Q2 2021 Meredith Corp Earnings Call
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Ladies and gentlemen, and thank you for standing by and welcome to the Meredith fiscal 'twenty 'twenty, One second quarter earnings conference. At this time, all participants are in a listen only mode and.
After the speaker presentation, there will be a question and answer session.
Ask for questions Ryan that session, you will need to press star one on your it's all about.
Please be advised that today's conference is being recorded.
Acquiring any further assistance please press star zero.
And now I'd like to hand, the conference call over to your speaker for today, Mr. Mike Lovell, Sir you may begin.
Good morning, and thanks, everyone for joining us our call will begin with comments from Chairman and Chief Executive Officer, Tom Harty, followed by Chief Financial Officer, Jason for.
Remarks. This morning will include forward looking statements and actual results may differ from our forecasts.
The reasons for the differences are described at the end of our news release that was issued earlier this morning and in our SEC filings.
Certain financial measures that we're discussing on this call are expressed on a non-GAAP basis that have been adjusted to exclude the impact of special items.
Reconciliations of these non-GAAP measures are included in our slide presentation.
Our earnings release, and slide presentation are available and the Investor Relations section of Meredith Dot com.
An archive of our prepared comments will be available on our website later today.
And now I'll turn the call over to Tom.
Thank you, Mike and good morning, everyone.
And I hope you've had the chance to see our news release and a related slide presentation issued earlier this morning.
And they include disclosures, we think youll find very useful.
I'll start with slide three.
Our audiences continue to count on Meredith trusted brands and our advertisers are responding in kind as a result, we delivered record revenue and adjusted EBITDA performance and our fiscal 2021 second quarter.
Even as the Covid pandemic continues to impact certain aspects for our business.
To summarize EBIT.
EBIT growth for each of our segments was driven by strong gains and the National Media group digital advertising and our local media group political advertising revenues, which more than offset adverse COVID-19 related impacts we.
We had the best second quarter free cash flow performance and our history and finished the quarter with more than $375 million of cash and the bank.
This performance has enabled us to continue strengthening our liquidity and reducing our net debt.
As we've discussed in the past the strategy, we're pursuing has two facets.
First net debt reduction is our number one priority.
Our leverage ratio target is two times adjusted EBITDA over the long term, we're making great progress and with improvement and our leverage ratio compared to September 30.
We will continue strengthening and enhancing our digital and consumer focused capabilities. We reached a critical milestone in the quarter as digital advertising revenues surpassed magazine for the first time and our licensing and digital consumer businesses reached record highs.
Meanwhile, consumer engagement remains strong response rates for our magazine subscriptions solicitations remain above historic norms and traffic to our National media group sites and expanding.
National Media group consumer related revenues accounted for nearly 50% of the segment and we are leaning aggressively into growing licensing and E commerce opportunities.
We believe we have a strong opportunity for growth ahead.
With that let's go into detail of the quarter Star.
Starting with the digital side of the National Media Group, our team delivered outstanding performance.
Digital advertising revenues grew 22% for a record high $161 million.
Our multi year efforts to bring all of our brands together on a single digital platform continues to enable strong consumer engagement, along with growth and advertising and ecommerce revenues of note track.
Traffic to our digital properties and partner networks grew significantly with 16% session growth from the prior year period.
Our fiscal second quarter, which includes several holidays is heavily influenced by food all recipes the world's largest digital food site as ranked by Comscore delivered record performance with almost half a billion sessions up 23% from the prior period.
People Dot Com also delivered record performance and remains the number one destination and the entertainment category. Additionally.
Additionally, our powerful National Media group brands led by people and better homes and gardens delivered strong growth and brand licensing revenues, particularly from our digital relationship with Apple News plus along with continued growth from our longtime licensing partner Walmart.
Our performance is driven by our trusted brands relevant content and.
Consumer experiences at scale digital first party data and unique offerings for our partners, we're seeing significant demand from the capabilities offered by our Meredith data studio, which we launched last quarter.
Our clients are seeing value from it across a broad range of offerings, including predictive insights that help our brands and our partners create the right content and messaging for consumers.
Robust data driven audience targeting for our partners and leveraging our taxonomy that is unique to the industry and predictive advertising solutions based on our contextual data that's driven click the card experiences.
As a result of our unique and robust suite of offerings, we sold twice as many million dollar plus programs during the second quarter compared to last year.
