May 10, 2018
Executives
Michael Alan Lovell - Meredith Corp. Stephen Mark Lacy - Meredith Corp.
Thomas H. Harty - Meredith Corp.
Joseph H. Ceryanec - Meredith Corp.
Jon Werther - Meredith Corp.
Analysts
Kyle Evans - Stephens, Inc. Eric Katz - Wells Fargo Securities LLC Dan L.
Kurnos - The Benchmark Co. LLC Jason Boisvert Bazinet - Citigroup Global Markets, Inc.
David Scott Farber - Credit Suisse Securities (USA) LLC Barry L. Lucas - Gabelli & Company David Saber - Wells Fargo Securities LLC
Operator
Good afternoon. My name is Lisa, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Meredith Fiscal 2018 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will a question-and-answer session. Thank you.
Mike Lovell, you may begin your conference.
Michael Alan Lovell - Meredith Corp.
Good morning, and thanks everyone for joining us. Our call today will begin with comments from Executive Chairman, Steve Lacy; President and Chief Executive Officer, Tom Harty; and Chief Financial Officer, Joe Ceryanec.
And then, we'll turn the call over to your questions. Also on today with us, our Local Media Group President, Paul Karpowicz; and National Media Group President, Jon Werther.
An archive of the call will be available today on our website later this afternoon. Our 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 we issued earlier this morning and in some of our SEC filings. Certain financial measures that we are 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 website. With that, Steve will begin.
Stephen Mark Lacy - Meredith Corp.
Thank you very much, Mike, and good afternoon, everyone. I hope you've had the opportunity to see our news release issued earlier today.
I'll begin with a review of the key strategic rationale that drove our acquisition of Time Inc. Then I'll turn it over to CEO, Tom Harty, who will discuss the integration of Time Inc.
and the strategies that we're pursuing to maximize our new and very exciting National Media Group portfolio and update you on our Local Media Group operations. Then Chief Financial Officer, Joe Ceryanec, will discuss our third quarter results, detail several of the positive developments that have occurred since we announced the Time Inc.
acquisition, walk you through the important changes we've made to our financial reporting and provide you with our financial outlook for the balance of our fiscal 2018. Before we get started today, let me provide you with some context around today's conversation.
February was our first month of operation as a new and combined company, and there are still many moving parts. These include the ongoing integration of Time Inc.'
s operations, a number of assets that we have placed for sale or in fact have sold, a major sales reorganization and a great deal of work on cost synergies. Here are few key observations.
First, although it's difficult to surmise by looking at the reported financial results, the legacy Meredith National and Local Media Groups are performing in line with our expectations for the second half of our fiscal 2018. Second, as we expected, turning around the advertising performance of the Time Inc.
brands will in fact take some time, but I'm extremely confident that we now have the right sales structure and the right sales team in place. More on that from Tom in just a few moments.
Third, while we don't have any signed deals yet, we now in fact expect to significantly exceed the original expectations regarding the potential asset sales. This is based on the strong interest that we've received to-date along with the value received for previous assets sold.
And finally, we're very pleased with the integration work so far, including the progress we're making on cost synergies that we expect to achieve. When we announced the deal, we estimated a synergy range of $400 million to $500 million.
After just three months of operations as new and combined company, we now expect to exceed the high end of that range, the $500 million mark, and again, Tom will provide you more details in just a few moments. So now for a quick review of the strategic rationale behind the Time Inc.
acquisition, first and most important, we have created an unparalleled portfolio of national media brands with tremendous scale and efficiency. We now reach over 175 million unduplicated American consumers across media platforms, including 80% of adult millennial women, and that's excluding the assets that we're holding for sale.
Second, we continue to benefit from our strong and growing Local Media Group. Our portfolio of 17 high performing stations is a consistent generator of strong cash flow, averaging approximately $230 million of EBITDA annually.
