Good morning. My name is Matthew and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter Fiscal 2018 Earnings Conference Call. [Operator Instructions] Thank you. Mike Lovell, you may begin your conference.

Hi, good morning. Thanks everyone for joining us. Our call today will begin with comments from Chairman and Chief Executive Officer, Steve Lacy; President and Chief Operating Officer, Tom Harty; and Chief Financial Officer, Joe Ceryanec. And then, we’ll turn the call over to your questions. Also on the line today are Local Media Group President, Paul Karpowicz and National Media Group President, Jon Werther. An archive of our call will be available later today on our investor website. Our remarks this morning will 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.

Thank you, Mike and good morning everyone. I hope you have had the opportunity to see our earnings release that was issued earlier this morning. First quarter fiscal 2018 earnings per share were $0.73, including a $0.04 gain related to the sale of a majority stake in the Family Circle Cup Tennis Center. Excluding this special item, earnings per share were $0.69. This compares to earnings per share of $0.75 in the prior year period, which included $0.20 per share of political advertising revenues. We are particularly pleased that we were able to make up most of the profit that does not recur due to the every other year political election cycle. The main drivers of our strong company-wide performance were continued growth in our profitable digital activities, favorable results from retransmission agreements, solid magazine execution in all aspects, including growth in subscription revenues, and of course, ongoing discipline control of our expenses. As we look ahead to our second quarter of fiscal 2018, we are encouraged by strengthening demand for nonpolitical advertising revenues in our Local Media Group, which is pacing up in the mid to high single-digits. This performance is being led by our two largest ad categories, automotive and professional services, partially offset by weakness in retail. Our stations in Atlanta, Las Vegas and the Kansas City markets are performing particularly well. We also expect continued benefit from our recently renewed retransmission agreements. As you may recall, we renewed about 40% of these agreements in our fiscal 2017 and are now fully realizing the financial benefits of those negotiations. As a result, we expect nonpolitical revenues in our Local Media Group to be up in the high teens. We are experiencing some softness in National Media Group advertising, similar to what has been reported by the major…

Thanks, Steve and good morning everyone. Local Media Group fiscal 2018 first quarter operating profit was $41 million and EBITDA was $49 million. Revenues were $154 million. Looking more closely at fiscal 2018, first quarter performance compared to the prior year, nonpolitical advertising revenues grew 4% to $88 million, led by growth in the Atlanta, Phoenix and St. Louis markets. Digital advertising revenues grew 14%. Performance was driven by initiatives to drive traffic to our stations’ digital properties and stronger consumer engagement. This included the recent re-launch of mobile news, weather and traffic apps across our portfolio, which generated record app opens and unique page views. As expected in an off-election year, political advertising revenues were $1 million compared to a fiscal first quarter record of $16 million in the prior year period. Other revenues and operating expenses increased, primarily due to growth in retransmission revenues from cable and satellite television operators, partially offset by higher programming fees paid to affiliated networks. We continue to pursue initiatives to strengthen our brands, including the launch of drone newsgathering in each of our markets. Drones are safer and a lot less expensive to operate than helicopters and allow richer storytelling. Additionally, we are deepening our commitment to investigative news teams across the group. These efforts helped our Local Media Group deliver strong performance during the July rating period. Stations in 9 of our 12 markets ranked number one or number two in morning or late news and stations in 7 of our markets were number one or number two from sign-on to sign-off. Turning to our National Media Group, fiscal 2018 first quarter operating profit grew 17% to $28 million and was up 4%, excluding special item. Revenues were $239 million. Looking more closely at fiscal 2018 first quarter performance compared to…

Thanks, Tom. Good morning, everybody. Looking at our fiscal 2018 first quarter metrics, cash flow from operations grew 45% to $51 million. Our debt balance at September 30 was $705 million and our weighted average interest rate was 2.9% with half effectively fixed at low rates. We ended the fiscal first quarter of 2018 with a trailing 12 month debt-to-EBITDA ratio of 2:1, leaving us with significant additional capacity and we had $62 million remaining under our stock buyback program. We more than doubled our dividend since we launched our successful TSR strategy 6 years ago. And currently, our stock is yielding a 4% dividend. Now turning to our outlook, we expect full year fiscal 2018 earnings per share on a GAAP basis to range from $3.24 to $3.54. Excluding special items, we continue to expect full year fiscal 2018 earnings to range from $3.20 to $3.50. During fiscal 2018, Meredith is cycling against a record $0.85 per share or $63 million of political advertising revenues recorded by our Local Media Group in fiscal 2017. We expect fiscal 2018 second quarter earnings to range from $0.87 to $0.92. This compares to earnings per share of $1.58, or $1.30 excluding special items, recorded in the prior year period. Again, we will be cycling against $0.54 per share of political ad revenues we recorded in the prior year. Looking more closely at the second quarter of fiscal 2018 compared to the prior year period, when we generated approximately $40 million of political ad revenue, we expect Local Media Group total nonpolitical revenues to be up high teens, National Media Group revenues to be down mid-single digits and total company nonpolitical revenues to be up low to mid-single digits. Now, let me close my comments with what we believe is a compelling investment thesis for Meredith. First, we have a great portfolio of media assets that deliver consistent and strong cash flows. Second, we are executing a balanced capital allocation strategy that reinvests approximately half of our cash generation into our business and returns the other half to our shareholders. Our goal is to continue to deliver top third total shareholder return. Third, we are well positioned to continue as an industry consolidator, and we’re constantly evaluating strategic acquisitions, both large and small. And finally, we have a strong and proven management team that consistently delivers results. With those remarks, we’d now like to open it up for questions.

