Meredith Corporation
Q2 2015 Earnings Call Transcript

Published: 29 Jan 2015

[Operator:]

Ladies and gentlemen, thank you for standing by. And Welcome to the Meredith Corporation Fiscal 2015 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's conference is being recorded. Now, I would like to turn the conference over to Mike Lovell. Please go ahead.

[Mike Lovell:]

Hi, good morning. And thanks everyone for joining us. Our call this morning will begin with comments from Chairman and Chief Executive Officer, Steve Lacy; and Chief Financial Officer, Joe Ceryanec. Then we'll turn the call over to questions. Also on the line this morning as usual is National Media Group President, Tom Harty; and Local Media Group President, Paul Karpowicz. An archive of today's discussion will be available later today on our investor website, and the transcript will follow that. Our remarks today will include forward-looking statements; actual results may differ from forecasts. Some of the reasons why are described at the end of our news release that we issued earlier this morning and in some of our SEC filings. And with that, Steve will begin.

[Steve Lacy:]

Thank you very much, Mike. And good morning, everyone. I hope you have the opportunity to see our news release issued earlier today that details our results. I am pleased to report a strong second quarter and first half of our fiscal 2015. Excluding special charges we increased earnings per share by 45% in the quarter when compared to the prior year period. Total revenues grew by 13% and total advertising revenues were up 25%. Results were led by our Local Media Group which delivered all time record performance across the board in revenue operating profit and EBITDA. This included political related advertising revenues of $29 million in the quarter and $42 million overall for the election cycle, both were record. Our National Media Group delivered an operating profit increased of 7% and operating margin strengthened. Results were driven by higher advertising revenues, stronger performance for Meredith's accelerated marketing and a 4% decrease in operating expenses. Total company digital advertising revenues grew by 45% to a fiscal second quarter record driven by both recent acquisition and organic growth. National Media Group digital advertising revenues increased nearly 45%, while Local Media group digital advertising revenues increased more than 50%. Consumer engagements strengthened across our media platform during the quarter. Our television stations delivered strong November ratings book. Our National Media Group grew a total audience and traffic increased across our digital and our mobile site. Finally, our diverse and multi platform business model continue to generate strong and sustainable cash flow. We generated $74 million of operating cash flow during the first half of fiscal 2015. That's more than a 20% increase over the prior year amount. We remain committed to our total shareholder return strategy, key elements of which include, our current annual dividend of $1.73 per share, $100 million share repurchase program and ongoing strategic investments to scale our business and increase shareholder value over time. As many of you who follow us closely know, we've executed a number of strategic investments over the last year. As I reflect back on calendar 214, I'd like to highlight the steps we've taken to strengthen our competitive position and deliver higher revenue, operating profit and cash flow over time. First of all in calendar 2014, we added meaningful scale to our local media business acquiring four strong stations. In total, we expect these acquisitions to add more than 30% to the revenues of our local media portfolio. But more than scale alone, these additions to the portfolio are also very strategic. In Phoenix, we added KTVK, one of the most successful, independent stations in the country. We already own the CBS affiliate there so KTVK gives us a duopoly in the nation's 11th largest market. In St. Louis, we add KMOV, a strong CBS affiliate with greater viewership and sales momentum. Between KMOV and St. Louis and KCTV, the CBS affiliate we own in Kansas City, where we are well represented in Missouri along with neighboring Illinois and Kansas. These are states that consistently deliver strong political advertising dollars. In Mobile-Pensacola, we added WALA, the market leading Fox affiliate. This is the strong market in the Sun Belt state that gives access to Florida political advertising dollars. And finally, we created another duopoly in Springfield, Massachusetts with the purchase of WGGB. This ABC affiliate has a strong news presence and also airs Fox on a digital tier. Together our stations reach nearly 11% of U.S. household. We now have five highly profitable duopolies, seven stations in Top 25 market and 13 of our 17 stations are in Top 50 television market. Second, during calendar 2014 we added scale and capabilities and launched new products