As our digital business continues to grow we expect to provide additional disclosures and an effort to provide more transparency. We've already heard for many of you about this and continue to welcome feedback on digital related disclosures that will be helpful to better understand our business results.
Turning to our National Media Group magazine business, we're encouraged by our continued recovery and magazine advertising and delivered sequential improvement from the prior quarter as you may recall at the pandemic start we put together a plan to maximize performance during the crisis.
And it included differentiating ourselves by maintaining publishing frequencies and schedules, which has contributed to merit, gaining nearly five points of market share and the last year.
We continue to see strength and magazine subscription solicitation direct mail response rates were up 50% and this spring, 38% and the summer and 35% and the fall.
Online sales that magazine Dot store are up for 39 of the last 41 weeks and up 40% year over year. These.
These strong response rates form the basis for our long term relationship with our customers subscribers.
Subscribers, we source ourselves renew at higher rates and agent sources, allowing us to grow the profit contribution from our subscription activities over the long term as rates step up overtime.
Looking more closely at our broadcast and portfolio, we delivered record political advertising results and the second quarter competitive races, particularly those in our Phoenix and Atlanta and media markets drove nearly 100% growth versus two years ago.
Our local digital efforts have gained significant traction and are giving us a platform to capture digital political growth.
Our team delivered $12 million of digital political advertising revenues and the quarter compared to less than $1 million two years ago.
Non political advertising was clearly impacted by political crowd out while still improving sequentially versus the prior quarter.
Turning to slide four.
We have more than 40 brands and our portfolio and we continue to develop new opportunities for growth for.
For example, we announced last month, our strategic relationship with Wyndham destinations that includes the sale of the travel and leisure brand for $100 million and cash and a commitment for $30 million and marketing spend across our portfolio over the next five years, we received $55 million and cash in fiscal 'twenty one.
And the balance over the next three years. Our agreement also grants Meredith a 30 year renewable royalty free license to continue operating travel and leisure media assets. So we expect little change for our P&L going forward.
And we're expanding our brands to new media platforms, including broadcast television a Great example is our recent launch of the people show, which debuted in September 2020 across our 12 markets and remains the number one new show. This season. According to the most recent Nielsen ratings and December 2020.
<unk> TV is a natural extension for the people brand and the show's ratings are compelling.
As a reminder, we are working with Sony Pictures television to syndicate, the show to non Meredith stations beginning in the fall of 2022.
And the third column, we are pursuing consumer driven opportunities, including E commerce.
And as an example, our content commerce team drove a four fold increase and partner retail sales during Amazon's Prime day through solid execution of cost and editorial and promotion across our sites.
Weeks later, we delivered similarly strong performance during the Black Friday, cyber Monday weekend retail event.
And finally, we are launching new products, including podcasts and more video video views across our owned and operated properties and network partners grew 17% and the second quarter of fiscal 2021 compared to the prior year period, we've doubled the number of our brands, creating podcast and the last year and podcast.
Production is up nearly 30% from a year ago.
While the macroeconomic backdrop still uncertain and we're excited about our performance for the first half of fiscal 2021, and the groundwork we've laid for future growth with that overview I will turn it over to Jason I'll come back to highlight certain trends, we're seeing and our third quarter and offer closing comments then we'll invite your questions.
Thanks, Tom.
I'll begin on slide five looking at the second quarter 2021 consolidated performance revenues were $902 million up 11% from the prior year period and.
Adjusting for portfolio changes announced over the last year total revenues would have been up 14% on a comparable basis with the second quarter complete we have now cycled through these portfolio changes as the last actions taken happened and the second quarter of 2020.
Advertising related revenues were 525 million, 23% higher than the prior year period on comparable basis, excluding $2 million and portfolio changes advertising related revenues were up 26%.
As Tom said growth was led by record political advertising across our station group and record digital advertising across our national media sites.
And that said Covid continues to impact our results, particularly in our legacy magazine and nonpolitical advertising channels and as we continue to progress through the pandemic quantifying the precise impact has become more challenging our estimate for the COVID-19 related revenue impacts to advertising consumer related and other activities for the second quarter total between 25.
And $35 million with the majority.
City of declines and the National Media group.
Consumer related revenues were $358 million up 3% from the prior year period on a comparable basis, excluding $8 million and portfolio changes consumer related revenues were up 5% driven by licensing and retransmission growth of the revenue was $18 million down 46% from the prior year peer.
This was primarily the result of non repeat project work and sunsetting and service agreements for sole brands, including time sports illustrated and fortune.
