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Meredith (NYSE:MDP)

Q3 2013 Earnings Call

April 25, 2013 11:00 am ET

Executives

Michael Lovell - Director of Investor Relations

Stephen M. Lacy - Chairman, Chief Executive Officer and President

Joseph H. Ceryanec - Chief Financial Officer, Principal Accounting Officer and Vice President

Thomas H. Harty - President of National Media Group

Paul A. Karpowicz - President of Local Media Group

Analysts

John D. Crowther - Piper Jaffray Companies, Research Division

Matthew Chesler - Deutsche Bank AG, Research Division

Gregory Stein

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Meredith Corporation Fiscal 2013 Third Quarter Earnings Release Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to the conference over to our host, Mr. Mike Lovell. Please go ahead.

Michael Lovell

Hi, good morning, and thanks, everyone, for joining us. We'll start today 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 are Tom Harty, President of our National Media Group; and Paul Karpowicz, President of our Local Media Group.

An archive of today's discussion will be available later this afternoon on our IR website and a transcript will follow that. Our remarks today include forward-looking statements and actual results may differ from forecasts. Some of the reasons why are described at the end of our news release issued earlier this morning, and in some of our SEC filings.

With that, Steve will begin.

Stephen M. Lacy

Thank you, Mike, and good morning, everyone. I hope you've seen our news release issued earlier today, detailing our results. I'm pleased to report a strong fiscal '13 third quarter as we grew total company revenues by 7% and earnings per share by 9%, excluding special items. There's always a bit of uncertainty as we enter a new calendar year, particularly when it comes to advertising.

Before discussing quarterly operating group performance in detail, let me give you some of my thoughts on early calendar 2013. First of all, we're generating very robust digital performance across the company. Digital consumer metrics are at an all-time high, and we grew digital ad revenue 45% in the quarter. Digital growth, of course, has been a major point of emphasis at Meredith, and I'm pleased with how we're executing against those growth strategies. This includes driving record online magazine subscription orders to our print publications.

One of those digital strategies was to acquire Allrecipes.com, the world's largest digital food media brand. We've now celebrated the 1 year anniversary of its acquisition, and we've made tremendous progress on the brand's growth initiative during this past year. We've increased consumer traffic to the site, created a mobile-specific Allrecipes capability that consumers are using right in the grocery store aisles at growing rates. We continued the brand's international growth as well. Additionally, we're very excited about a recent test issue of a magazine based on the Allrecipes brand. Consumer response has been very strong, and we'll have another test issue in our fiscal 2013 fourth quarter. We'll have a final decision about whether or not to move forward with the launch of the Allrecipes magazine, when we report full year results for fiscal '13 at the end of July.

We're seeing improvement in early calendar 2013 National Media Group print advertising as well. I'm also pleased to report that the first year of our innovative Meredith Sales Guarantee program, which guarantees our marketers a return on their investment, was in fact a major success. You may recall that the Meredith Sales Guarantee uses independent data from Nielsen's Homescan program to, in fact, prove that advertising in Meredith magazines increases product sales at retail. We're expanding that program based on those first year results.

We're seeing growth in businesses not dependent on advertising as well in early calendar '13. Brand licensing revenues are up, boosted by our program expansion at Wal-Mart. Meanwhile, Meredith Xcelerated Marketing, our marketing services business, is off to a good start in early calendar 2013. All of its major clients renewed their programs, and we've added several new clients and expanded business with current clients as well.

In our Local Media Group, we're encouraged by our success in growing retransmission fees, an increasingly important revenue stream that's helping offset the every-other-year absence of political advertising dollars. In addition, we've gained a national cable distribution platform for the BETTER show with the Hallmark Channel. And Joe Ceryanec will elaborate on that new initiative in a few moments.

