Start Time: 08:30 January 1, 0000 9:15 AM ET
Meredith Corporation (NYSE:MDP)
Q4 2019 Earnings Conference Call
September 05, 2019, 08:30 AM ET
Tom Harty - President and CEO
Joe Ceryanec - CFO
Patrick McCreery - President, Meredith Local Media Group
Mike Lovell - Director of IR
Conference Call Participants
Kyle Evans - Stephens Inc.
Eric Katz - Wolfe Research
Davis Hebert - Wells Fargo
Jason Bazinet - Citi
Ladies and gentlemen, thank you for standing by. Welcome to the Meredith Fiscal 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.
Mr. Mike Lovell, you may begin your conference.
Thank you. Good morning, and thanks everyone for joining us. Our call will begin with comments from President and Chief Executive officer, Tom Harty; followed by Local Media Group President, Patrick McCreery; and Chief Financial Officer, Joe Ceryanec.
Remarks this morning will include forward-looking statements and actual results may differ from our forecasts. Some of the reasons are described at the end of our news release that was issued earlier this morning, and in some of our SEC filings.
Certain financial measures that we're discussing on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of special items. Reconciliations of these non-GAAP measures are included in our earnings release, which is available in the Investor Relations section of our meredith.com. Finally, an archive of the call will be available on our Web site later this afternoon.
Now, I'll turn the call over to Tom Harty.
Thank you very much, Mike, and good morning, everyone. I hope you’ve had the opportunity to see our new release issued earlier this morning. Fiscal 2019 marked our first full year of owning and operating the assets acquired from Time Inc. and we have been laser focused on integrating what we believe is the best portfolio of National Media brands in the industry.
Our National Media Group delivered on many of the key elements of our acquisition plan, including improved comparable advertising performance in every quarter of fiscal 2019. Of particular note, we generated comparable advertising revenue growth in the fourth quarter that included double-digit growth in our digital business along with low-single digit growth in print advertising revenues at the legacy Time Inc. titles. As a reminder, advertising revenues at these titles were declining in the 20% plus range when we acquired them. Our team and our business have made significant progress.
Our team also made significant strides in achieving the cost synergies associated with the acquisition. Through the end of fiscal 2019, we have realized 430 million of cost synergies and have a clear path to 565 million in our first full two years of operating post acquisition. At the same time, our Local Media business delivered its third straight year of record performance, including an all-time high of 103 million of political advertising revenues. Additionally, we continue to increase retransmission profit contribution and significantly grew our digital business.
From a capital structure perspective, we strengthened our balance sheet by paying down 825 million of debt and we grew our dividend by 5.5% in fiscal 2019. Notably, our current dividend yield of 5.3% is more than double the average of the S&P 500 and triple the 10-year U.S. treasury rate, which we believe is a testament to our long-term track record of execution and fiscal discipline.
We believe we have positioned Meredith to compete more successfully than at any point in our 117-year history. Importantly, our audience reach is now 115 million or 90% of all American women. We are a top 10 digital media company with 150 million average monthly unique visitors. We now possess the leading position in food, lifestyle, parenting, home and entertainment categories and have a formidable position in the beauty, fashion and luxury categories.
Our flagship PEOPLE brand is the crown jewel of our brands. PEOPLE reaches nearly 100 million adults or 40% of all adult Americans across all media platforms. It reaches more consumers than the combined audiences for the Oscars, Golden Globes and the Emmys. Last month, people.com served 76 million unique visitors according to Comscore.
Independent research is confirming the strength of our new portfolio. In its most recent brand tracking study performed in May, the highly respected Advertiser Perceptions serve 300 large advertisers with an average advertising spend of 27 million. Meredith ranked number one among all media companies for owning trusted brands that drive women to action. We ranked fourth as both an important media company to do business with as well as owning a brand portfolio that’s effective for reaching a broad audience. We trailed only Google, Disney and Facebook in these important categories.
Compared to fiscal 2017, our last full year before the Time Inc. acquisition, we’ve nearly doubled revenue and adjusted EBITDA. Our sources of revenue are more diversified as well. For example, consumer-related revenue, most of which is contractual, now accounts for nearly half of our total revenue. This is compared to one-third five years ago. At the same time, digital advertising revenue now makes up a third of all National Media Group advertising revenue compared to just 16% five years ago. That said, we acknowledge the challenges we face that resulted in a reset of EBITDA expectations for fiscal 2019 and going forward. Foremost, it took longer than expected to turn around advertising performance with the legacy Time Inc. brands.