On a consolidated level adjusted EBITDA grew 57% to $304 million from the prior year period growth was driven by a $130 million and political advertising revenues, including $118 million and political spot and $12 million of digital advertising revenues, along with 22% growth and National Media Group did.
<unk> advertising revenues.
Fiscal 2021 second quarter free cash flow was $174 million.
$107 million better than the prior year period, as we benefited from digital and political advertising revenues lower employee related items and lower restructuring payments.
Turning to next page on slide six.
National Media group revenues were $576 million down 4% for the prior year period. The portfolio changes I mentioned earlier accounted for $18 million of the decline with consumer and advertising generally impacted equally.
On a comparable basis, excluding portfolio changes National media group revenues were down 1%.
Advertising related revenues were $295 million down 2% from the prior year period adjusted for portfolio changes advertising related revenues were up 1%.
That includes comparable digital advertising growth of 22% or $29 million, which more than offset comparable magazine declines of $19 million a critical milestone for the company.
As the Covid recovery continues and due to seasonality of our advertising businesses. We don't expect this transition between digital and magazine advertising to happen every quarter in the immediate term, but we continue progressing towards a more permanent portfolio shift.
Giving some more color on our advertising performance during the quarter, we are benefiting from our multi year investment and the technology platform. We highlighted last quarter as a reminder of the new platform brings together consumer profiles real time insights and intense signals to one predict trends that inform our editorial and product roadmap to provide <unk>.
<unk> experiences to our consumers and three give our advertisers the ability to tailor the right messages and products to the users and most likely to buy at any given time.
And also prepares us well for World, where third party cookies are no longer supported.
And the magazine platform is recovering in line with our expectations here are two clients are looking for dependability flexibility and brand safety.
As a result, our magazine brands are outperforming the competitive set and continue to take market share.
According to media radar mirror this share of U S magazine advertising market stood at more than 35% and calendar 2023 December up from 31% and the same period a year ago.
National Media group consumer related revenues were up 1% from the prior year period adjusting for portfolio changes and consumer related revenues grew 4%.
Subscription.
Revenues were down 5% on a comparable basis, primarily due to our efforts to shift our subscription solicitation mix towards direct to publisher and away from third party agents as a reminder of the strategy reduces revenue, but increases profitability over time and a rate base remains stable at $36 million.
<unk> revenues grew $3 million, despite the challenging COVID-19 environment, which continues to impact certain retail channels, including airports and bookstores, we saw opportunities based on current events and publish more special interest titles compared to the prior year period or.
Our licensing and digital consumer activities, which includes E commerce lead generation and content Commerce continued to deliver strong growth up 34% and the quarter from the prior year period.
Other revenues were $47 million down 34%, primarily the result of non repeat project work and sunsetting and service agreements for sold brands.
Adjusted EBITDA was $156 million up 11% despite continued impact from COVID-19 compared to the prior year period.
The driving factor was digital revenue.
Which reached a milestone of surpassing magazine advertising revenue and the second quarter and helped deliver margin expansion for the National Media group.
Similar to our discussion last quarter and consistent with our goal to expand disclosures related to our digital business. Let me walk you through a few digital kpis on the right side of the page.
Digital sessions were up 16% from the prior year period.
All recipes delivered the strongest year over year traffic growth as consumers visiting the site for holiday related food inspiration. This performance was followed by people Dot com, which continues to benefit from strong interest and celebrity and entertainment related information.
We saw more advertisers coming back into the open programmatic market, which helped increase programmatic pricing and importantly, we also saw strong growth and direct sales driven by advertiser demand for our powerful brands premium content and first party data along with the flexibility that our digital platform offers.
Looking beyond advertising at the bottom right of the page.
Licensing and E commerce activities continued to gain traction led by relationships, including those with Walmart and Amazon.
Turning to slide seven.
Local media group revenues were $328 million up 53% political spot advertising revenues of $118 million.
Mission revenues of $92 million and third party digital political advertising revenues of $12 million offset a 16% decline and non political spot advertising revenues driven by crowd out from political demand.
We estimate <unk> from political spot advertising revenues lowered second quarter non political spot advertising revenues by approximately 14 to 16 points.
Adjusted EBITDA more than doubled to $161 million, driven primarily by political demand looking more closely and political advertising the map and the right side shows where we delivered the most revenue by market as depicted by the size of the shaded circle.
And the second quarter political advertising revenues were up 96%.