in our National Media Group through a series of acquisitions and long-term relationships. We announced a long-term agreement with Martha Stewart Living to operate its magazine, digital, mobile and social media businesses. These are great brands with loyal audiences. Adding these attractive properties to the Meredith's portfolio gives us increased reach and has already resulted in several new or expanded advertising commitments. The agreement with Martha Stewart also includes Martha Stewart Weddings magazine and website. Combined with our recent acquisition of MyWedding.com, it provides a strong entry to the wedding media market place. MyWedding is a leading site for couples planning their wedding and the advertisers, retailers and service providers who want to reach them. We also increased the rate base of Allrecipes magazine by a 120% to 1.1 million copies starting with the February, March issue. That's up from 500,000 net launches just a year ago. We also agree to create a line of cookware, bakeware and kitchen accessories under the Allrecipes brand, marking Allrecipes first retail licensing program. We continue to be pleased with the enthusiastic response to the brand across digital and in print and we are of course excited to add Allrecipes to our growing brand licensing activity. Equally as exciting earlier today we announced the acquisition of the Shape print and digital brand from American Media Inc. We will begin producing Shape with the May 2015 issue with the current readers of Shape and Meredith's Fitness receiving a new and enhanced Shape magazine. The new Shape will have a guaranteed rate base of 2.5 million, that's 60% increase from its current level of 1.6 million. The Shape and Fitness website will continue to operate as separate digital destination with a combined reach of almost 7 million unduplicated monthly unique visitors. The acquisition of Shape establishes Meredith as the leader in the women's active lifestyle media category. It increases our reach among millennial women and creates an unmatched opportunity for advertisers to connect with this highly valued audience across multiple media channel. As we've done with the recent acquisition of Everyday, with Rachael Ray, Family Fun and Eating Well, we are utilizing our industry best circulation, production and support functions to drive cost efficiencies and create synergies. This process is well underway with the Martha Steward brand we will do the same with Shape. Without doubt, this unique strength clearly position Meredith as the partner of choice as we pursue further media industry consolidation. And third during calendar 2014, we significantly enhanced our digital presence and digital capability. Our digital traffic is now averaging over 70 million monthly unique visitors, ranking Meredith among the Top 30 digital operators in the country. Our goal is to reach 100 million monthly unique visitors and of course aggressively monetize the scale digital audience. To reach that 100 million goal, we are placing a great deal of emphasis on the mobile market place, creating new apps and re-launching existing products. We are expanding our audience targeting and problematic advertising initiative. And finally on the digital side, during the quarter we acquired Selectable Media, a digital advertising platform and network whose products include native and engagement based advertising. It allows us to increase our digital inventory and drive higher advertising CPM in our digital business. Selectable technology is well suited for the growing mobile market place as well. When you combined our premium branded content, highly engaged consumer audience and rich first- party data drawn from our 100 million name database, it provides a very powerful and unique advertising proposition for clients helping us maximize our revenue opportunity going forward. And finally on the corporate side during calendar 2014, we grew our dividend for the 21st straight year, authorized another $100 million share repurchase program and took advantage of low interest environment to effectively fix $400 million of debt at an average interest rate of 3%. All of these actions add to another year of very strong execution against our total shareholder return strategy. As we look at the future, we'll continue to look for strategic acquisitions and partnership and investment opportunities to expand our reach and create additional shareholder value. We believe the combination of our audience reach multiplatform expertise; strong advertising relationships and production efficiencies afford us unique, compelling and strategic opportunities to continue consolidating in the fragmented media industry. With that overview, I'll turn the conversation to Joe Ceryanec, our CFO for the operating performance of our two major business groups. And given our recent portfolio additions, Joe will also provide you with the view of our increased financial expectations for the balance of our fiscal 2015.