[Operator Instructions] Your first question comes from the line of John Janedis with Jefferies. Your line is open.

Thanks. Good morning, guys.

Hi, John.

Two quick ones for me. One, with YouTube TV in Atlanta and Phoenix now for about 3 months and St. Louis and Kansas City for 2 months, could you talk about what you are seeing in terms of either interest level or subscribers? And more broadly, can you give us an update on sub-trends and to what extent you think virtual MVPDs are having or do you expect to have a positive impact, understanding it’s early?

Okay. So I am going to ask Paul to comment on any information he has on Atlanta or Kansas City. And on sub-trends, the most recent data that I have seen John, would show that cable subscribers in our markets are down about 2% and we pick up some of that on the satellite side. So really it has not caused any significant change in our revenue stream, at least to-date. And Paul, do you have any thoughts on John’s question on YouTube in those markets at all?

Yes. The numbers are still very small, but I think the important thing to remember is, with those services, we still receive a sub-fee. So even if, in fact, those people are shifting off of satellite or cable and going to whether its CBS All Access or YouTube or whatever, because of the relationships that we have with each of our networks, we are protected that in our markets it’s exclusively going to be our station, our programming, and we’ll still get a sub-fee on that.

Okay. Alright. Maybe separately, thanks for that. With Fixer Upper going into its last season at least for now, can you talk about the implications for The Magnolia Journal? I don’t know to what extent the show was a driver in newsstand sales, but do you need to up marketing or make any changes to maintain the growth trajectory?

Yes. Jon, do you want to speak to that as it relates to the wonderful growth received from Magnolia Journal?

Yes, we are very excited about the growth we’ve seen for Magnolia Journal, which has been one of the most successful launches in Meredith history. And obviously, as we move forward, we look to continue to expand that partnership in ways that are feasible. And so I think, you can expect us to continue to lean into the brand. And the opportunity from a marketing perspective as it’s been very successful with consumers, and we continue to see a lot of upside there.

John, interestingly enough just within the last few days, Chip and Joanna did an interview that we used for daytime programming across our station group. I’d be happy to send those clips to you. And it’s compelling content. And they also, of course – was really related to a book that’s coming out, but they also talked about the upcoming issue of Magnolia Journal and pick it up at your newsstand or subscribe. So we are looking for opportunities that don’t violate any of their other contractual agreements, but also help us expand that business. Okay?

Alright. Thanks a lot.

Thanks, John.

And your next question comes from the line of Dan Kurnos with The Benchmark Company. Your line is open.

Hey, Dan.

Hey, Steve. How are you doing?

Pretty good. How are you?

I am doing well. Thank you. I won’t bug you about the Time assets that came up for sale. I am sure you saw the news. So, let’s focus on just kind of the core business here. Can you just maybe, Joe, even just remind us what in the quarter if you stripped out Peach what core was in the quarter, and how it’s pacing in Q4 just to make sure that we – our calendar Q4 to make sure we have our numbers right?

So without Peach, we were flat, Dan, maybe just up a tiny bit. In total, I think we are up about 4%. Q2 is pacing strongly. We are currently pacing high single, which is probably where we expect to see the quarter end. And again, without Peach, we are kind of mid-single up, pacing for Q2. Okay?

Got it. Thanks. Yes, that’s helpful. And then Steve, just high level, obviously, the FCC announced sort of what we expected on sort of broad sweeping de-reg the other day, although it was maybe a little bit broader than most people were thinking about. We talked about potential newspaper and radio cross ownership. Certainly, you guys are thinking about your portfolios and trying to orient yourselves appropriately in the marketplace. Does the FCC does take action does that change the way you think you will address the marketplace beyond kind of the assumed opportunity to pursue in market duopolies?