From the prior election cycle two years ago, approximately 60% of second quarter revenues came from the Senate races in Arizona and in Georgia, where we also benefited from runoff races, and the U S Senate.
Finally, as Tom mentioned, our digital efforts extend to our local media group.
Local digital team has expanded beyond non political and captured $12 million of third party digital political advertising revenues in the quarter. This compares to less than $1 million during the last election cycle two years ago.
This highlights can be found in our segment schedule within the local media group third party advertising revenue line.
Turning to slide eight cash flow liquidity and balance sheet strength remain critically important to Meredith net debt reduction.
And we driven by a strong political advertising and digital performance lower employee related items and lower restructuring payments.
As a result of our cash and adjusted EBITDA performance, our leverage ratio on a reported basis was three nine times adjusted EBITDA as of December 31, 2020, a significant improvement from the prior quarter.
Looking at the bottom of the slide we ended the second quarter of 2021 with $379 million of cash and the bank compared to $21 million and the prior year period, our revolver balance was zero at December 31, and continues to be unused.
We continue to see positive momentum and our efforts to improve cash flow helped by strong digital and political advertising demand, we had approximately $450 million of cash and the bank as of January 31, 2021, and we expect to continue generating positive free cash flow each quarter throughout fiscal 2021, now I'll turn it back to Tom for closing.
And that's on slide nine.
Thanks, Jason Arkansas.
Our consumers today continue to focus on food home Health Entertainment and news and information about their local communities. These subjects are the cornerstone of the Merit Corp.
As we think about our priorities today I want to leave you with for key thoughts.
First our number one priority is debt reduction our goal is to reduce our net debt to a leverage ratio of two times and were making progress for approximately $450 million of cash and the bank at January 31.
Second we're excited at our digital advertising and consumer revenue growth. This.
This includes achieving a critical milestone with digital advertising revenues, surpassing magazine advertising revenue for the first time and our history with.
We attribute this success to several factors, including investments and our National Media Group Digital platform, our deep first party data and analytics capabilities and our powerful brands, which include people allrecipes better homes and gardens and southern living these brands are backed by a tremendous creative.
Engine and collectively reach and engaged nearly 95% of American women.
More women than any other media portfolio and the United States.
Together these assets and capabilities, our marriage, Differentiators and form the basis of our value proposition to advertisers and shareholders.
They also position us to benefit from incremental advertising spend as the economy recovers.
Third non political spot and magazine advertising are recovering at a measured pace and we expect continued improvement over time.
Finally, our advertising and marketing partners are expressing optimism for calendar 2021, citing the expected passage of further economic stimulus legislation and large scale deployment of COVID-19 vaccines.
That said near term uncertainty caused by the unstable political environment and persistently high cases of Covid nationwide are contributing to a slower start to advertising spending and the March quarter. This.
And this was particularly true for magazine advertising, including our luxury and travel related brands.
As we look into our fiscal 2021 third quarter compared to the prior year period, assuming no changes and trajectory due to COVID-19 or other macro factors, we expect national Media group digital advertising revenues up and the mid teens.
Magazine advertising revenue down in the high teens.
Local media group non political spot advertising revenue to be approximately flat and.
And we expect costs and the third and fourth quarter and returned to the normal run rates.
In closing, we're excited by our performance and the first half of fiscal 2021, we're cautious and so we look into the second half of fiscal 2021 as there continues to be significant variables at play to reiterate our goals are to reduce debt and continue to strengthen and enhance our digital and consumer growth opportunities.
With that we'll open it up to your questions.
As a reminder for asphalt question, you will need to press star one and Thats all around so let's divide your question and first the pound or hash key sales.
And the standby, while we compile the Q&A roster.
At this time I would like to turn the call over to Tom Harty.
Good morning, everyone, joining Jason and myself. This morning, we have Patrick Mccreery President of the local media group. We also have capturing Levine president of the National Media group and since our last earnings call. Catherine was promoted into the leadership position of the National Media Group, where she previously ran our digital business.
And we're thrilled to have Catherine and this leadership position and joining US today now we're happy to take your first question.
Your first question for Us on a line of Jon <unk> with Wolfe Research.
Thanks, Tom.
You guys you talked about your direct marketing response rates, how do you see those trending as you comp to start of the pandemic and and how you're thinking about retention relative to historical levels and then maybe quickly on your comments related to magazine advertising in terms of the outlook is there.
And to call it down high teens and is that broad based or is that still confined to some of the categories. You talk to you on prior calls thank you for.