[Joe Ceryanec:]

Thanks, Steve. And good morning, everybody. I'll start with a look at our Local Media Group results. Fiscal 2015 second quarter revenues increased 50% to $157 million. Excluding special charges operating profit grew nearly 65% to a second quarter record of $60 million, and our EBITDA margin was very strong 44%. Looking more closely at that performance, the primary growth drivers were our newly acquired stations in St. Louis and Phoenix, along with strong performance from our existing stations in Phoenix, Hartford and Portland. In total, nonpolitical ad revenues were up more than 20%. Backing out the contributions from our new stations, our core nonpolitical ad revenues were down mid single digits as is expected in a quarter that has such heavy demand for political advertising. That said nonpolitical ad performance was approximately flat for the period following the election. We recorded $29 million of political ad revenues in our second quarter, and our political spending was much more evenly spread out amongst our stations than we've seen prior political cycles and was strongest in our Phoenix, St. Louis, Kansas City and Hartford markets. In Phoenix market, with our new duopoly we captured nearly 40% of all political ad dollars in the Phoenix market. Other revenues and expenses both increased due primarily to growth in retransmission revenues we get from cables and satellite providers, as well as higher programming fees paid to the networks. As a reminder, we will have another round of renewals with most of our cable and satellite providers in fiscal 2016 and fiscal 2017 which is ahead of our next major network affiliation agreement renewal. Now turning to look at National Media Group. Again excluding special charges, we delivered 7% growth in operating profit and profit margins strengthened in the quarter. A digital advertising in brand licensing activities set fiscal second quarter record, and Meredith's accelerated marketing strengthened its performance considerably. We also demonstrated continued expense discipline, cutting cost 4% and improving margins 120 basis points. As you may recall, we transitioned Ladies' Home Journal to a newsstand only title at the start of fiscal 2015. And that's reflected in our advertising and circulation results. Without LHJ advertising revenues would have been up mid-single digit and circulation revenues would have down less than half of what we reported. Looking more closely at the fiscal second quarter performance compared to the prior year period, magazine ad rates grew 3% from the prior year. Digital advertising grew nearly 45% and accounted for nearly a third of total advertising revenues. Growth was led by performance at Allrecipes.com along with addition of MarthaStewartLiving.com in November. Brand licensing revenues grew in low single digit helped by sales of more than 3,000 Better Homes and Gardens branded product that are available at 4,000 Walmart stores across the U.S. and at Walmart.com. Meredith accelerated marketing delivered strong growth and operating profit. And during the quarter we secured new assignments with Bob Evans and CBS Health. Now let's turn to our outlook. Given the recent acquisitions, we've added to our media portfolios, we now expect full year fiscal 2015 earnings per share before special items to range from $3.25 to $3.35. This new and higher range includes expected attrition of between $0.10 and $0.15 from the Martha Stewart Media property and the Shape brand to our National Media Group and WALA in Mobile-Pensacola to our Local Media Group. Looking more closely at the third quarter of fiscal 2015 compared to the prior year, we expect total company revenues to be up high single-digit. We expect local media revenues to be up 25% to 35% and we expect the National Media Group revenues to be up low single-digits. While we expect our third quarter earnings per share to range from $0.66 to $0.71. And while we expect the Shape brand to be accretive to earnings per share for full fiscal 2015. We do expect Shape to be $0.04 dilutive to earnings in the third fiscal quarter. This is due to the timing of certain expenses occurring before revenue generation. The first combined Shape that this magazine will go on sale in April, which is in on our fourth quarter. Now I'll turn it back to Steve for a few closing comments and then we will open it for Q&A.

[Steve Lacy:]

Thank you very much, Joe. In conclusion and before the Q&A period this morning, I am again pleased with our strong start to fiscal 2015. As a quick reminder, we continue to aggressive pursue the following strategy. First, growing our existing businesses organically. And this includes of course television, magazine, digital, licensing and our marketing services portfolio Meredith accelerated marketing. Second, successfully integrating our recently acquired businesses and continuing to pursue opportunities to add to both our National and our Local Media Group portfolio. Third, aggressively managing our cost and finally continuing to execute our total shareholder return strategy as highlighted by our ongoing dividend increases and corresponding very attractive yield. Share repurchases while pursing accretive acquisitions to grow our already strong cash flow over time. With that we'll be happy to answer any questions that you might have this morning.

[Operator:]

[Operator Instructions] And our first question is from Bill Bird - FBR. Please go ahead.

[Bill Bird:]

Good morning. Steve for NMG, what was organic ad growth in the December quarter? And can you give us a split out of what the organic growth look like print and digital? Thank you.

[Steve Lacy:]

Okay. Thanks, Bill. Joe is looking that up. And I think he is got that at his finger tips.

[Joe Ceryanec:]

So, Bill, for Q2 and excluding the impact of LHJ as well as Martha Stewart, total ad revenue was down 1.9%. The digital was up about 12% and the print was down about 5%.

[Bill Bird:]

Okay. And can you speak to I guess each of NMG and LMG in terms of what you're seeing in terms of underlying organic growth as you look at the March quarter? Do trends look similar or are they much different?

[Joe Ceryanec:]

I'd say for Q3 on the NMG side, it is looking pretty similar - print running down again around 5%, digital up kind of mid-teens.

[Steve Lacy:]

That's organic.

[Joe Ceryanec:]

That's organic. And the TV side, it is little earlier but was flat to up slightly is our expectations. Again they are organic same store sales basis.