Finally, we continue to demonstrate our ongoing commitment to total shareholder return. Fueled by our strong cash flow, we increased our annual dividend rate by 7% in February. That's the 20th consecutive year we've increased the dividend. Over the last decade, we've grown our dividend at an average annual rate of approximately 15%. Additionally, we continued our share repurchase program. So to summarize, I'm pleased with our progress in early calendar 2013.

So now let's take a closer look at operating group performance. National Media Group's third quarter of fiscal 2013 was characterized by strengthening performance across all major business activities, resulting in operating profit growth. I'll begin our discussion with a look at advertising performance.

Fiscal 2013 third quarter advertising revenues grew 5%, driven by our acquisitions of Every Day with Rachael Ray, FamilyFun and the Allrecipes brands, along with our existing digital properties. On a comparable basis, advertising revenues declined 3% from the prior year period. This represents a significant improvement over results in the first half of fiscal 2013.

We delivered strong gains in food and beverage, financial services and the home categories. Weakness in the prescription drug category, our third largest, continued, reflecting a combination of factors that include popular drugs exiting patent protection, a lack of new drugs entering the pipeline and a more cautious approach to marketing in response to regulatory issues.

On a weighted average, net revenue per page grew by 5% in the quarter. National Media Group digital advertising revenues grew more than 55%, led by the addition of Allrecipes. On a comparable basis, digital advertising revenues grew a very strong 16%. While we're seeing an improving trend in early calendar 2013, the National Media Group continues to operate in a tough ad environment. We're pleased that our initiatives have doubled magazine advertising marketing share over the last decade, and according to data from Publishers Information Bureau, our share stood at approximately 11% in the third quarter of fiscal 2013.

To further strengthen performance, we're pursuing a variety of growth strategies. First, we're adding scale via acquisition and operational excellence. Today, we are the #1 print and digital media company in the food category. We're also a strong leader in the parenthood, home and Hispanic categories. We continue to look for brands across media platforms that offer compelling subject matter to women, our primary consumer.

Second, we continue to enhance the creative side of our business. This strengthens our consumer connection and helps advance our advertising objectives. So far in fiscal 2013, we've launched fresh new designs for Fitness and FamilyFun and a new look for Parents.com. These come on the heels of recent design upgrades at Parents, Ladies' Home Journal, Traditional Home, Midwest Living and Eating Well magazines. We have a refresh for Better Homes and Gardens coming in the May issue, and our must-have recipe app has just launched for Android devices as well.

Finally, we're expanding our key brands across media platform. We've spoken at length about our efforts to develop the tablet and mobile opportunity. We now have approximately 550,000 tablet customers. That's nearly 2% of our total circulation. Additionally, the 20 mobile apps we've launched have now been downloaded more than 22 million times.

Turning to circulation. Revenues were higher in the third quarter of fiscal 2013 for 3 primary reasons: growth from our existing or comparable titles; the addition of Every Day with Rachael Ray and FamilyFun; and the contribution from the Allrecipes test issue.

Regarding the Allrecipes magazine, we polybagged 10 million sample copies that were distributed along with certain Meredith magazines. As I mentioned earlier, we generated a very strong consumer response and number of paid orders. While we incurred certain creative, production and distribution cost, this sampling method resulted in significant savings in postage and direct mail cost compared to traditional subscription acquisition methods. And most importantly, the consumer was able to, in fact, touch and feel a real Allrecipes magazine that resulted in the strong order generation I mentioned earlier.

Looking at other key National Media consumer metrics, magazine readership is at an all-time high of 116 million, according to the most current data from Mediamark Research and Intelligence. Traffic to our digital properties grew more than 45% in the third quarter, driven by the acquisition of Allrecipes, along with aggressive digital marketing initiatives. We generated 3.8 million digital orders for print magazine subscriptions during the first 9 months of fiscal 2013. That's up 75% from what we generated in the prior year period. This, of course, lowers our subscription acquisition costs and increases the opportunity to upsell and cross sell other Meredith properties at the digital checkout. Taken together, these factors help us realize an incremental $5 in operating profit per digital order over the average life of the subscription.

