Media Company Meredith Corp. Reports Record Earnings for Q1 FY 2017

Company credits 'strong political advertising performance' and growth in digital advertising revenue for success.

Subscription News: Media Company Meredith Corp. Reports Record Earnings for Q1 FY 2017

Source: Meredith Corp.

Last week media company Meredith Corp. (NYSE: MDP), owner of brands like Family Circle, Better Homes and Gardens and Martha Stewart Living, posted record financials for the first quarter of their fiscal year 2017, ended September 30, 2016. Total company revenues for the period were $400 million, a 4 percent increase year-over-year. Total advertising revenues were $226 million, a 3 percent increase year-over year. The company credits political advertising and digital ad growth for its success.

“We’re off to an excellent start in fiscal 2017, boosted by strong political advertising performance at our local television stations, along with double-digit growth in digital advertising revenues in both the national and local businesses,” said Stephen M. Lacy, Meredith chairman and CEO.

Other highlights from the first quarter of fiscal year 2017 include:

  • Earnings per share were $0.75, compared to $0.24 for the same period last year.
  • Companywide digital advertising revenue grew a record 16 percent.
  • Local Media Group revenue grew by 20 percent to $153 million, operating profit was $51 million and EBITDA was $60 million, all record numbers for Meredith Corp. Growth was driven by political advertising and retransmission revenues.
  • Magazine readership is at 127 million.
  • Traffic on Meredith’s digital and mobile sites averaged 81 million unique visitors per month, a 13 percent increase year-over-year.
  • Cash flow from operations grew from $3 million in the prior year to $35 million.

Local Media Group: Meredith’s Local Media Group includes 17 owned or operated TV stations in large, fast-growing markets, reaching 11 percent of U.S. households. They produce close to 700 hours of local news and entertainment each week. For this business segment, operating profit grew 70 percent to $51 million, compared to $29 million year-over-year.

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Revenues grew 21 percent to $153 million. Political ad revenue was $16 million, a 26 percent increase over the last political cycle in Q1 of fiscal year 2015. Non-political ad revenue was $84 million. Digital ad revenue grew 22 percent compared to the same period last year.

National Media Group: National Media Group reaches more than 100 million American women and three out of four millennial women, according to Meredith Corp. Operating profit for the quarter was $24 million and revenue was $247 million. Total advertising revenue dropped to $125 million, excluding MORE magazine which the company stopped publishing this spring. Digital ad revenue grew 15 percent, led by Allrecipes, Parents and SHAPE. Total magazine ad revenue grew to 12 percent from 10.5 percent.

Total circulation revenue (newsstand and subscription) were $69 million, down from $72 million, but profit margin increased. Newsstand revenues grew, while subscription revenue dropped, due in part to the closure of More.

Operational highlights for Meredith Corp. for the first quarter of fiscal year 2017 include:

  • Meredith renewed its licensing agreement with Walmart to sell 3,000+ Better Homes and Gardens-branded products at more than 4,000 Walmart stores and online.
  • The company launched The Magnolia Journal in September, a new quarterly lifestyle magazine from HGTV’s Chip and Joanna Gaines.
  • Meredith also launched new products based on the success of its magazines: a new line of frozen foods based on EatingWell; fitness apparel from SHAPE; and cooking utensil by Allrecipes.
  • The company launched a broadcast TV series on the CW Network, based on Allrecipes’ Dinner Spinner app.

The company is forecasting record second quarter earnings between $1.18 and $1.23 per share, driven by political advertising, higher retransmission contribution and strong digital ad growth. It expects total Local Media Group revenues to increase 25 percent, year-over-year, total National Media Group revenues to be down in the low-single digits, and total company revenues to be up in the mid- to high-single digits.

For the first half of fiscal year 2017, Meredith anticipates political advertising to range between $40 million and $50 million. It projects full-year earnings for fiscal 2017 to range from $3.50 to $3.80 per share.

Despite record revenue, Meredith Corp. stock dropped $0.20 from $45.95 to $45.75 between the close of trading on Thursday, October 27 – the day results were announced – in after hours trading on Friday, October 28. On November 2, 2015, Meredith’s stock price was $47.28.

Subscription News: Media Company Meredith Corp. Reports Record Earnings for Q1 FY 2017

Source: Google Finance – Yahoo Finance – MSN Money

Insider Take:

Despite strong financials and Meredith’s guidance that its second quarter will be strong, investors are not impressed. The second quarter will include about five weeks of political ad revenue, so the quarter probably will finish strong as predicted, but Meredith will need to continue to do well in the third and fourth quarter for investors to regain their faith. In the meantime, Meredith is trying new products, banking on several of its popular brands to diversify revenue streams. It also needs to focus energy toward subscription losses in fiscal year 2017.