Jon Yes, so the one one insight that we found through the through the pandemic consumer insight I think it probably took us most by surprise was.
The response rates to <unk>.
<unk>, so consumer demand for magazine and solicitations shot up on day, one of the pandemic and as I mentioned, we had a 50% lift and direct response rates in the spring and close to 40% for the.
Balance and a year that those trends continue.
There is something I think when we look at women. They are doing bolt theyre looking at digital and Theyre looking at magazines and Theres something about the magazine format in the pandemic and the content that we deliver that spiking that demand. So we're taking advantage of it and actually Jason has been leaning in and giving a teen more investment dollars. So.
As we've talked about in the past that and a more direct to publisher or deals that we have ourselves.
With consumers and the long run when you look at consumer lifetime value. It's a great great thing for us. So we see that trend continuing and we're excited about it.
And when you look at advertising, where we've been most hurt through the pandemic has obviously been and our travel and luxury brands for some of those have been down and continue to be down over 50% year over year. So we're seeing that trend continue so when you say when we look at the whole portfolio. Some of our brands are performing.
Closer to flat and in some instances actually up and then we have others in a like luxury and travel that are down significantly. So it's a little bit of metallurgy cities, depending on the brand and the category, but we're excited to see as the as the Covid vaccines come out we expect all of that travel advertising to come back and will prepare.
And for it. So again, we don't know exactly when it's going to happen, but we're cautiously optimistic as we look for the future with some of those categories had been highly impacted by COVID-19.
Okay. Thanks, and maybe one last one just on your comment on costs moving to a normal run rate going forward are there specific areas to call out that we'll see the investment.
Thank you Mike.
And what does normalized cost level is actually mean.
Yes, I think as we look at kind of cost levels pre pandemic.
And what that's really referring to Jon I think the as you think about our cost levels and the third and the fourth quarter last year I think were low for reasons that we've talked about before specifically and and employee related costs.
And we've talked about kind of a onetime salary actions that we've taken.
And we talked about.
In terms of.
Benefits and healthcare costs people aren't going to doctors those types of things and now thats kind of come back to a more normal run rate.
Those types of costs and employee related nature, I think would be the most.
The highlights and I'll give you there.
Alright, Thanks, a lot guys.
Jon.
Your next question comes from the line of Dan and earn outs with benchmark.
Yes, good morning first off Greg.
And Catherine well deserved.
Yes, Tom.
Tommy and immediate and Catherine here I guess.
We've been hearing a lot, obviously and analyze high and that's something that Jon and SaaS.
Tail and remarks here, Tom just around.
The impact and mobility here, obviously digital.
Based on your initial expectation when we started the quarter and then where they finished keen and much better.
And we've had an unfortunate.
Resurgence of Covid, which continues to.
Here in Q1 here and I just wanted to get a sense for you guys, how you're thinking about the sustainability.
The growth here given all of the changes you've made clearly you guys are benefiting from trends, but also a lot and internal investment so to the extent that you have kind of any visibility here in terms of the digital outlook and how long.
And <unk> level of cash and traffic.
Our revenue year over year growth given that it's pacing above what I think kind of your long term targets are that would be super helpful and start.
Sure sure I'll ask Catherine to.
Pile on but.
To begin and I think that our guidance for advertising for digital and Q3.
Up mid mid teens.
Kind of shows the strength and what we're looking for in Q3.
So we believe we've got a long runway for.
For growth from an advertising perspective, but also I want to make sure that you are focusing in on some of our other digital growth specifically related to consumers. So I'd like Catherine and make some comments about what we're seeing and in our licensing area and our E Commerce area and those investments that we've made over the last five years really.
And to pay dividends for maybe Catherine Kevin gives them some observations about advertising, but also focusing on consumer.
Sure.
And then let me just start with advertising and.
Thanks <unk>.
If anything our session growth has been strong and for fall and.
And I think as people go back.
And in the office and life open GAAP and <unk>.
<unk> may not be up and growth rate assets.
And.
Jim Colgate and the other hand open.
Open programmatic.
Only a thorough and of our.
At the driver of growth.
And and the digital business and every demand channel so that income and direct sales and premium programmatic are by and large sponsorships.
And that 22% volume.
<unk> is up significant role audio and yet again.
Digital consumer and Con Ed is absolutely wonderful and we signed twice as many loans and our quest partnership.
And the advertising category.
Every every channel for rack and premium programmatic, which are sold by our sales force and mainly driven by our competitor and competitive advantage net.