I think unless it comes out in a way, Dan, that we don’t expect, sort of any of the regulation that is at play on the broadcast side, opens incremental opportunities for us. As you say, whether if the duopoly or whether it allows us to do some swapping of assets, which we’ve been having some conversation about, I think there is much more of an appetite in the market to do things that allow whether it’s us or one of our competitors to make more money, which is what this is all about. So I think we are very, very optimistic about where that is going. It’s just hard to determine the time frame. And Paul, if you would like to add anything to that you are in all of those industry discussions, please feel free.

Yes. I think it’s really two phases. One is what the FCC does in terms of their deregulation and so forth. And then the other part is what the Justice Department does. The issue for the Justice Department is how do they define the market? Because even if the FCC changes and says you can own two of the Big 4, unless the Justice Department changes their rationale and their definition of the market that might still be difficult. But we know that the Justice Department is looking at that and that would – again, I think that would open up some tremendous opportunities for us.

Got it. And if I could just ask one last one, I know it’s kind of early, but you guys may end up being the beneficiary of this with now Senator Jeff Flake retiring, announcing he is not going to run again. You also have a Nashville station where Corker has decided he is going to retire. I don’t know if you got any benefit in Mobile from the Moore special election, but just how are you thinking about the way political is shaping up heading into 2018?

Do you want to address that, Paul? We learned those by the way, Dan.

Yes. We went through the special election in Atlanta with Congressman Price’s seat there. And then Mobile was also sort of a nice pleasant surprise. And certainly, with Senator Corker and Senator Flake, we do anticipate that those will be highly contested races. And the expectation is that those will be pretty good. So we’re cautiously optimistic that those races will be pretty strong for Meredith.

Alright. Thanks for the color. I will jump back in queue.

Thank you, Dan.

Your next question comes from the line of Kyle Evans with Stephens. Your line is open.

Alright. Good morning.

Hi, Kyle. How can we help you?

A few questions. In two of the last 3 fiscal years, your other line in LMG has dipped slightly sequentially. How should we be thinking about grocery trends as it phases across the rest of the fiscal year? And could you please give us a reminder on the sub-renewal schedule over the next few years?

Okay. Joe is digging around here. Just give us a second.

So grocery trend, Kyle, is up for the quarter a few million dollars. We recently renewed a pretty large MVPD which has given us some tailwinds going into the year, probably a little bit stronger than we might have thought when we talked back in July. I think the schedule – I think, for this year, we’re pretty much done. As we look into fiscal ‘19, we got, I guess, 8%. So we have got some smaller ones. Yet this year, next year fiscal ‘19, we’ve got about 35% of our subs come up. And then, 2020 is a big year where we got almost 60% of our subs come up.

Which is timed nicely in sort of the every other year off political cycle which should help smooth out revenue.

Got it. So, on the first part of my question, the dip that we have seen in 2 out of 3 years, you do not expect to see that in the current quarter?

You are talking about LMG?

Yes.

We will have to look at that, Kyle and get back to you, because I can’t picture the dip in other, in LMG, but Mike made a note of it. And we will take a quick look and give you precise answers. I don’t know why it would dip.

Yes. I guess, the only thing I can think of off top of my head, Kyle, would be Peach used to come through other, because we were managing the station for Time Warner. Now that we own the station, it comes through the full P&L.

That might be it.

It would have shifted into local nonpolitical as opposed to other.

Joe, I think that’s exactly right, because that’s where Peach was. It was in other before.

Okay.

We will check on that for you.

Okay. Last one and then I will hop back in queue. Can you just more broadly talk about your outlook for print advertising in the NMG business please?

Yes. I am going to ask Tom to give you sort of what is our longer term view, which is actually, although there is always quarter-to-quarter volatility and this has actually played out very well for 6 years in a row, so.

Yes. We have taken the long-term view that print is going to decline at mid single-digits and that’s what we have been seeing, as Steve mentioned for the last 5 to 6 years. We’ve had quarters where we’ve been up. We’ve had quarters that we were down worse than that. But when you look at the years in total, it’s been very, very consistent. And we anticipate that to be happening for this fiscal year too, but there’s some volatility. We’re kind of facing some to – the comments in the transcript, was that we were facing some volatility in some of our key categories like CPG. And you might have saw some of the announcements from some of the holding companies like Interpublic yesterday came out and talked about that, that they’re seeing weakness at some of these CPG companies and we’re seeing that in the current quarter.

From a numbers perspective, if you look over the last 6 years in a row, it would range from down 4 to down 8 in total for the year comparable print advertising. And so from a planning perspective and from a growth of other streams of revenue, that’s what we use and what we think about as we look over the longer term. Does that help?