Finally, the strength of our consumer connection can also be seen at retail as brand licensing revenues grew in the third quarter of fiscal 2013, driven by a broader program with Wal-Mart that further expands the scope of the Better Homes and Gardens brand in its stores nationwide. Currently, there are more than 3,000 Better Homes and Gardens branded SKUs available.

I'll close the National Media Group discussion this morning with an update on Meredith Xcelerated Marketing. Operating profit grew in the third quarter of fiscal 2013 over the prior year period, representing an improvement in results when compared to the first half of fiscal 2013. We've renewed all of our major clients for calendar '13, and the new business pipeline continues to be very strong. We've landed several new accounts, including AT&T and Samsung, along with business expansions with existing clients such as Church & Dwight and Allergan. We expect these new and expanded programs will translate into growth for Meredith Xcelerated Marketing in calendar 2013 compared to the prior year.

Now I'll turn the discussion over to Chief Financial Officer, Joe Ceryanec, to discuss Local Media Group results and our outlook.

Joseph H. Ceryanec

Thanks, Steve, and good morning, everybody. Our local media business continues to have a record year. After delivering our best-ever political ad revenue performance in the first half of fiscal 2013, we grew total revenues by 10% in the third quarter. Our success at growing retransmission revenues is helping deliver year-over-year revenue gains, even as we begin to cycle against calendar 2012's very strong political season. We've successfully negotiated favorable contracts with most of the cable and satellite operators in our markets, and we've secured new long-term affiliation agreements with CBS and FOX, our major network partners. As we've discussed in the past, this will result in increases in our net profit related to retransmission. We began to see this bump in the third quarter, and we expect that contribution to grow into the fourth quarter and into fiscal 2014 as well.

Turning to fiscal 2013 third quarter ad performance. Nonpolitical advertising revenues were slightly lower than the prior year period as continued growth in the important automotive, retail and furnishing categories were offset by softness in a number of smaller categories. Also, as we expected, political ad revenues were lower year-over-year in the third quarter. It was at this time last year that we started seeing the early primary money, leading to our best-ever political season. And we will begin cycling against that for the balance of calendar 2013.

Turning to the consumer connection. Our viewership continued very strong during the third quarter of fiscal 2013. During the February ratings period, our stations in Phoenix, Hartford, Kansas City and Saginaw were #1 in their markets from sign on to sign off. We're also very pleased with the growing digital presence of our local brands. Our Kansas City station's website is the top website among all Kansas City media outlets during the third quarter. Meanwhile, our station sites in Hartford, Nashville and Saginaw were the most visited TV station websites in their respective markets.

Finally, as Steve mentioned, we reached an agreement with Crown Media Family Networks for a national cable network distribution of the BETTER Show. It's our daily syndicated women's lifestyle show, and that will begin in the fall of 2013. This is a significant development for Meredith Video Studios, our video content creation unit, as the Hallmark Channel is available on nearly 90 million households. When combined with its current syndication of 160 markets, reaching 80% of the U.S. household, this establishes the BETTER Show as a major presence in the women's lifestyle television marketplace.

Now looking at a few other financial details before turning to our outlook. Our total company cash flow from operations increased 7% for the first 9 months of fiscal 2013 compared to last year and totaled approximately $190 million for the 12 months ended March 31. As Steve noted, we remain focused on executing our total shareholder return strategy, which includes returning a meaningful portion of our cash flow to our shareholders. Consistent with that strategy, we increased our dividend in February. We've grown that dividend at a 15% annual rate over the last decade, and today it's yielding over 4%.

We've also been active buying back our stock, repurchasing another 380,000 shares during the third quarter. That brings total shares repurchased this year to 1.1 million. And at March 31, we had just under 50 million remaining under our current share repurchase authorization.

We also continue to prudently manage our capital. At March 31, our debt to EBITDA ratio was a conservative 1.4:1 and our debt was at $355 million. We have plenty of capacity for future acquisitions, which we will continue to pursue on a very strategic basis.