No the <unk> platform.
And our relationship with consumers and.
And our ability to target.
Net ticket.
And that's that's growing equally.
Equally our open programmatic per session. So that's the first part and and video.
Okay, and now and advertising and.
Consumer.
Even stronger growth and <unk>.
And how to Keith and and some of our numbers.
E Commerce portion of our consumer digital revenue.
And as optimum 16.
Right. So we're talking about affiliate commerce market growth.
Promotion.
Gotcha, that's growing significantly and we expect that to be sustained and.
And those rates moving forward.
And we can see adding some of our prime day numbers that Tom talked about.
Black Friday and then.
Ongoing throughout the quarter.
And the other area we see.
And we expect to be moving <unk> are paid products, we're still in the early <unk>.
And of our thinking around paid product and our strategy, but we are developing new products and services that consumers will ultimately pay for it so.
So we see a lot of a lot of opportunity and net content.
Commercial and consumer revenue category and <unk>.
About attack.
Yeah, I was going to ask that next and just didn't want to credit all in one question.
But yes, Catherine can you dig a little bit more into that I noticed for the question I asked and the last called surround kind of economy and licensing opportunities and obviously you have had a very strong relationship with Walmart and feels like <unk>.
Increasing allrecipes opportunities I'm just curious.
Are you driving a lot of your revenues through affiliate or Amazon and are there opportunities to.
GAAP more incremental brands into the marketplace how much.
And our heavier unit.
Areas and.
And growth rates off of slightly smaller numbers, but just over time over the next I don't know three to five years, how big a piece of the business do you think out of those components and get too.
Yes ill start off I'll ask Catherine I think that.
Our licensing business.
Grew by just over 40% in the quarter and to your point and there's two main drivers of that and one of them is Apple news plus so that is our relationship with Apple, where we have our premium content and our paid environment and Apple news and we get paid.
Royalty on that and that's been growing significantly and then Walmart continues with the better homes and gardens brand.
And to grow.
And through through the pandemic, it's up and.
Over and over 10% kind of consistently and so we've seen nice growth.
Through the through this period of time and and Thats been a long term relationship that we've been growing on a year over year. So so licensing and I'll I'll ask Catherine and getting a little bit more detail about the digital consumer area and make some comments, but again, it's not just about advertising our strategy from a digital perspective is to <unk>.
Row consumer revenues on products and services and some of that is going to be licensing some of thats going to be direct products that we sell to the consumers are and what's going to be affiliate deals.
A significant area of growth that we see going forward and our cash flow. If you have any other comments on that area.
I think thats exactly right.
Temporal voluntary and want a question.
Wow.
No that's fine.
<unk> incremental color anyway, thanks for the clarity guys and congrats on the quarter and make sure you put that when the money and the bank Asa and what it used in mind.
[laughter].
Yes.
And our next question comes from the line of Jason Bazinet with Citi.
Can I just ask a follow up on that on that $10 million nominally a license fee growth.
I think the thing that everyone's probably trying to figure out is how much of that.
Sort of has the that the growth sort of has this.
Secular tailwind that could continue like Apple news plus as opposed to.
Commerce, driven right, which will obviously be.
Be a bit more bumpy up and down.
Christmas the holiday season versus a normal quarter.
Is it sort of like 20% and the growth is Apple news and the other part is commerce related.
Something like that.
We can dig out the numbers.
I'll ask Jason <unk>, we have the numbers on that and I don't have it off the top of my ahead, but I think what I would say about Apple news plus Jason is that it's really not related.
Two.
And anything related to Covid.
This was a long term deal that we cut with them and we have.
Escalators related to year over year escalators related to the deal related to our content performance within Apple news plus and so its really on time spent with our brands.
So this is something a lot of this growth even pre <unk>.
Pre COVID-19, we were anticipating and see that kind of continuing to grow as we go forward. So.
Really not related to Covid I don't know if we have the exact numbers we can breakdown.
And I can tell you that over half of our per well.
And I still think for tomorrow.
And that simple home for autonomous volume, our Omaha, such deals this past quarter, and we see that continuing.
So we are in fact and are investing more in that area.
E Commerce.
And I don't see while slowing down.
And in the near term.
Steven sequentially.
Year over year year over year, Okay. That's for sure Okay perfect.
And obviously there is some seasonality associated with that Jason.
There's a lot of commerce activity that happens and we talked about with Amazon Prime day, and things like that and the fall, yes totally get it. Thank you.