Additionally, the number of low margin magazine subscriptions we encountered inside the legacy Time Inc. brands were more than anticipated. Both issues required additional investment spending and impacted our EBITDA generation. Once recognized, we tackled these issues head on and we are confident in the plan and the approach we’re taking in fiscal 2020 and beyond. As a result, we begin fiscal 2020 a lower profit point than originally expected which contributes significantly to the outlook we’re providing. Joe will provide a detailed fiscal 2020 outlook at the end of our call, but let me give you some initial color.
As we sit here today, we are encouraged with the current print and digital advertising trends in the National Media Group. We expect comparable print advertising revenue for the combined portfolio to be down in the mid-single digits for the full year, consistent with Meredith’s historical performance over the last eight years. That’s where it’s pacing now for the first quarter of fiscal 2020. Meanwhile, we expect digital advertising revenues to be up in the mid-single digit range for the full year. It’s currently pacing up 10% range for the first quarter of fiscal 2020. So total comparable advertising, print and digital combined, will be flat to up slightly in Q1.
The turnaround in the National Media Group advertising performance along with continued strength in our connection to 115 million unduplicated American women is giving us confidence to make additional investments that we expect to produce long-term revenue and profit growth. These include additional headcount and initiatives to grow consumer-related revenues such as subscription acquisition, e-commerce and Apple News+.
Meredith first entered the e-commerce space with the acquisition of ShopNation seven years ago. Since then, e-commerce revenue growth has been exceptionally stronger and it offers a promising opportunity. By investing in content in commerce, expanded digital couponing and in new partnerships, we see the opportunity to continue growing strongly over the next three years.
We also plan to invest in new digital platforms, more robust video production and other activities that will drive increased consumer engagement. The market for digital video-related advertising is expected to grow 30% faster than non-video display advertising and account for more than half of total digital display ad spending in 2019 and 2020 according to eMarketer.
For Meredith, digital video advertising accounts for less than 25% of our total digital advertising revenue and we typically are sold out of our owned and operated video inventory. We plan to grow our video inventory, distribution and monetization both on our O&O platforms as well as third party platforms with the goal to achieving a greater share.
Both e-commerce and digital have been among the strongest, fastest growing platforms in media in recent years. The same is true with Meredith. For example, five years ago, our e-commerce and digital activities generated less than 100 million of revenue. Today, annual revenue from these activities are 500 million.
Shifting to our Local Media Group, we will be cycling against a record 103 million of political advertising revenues generated in fiscal 2019. While we anticipate some political advertising revenue and also increased retransmission and digital revenue, these will fall short of offsetting the absence of political advertising, typical for a non-political year.
With that introduction, I’ll turn the review of our operating group performance in fiscal 2019 beginning with our National Media Group. Fiscal 2019 National Media Group operating profit increased nearly 50% to 126 million. Excluding special items, operating profit was 230 million and adjusted EBITDA grew nearly 80% from the prior year, all records. Revenues rose nearly 50% to 2.3 billion. These results exclude discontinued operations.
As you can see in our P&L this morning, we continued to make significant progress on the key initiatives that we put in place upon acquiring Time Inc. to integrate and maximize our new portfolio. This is particularly true of our performance in the fourth quarter, which was the first full quarter since the acquisition closed that we owned the Time Inc. assets in both the current and prior year periods. We said the integration of Time Inc. would take time and while not without challenges, we delivered on most aspects of our integration in fiscal 2019.
To start, we said we would improve the average print advertising performance of the acquired Time Inc. properties to Meredith’s historical levels. Admittedly, progress on this goal got off to a slow start. Calendar 2018 comparable advertising revenue at the legacy Time Inc. titles were down in the low 20% range, considerably underperforming the expectations we had at acquisition close.
However, we stuck with our plan and gradually saw a strong and favorable response from the advertising community that began to pay off as we move into calendar 2019. Our advertising performance met our expectations in the third quarter and exceeded them in the fourth quarter, as we delivered low-single digit growth for the legacy Time Inc. titles.