And lastly, you'll note our unallocated corporate expenses increased approximately $9 million over the prior year. That's due primarily to a $5 million special item for professional fees and expenses related to a previously disclosed transaction that did not materialize. In addition, we made the Meredith Foundation contribution this quarter and also had higher consulting, health care and incentive compensation accruals.

So now turning to our outlook. Looking more closely at the fourth quarter of fiscal 2013 compared to the prior-year period, we expect National Media Group ad revenues to be flat to down slightly; Local Media Group, we expect total revenues to increase in the mid-single digits. Nonpolitical ad revenues are expected to be flat to up slightly. And as I mentioned, we'll be cycling against $3 million in non -- or in net political ad revenues that we recorded in the fourth quarter of fiscal 2012.

We expect fiscal -- fourth quarter 2013 earnings per share to range from $0.68 to $0.73. And when you add that to the $2.17 we generated in the first 9 months, we would expect 2013 full year earnings per share to be towards the upper end of the original $2.60 to $2.95 range we established back in July at the beginning of our fiscal 2013. And these amounts all exclude special items.

So with that, we'd now be happy to open up the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from John Crowther with Piper Jaffray.

John D. Crowther - Piper Jaffray Companies, Research Division

Just, first, I want to dive in a little bit on the circulation performance. Maybe you could talk a little bit about the performance of the acquired properties versus organic in the quarter. I know you broke out both as being stronger. But just wondering maybe you could give us an idea of what maybe the runway is for some of your acquired properties like FamilyFun and Rachael Ray, given now that they're underneath the Meredith umbrella, for increasing that circulation size.

Stephen M. Lacy

Well, thank you for your call. Everything now, going forward, until we have a new opportunity, will be comparable. So this is -- the third quarter was really the last quarter that we would have that sort of a difference on those acquisitions. But between the core magazines in the quarter and the acquisitions, it was sort of an even split in terms of the revenue growth. But again, that acquisition part kind of goes away in Q4. And from a core perspective, it oftentimes has a lot to do with the number of Special Interest Media titles that we release. And the third quarter is a very heavy time for that because of all the gardening titles that we put out into the market. Third quarter and, actually, second quarter, because of all of the holiday titles. But our renewal rates and direct mail response rates continue to be quite strong. And the other area that we're very excited about, as I mentioned, are the number of consumers who are switching to digital interaction, so we can move away from direct mail, which is very important for persistency and for cost savings.

John D. Crowther - Piper Jaffray Companies, Research Division

Great, and you did mention it in your comments about further pursuing sort of tuck-in acquisitions like FamilyFun and Rachael Ray. I'm just wondering -- what your -- if you have any updated thoughts there. And what you think the opportunities are there in the market right now for sort of that acquisition strategy.

Stephen M. Lacy

We are very focused on 3 broad areas. Digital or print brands that serve the women's very important responsibility of taking care of her children, in what I would broadly call the parenthood category. Obviously, her activities of making a nurturing home environment. And then the family's health and well being and her own as well. There are still some stranded titles around that would make sense for us, from a tuck-in perspective. And the people who own those business -- about all I can say is the people who own those businesses are very, very well aware of our interest in some of those brands. It just becomes increasingly difficult, both from a consumer marketing perspective and from an advertising perspective not to be part of a broad group buy. Our advertising customers are preferring to have bigger deals with a smaller number of players. So I think you'll continue to see industry consolidation. And I think you'll continue to see us play the role of a consolidator.

John D. Crowther - Piper Jaffray Companies, Research Division

Okay, great. And then just one last quick one. You mentioned -- I appreciate the update on your success with digital tablet subscriptions, hitting the 2% mark. Just wondering if maybe you could give us some early read through on some of your different distribution strategies. I know that recently you've been out with -- in the Next -- I think it's the Next...

Stephen M. Lacy

Next Issue Media?