We have highly profitable duopolies in five of our 12 markets. Third, we've significantly accelerated our digital scale.
We now deliver nearly 140 million monthly unique visitors and 9 billion annual video views. This scale moves us solidly into the top ten among U.S.-based companies as ranked by traffic.
And last month, People.com alone recorded a record 75 million monthly unique visitors. We're without a doubt, the number one digital player in lifestyle and the food categories and the leader in reaching millennial women.
Fourth, we're accelerating consumer revenue diversification and growth. We possess a stable and recurring circulation revenue stream that's now spread across more than 45 million paid subscribers.
Our diversified non-advertising-based revenue streams include a highly profitable brand licensing business, e-commerce and events. Fifth, the combination meaningfully enhances our financial scale and our flexibility.
Again, we expect annual cost synergies to exceed $500 million by the end of the first two full years of operation. We have an excellent track record of achieving these cost synergies in prior acquisitions, and are confident in our ability to optimize the cost structure of the new and combined business.
Sixth, we expect to maintain a strong credit profile, continue to generate strong cash flow and increase shareholder value over time. We currently have modest leverage, under 3 times, including synergies.
We plan to aggressively de-lever using the cash generated from upcoming asset sales and ongoing operations. We remain committed to annual dividend increases and to delivering top-third total shareholder return.
And finally, Meredith continues to be led by a very experienced and best-in-class management leadership team, with a proven track record of consistently outperforming our peers and successfully integrating many, many acquisitions. When we closed on the Time Inc.
acquisition, we set in motion a two-year plan to integrate and optimize the new and combined portfolio. We have a lot to accomplish, but have really hit the ground running, as you'll hear from Tom and Joe.
We're very confident in our plan and have set a goal to deliver $1 billion of debt reduction in fiscal 2019 and generate $1 billion of EBITDA in fiscal 2020. With that, I'll turn the discussion over to Tom Harty to update you on the integration of Time Inc.
and the strategies we are aggressively pursuing to maximize our new National Media Group portfolio going forward.
Thomas H. Harty - Meredith Corp.
Thanks, Steve. When we announced the completion of the Time Inc.
acquisition, we outlined a go-forward strategy consisting of four key components: improving the advertising and circulation performance of the acquired Time Inc. properties to at least industry norms; aggressively growing revenue and raising the profit margins on the acquired Time Inc.
digital properties to the Meredith's mid-to-high teen levels; conducting a portfolio review of the media assets and divesting those not core to our business; and fully realizing the high end of the $400 million to $500 million range of annual cost synergies by the end of the first two full years of operations. Let me provide you with more detail on our progress for each of these initiatives, starting with improving advertising performance of the acquired properties to at least industry norms.
As previously communicated, it will take time to turn around the performance of the Time Inc. legacy brands.
They have underperformed the industry due to a mid 2016 realignment of their advertising sales force. We have quickly implemented Meredith's strategies, standards, and disciplines across the portfolio to improve performance.
These include: installing publishers at the brand level responsible for brand specific sales for the print titles we acquired; maximizing our very successful and experienced corporate sales team, which acts as a central point of contact for our largest advertising relationships and streamlines client agency communication; leveraging our industry-leading digital sales team to focus on scalable and innovative solutions for our marketing partners; and generating non-traditional revenue through our opportunistic direct media sales team. Looking more closely at print advertising for the second half of our fiscal 2018, legacy Meredith comparable print advertising revenues declined in the 10% range in the third quarter of our fiscal 2018.
However, trends are improving and fourth quarter fiscal 2018 ad revenues are running down in the mid single digits. Legacy Time Inc.
print advertising revenues are running down in the high teens, excluding the brands we placed for sale, although improving modestly as the period has progressed. As a reminder, the majority of the advertising inventory for the March 2018 quarter for legacy Time Inc.
brands were sold before we had closed on the acquisition. A significant decline in cyclical, pharmaceutical advertising is impacting results across our combined magazine portfolio.
