Meredith Corp (NYSE:MDP)
Q4 2021 Earnings Call
Aug 12, 2021, 9:00 a.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Good day, and thank you for standing by. Welcome to the Meredith Fiscal 2021 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Mike Lovell, Investor Relations.
Mike Lovell — Investor Relations Director
Good morning, everyone, and thanks for joining the call. I hope you’ve had the opportunity to access the press release and presentation posted to Meredith’s website. We’ll use the presentation to structure our remarks this morning. We will begin with comments from Chairman and Chief Executive Officer, Tom Harty; followed by Chief Financial Officer, Jason Frierott. Certain financial measures that we’re discussing on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of special items. Reconciliations of these non-GAAP measures are included in our slide presentation, which is available in the Investor Relations section of meredith.com.
I also want to remind you that we will be discussing forward-looking information today and of our Safe Harbor disclaimer on Slide 2. Also as noted on Slide 3, we will be filing relevant materials with the Securities and Exchange Commission, including a proxy statement in connection with the announced sale of our Local Media Group to Gray Television. We encourage you to read these materials because they will contain important information about the company and proposed transaction. Finally, please note all figures refer to fiscal 2021 fourth quarter or full year and the comparable prior year period unless otherwise noted.
And now I will turn the call over to Tom, who will begin our prepared remarks, starting on Slide 4.
Tom Harty — Chairman and Chief Executive Officer
Thank you, Mike, and good morning. Since last reporting quarterly results on April 29th, we are pleased to deliver strong progress on the strategy we’ve described in recent calls, net debt reduction, growth in digital advertising, advancement of our consumer focused capabilities, including performance marketing and paid products.
First, as it relates to net debt reduction, we announced the sale of our Local Media Group to Gray Television in May and accepted an offer of $2.825 billion in June. We believe that the sale will unlock meaningful shareholder value and accelerates all of our top financial priorities, including materially reducing our debt. This will free up capital to invest in future high potential digital opportunities, while also enabling capital returns to shareholders.
Second, as it relates to advancing our digital advertising and consumer focus capabilities. Digital advertising revenues were fourth quarter record and surpassed magazine advertising for the third consecutive quarter. On the consumer side, licensing and digital consumer revenues continued to deliver record results and the newsstand channel grew as well. In total, our business remains well balanced with half our revenues based on advertising and half from consumers.
With that introduction, let’s dive deeper into the fourth quarter highlights. Starting with digital advertising. Our team delivered strong performance driven in part by strong pricing, partially offset by slight declines in traffic. We’re seeing market and consumer trends beginning to normalize, particularly compared to the year-ago period, which was heavily impacted by the onset of COVID-19 pandemic. Our licensing and digital consumer-driven revenues also delivered double-digit growth and record fourth quarter results. Driving our digital performance is our trusted brands and large audience reach to 150 million consumers who visit our sites each month, our strong commercial partnerships and our proprietary technology platform.
As we’ve discussed on prior calls, our platform brings together all of our content, our unique taxonomy and first-party data. It provides a comprehensive view of the consumer and how they interact with our branded content and products, providing valuable insights and predictive trends. This holistic view and our analytic capabilities provide us with deep insights into user behavior we used to drive advertising and performance marketing dollars as well as our own content and product development strategy. For example, our performance marketing teams drove a nearly threefold increase in partner retail sales for the week during Amazon’s June Prime Day through solid execution of custom content and promotion across our sites. We performed similarly for Walmart and Target, who also hosted digital sales events during our fiscal fourth quarter.
The combination of our influential brands focused on women, audience reach, commercial partnerships and proprietary platforms are differentiators in the market, which drive our growing and diversified digital revenue. Our magazine business is another differentiating factor. It’s the largest in the United States and drive strong awareness for our brands across platforms. PEOPLE and Allrecipes are the industry’s number one and number two brands and Better Homes & Gardens is number six. On an average, we sell one magazine via subscription and one via newsstand every second.
While advertising performance remained soft as the uncertain economic environment caused clients to be focused on bottom of the funnel spending, we continue to see strong consumer engagement and demand for our magazines, as evidenced by 7% growth in circulation revenues driven primarily by newsstand performance. Obviously, we have an easier comp as newsstand was impacted by the pandemic. However, I also want to highlight key points that make our newsstand specials, particularly attractive to consumers.
We react quickly to provide relevant in debt coverage of topics and trends that matter to our customers. We use high quality paper and we limit advertising pages. As a result, we were able to charge a premium price typically in excess of $10 per copy. In addition, consumer response rates to our subscription offers continue to be strong and we have been investing in channels that drive high lifetime value to capitalize on the opportunity. For example, we’ve more than doubled our direct mail offers in the fourth quarter and saw new subscription orders more than double as well. In total, our renewals were up 4% in the fourth quarter across all retention channels.
Looking more closely at our broadcasting portfolio, we delivered 50% growth in nonpolitical spot advertising revenues compared to the prior year period, driven by the professional services, automotive and gaming categories. We also benefited from continued growth in retransmission revenue. Finally, from a consolidated company standpoint, we delivered margin expansion. This was driven by topline growth, particularly from our digital and television businesses which have relatively higher fixed cost and thus drove positive cost leverage. Consistent with our financial priorities, we continue to make progress reducing net debt and our net leverage ratio, and grew our cash position sequentially from the third quarter.
With that fourth quarter summary, I want to step back and share some thoughts on our full year performance on Slide 5. It was equally remarkable and challenging, beginning under deep pressure due to COVID-19 and ending with the second highest adjusted EBITDA in Meredith’s history, approximately $20 million shy of our all-time high. It was also a transformational year shaped by several significant strategic events. First, we crossed an important milestone with digital advertising revenue surpassing magazine for the first time in Meredith’s history. Second, the agreement to sell our Local Media Group, as I mentioned earlier, for $2.825 billion, representing a 10 times valuation. The combination of these two events sets the stage for post-transaction Meredith to be positioned as a digital-first media company with low leverage and the capacity to invest in future organic and inorganic growth.
We delivered many operational milestones during the year as well. Our digital businesses delivered record revenues across the board, driven by our launch of the Meredith data studio, which brings together our…