Next, we said we would improve the performance of the acquired digital properties to Meredith’s high levels. I’m pleased to say that our performance accelerated during fiscal 2019 and we grew comparable year-over-year digital advertising revenues in the low-double digit range in the fourth quarter of fiscal 2019.
Digital advertising revenues accounted for 34% of total National Media Group advertising revenues in fiscal 2019. As a reminder, these digital activities today engage approximately 150 million unique visitors per month, making us a top 10 player in the U.S.
Our third strategy was to grow our high-margin consumer-related revenues by leveraging our expanded brand portfolio. Fiscal 2019 consumer-related revenues accounted for 46% of our total National Media Group revenues in fiscal 2019, up from 41% in the prior year.
Our consumer revenue activities are diversified and mostly contractual. These include our magazine subscriptions, paid products, brand licensing efforts, lead generation and affinity marketing initiatives.
We see enhanced digital-first opportunities going forward, particularly e-commerce and Apple News+. As a reminder, the economic benefits to Meredith from Apple News+ flow from four areas; guaranteed minimum payments, royalty based on time consumers spend with our brands on the platform, cost savings including lower subscription acquisition expenses and lower magazine production expenses over time and innovative advertising opportunities on the Apple News+ platform.
Our fourth strategy was to sell non-core media assets. Joe will discuss our progress in a few moments. Before he does, I’ll turn it over to our Local Media Group President, Patrick McCreery, for an update.
Thanks, Tom, and good morning, everyone. Fiscal 2019 Local Media Group operating profit grew nearly 50% from the prior year, adjusted EBITDA grew 43% and revenues grew 25%, all were record highs.
Looking more closely at fiscal 2019 performance, total advertising-related revenues grew nearly 30% to 538 million driven by strong demand for political advertising. Political advertising revenues were 103 million. We generated significant revenues from our stations in Phoenix, Las Vegas, St. Louis and Kansas City.
Non-political advertising spot revenues were down in the low-single digit range. This was due primarily to the very strong demand for political advertising in the first half of the year.
From a category standpoint, declines in the automotive and retail advertising categories were partially offset by growth in professional services, media and home services categories.
Consumer-related revenues increased more than 15% to 317 million due to growth in retransmission fees from cable and satellite television operators. These increases were partially offset by higher payments to affiliated networks.
During the year, we continue to aggressively pursue a series of well-defined strategies to deliver growth. These include increasing our connection to the 30 million U.S. households that we reach.
Our ratings performance was strong throughout fiscal 2019. For example, during the most recent May rating period, our stations in 8 out of our 12 markets ranked number one or two sign-on to sign-off.
Additionally, the number of paid TV subscribers across our markets was approximately even in fiscal 2019 compared with the prior year, driven by growth in over the top subscribers.
Second, we delivered growth in our digital platforms. This was driven by a full year of contribution from MNI Targeted Media. Additionally, traffic grew in the low-double digits to an average of 19 million unique visitors per month in fiscal 2019.
Third, we grew retransmission revenues. In fiscal 2019, we successfully renewed key distribution and network affiliation agreements. This included retransmission consent agreements with Cox Communications and Comcast Corporation as well as network affiliation renewals for all five of our Cox affiliated stations into fiscal 2023.
Further in fiscal 2020, we will renew nearly 60% of our 10 million MVPD subscribers. As some of our affiliation agreements are longer term, this will allow us to grow net retransmission.
Let me also address the current situation regarding Dish which accounts for less than 10% of our total audience. Clearly, Dish is trying to use current negotiations with local broadcasters to help STELA legislation renewed.
This strategy shows a total disregard for their subscribers using them as pawns to try and advance Dish’s legislative agenda. We’ve presented Dish with very reasonable contract terms and we hope Dish doesn’t withhold college and professional football games from their subscribers.
Finally, we are launching new programming to expand our reach by leveraging PEOPLE, the biggest brand acquired from Time Inc. Our new weekly television show, based on the strength of the people brand, has been very well received by audiences and advertisers alike.
As a result, we are committed to launching the show in daily syndication in the fall of 2020 beginning with distribution across all 12 of our local television markets. We are actively speaking with other broadcast station owners about airing the show.
Now, I’ll turn it over to Chief Financial Officer, Joe Ceryanec.
