% in other revenue.
Excluding the recent acquisitions of "Allrecipes.com," "EveryDay
with Rachael Ray" and "FamilyFun," advertising revenue would have
waned 9%, whereas circulation revenue would have remained
The retail, media and entertainment, and pets categories
showed robust trends. However, sluggish performance continued
across the prescription drug category. The company hinted that
Meredith magazines readership touched a record of 116 million
while digital advertising revenue more than doubled during the
quarter. However, excluding the recent acquisition, digital
advertising escalated 30%.
Segment EBITDA declined 11.6% to $34.8 million with EBITDA
margin contracting 220 basis points to 13%.
Meredith now projects National Media Group advertising revenue
to increase in mid-teens during the second quarter of fiscal
2013. However, excluding the recent acquisitions, advertising
revenue is expected to decline in the mid-single digits.
Local Media Group
revenue rose 25.8% to $87.2 million. Non-political advertising
revenue increased 5% to $62.2 million, indicating the twelfth
successive quarter of year-over-year enhancement. Political
advertising revenue came in at $12.2 million, up from $583,000 in
the year-ago quarter. Other revenue jumped 34.9% to $12.7
EBITDA at Local Media Group almost doubled to $33.7 million
compared with $17 million in the prior-year quarter. EBITDA
margin marked a substantial improvement and came in at 38.7%
compared with 24.6% in the prior-year quarter.
Management now expects Local Media Group advertising revenues
to jump over 20%, including projected political advertising
revenues of $18 million to $20 million during the second quarter
of fiscal 2013. However, non-political advertising revenue is
expected to register a slight decline or remain flat.
The company expects to deliver record political advertising
revenue and stated that it will meet or surpass its earlier
guidance range of $25 million to $30 million during the election
phase, which comprises of first and second quarter of fiscal
Meredith's Growth Catalysts
It's been a constant endeavor by Meredith to explore and add
alternative revenue generating channels through acquisitions or
strategic alliances. Thereby, the company attempted to reduce its
dependence on conventional advertising.
The sluggish economy prompted Meredith to diversify and add
significant revenue streams beyond traditional advertising by
leveraging its brands through strategic alliances. Brand
Licensing revenue supplemented the sales of the company, led by a
rise in sales of Better Homes and Gardens' branded products at
Wal-Mart Stores Inc
The company extended its contract with Wal-Mart Stores through
2016, which includes an expansion of the Better Homes and Gardens
branded home decor and garden program at Wal-Mart stores across
the United Statesand Canada.
Meredith remains committed to making strategic investments to
increase its revenue generating capabilities while enhancing its
profitability. The company is aggressively expanding its brands
through online platforms, televisions, videos, mobile
applications, and is expanding its reach of food and lifestyle
content across tablet products, such as the iPad, NOOK Color,
Kindle Fire and Samsung Galaxy.
Following its growth trajectory, Meredith acquired "Every Day
with Rachael Ray" the award-winning magazine of Reader's Digest
Association, and assets of "FamilyFun" magazine from Disney
Meredith, the media and publishing company, also acquired the
world's No. 1 digital food site, "Allrecipes.com" for about $175
million, to expand its digital platform. The transaction will be
modestly incremental to its earnings per share and free cash flow
in fiscal 2013.
Going forward, management's strategy will be focused upon
bolstering advertising revenue, primarily in the digital space;
enhancing online consumer transactions, especially magazine
subscription orders; focusing on non-advertising depending
activities, such as brand licensing, marketing services and
e-commerce; and attaining operational efficiencies.
Other Financial Details
Meredith ended the quarter with cash and cash equivalents of
$27.6 million, total debt of $405 million and shareholders'
equity of $800.7 million. During the quarter, the company
repurchased 530,000 shares and has $70 million remaining under
its share buyback program. The company's leverage ratio (debt to
EBITDA) was 1.6 to 1 for the 12 months period ended September 30,
Currently, we maintain our Neutral recommendation on the
stock. Moreover, Meredith retains a Zacks #3 Rank that translates
into a short-term Hold rating.
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