As we discussed previously, we expect to see meaningful improvement in our advertising results as we progress through fiscal year 2019, which starts July 1, 2018. The power of our new offerings is generating marketplace buzz and is already generating expanded client relationships.
For example, we pitched the new program for General Mills that included native and influencer media, custom shoppable solutions and retail activations. General Mills liked the idea so much, they extended a partnership to us, a relationship neither Time Inc.
nor Meredith has had in the past. Turning to circulation, we've launched a large scale initiative to use our much larger subscription database of 175 million individuals to cross-promote titles to both increase circulation revenue and lower subscription acquisition costs.
There are opportunities to optimize newsstand too, as the number of pockets we control nationwide has grown to nearly 1 million from 300,000. We are focused on higher value magazines and bookazine products, which carried a higher price points to the consumer.
Our second go-forward strategy is to aggressively grow revenue and increase the margins of the acquired Time Inc. digital properties.
For the past five years, Meredith has operated a digital business and has delivered greater than 15% average annual revenue growth. Its operating profit margins are in the mid- to high-teens.
In fiscal 2017, we achieved the important milestone of digital ad revenue gains more than offsetting print ad declines, resulting in organic advertising growth for our national properties. We are viable alternative to Facebook and Google with branded experiences in content expertise they don't have.
We believe there is tremendous upside raising legacy Time Inc's. digital operating margins to Meredith's levels.
Second half fiscal 2018 digital advertising revenues across the National Media Group are expected to grow in the low-single-digits. This is on top of 16% growth in the year-ago period for the combined digital portfolio.
We've had some early success with the combined portfolio winning new digital business as well. For example, we are creating content for Whole Foods and sharing our market and consumer insights with the retailer.
This innovative relationship will run across digital editorial, social and shopper marketing platforms and harness emerging digital channels including e-commerce, voice and the connected home and car. Just last week, we delivered our new go-to market strategy to the advertising and the marketing community at Meredith's NewFronts presentation.
Among the highlights, we're extending our Meredith Sales Guarantee to video and introducing a new advertising product for video called Meredith Stories, which will allow advertisers to integrate easily alongside our premium editorial content. Our third go-forward strategy is to review our portfolio and divest assets not core to our business.
Sales proceeds from Golf, Essence, Time Inc. UK, SI PLAY and SUNSET brands were approximately $300 million.
These occurred either just before or right after we closed on the transaction. We've completed a full review of our combined company's portfolio and have taken these actions.
We retained advisors to explore the sale of the TIME, Sports Illustrated, Fortune and Money brands. Although we've been selective about who participates, I can tell you that it's very competitive.
There are many well qualified, well capitalized participants and preliminary indications are exceeding our initial model. We expect to be moving into a second round of qualified bidders in the near future.
We also moved the 60% equity investment in Viant to an asset held-for-sale status, as we begun to explore the sale of this business. In addition, we recently sold Meredith Xcelerated Marketing to Accenture Interactive.
We believe MXM will be better positioned for growth with Accenture. That transaction closed last week on May 4.
Our fourth and final go-forward strategy is to exceed the $400 million to $500 million range of our annual cost savings we initially pledged to achieve within the first two full years of operations. About half of this savings will come from reduction in head count, the other half will come from savings in vendor contracts, real estate and non-head count related activities.
We are laser focused on our strategy target and are bringing to bear the cost discipline you've come to expect from Meredith. For example, since the acquisition closed, staffing related to Time Inc's.
public company structure was eliminated immediately, including Time Inc's. board of directors and senior management team.
In late March, we announced further head count reductions to eliminate duplicative positions and consolidate certain functions at our headquarters in Des Moines, where operational costs are significantly less. From a vendor standpoint, we're closing Time Inc.'
s consumer service center in Florida and moving fulfillment to an outsourced solution. This action accounts for more than 10% of our synergy target.