Thanks, Patrick, and good morning. I’ll begin with the financial highlights from our press release this morning. Total company revenues from continuing operations grew more than 40% to 3.2 billion. Earnings from continuing operations were 129 million compared to 114 million.
And excluding special items in both periods, earnings from continuing operations increased more than 50% to 223 million. Adjusted EBITDA grew 67% to 706 million. And these results include the Money brand which we pulled in from discontinued operations after deciding to retain the brand.
Now shifting to an update on our integration activities and asset sales. From an integration standpoint, many of the work streams put in place to capture cost savings are working well. Our fourth quarter accomplishments included completing the wind down of Time Inc. retail and integrating our digital asset management systems.
Looking ahead to fiscal 2020, we will continue to execute against longer tail synergies that take time to achieve such as negotiating more favorable rates for longer-term contracts that have not yet been up for renewal since the acquisition.
We sold Sports Illustrated brand during the fourth quarter of fiscal 2019. Recall that earlier in fiscal '19, we sold the TIME and FORTUNE media brands as well. We’ve realized proceeds of 430 million through the sale of these brands.
We’ve used this cash to pay down 825 million of debt and our net debt stood at 2.3 billion at June 30, 2019. We continue to work on selling FanSided along with our interest in Viant and Xumo and expect to reach successful conclusion in the near future.
Now turning to our outlook for full fiscal 2020, we expect total company revenues to range from 3 billion to 3.2 billion, earnings from continuing operations to range from 197 million to 212 million and from $2.58 to $2.88 on a per share basis. These amounts do not include special items and our actual results may include special items that have not yet occurred and are difficult to predict with reasonable certainty.
We expect full fiscal 2020 adjusted EBITDA to range from 640 million to 675 million and adjusted earnings per share to range from $5.75 to $6.20. As Tom mentioned, while we accomplished many of the acquisition-related goals that we set for ourselves, we acknowledge that we are not where we thought we would be at this point in time. As a result, we’re resetting the EBITDA expectations for fiscal '20 and going forward.
Now this outlook is informed by the factors that Tom mentioned but it’s also informed by the completion of a rigorous budgeting process for fiscal '20 that’s based on results we’ve delivered since acquiring the Time brands and businesses 19 months ago.
In addition to our internal processes and following the change in guidance that we communicated on our last earnings call in May, we engaged outside support to; one, verify the cost synergies we originally identified and determine that we achieve them. Two, help us identify additional cost synergies. And three, assist with the development of the zero-based budget.
As a result of this work, we confirm that we achieved 430 million of synergies through fiscal 2019, which is actually more than we had originally expected but somewhat reduces our 2020 expectations.
Finally, we have completed our fiscal 2020 budget with an increased rigor, a result of the zero-based budgeting process. Our fiscal 2020 budget is informed by improved visibility into our financial performance now that we have completed the integration of the Meredith and Time Inc. financial platforms. And I cannot overestimate the importance of finally being one financial platform.
That said, looking more closely at the factors that bridge fiscal 2019, adjusted EBITDA of 706 million to the range that we see for fiscal 2020, we expect that the Local Media Group will be cycling against 103 million of political ad revenue that it generated in fiscal 2019.
We generated 16 million of political ad revenue in the last non-election year and it is reasonable to expect a similar amount in fiscal 2020. On the plus side, we expect higher profit contribution from retransmission consent fees.
On the National Media Group, we have more moving parts. On the plus side, we expect to deliver an incremental 135 million of synergies in fiscal 2020. We also expect growth in digital ad revenues.
We expect print ad revenues to decline in the mid-single digit range in line with Meredith’s industry best historic levels. We expect lower contribution from consumer-related revenues and primarily to the lower margin subscribers we acquired with the legacy Time Inc. brands. And we also expect higher production and distribution expenses, including an expected postal rate increase.
Finally, we expect spending on strategic investments to be approximately 50 million in fiscal 2020. These investments are essential to growing our digital and consumer-related revenues over time.
Putting it altogether, we see our Local Media Group EBITDA to be approximately 60 million to 75 million lower than the 318 million we delivered in fiscal 2019. We see National Media Group EBITDA 10 million to 30 million higher than the 456 million we delivered in fiscal '19. And we see corporate expenses roughly in line with fiscal '19.