[Operator:]

Question from Craig Huber with Huber Research Partners. Please go ahead.

[Craig Huber:]

Yes, hi, good morning. Just a follow up to Bill's question there. You commented abut TV for the March quarter. I think revenue up flat to slightly organically. What is that number just for the core ad revenues excluding the acquisitions?

[Steve Lacy:]

That's the number.

[Joe Ceryanec:]

That's where I was going.

[Steve Lacy:]

That's the number, Craig.

[Craig Huber:]

That's the number, okay, very good.

[Steve Lacy:]

Yes. That's the organic or same store basis number. Flat to up slightly in TV, fiscal Q3 compared to the prior year.

[Craig Huber:]

Okay. Can you also help us with just ballpark for us I mean the quarter you guys just finished network compensation as a percentage of your retransmission revenues. Is that roughly 50

[Joe Ceryanec:]

Yes. It is right at 50 correct.

[Steve Lacy:]

50, 50 split. You got it Craig.

[Craig Huber:]

And then you also mentioned for fiscal 2016 and fiscal 2017, you have a large round retrans contracts coming up renewal. Can you just remind us what percentage your subs come up renewal each of those of those two years if you have that handy?

[Joe Ceryanec:]

Give us a second.

[Steve Lacy:]

Don't know if we've got that right with our finger tips but we will look for it and if we got here, I'd say if we find it, if not, we will call you back, okay.

[Craig Huber:]

And my final question. I appreciate that, is just on auto for your TV stations. Post the election, how do auto on core basis excluding acquisition do like end of December year-over-year and how does it tracking for this first quarter please? The first calendar quarter.

[Joe Ceryanec:]

Again, I am going to give you excluding the acquisitions so you get the feel for what we are seeing in auto was actually down high-single digits in Q2.

[Steve Lacy:]

We don't have spacings by category for Q3; it is just too early, Craig.

[Craig Huber:]

Do you have a sense of how auto did then in December just to get away from the election influence?

[Steve Lacy:]

Paul, do you happen to know post election how auto performed all our numbers for the whole quarter.

[Paul Karpowicz:]

Yes. It started to come back. November was down as you indicated there. It started to come back towards the end of the year in December. We did have some bad weather in a few markets that we think slowed down the auto growth there. But it starts to come back a little bit towards say December 15 through the end of the year.

[Craig Huber:]

Is your expectation for the March quarter that it's similarly to your overall trend flattish?

[Steve Lacy:]

What we are looking at right now is flattish to a little bit up.

[Craig Huber:]

For auto?

[Steve Lacy:]

For auto, for auto.

[Craig Huber:]

Okay, great, thank you guys.

[Joe Ceryanec:]

So, Craig, back to your earlier question. I think it was how many subs we expect to renew in 2016 --

[Craig Huber:]

What percentage or how you want to do it.

[Joe Ceryanec:]

Yes, what percent -- barring some of the real small players that are in the market, about 50% of the subs will renew in our fiscal 2016 and the other 50% will renew in our fiscal 2017.

[Operator:]

Question from John Crowther with Piper Jaffray Companies. Please go ahead

[John Crowther:]

Yes, thank you. So my first question is you guys obviously have delivered some great margin improvement here driven by the growth you are driving in TV and through acquisitions as well as cost control. And I think you are trending towards 20% EBITDA margins in this fiscal year. That is a level you guys saw before the cyclical downturn. I was just wondering as you look forward here what sort of expectations do you have for margins? As we go forward do you guys have sort of level in mind or sort of a level you would like to hit each year in terms of potentially driving some expansion? Obviously given the bi- annual exposure to political?

[Steve Lacy:]

Yes. I would say absent the political every other year phenomenon when our philosophy is taking the money. I think you will be able to see us improve our margins sort of same store basis above the point a year. And lot of that includes the benefits that we will have in the relative near term as we integrate the various acquisitions we have and that the full implementation of that often times take 12 to 18 months. But we are very optimistic about that as we look to the future. Again absent the political cycle that of course we deal with every other year.

[John Crowther:]

Okay. And maybe just I could dive down a little bit into that sort of goal of it -- you talked about acquisition integration as being a nice step up as you guys can drive some pretty nice cost synergies there. Are there any other specific drivers first on the National Media Group in terms of the core business right now that is going to contribute to that going forward? Maybe the talk about how production costs are trending here recently and then on the Local Media side, I am assuming that's still just leveraging a relatively fixed cost base ex the retrans comps you have to payout.