John D. Crowther - Piper Jaffray Companies, Research Division

Next Issue Media initiative. And just wondering, is there anything on those different strategies that's helping you sort of accelerate that adoption curve.

Stephen M. Lacy

Well, at this point in time, let me just give you a few facts. We have 20 of our titles that are available across one or more of the 6 major tablet newsstands that are available. So that's Apple iPad and the mini, Amazon Kindle Fire, Barnes & Noble with the Nook, Google and the Samsung Galaxy, along with Next Issue Media. Apple is the #1 platform in terms of volume out of those, with Amazon and Barnes & Noble growing and becoming increasingly important. So the Next Issue Media is a little different opportunity, which we're pretty excited about, which allows the consumer to do their own bundling. And if you haven't been on that side, I think you'd find it very, very compelling. And we're working aggressively to create a compelling product for our consumer, so that over time, more and more are willing to pay for and accept tablet distribution and let their print copy go, and that's, obviously, our strategy. But we're very aggressive on every platform.

Operator

You do have a question from the line of Matt Chesler from Deutsche Bank.

Matthew Chesler - Deutsche Bank AG, Research Division

I wanted to ask a couple of questions around Allrecipes, and then I'll follow up with a TV question, so Joe and Paul can chime in. So on Allrecipes what are you thinking about in terms of success hurdle in order to go forward? Are you thinking in terms of any particular rate base? And also, can you quantify at all what the contribution was in the quarter to circ revs and more -- most importantly, what you think the incremental costs you highlighted, you called out, for launching that were to National Media cost. They did step up?

Stephen M. Lacy

Yes, so Matt, let me give you some of that data and then I'm going to ask Tom from a strategic perspective to talk about what we're thinking from a launch rate base and frequency and sort of our timing into the marketplace. So we believe, and we'll really be able to be a lot more crisp on this when we finish the fourth quarter, because as I mentioned, we have another test. It's a bit smaller than the one this quarter. But we think that we will have somewhere in the range of 0.25 million orders on the file, which is, obviously, a wonderful place to start from people who've actually seen the magazine and responded to the offer that was included in it. And this really would not have been historically financially feasible in any way, shape or form, absent as you probably recall a couple, 3 years ago the change from the Postal Service, where we were able to polybag and do rightalongs. Most of what we've done, as I know you recall, have been marketing rightalongs for our ad customers. Direct-mail pieces, if you will, but we really sort of took this to the next level and really created a sample magazine, where the consumer could touch and feel that. We spent several million dollars doing that, and we will spend some more. I don't have those exact numbers at my fingertips, but if we had gone through what I would call traditional sources, like the way we launched More magazine a number of years ago when we were -- we came out with More at 350,000 guaranteed rate base when we launched it. We would have had to drop well over $5 million worth of direct mail. And, of course, then you had a direct mail package that wasn't a real magazine, and she didn't oftentimes know what she was going to really receive. So as I said, there are some costs and some revenue in the quarter related to that. And it'll probably net out $2 million to $4 million somewhere when all is said and done in Q3 and Q4. But I think the most important thing and the clever idea that Tom and his team came up with was really doing this rightalong and having the consumer see a real magazine. So Tom, why don't you give your thoughts a little bit more on where you'd like -- if Q4 is successful, where you'd like the rate base to be, and kind of how you're thinking about taking this into the market, should we decide to make the investment and do that?