We're also finding distribution-related savings by combining mail at the printer and bundling magazines that go to the same subscriber. Regarding real estate, we're consolidating our New York presence to the former Time Inc.
offices at 225 Liberty. This includes exiting the Foundry's Brooklyn location and leaving Meredith's former midtown, Manhattan office space, where we've already sublet half our space and we're in active discussions for the remaining space.
We also look to consolidate other office locations as leases expire. Turning to the Local Media Group, as I'm sure you've heard from others, advertising performance for the broadcast television industry as a whole is experiencing a soft start to calendar 2018 plus there were some anomalies in the March quarter that did impact non-political advertising revenues across our station group.
Many of our clients directed advertising spending towards the Winter Olympic Games and Super Bowl, both of which were broadcast on NBC. Nashville is our sole NBC affiliate and while it delivered a 12% growth in non-political advertising revenue in the third quarter, this rare occurrence impacted the rest of our portfolio.
Looking into the fiscal fourth quarter, non-political advertising pacings are improving. Third quarter political advertising revenues were $2 million.
Thanks to stronger than expected, gubernatorial primary activity in Illinois and Tennessee. This bodes well for the 2018 midterm elections this fall.
There are nine open Governor seats in our markets, the most we have seen in decades and we also expect several competitive races for the U.S. Senate, including open seats in Tennessee and Arizona.
Other revenue and operating expenses increased. This was primarily due to growth in retransmission revenues from cable and satellite television operators, partially offset by higher programming fees paid to affiliated networks.
Growth was also driven by the contribution from MNI Targeted Media, which was part of the Time Inc. acquisition.
MNI offers clients targeted advertising solutions in primarily at the local and regional levels. As an example, MNI recently created a campaign for retail client to support the opening of six new stores in the Los Angeles market.
This campaign featured a cover wrap to unique issue of People magazine that was delivered to 90,000 subscribers who live within 35 miles of the new stores and have children in the home. Now, I'll turn it over to Joe for further updates.
Joseph H. Ceryanec - Meredith Corp.
Thanks, Tom, and good morning everybody. So since we announced the Time Inc.
acquisition, there have been several positive developments. First, we had a head start on many of the initiatives that Steve and Tom discussed today because we're able to close just two months from the time we announced the deal.
Second, we have over $300 million more cash on our balance sheet than we expected to have at this time primarily because of the completed asset sales again that Tom had mentioned. Third, we expect to receive more cash than we originally planned from future asset sales.
And we believe we can minimize the taxes through the use of loss carryforwards and tax plan. Fourth, we expect over $10 million in annual savings related to our credit facilities and bonds compared to our initial financial model because of our offerings being very well received and significantly over-subscribed.
And finally, we expect to save hundreds of millions of dollars in cash tax expenses over the next several years compared to our financial model due to changes in our effective tax rate. We expect a combined effective federal and state tax rate of 28% for our fiscal 2018, and between 26% to 28% thereafter.
So, the combination of these events will allow us to de-lever more quickly than we had originally expected and leaves us feeling even more confident of the shareholder value that we expect to create. Now as Steve mentioned, we made a number of changes to our financial reporting.
And let me walk you through some of those changes beginning with the P&L. First, keep in mind that we closed on the Time acquisition on January 31.
So, the results we issued this morning include just two months of Time's operations. Next, you'll see a non-operating expense line that reflects a loss relating to Meredith's equity investment in Texture.
This is the digital magazine app that was acquired by Apple, and we will continue to receive a revenue share for our content on this platform. The sale of Golf closed on February 7.
Time UK closed on March 15, and we placed the TIME, Sports Illustrated, Fortune, Money, and the affiliated media brands up for sale during the quarter as well as our equity investment in Viant. So, as a reminder, the revenue and cost related to these properties that have been sold or those that are currently held for sale are not included in our fiscal 2018 third quarter and nine-month revenues or costs.