And anything else for years.
As a reminder to ask a question you would need to press star, one and I'll get telephone.
Yes.
Our next question and Thats on the line of Kyle Evans, what Steven.
Hi, good morning. Thanks.
And Kyle Kathryn congratulations.
And we've talked a lot about.
And kind of the unit volume trends on the digital side.
What is the contribution of video Jim.
National Digital and where do you where do you think that sales overtime.
Alright.
And yes.
So.
Video and scale.
Fairly small for us.
Total.
And while advertising revenue.
Which in some way.
And good news and the Battle net.
The good news for while we have a lot of runway.
Yes.
And with them.
Starting to invest more and more I think we talked last year about investments and payouts for <unk>.
King.
And all of that and our normal pack for because of Covid, but we expect for the warm fall enrollment for <unk>.
And for building out and in fact, and we just hired a new chief Digital content Officer, who came from take me and if you're familiar with total.
And it's turned into Maryland, and smartphone and <unk>.
And she will help content there. So we just brought her over.
Moving her expertise across our digital that will trail by Kevin and Hello.
And.
Yes.
Great.
And I'll switch over to Patrick you've been.
And Patrick.
All right Jason correctly, your estimate on political crowd out.
And almost completely.
And again.
Year over year decline and non political spot television ads first off did I hear that right.
And we were kind of flattish ex political and then and then.
How do we get there.
This is a business that was.
Waylaid and.
And margin was down massively kind of where the pockets of strength that are getting us back to Jim flat.
Flattish Corp.
Yes, you did hear it correctly and for those stations of ours that were not heavy and political that's exactly what we saw flattish.
I think look.
We've seen strong growth and professional services quarter over quarter, and we've even seen and strong growth quarter over quarter and auto.
I mean look retail and restaurants are still really challenged no doubt about it there and theres a level of uncertainty there, but we are seeing continued sequential quarter over quarter improvement.
<unk>.
So.
Really I think Theres also a lot of frankly pent up demand out there for these businesses that we'd like to grow and need a way to do that.
And Kyle and might have just piling on with Patrick to the portfolio. It is not we are a different portfolio.
With different performance by market too. So we have some some markets like Las Vegas, and Portland that have obviously been more affected by.
By Covid and some of the political unrest, that's been happening and those market. So.
That's where you would expect to see some some recovery.
As we get through this crisis.
Patrick I'm, not asking you to guide and how should we think about.
Annualizing.
And the pandemic pressures and this last March and the.
The reverse political displacement and kind of and the second half of calendar 'twenty, one and what are the.
I'm, having trouble thinking about.
For over the next four quarters.
Yes, well look I think that.
I'm looking forward to this quarter, because I've got the Super Bowl on CBS and that's a nice that's a nice bump and then we are up against not having the NCAA tournament last <unk>.
March and April which returns this year and that will for about another nice secular bump. So I think net as you look at core there are still plenty of items and reasons to come advertised.
And I think youre going to continue to see the quarter over quarter improvement that we've been seeing.
<unk>.
And I don't want to I know, you're not looking for a guide and I'm, probably not the one to give you the guidance.
But we're seeing good pacings this quarter that continue that trend.
Got it.
The national side.
I feel like for.
And I don't want to beat this horse again, because you talked about very strong direct response Mayo and.
And digital.
Subscription and we're still looking at negative revenue numbers there.
And we're rolling off of some of the third party stuff that you inherited with time and.
As well as rolling offs.
And kind of comparable.
Title changes that you Mike could you just kind of update us on where you are.
And for where we all are and rolling off the time subscription third provision.
And rolling off.
Comparable title on the magazine Jon.
Well Kyle I.
I would say that we are.
Yes, we are and our third year. This is the third year, we actually just celebrated our anniversary of the time, Inc. Acquisition on February one so the thing that I was most excited about we talked about the journey at the timing that it was the integration was a heavy lift and it was going to be a full two year integration and what were <unk>.
<unk> and this year is the fruits of our labor for those two years and we're starting to see the digital performance because we're on one unified platform. We got rid of the titles that we didn't want it and we sold so even with the Covid pandemic that we are hit with which obviously wasn't a complete surprise.
<unk> media group and the current quarter that we just closed is up and operating profit and up and adjusted EBITDA year over year and they also are up for those same metrics and the first half for the fiscal year So outstanding performance.