Now looking more closely at the first quarter of fiscal 2020, we expect National Media Group revenues to range from 535 million to 565 million, Local Media Group revenues to range from 195 million to 200 million, earnings from continuing operations to range from 20 million to 22 million and $0.01 to $0.05 on a per share basis. We expect fiscal 2020 first quarter adjusted EBITDA to range from 122 million to 127 million and adjusted earnings per share to range from $0.88 to $0.93.
With that, I’ll turn it back to Tom to lead us into the Q&A.
Thank you very much, Joe. We are proud of our accomplishments in fiscal 2019. Our National Media team is making significant progress in turning around a business that was twice its size and our Local Media team continues to perform at a very high level.
In closing, while there’s still more to do, we have accomplished a great deal in fiscal 2019. We are encouraged by advertising trends both in our National and Local Media Groups, consumer revenue performance across the company, including response rates to our subscription offers, the launch of Apple News+ platform, our growing e-commerce activities and continued growth in retransmission revenue and contribution. As a reminder, we expect to renew 60% of our retransmission consent agreements in our next fiscal year.
Now, we’d be happy to answer any questions you might have for us this morning.
[Operator Instructions]. Your first question comes from the line of Kyle Evans with Stephens.
Hi. Thanks for taking my question.
Good morning, Kyle.
Good morning. I think we’re all probably scratching our heads trying to reconcile what looks like a pretty conservative adjusted EBITDA guide with some kind of optimistic trends especially on legacy print Time side. You gave us the 50 million for strategic investments, but looking into kind of your guidance commentary from the release, could you put some brackets around the impact of the higher production and distribution expenses and your efforts to fix those lower Time subscription margin beta problems?
Sure. I’ll ask Joe to try to reconcile it for you and then I’ll make a comment about our investments.
Yes. Kyle, as we look at reconciling the National EBITDA, if we take 2019 of 456 that we delivered, obviously we said we’ve got synergies positive of 135, we expect digital to contribute kind of mid-teens EBITDA. Obviously with print down mid-single digits, that’s about a $25 million drag. As we mentioned, the investments are about 50 on the lower margin consumer revenue, that’s about a $20 million reduction year-over-year. And then the remaining is a series of expenses that includes compensation adjustments, it includes the postal increase and it includes some expectations on how higher paper and production expenses. That’s about 20 million.
Kyle, just one comment on the lower margin subscription. When we dug into Time Inc. obviously in the last year and they had significantly pulled back on their investment in what we would call direct to publisher subscriptions. So over a period of time you make deficit investments to acquire subscriptions and then you make money over the lifetime of that subscription. Well, when they were in a cash crunch, they went to what I would say less profitable longer-term subs and pulled back on that investment in the range of about $20 million a couple of years ago. So this isn’t the standard that Meredith stands up to because we look much longer term, so we’ve made some investments last year and we continue to move forward to make some additional investments in what we would call direct to publisher subscriptions to improve profitability subs longer term.
Great. You referenced growth in the legacy Time print ad business. Could you give a more specific update on PEOPLE from a top line and margin perspective? And then are there some Meredith properties that are underperforming and driving the kind of conservative look in fiscal '20 EBITDA guide?
Yes, PEOPLE took a little longer. I think we gave a little – some commentary last year about that. Obviously it was – the whole Time Inc. portfolio was performing about the same in the beginning of last fiscal. And then we made a strategic change and put actually one of our legacy leaders onto PEOPLE in October of last year as a group publisher and we started to see significant turnaround in that business. So in the fourth quarter of fiscal '19 that ended in June, PEOPLE was up in advertising what I would say is low-single digit growth. And as we mentioned in our guidance that we’re seeing advertising trends that we saw overall from the fourth quarter are going to continue into fiscal first quarter. And PEOPLE will perform again being up in that low-single digit range. And as we look out even further, part of it because of the comps, so we look into our fiscal second quarter, things look pretty good for PEOPLE too. So we believe we’re going to have three consecutive quarters of year-over-year advertising growth for PEOPLE.