It does. Thank you so much.

Thank you.

Your next question comes from the line of Eric Katz with Wells Fargo. Your line is open.

Hey, Eric. Good morning. How can we help you?

Just have a couple of questions here. I thought the comments on strength in auto are interesting. I know you only have a couple of TV stations down south. But I was wondering if you could talk to what you are seeing in the auto categories, especially after the hurricanes?

Well, Joe can dig out the actual auto category numbers. Paul, I don’t know that we have had any hurricane impact. Would you comment on that? And then, we’ll come back to the numbers from Joe?

Sure. No, based on where our markets are, we fortunately avoided really any hurricane issues. So even in Mobile, which got some storms, we haven’t seen any negative impact there on automotive. So from that perspective across the board, we still feel pretty good about automotive going forward.

Okay. So, general auto is picking up, okay.

And Eric, in Q1, auto was up about 4%. And I’d say, in Q2, we’re pacing right there, maybe up 5%.

And you know the second largest category is Professional Services and it was actually up 14% in the first quarter, so.

Okay. We have also been reading in the press that Hearst is buying Rodale. Do you expect any divestitures from that deal? And would you actively look at any particular brands if they became available?

Obviously, we are not sure exactly what Hearst might do with those assets, but there is two big assets in that portfolio, Men’s and Women’s Health. I seriously doubt they would divest of those. And otherwise, we would not be interested in any of the other parts and pieces of that business.

Okay. And then lastly, it sounds like digital is a little bit softer than what you are seeing the last couple of quarters. Could you give a little more color on what you are seeing there?

Yes. It’s really related to the food category – I am sorry, not in Q1, hold on a minute. Joe get to the right. I get all these different businesses. Tom, you want to take that?

Yes. We are seeing – we are coming against a comparable – our year last year, digital was up plus 20% in the National Media Group and was kind of consistent quarter-to-quarter. So we’re facing some tough comps. But as my comments before on the last question, we’re kind of facing some – little bit of headwinds related to the food category and CPG that’s kind of industry-wide and that’s kind of what we’re seeing in the current quarters kind of decelerating our growth a little bit.

Yes. Eric, what you are hearing generally, retail is soft. It was soft in both our first quarter and it’s looking soft in digital, going into second fiscal and food again in the second fiscal is soft as well.

Got it. Thank you very much.

Thank you.

[Operator Instructions] Your next question comes from the line of Barry Lucas with Gabelli & Company. Your line is open.

Thank you and good morning. Steve, maybe if you could just drill down a tad more on the digital versus print advertising, you have talked about this in the past. So, if print advertising was down roughly mid single-digits, what was the increase in digital or did it increase at all given what you have just said?

Yes, digital was basically flat for the quarter.

In the National Media Group?

In the National Media Group side.

It’s up 14% locally.

Yes. On the local side, it was up 14%. So, there were lots of variances by category, but the ones that Tom and Joe already disclosed were the most significant ones.

And print was down roughly that mid single-digit range, you said?

Yes, exactly, little under 5%.

A little under 5%, 4% and change in this quarter, Barry.

And what would digital represent of NMG advertising at this point?

30%.

Okay. I’d like to try and comment this in other way. Clearly, those Men’s and Women’s Health titles that Rodale had where – would have fell right into your wheelhouse. So was that more a function of price or the other assets were less appealing and let’s say diminished your interest? Maybe, that’s the question.

Well, I think you know us pretty well, Barry. And we are pretty good at doing the numbers on all of these businesses. And we don’t overpay. We don’t know what arrangement may be in process between the Rodale family and Hearst. But in our opinion, the vast majority of the value was in those two assets and that’s how we did our valuation. And we take a pretty hard-headed approach to these things. There isn’t any reason to overpay and set the operating group up for continued failure of inability to meet a ridiculous acquisition plan. So we put our numbers together, and we look at these businesses the way we look at our own. We look at the costs that we can take out. And we know how to do that because we have done it a lot of times. And then, we do a net present value of the future cash flows and decide what’s good for Meredith shareholders and there is no reason to overpay.

Okay. Last one for me is really for Joe is what were the actual number of shares that you purchased in the quarter?

Have to dig deep for that one, Barry. I can tell you it wasn’t a lot, 299,000.

99. Okay, thanks, Joe. That’s it for me.

Okay. Well, thank you all for your participation. As always, we are available for the balance of the day if there are follow-on questions. We appreciate your participation this morning and your ongoing support of Meredith. And we will get back to work. Thank you very much. Have a good day.

This concludes today’s conference call. You may now disconnect.