[Steve Lacy:]

Well, I'll start on either side and then I'll ask Tom and Paul to add to it. On the National Media side the piece that takes a while to figure out is really the circulation benefit across marketing as an example Martha Stewart and Shape with our existing portfolio. And that is the rollout that really take somewhere in the range of 18 to 24 months because you have to go through the renewal cycle and begin to test the cross marketing opportunities. There is a revenue opportunity there and there is a cost opportunity. The more direct cost that's relate to headcount as it relate to the fact that our printing contract and paper contracts are always better than any deal we've ever done. Those come in more quickly. And we realized those costs more quickly. But on the revenue side, what we do in circulation and the ability to put these properties into our Meredith buy, our corporate deal, those things come about as those corporate deals renew.

[Joe Ceryanec:]

One other one John on the NMG side. As you know, we had over 30% of the ad revenue came from digital now with Allrecipes, with Martha Stewart, there are some holiday seasonality in there but it does seems like we are starting to hit the critical mass on the digital side. And able to improve the margins, now that we've got significant scale. So I think leveraging the digital is helping the margin as well.

[Steve Lacy:]

So before we go to local, Tom you are really in-charge of all these integrations, would you have any further thoughts on the near and longer-terms benefits we'll receive.

[Tom Harty:]

I think you covered, Steve. I think we target double digit savings on the cost side when we look at these businesses, and as Steve mentioned there is upside on the advertising when we go to the market place. And both Martha Stewart and in regard to Shape, there are certain clients that were buying them because they want to part of a bigger corporate deal. And with us opening them up, they become part of the sale and we think there is opportunity to grow advertising in both those businesses.

[Steve Lacy:]

So is that answers your question on the national side, John, before we go to local?

[John Crowther:]

Yes, now that's great detail, thank you.

[Steve Lacy:]

Okay. Now on the local side, you may recall or you may not have been following us, several years ago we made quite an investment in creating two very large what you might think of as back office hub. One in Phoenix and one in Atlanta. So there is some cost benefit of these acquisitions and then there are some retransmission revenue benefits when those deals come up for renewal. And then frankly there are just some fundamental expense tightening opportunities because we believe that we are a best in class operator and some of those are in process and some are yet to come from mostly a headcount and then a purchasing perspective. And Paul, I don't know what you would add to that as you are busy integrating these recent acquisitions.

[Paul Karpowicz:]

No. I think you hit on really the key elements. The only thing I would add would it be with these -- with two of these acquisitions this year, we are also going to have some very interesting real estate savings to the extent that we are going to be able to consolidate facilities. So in both Springfield and in Phoenix, we are going to move out one station and consolidate everybody into the other station which in one case will save on rent and the other case will be able to sell the property. So in addition to the hubbing the other consolidation that we are doing, in this case the real estate is also going to be a little bonus.

[Steve Lacy:]

And that's the duopoly aspect of that John. The two duopolies we created.

[John Crowther:]

Great. And maybe if I could just ask one more quick question. Digital advertising on the Local Media Group, you guys said was up 50%, wondering -- I was trying to piece your numbers and I didn't hear if you maybe had called out what that was on an organic basis, wondering if you could also talk about is that seeing some benefit from the political atmosphere in this current quarter? And then sort of your thoughts on that longer term, what percent of that of your total advertising is it right now and what do you think that can be over time as you try and build up those opportunities to compliment -- obviously constrain TV inventory?

[Steve Lacy:]

Organic digital is very similar to what we saw organically on the national media side, up in the mid teens and we see that continuing as we go into the new calendar year. Okay?

[Operator:]

Question from Lance Vitanza with CRT Capital Group LLC.

[Brad Tesoriero:]

Hi, guys, this is actually Brad in for Lance. First on a local media side. Broadly speaking there is a perception in the market that the network affiliate relationship is changing with the networks becoming much more aggressive and adversarial and pressuring affiliates on programming compensation. I was just wondering what your comments were sort of on the network affiliate relationship and if it changed much during the year or if it hasn't and if these fears are overblown?

[Steve Lacy:]

Well, I'll start on this and then I'll ask Paul to comment. First of all, our major arrangement are in place and really don't come for renewal until our fiscal 2017 and fiscal 2018, so we were not doing any major network affiliation renewal activity during this time period. But Paul you might speak to how we think about these things going forward and our strategies as we think about longer term.