On the Meredith side, some of the Meredith titles had a little tougher time in the fourth quarter. We could say that since we are so large now, we do see some shifting possibly between different titles but we’ve also been affected a little bit in the food category and in the pharma category this past year. So Meredith was also against some tougher comparables from last year in our Q4. But overall we think the portfolio as we’ve been saying for a number of years we feel confident that the combined portfolio, print portfolio will perform at that minus mid-single digit range. And obviously we have fluctuations quarter-by-quarter, but that’s our long-term view and it’s what we’ve seen historically. And we believe now that we’ve got the Time Inc. portfolio performing there.
Great. Last one and then maybe I’ll get back in the queue. Last quarter you guys sounded like you were uninterested in selling your LMG biz. To me, it seems like you’re either a buyer or a seller in this market and I don’t see an easy clear way for you to grow your TV station footprint. Any change in thinking on the strategic fit there of the TV stations?
We love our television business. It generates an enormous amount of cash for us. As we said, Patrick and his team just had their third consecutive year of record profit contribution to the company. We’ve been laser focused on the integration of Time Inc. which obviously was the biggest acquisition in the company’s history. We’re focused on our balance sheet and paying down our debt and obviously the Local Media Group helps us in that area. And then we’re seeing some – finally after a long time we’re seeing some opportunities with our National brands crossing over to our Local brands as Patrick said with the launch of PeopleTV syndicated show next year. So we are looking to increase shareholder value over time. We’ve always said that we would look at strategic opportunities for both businesses, but just Time as your first question was, we are very pleased with our Local Media Group stations and we’re not looking to sell them.
Okay. Thank you.
Your next question comes from the line of Eric Katz with Wolfe Research.
Good morning. Now that you’ve run through your budgeting process for fiscal '20, can you maybe size some of the investments within the 50 at the buckets for the year? And is there anything new you’ve identified since the last earnings call?
Joe identified and said about $50 million of investment, I would break this down by two components mostly, first being digital. So we’re looking to get this digital business growing and we were making about 30 million of that 50 million will be in the digital area. Really related to kind of three main areas, the first being our platform. We’re making a significant investment in our content system. We want to have a unified CMS so we can maximize revenue growth and opportunity and that will be completed. We’re in the middle of that. That will be completed by the end of this fiscal year. As I mentioned in my remarks, video is a huge part of that. So about a third of that investment will be in the video creation area and then finally data. So data, video and then our platform and infrastructure related to digital.
The other piece of the balance is really going to be in our consumer area. As I mentioned in our core subscription business, we’re making investments there for the long term for a piece of that. And then we have this growing very nicely e-commerce business and performance marketing and obviously the Apple News+ platform takes some investment for us to get that product converted and over into the Apple format. So we’ve been making some investments last year and that will continue this year. So about $50 million in total in those areas.
As far as the digital side, I believe when Time was a public company, they were shooting for about $1 billion in digital revenue and I think you mentioned on the call you’re somewhere in the 500 range. Do you have any viewpoint on where you see this going over the next few years? Thank you.
We believe that our guidance has been – we’re giving mid-single digit growth in digital advertising for the fiscal year even though that in the last quarter we saw double digit growth of 10% and as we gave guidance going forward in Q1, we’re going to see about 10%. It’s a little fickle. We’ve had different quarters where we’ve been up and down, so our long-term view for this fiscal year is about 5% growth and hopefully a little better if we can get some of these digital investments and content creation going.
On the digital consumer piece of the business, which is part of that $500 million, we’re growing in the high-double digit range from a revenue perspective in the e-commerce area, affinity marketing. So you put it together and I think it’s still in that kind of high single digit range from a growth perspective close to a double digit growth perspective when you put it together. But this business now is significant, $500 million. And from an EBITDA perspective you’re talking about margins of 20%, so a very robust business that we’re leaning in and investing in.
And the Time numbers, Eric, obviously included the brands we’ve sold as well as Viant which is held for sale. So those numbers would have to come out of the Time numbers.
And on the advertising piece on a comparable basis last quarter ending Q4 on a comparable basis we were up in advertising, so the digital growth outstripped the print decline and we see that happening again in Q1, so some positive trends.
Great. Thank you.
Your next question comes from the line of Davis Hebert with Wells Fargo Securities.
