Meredith Reports Ongoing Growth In Core

This is a prime quarter during which television groups hit a big dip in the political revenue roller coaster. Nevertheless, Meredith Corp. execs told securities analysts that it was pleased with its fiscal 1Q 2018 results, which included positive outcomes from other revenue streams, including retransmission consent and core local advertising.

In numerical terms, local core was up 4%, to $88 million, a gain of approximately $3.5 million. According to Chairman-CEO Steve Lacy, growth in core should pick up steam going forward, with gains in the mid- to high single-digit range.

Lacy said: “We’re encouraged by strengthening demand for non-political advertising revenues … which is pacing up in the mid- to high-single digits. This performance is being led by out two largest ad categories, automotive and professional services, partially offset by weakness in retail.”

Auto was up 4% in the quarter and is pacing up 5%, according to CFO Joe Ceryanec. Lacy added that the gain in professional services amounted to 14%.

The gain in core was not nearly enough to counter the loss in political, which dropped from $16 million to just $1 million.

The overall loss in advertising revenue was partially offset by increased retransmission income, which was a result of the renegotiation of contracts affecting 40% of the Meredith’s audience base. “We recently renewed a pretty large MVPD which has given is some tailwinds,” Ceryanec said.

He noted that it the company’s fiscal 2018 will be quiet on the retrans front, with only 8% of the company’s subscriber base up for renewal, but that will be followed by 35% in fiscal 2019 and almost 60% in fiscal 2020.

As yet, the company has no concerns about the advent of virtual MVPDs. Local Media Group President Paul Karpowicz noted that while cable subs are down about 2%, much of that has simply moved to satellite and added that the company receives fees for the small amount that has moved to the virtual category.

To a degree, the political category is a matter of location, with perennial battlefield states the prime real estate of the category. But there is also a circumstantial factor as well. For example, earlier in 2017 Meredith benefitted from a special election affecting the Atlanta market to replace Rep. Tom Price after he joined the Trump cabinet. And looking ahead, Karpowicz noted that Meredith is situated to benefit from the retirements of Sens. Bob Corker (R-Tenn.) and Jeff Flake (R-Ariz).

On the M&A front, Ceryanec said: “We are well positioned to continue as an industry consolidator, and we are constantly evaluating strategic acquisitions, both large and small.”

Lacy said the company is open to both swaps and straight acquisitions, and further noted that it is very optimistic about the dereg path upon which FCC Chairman Ajit Pai has embarked. He did note that there are a lot of moving parts — including the likelihood of court challenges and the need for congruence between the FCC’s and the DOJ’s definition of a local market — before any new rules can become final.

President-COO Tom Harty said that Meredith is a big believer in drones, and is increasing its use of them in lieu of helicopters. He noted that they are cheaper, safer and provide great content for the company’s local news operations.