[Paul Karpowicz:]

Yes. We continue to work with each of the network and I think to the extent of their relationship is evolving, that's always going to be the case. But I think when as affiliates we deliver great television stations and great markets with greater audiences, that enables us to have meaningful discussions with the networks about how the compensation would work. We did just do and Steve is right, it was not a big deal but we just did a small deal with ABC in Springfield. Our first ABC affiliation agreement and it went fine. And I think it is just been able to balance and have a clear understanding of our relationships with the MSOs and how those payments are going to work. And then balance that against what we anticipate we are going to be paying to the network. So we -- while the relationship is adjusting and evolving, we still are very happy that the network is spending money on NFL football and the Olympics and live sport. So to the extent that we want them to continue spend on high profile must see events. We think that's really positive.

[Steve Lacy:]

Is that answers your question, Brad.

[Brad Tesoriero:]

Yes, thank you. And then just one more if I could on that national media side. You guys did a couple of great deals that fit within your core competency of women's magazines. Do you guys have any M&A appetite outside of the women's segment?

[Steve Lacy:]

Well, only if it would bring the property, would bring with it a meaningful database of male names that we could add to and market to, and that's the primary reason that we have generally stayed within areas of interest that focused primarily on the female audience because we can have the most value to those properties from a circulation perspective and they hang together from an advertising relationship perspective. But it is important to remember that we have a very large male audience. I was just this morning with the woman who runs the Better Homes and Gardens brand, and she was showing me some recent data, confirming once again in calendar 2014, the 20% of the audience of the Better Homes and Gardens brand is men and 25 years ago 20% of the audience of Better Homes and Gardens magazine was men. So it has about 40 million monthly readers and in calendar 2014, 7.1 million of those were in fact men. Allrecipes also has a very large male audience. So while we don't market ourselves that way, we do serve men. Does that answer your question?

[Operator:]

We have a question from Barry Lucas with Gabelli & Co.

[Barry Lucas:]

Great, thanks very much and good morning. Two areas. Steve could you talk a little bit about the -- either the financial terms of the Shape deal or some other financials of Shape and understanding that you are going to fit into the Meredith machine, but could you size that at all in terms of revenues and circulation and advertising?

[Steve Lacy:]

Yes. I'll talk a little bit about the terms and then I'll have Joe give you sense of kind of the top line impact. So interestingly enough, Barry, and you know us very well and you know that we have businesses that we work withed for a very long time. So our first attempt at Shape is about year 2001 and when the Weider properties were sold that you probably remember long ago. And John Zieser and I who heads up our development activity were there at that time, and we weren’t able to make it work. And more recent times Tom Hardy and I have worked on that because you know our desire is that the number one or number two properties in any field where we operate. And Shape is the number one property. So we will be making an upfront payment of $60 million and there is a profit sharing arrangement that is paid out at the end of our fiscal 2018 depending on how well the business performs. Our best estimate and of course there is a lots of estimates on revenue and cost savings in digital is that it is going to be around 3.5x first year cash flow and we should deliver over a 20% return on investment over the timeframe as it relates to their business. And the real reason for that is the ability to combine that with Fitness and create this new much larger property and clearly the market leader which Shape already was in that category. And, Tom, do you want to talk a bit about your thoughts on how that's going to happen and then we will give you sort of revenue horizon, Barry, on that. And Tom how are you going to take this property to market?

[Tom Harty:]

Yes. We are excited. We just announced today we are bringing the teams together, so we are going to take the best of both brands from Fitness and Shape from employee basis and also from a brand perspective. And go to market with this new enhanced Shape product that will have a 2.5 million rate base. We will be positioning it as a category killer because it will have such a large rate base compared to any other competition in the women's lifestyle category. So we are really excited about the opportunity and we are on the phones as we speak, talking to our advertisers about this enhanced brand from Meredith.

[Joe Ceryanec:]

Hey, Barry and for the guys on the phone that are doing, updating their models, we really won't have much revenue in Q3. As I mentioned the first combined Shape Fitness magazine will be the main title which goes on sale in April. So that will be fourth quarter. We are bringing the employees over related to the Shape brand, certain of them in the third quarter so that's why we are saying it will be $0.04 dilutive. As we look at the fourth quarter, we would expect revenue and the combined brand to be about $20 million. And for the year we expect the accretion to be about a nickel. So as we said dilutive $0.04 Q3 which means we should get about 9% positive top in --

[Steve Lacy:]

$0.09

[Joe Ceryanec:]

$0.09. And then $20 million in the Q4. I don't have 2016 estimate in front of me but offhand, it is probably four times that number.