Thomas H. Harty

Yes, so just backing up a little bit. After we acquired the brand last year, we knew it was a powerful digital brand online, but a lot of that was through search, because 85% of Allrecipes traffic comes from people actually typing in a specific keyword related to food, and then they have their SEO power. So we didn't really know from a consumer standpoint in other media like print would there be powerful enough response from consumers. So we actually did last summer an SIP test. We took one of our existing food SIPs, and we just put the Allrecipes brand on it. Small test, just newsstand only. And when we measured that in the fall, there actually was a 47% lift from just putting the Allrecipes brand on that SIP compared to what we were seeing from other performance. So that pushed us to say, "Let's figure out a way to do a bigger consumer test from a subscription standpoint." As Steve mentioned, we were able, with the postal change, to actually get a sample in existing subscribers' hands by using the polybag. So we're about halfway through our consumer test. It's been very positive so far. As Steve mentioned, we're about 250,000 subs. We'll look towards the latter part of this fiscal year, the June, July period, to make a formal decision if we're going to launch full or not. If we do launch, it would be one issue probably in the fourth calendar quarter that we would launch, with a frequency to continue about 6 times a year with an initial rate base of about 500,000.

Stephen M. Lacy

So does that help you, Matt?

Matthew Chesler - Deutsche Bank AG, Research Division

That does. It does help a little bit. Maybe just to put a finer point on that. I suppose it's a little bit more complicated. I'm looking at the National Media cost in the quarter, and I'm seeing that they did increase and trying to back in to get a better understanding of what drove that. And if costs in the fourth quarter National Media will be up again relative to your fourth quarter of last year, or if they're going to be down, because...

Stephen M. Lacy

Yes, I would say, Matt, that when you see the fourth quarter, it will look quite a bit based on where we think. And what's a little different now for us, it's kind of exciting but a little different, because digital is becoming such a bigger part of the business. It's a little bit more like TV, where you can book it later, and you can cancel it. But we think the fourth quarter, in terms of sort of the percentage variation in most of the line items will look fairly similar to the third quarter. And that increase in expenses is partially related to the Allrecipes test and is partially related to the rolling in the acquisition activity, sort of -- kind of a 50/50 split there. So and then, obviously, we'll know about how many orders we end up with, and then we'll have to make some financial decisions around the launch. And then we'll give you some sense of how much of that will play into future quarters going forward.

Matthew Chesler - Deutsche Bank AG, Research Division

Real quickly on TV, and then I'll step out of the way. Joe, just -- can you put a finer point on the profit contribution on a net basis of retrans? And then Paul, could you just address -- I'd like to get a sense as to how underlying costs in local media are trending if you back out the increase in the reverse comp. What did you guys do in the quarter? And how is that trending going ahead?

Joseph H. Ceryanec

Sure. So Matt, when you look at the local media other category, which has the retrans, it's up a little over $9 million. A little over $8 million of that $9 million relates to the lift in the retrans rates. When you look at the cost side, they're up a little over $7 million. And most of that expense lift is due to the higher fees we're paying CBS and FOX. So I think as we've talked about in the past, this quarter, our third quarter, we started actually seeing incremental operating profit from the changes in the rates. So it was a little over $1.5 million of operating profit lift in the National -- or I'm sorry, in the Local Media Group in the third quarter. We expect in the fourth quarter that we'll grow a little more, and we'll continue to grow into '14 when we lose the seasonality on the MSO contracts.

Stephen M. Lacy

Paul, why don't you give Matt a sense of where you are in the major MSO renegotiations and sort of what's left to be done before we sort of button up what fiscal '14 will really look like from a net retrans perspective?

Paul A. Karpowicz

Okay, yes. And Matt, thank you for the question. It's always great to get TV questions. But primarily, we're completed, and the only 2 major MSOs hanging out there, and then we've got one on the satellite side, we have DIRECTV that is still out there, and we're in negotiations with them now, and then Charter as well. So all the other majors, Time Warner, Comcast, MediaCom, those are all completed and set in place for a number of years. Relative to your other question about the trend line on expenses, I think, once you take out the new network fees, we're actually able to reduce our programming cost and then take a very hard look at how we allocate our personnel resources. As we're putting more people into our digital initiatives, we're able to just shift costs out of kind of more traditional areas into the digital side. So I think you'll see our cost other than the network fees moderate there.

Operator

And we do have a question from the line of Craig Huber with Huber Research Partners.