Good morning, everyone. Thanks for taking the questions. Just a couple on the balance sheet. Joe, I’m wondering if you could share with us your leverage as of fiscal year end. And you mentioned an interest in paying down more debt. So just kind of curious what we should expect on that front knowing the progress you already made in the last fiscal year was very productive? So just some comments on the balance sheet. Thank you.
Sure. Leverage at June 30 was 3.3x. We expect next year – as I mentioned, we’ve still got some of the assets that are held for sale. We’re expecting somewhere around 70 million to 75 million and expecting debt pay down somewhere in the 5% to 7.5% range next year, obviously with continued focus.
5% to 7% of the current --
Of the outstanding net debt, yes.
Okay, great. Thank you.
So 150 to 175.
150 million to 175 million of additional debt beta.
Okay. Any change to your leverage target over time?
No. We still like to run the business somewhere around that 2x level.
Okay, great. Thank you so much.
And your next question comes from the line of Jason Bazinet with Citi.
Thanks. I’m just wondering if I could just ask maybe a bigger picture question. When I just try and bridge the simple financials between the 565 of cost cuts that you laid out by the end of fiscal '20, sort of historical Local Media Group EBITDA say 15 to 18 was at least 200 million each year; that gets me to about 765. And if I back out the adverse political ads of 100 million or so that you talked about, it gets me about where your guidance is. That gets me to 665 million which is sort of in the midpoint of your guide.
And it just seems like the implication of that if I just step back from it is all of the legacy National Media Group EBITDA, all of the legacy Time EBITDA has just sort of disappeared. And so my question is – and it gets even more confusing because the revenues that you guided to is sort of in line I would say with at least our model and probably street expectations. So what is the big picture thing I’m missing? I just don’t understand this guidance at all even though I heard all the detail you gave us, it seems like there’s $0.5 billion question. I don’t understand.
Thanks. I think maybe Joe can pile on with the bridging of the numbers, but we acknowledge that our guidance for '20 is below our expectations – below the street’s expectation. So we’ve looked at the guidance numbers and we do that. And I’ll address kind of some of the factors that are affecting that in a second. But I just want to address the reason why we did this acquisition is that scale really matters in the media business and we’ve created an incredible audience reach that I outlined in my comments. We also wanted to create financial scale and financial diversification. So the audience reach now is 180 million unduplicated Americans. We’re a top 10 digital player. We reach 150 million unique visitors, huge digital business.
Total company revenues and EBITDA are nearly double what legacy Meredith was and our expectations for next year in fiscal '20, the EBITDA will be 3x what the legacy Meredith was from a National Media Group perspective. And we’ve diversified away from just being advertising driven where five years ago we were a third of our business. Now we’re from a consumer perspective now we’re basically half. So the factors – the patient was a little sicker than we expected when we acquired it and we’ve kind of outlined that. The advertising piece of it was a lot worse than we expected. We had two years before we acquired it with their mismanagement, the business was down 25% year-over-year in print advertising. And then we had a slower start because our advertisers had taken some time to do that. And so the base of that advertising business is much lower than what we had expected at the acquisition.
And then also from a digital advertising perspective as you go back, even though that we’re seeing double digit growth today, the beginning of the year we saw digital was basically flat. So we had expectations that digital was going to be growing kind of at that mid to high-single digit range. And then the subscription business as we’ve talked about that they were holding cash and not investing in the business. So the base piece of the business was actually just that much lower. There are some accounting issues where the 606 going into the weeds, the new revenue recognition actually pushes out EBITDA to the future, but I’ll let Joe kind of outline some of the buckets.
I think Tom hit on them, Jason. We went back and looked at our acquisition models back in late 2017 and said where is that Time business? Their print ad revenue running down more than 20% all during fiscal or calendar '18 was a couple hundred million of reduction in revenue on the print side. Digital was flattish which none of us expected digital to be flat in calendar '18. And then as Tom mentioned, the lower margin on circ, when we did our bridge from that original acquisition plan to our latest forecast, those three areas; print, digital and circ, accounted for over 350 million of EBITDA decline from that original acquisition plan and it was really, as Tom said, the expectations versus the reality business that came in.
Okay, all right. Thank you very much.
Thanks, Jason. So that concludes our questions for today. We appreciate everyone’s time and look forward to catching up and moving forward into fiscal 2020. Thank you very much.
This concludes today’s conference call. You may now disconnect.