Wish we didn't have the effect of the Covid, the COVID-19 issue, but but again kind of what we expected that this was the year, where we were going to finally see the fruits of our labor pay off and really start to see us return to growth. We are we are.
Always lumpy I know, we make it a little hard for you guys that you know when we made the decision on family Circle last year and it creates some adjustments that we need to make this will be the first clean quarter.
With no adjustments as we enter Q3 and again to answer your question on consumer.
We're always looking to take advantage of consumer profits over the long term and I'm talking decades, we've optimized the National Media Group magazine business to more of and advertising driven model. We obviously, we get revenues from consumers and advertisers, but we sacrificed consumer prop.
<unk> and.
<unk> had higher rate basis, and more copies to be able to take advantage of a robust advertising marketplace.
Over the last year and into the future and we're going on we're going to be changing that model because obviously when advertising demand comes down and you see the numbers that we mentioned, where we see that demand for consumer and we increased price and we get rid of less profitable circulation and thats an ongoing.
Change that will happen over time and you got to think about long term on consumer marketing, where you get lifetime value you acquire somebody you can step them up and price of auto renewals. So it takes time and we have that accounting issue, where we've talked about that when we optimize profit direct to publisher subs, which are.
And more profitable over the long run can decrease circulation revenue related to agents. So a long winded answer, but where we see opportunity for the magazine business consumers love magazines, where sell more copies and our special interest copies last year than we did the year before even with the pandemic.
<unk> revenues subscription profit is going to be up so.
It's something that we're excited about we're always going to be tweaking and optimizing that model.
Great. Thank you.
Yes.
Your next question comes from the line of Aaron Watts with Deutsche Bank.
Hi, everyone. Thanks for having me on.
I appreciate your comments around net debt reduction and being a priority and you've built currently got the healthy cash balance for end up for calendar year.
Which helps all or your leverage metrics and I'm curious, how you're thinking about the priorities for that cash and when you might be comfortable enough with the operating backdrop to perhaps use that cash to pay down tangible net balances and bringing our gross debt leverage down and alongside your net debt leverage credit.
For the ask Jason and kind of take that Eric.
In terms of how we've thought about it obviously navigating the pandemic.
Although a whole host of unknowns has been kind of a sense of caution for us and.
As we look into the beginning of this calendar year and little bit of a slow start in advertising as Tom said before and we're looking at consumer metrics and <unk>.
And those types of things in terms of where we are and what we see in front of us.
Moving to Kevin key metrics that we're looking for to kind of give us a little bit of a guide in terms of the timing of doing that we're absolutely going to do that I just want to make sure that we're.
<unk>.
Thoughtful in terms of the timing and doing that.
And kind of working through that and in a methodical way versus maybe kind of a step back. So as the vaccine takes takes course and takes and the impact on those are all positive trends for us. So I would say that those are positive indicators and as we move forward and we'll continue to evaluate that and make sure that were taken into consideration as we determined kind of when to take down.
Our debt and pay that off.
Okay, Great. That's helpful and then if I could ask one other question.
<unk> validation and the television space Understandably took a bit of a breather and 2020 as we embark upon a new year with a new administration and a new FCC add how are you thinking about the potential for meaningful M&A activity to take place and the space broadly and what are your latest thoughts and how we should be thinking about Meredith participates in.
And that is either a buyer or seller of TV assets.
Jim.
Yeah listen and we always are looking in the marketplace for opportunities. We participated in the past 12 months looking at opportunities to acquire obviously.
Our number one priority is debt reduction so it would have to be something really extraordinary that fits our strategy either on the local media group side or on the National Media group side to make a decision on that but we're always looking and considering opportunities and we go forward. We believe we have a fantastic portfolio of TV and <unk>.
Patients that obviously had record performance and threw off a lot of cash and these two operating segments together are really performing super well and generating cash and allowing us to pay down debt and give us more flexibility as we go forward with our balance sheet and and how we look at that.
And so that's kind of where we stand.
Okay, great. Thanks again for the time.
Thanks, So I think that wraps up our Q&A session. Thank you all for participating today I just want to make one comment that we're 11 months into the Covid pandemic crisis and I'd just like to thank the Meredith employees and we're almost coming up to the anniversary, where we asked all of them to the pit.
And it and work from home and they obviously faced a lot of things changed from a personal perspective, and obviously from a work perspective, and I'm just thrilled with their performance and and I. Appreciate all they've done to move Meredith for during this crisis and and thank them. So with that I'd, just like to close and thank you very much for participating thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.