Gregory Stein

This is Greg Stein on behalf of Craig Huber. I have a couple of TV questions actually. First off, obviously, it's no secret that primetime ratings have been a little weak this year, down double digits across most networks. I'm just wondering if you're seeing any of that impact with the primetime ratings? And if you aren't, why not?

Stephen M. Lacy

Paul, would you help us with that one, please.

Paul A. Karpowicz

I think, primarily, what -- at the end of the day, the reason that even if, in fact, ratings are down, and while they're down in some areas, we'll find that in some areas, they're actually up. But I think what you'll find is advertisers, particularly, in the automotive category, have discovered that spots on television, local television and network television, actually sell cars, and that's the most productive efficient way for them to sell cars. What has happened is -- in that dynamic is the cost per thousand or the cost per point that the agencies are using has had to go up, because our rates aren't changing, our rates are not going down. But if, in fact, and based on the different measurements that are being used whether it's people meters, or local people meters or whatever measurement is being used, those ratings have fluctuated. But at the end of the day, our primetime sales continue to be very strong.

Gregory Stein

Okay. I guess, in connection, you mentioned auto, obviously, it's been very strong in the last several quarters. Just wondering how it's pacing in fiscal 4Q, and then also maybe what you see into fiscal 2014 as well.

Stephen M. Lacy

We've probably got that data here, Paul, just give us a minute to look it up, unless you know it off the top of your head.

Paul A. Karpowicz

I think we were looking -- I do have it somewhere here.

Stephen M. Lacy

We may have to get back to you with that one. Just give us one more second to see if we've got current pacings for Q4.

Gregory Stein

Sure, I do have one other question I could ask.

Joseph H. Ceryanec

Go ahead, Greg, and we'll...

Stephen M. Lacy

We do have it -- right now, at the moment, of course, that changes every week, it's pacing up about 5%.

Gregory Stein

Okay, great.

Stephen M. Lacy

What's your other question, please?

Gregory Stein

Yes, sure. I'm just wondering if you could go a little bit maybe more granular into this retrans. You mentioned it was up about $9 million or so. I was hoping maybe we can get a dollar amount for fiscal 3Q. And then, I guess, just in connection, you had mentioned a while ago that you expected both retrans and reverse comp to increase about $20 million this year. I was wondering if there's any updates on that figure.

Stephen M. Lacy

Joe, do you want to do the retrans again just for a second on Q3, and then sort of how we might think about it going forward? And, obviously, we'll give a guidance on fiscal '14 when we release earnings, because we'll have a little bit more negotiation done by then. So we'll do Q3 again and Q4.

Joseph H. Ceryanec

So Greg, Q3, the retrans revenue was up a little over $8 million. The expense to the affiliates was up about $6 million. So we added a couple million of operating profit in Q3. In Q4, that revenue number will go up a little more, call it about $9 million. The expense will go up a little more as well. So about $6.5 million or so. So we'll increase that operating profit a little over $2 million, almost $2.5 million in the fourth quarter. And we'll continue to see that trend as we move into fiscal '14. One of the last things I wanted to pile on to Matt's question was we do have one more affiliation agreement that will come up for renewal at December 31 of '13, and that's NBC. We have one NBC affiliate in Nashville, although NBC has been pretty clear on having a standard agreement. So we think we have a pretty good idea of what the impact of that affiliation renewal will be.

Stephen M. Lacy

We've actually started our negotiations with NBC, and Joe's right. We pretty much know where that is going to end up. And it's certainly within the parameters that we've set up for them.

Joseph H. Ceryanec

And, I guess, Greg, to come back, the $20 million we've been talking about on both the revenue side and the cost side are still about what we'd expect.

Operator

[Operator Instructions] At this time, it does appear there are no further questions from the queue.

Stephen M. Lacy

Okay. Well, again, thank you for your participation today and your continued support. And we'll get back to work on Q4 and our go-forward strategies. Thank you very much.

Operator

And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using the AT&T Executive TeleConference Service. You may now disconnect.

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