[Steve Lacy:]

Is that help, Barry? And obviously will give fiscal 2016 guidance when we close out fiscal 2015 and have everything integrated in a better sense of that we play forward.

[Barry Lucas:]

Yes, that's great, Stephen. Four times 20, I am capable of doing.

[Steve Lacy:]

You can do that right.

[Barry Lucas:]

Quickly actually for both you at the kind of high level and for Paul again -- beat this, but your appetite or enthusiasm in participating in any spectrum auction, it looks like we will kind of changed the rules so look back some of the thoughts from the post the Greenhill report that commission authored or developed?

[Steve Lacy:]

Yes. I can start and Paul can add to that. We are always open minded regarding an opportunities that we think could be good for our shareholders. We think it is downstream a bit and maybe will be uneven depending on the market, or said a different ways of places that we might feel we have access spectrum may not be the places that it has the greatest market value. But time will tell on that and we'll be very involved and very aggressive and trying to do the best thing for our shareholders. But it just feels, Barry, like that can't keeps getting kick down the road a bit. I don't know Paul if you got any other thoughts on that you'd like to share.

[Paul Karpowicz:]

No. I think that's right. And as Steve said we will keep a very close eye on it. I think the NAB lawsuit is helpful to the extent that it will help clarify the rules and make sure that the SEC follows the mandate that Congress had given them. And in that fashion be able to protect everybody who wants to participate in the auction. And given the markets where we have duopolies, we would have a number of opportunities where we very effectively could participate. So, we will just wait and see I think.

[Barry Lucas:]

And where would you be Paul in terms of utilizing the spectrum yourself, some of your peers are a little bit more aggressive on pushing for a change in the broadcast standard that might allow station owners to either you the pipe themselves or rent it to third parties.

[Paul Karpowicz:]

Yes, I think -- again I think there are still a lot of works to be done. I think there is a lot of good work that's happening right now with the various ATSC committees and the NAB technology committees that are working on a next generation standard. So I think we are supportive of those efforts and supportive of them, looking at those opportunities. But I think from where we are today to the implementation of a new standard, we've got a lot of way -- a lot of miles to go before we get there. There is a very long way to go. But I think the work has to be done. I think the research and the technology has to happen first. And then we will see where it goes.

[Barry Lucas:]

Great, thanks very much.

[Joe Ceryanec:]

Hey, Barry, let me just clarify that the comment on Shape. The number I gave is the combined Fitness Shape, so for this fiscal year on an annualized basis, Fitness is about $40 million top line magazine on an incremental basis, so when we combined the incremental revenue on annualized basis is about $60 million. So that would be incremental to the existing Fitness revenue.

[Steve Lacy:]

Rather than $80 million we said earlier, okay.

[Joe Ceryanec:]

It is now $60 million

[Operator:]

Question from Jason Bazinet with Citigroup Inc. Please go ahead.

[Jason Bazinet:]

I just had a quick question on the unique visitors that you cited; I think it was 70 million with a goal to get to a 100 million over time. Two questions. How long do you think it will take you to achieve that? And then second as we look at the underlying monetization of unique visitor? Is there sort of erosion under the hood where that won't --where those unique visitors won't all flow through the income statement? Or is it with the Selectable acquisition another things you are doing you think there is more of linear relationship between visitors and dollars?

[Steve Lacy:]

So absent addition to the portfolio which we will continue to work on if they make sense. We've been historically and in the recent past able to deliver sort of low double digit organic growth to that unique visitor portfolio. The acquisition of Selectable will allow us to move that number more quickly. And you are right that there tends to be un-monetized digital inventory generally in the market place and are real strong push downward on CPM which is the other aspects of why we were interested in Selectable. And Tom you might give maybe some more specifics of how we think that business will help us push not only traffic growth but also push CPM up in the right direction as we go forward on the digital side.

[Tom Harty:]

Yes. The Selectable piece for us is really a technology platform. It is an advertising technology platform that really delivers engagement what advertisers are looking for in the area of native especially. So what Selectable do, they also bring a network that their platform is installed on and they deliver network even to some of our competitors. So what you'll see is an expansion of our traffic growth that Selectable brings impression growth and because of this engagement, advertisers really want this. So you're going to see an increase in our yield because of this platform. That's why we're really excited about the acquisition.

[Operator:]

Question from Edward Atorino with The Benchmark Company, LLC. Please go ahead

[Edward Atorino:]

Hi, well, I just say good afternoon not quite. You some time ago you did a show called Better, sort of getting into programming with a larger TV audience and diversification of your magazines. Is there more opportunities to let say create programming of your own trend in your television stations?

[Steve Lacy:]

I would say a couple things, Ed, there is a tremendous amount of video content opportunity but probably the greatest money making opportunity is really short form video and very much like Tom mentioned tied to native advertising. So we think Allrecipes is a very interesting and creating way to possibly move further into that television market and within the existing Better show, there are segments that we are testing. But whether really make sense to go into incremental television programming on local media side I think remains to be seen. We make so much more money when we add additional day part in local news with much less organizational effort that might guess is Paul would tell you and I'll ask him to comment that our efforts might be better spent on the local side and focusing on our news inventory and these more television opportunities probably fit better on the national side. I don't know what would you about that Paul.

[Paul Karpowicz:]

Yes. I think that's correct. We still by the way do have the better show on the air right now. And we anticipate running that through the rest of the season. It will be completing its eighth season. Having said that though we've had much more success when we create local shows, we've got Better Connecticut, Better Atlanta, Better Phoenix, so we have created local shows that quite frankly are easy to produce, the infrastructure is simpler. So we will continue to focus really on a local level with development out of each station with things that are more remain to their market and just make more sense for what their station is trying to do. And then always continue to look for news time period as well where we can expand our news gathering efforts.

[Edward Atorino:]

And food shows are very popular. And you got a ton of food stuff --

[Steve Lacy:]

That's correct. And we are doing a lot of short form video and the question become whether that over some period of time turns into -- syndicated programming is not for the faint of heat or checkbook.

[Operator:]

Question from David Walker with Tricadia Capital. Please go ahead.

[David Walker:]

Yes, good morning. Thanks for taking the question. I guess I had two broad ones. The first one, thank you for all the detail on organic growth by division. I was curious if we look at the company as a whole in the quarter, what the overall organic growth was? Both for revenue and EBITDA. And if possible if you could give us particularly EBITDA excluding political.

[Steve Lacy:]

We are looking at a 1,000 numbers here. Everybody asked their questions differently. I don't know that we quite got it put together that way but give us about a minute.

[Joe Ceryanec:]

Yes. Looks like organically total company were up low single digits on revenue. And kind of mid single digits on profit organic.

[Steve Lacy:]

Okay.

[David Walker:]

Okay. And that's including political, though?

[Steve Lacy:]

That's including political because political is organic. Every other year to our business. And political was $29 million in the quarter.

[David Walker:]

Okay. So when you say organic, are you comparing it to the last political cycle or to -- are we talking about numbers --

[Steve Lacy:]

No. We are comparing it to last year this time.

[David Walker:]

Okay. So if we took political this round numbers I presume it would be sort of flattish revenue and low single- digit profit something of that nature.

[Steve Lacy:]

No. Because you would have to add in to nonpolitical, that's why it gets to be little dicey. Nonpolitical was down because political was so strong. So you can't just take political out for dollar, probably take out only about half of it.

[David Walker:]

Understood. That's what -- so that's helpful and one final question just at a high level. Your stock trades at perhaps ten times EBITDA which is relatively healthy evaluation compared to its constituent businesses, TV and particularly magazines which appear to trade several turns lower, so you got a very strong currency and I am curious to know what your thoughts on using that currency perhaps more aggressively, perhaps in greater size in acquisitions. Since it would appear to be somewhat accretive to do so?

[Steve Lacy:]

Yes. It is a very good point and a very good question. And again as if we relate to what we think of it as a transformational opportunity. We would certainly be open minded to that. We obviously in this kind of an environment where we go to the market from a debt perspective with a very, very low cost to borrowing, we are careful about using capital of that sort of value. But, in fact, if the opportunity presented itself, we would certainly be willing to work with that currency. Your point is well taken.

[David Walker:]

Very good, thank you.

[Steve Lacy:]

So thank you all for participating today. We appreciate all the questions and your ongoing support for Meredith. And if there are any further questions that we didn't cover feel free to reach out to us for the balance of the day. And with that I think we'll let everybody get back to work. Again, thank you very much for participating.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.