Instead, they're represented as a single line item called discontinued operations. And lastly on the P&L, we took several special charges this quarter, including first transaction and integration costs of $41 million, severance and related benefit costs of $95 million.
And now moving to the balance sheet, you will see both assets and liabilities held for sale. This represents the brands and activities that we have placed for sale, but haven't yet sold.
And that would include TIME, Sports Illustrated, Fortune, Money and the affiliated brands, as well as Viant and Meredith Xcelerated Marketing. So, now turning to our outlook for the fourth quarter of fiscal 2018, we expect the National Media Group revenues to range from $590 million to $600 million.
We expect Local Media Group revenues to range from $190 million to $195 million. We expect total company net earnings to range from $32 million to $44 million and total company adjusted EBITDA to range from $153 million to $158 million.
And lastly, as I mentioned on our last call, we will return to our traditional guidance when we do our year end earnings call and give our outlook for fiscal 2019. With that, I'll turn it back to Steve to conclude and lead into Q&A.
Stephen Mark Lacy - Meredith Corp.
So, thank you very much, Tom and Joe. And as you can tell, there has been a tremendous amount of work going on since we closed on the Time Inc.
acquisition. Let me close our formal remarks before the Q&A with what we continue to believe is a very compelling investment thesis for the Meredith Corporation.
The diverse businesses that we own and operate produce consistently strong free cash flow that's driven by: trusted national brands, with an unrivaled reach to American women and particularly millennials; a great group of television stations in large and faster growing markets; a profitable and growing digital business; vibrant brand licensing activities based on strong national media brands; and a strong and proven (26:02) management team, very successful record of integrating acquisitions, generating strong free cash flow, and growing shareholder value over time. Once again, in closing, we're confident in our plan and have set a goal to deliver a $1 billion of debt reduction in our upcoming fiscal 2019, and generate a $1 billion of annual EBITDA in our fiscal 2020.
And now, we'd be happy to answer any questions that you might have.
Operator
And our first question comes from the line of Kyle Evans from Stephens. Your line is open.
Stephen Mark Lacy - Meredith Corp.
Hi, Kyle, good morning.
Kyle Evans - Stephens, Inc.
Thanks, you too. What kind of long-term margin assumptions are you making for your National segment when you talk about that fiscal 2020 goal of a $1 billion in EBITDA?
Joseph H. Ceryanec - Meredith Corp.
Yeah. So, Kyle, its Joe.
As we look out and recognize the synergies over the next two years, we expect the National Media, I'll call it, EBITDA margins to be into the high 20s to low 30s.
Kyle Evans - Stephens, Inc.
Have either of the businesses been there on a standalone basis ever?
Joseph H. Ceryanec - Meredith Corp.
I can't speak for Time's history. Meredith generally was in the high-teens or low 20s.
What I will tell you is we look at some of the Time Inc.' s brands including People and some of the other affiliated businesses that drive significantly higher margins than either of our other brands did.
So, when you look at the People brand, you look at the agency business and apps, (28:04) those businesses are much higher margins than the rest of the portfolio.
Kyle Evans - Stephens, Inc.
Got you. And you have upped your synergy guide, even as you have put more and more businesses into the for-sale category.
Was that original goal based around the expectation that you were going to be selling things like Viant? Or what's changed and how are we supposed to get comfortable with those two things moving kind of against each other?
Joseph H. Ceryanec - Meredith Corp.
Yeah. Well, I would say that when we did our initial synergy range, that was based on the diligence work.
As we expected, once we got into the detail, we got into the procurement operations and we started looking at really combining on a detailed basis, we feel a lot more comfortable pushing beyond that $500 million number. And I would say even today, I guess we're four months – not even four months after close, we've got our eyes on, and when I say eyes on meaning, we got work to do to execute, but we've got our eyes on almost $500 million right now.
As Tom said, about half of that is head count-related, and about half of it is other third-party vendor or facilities or other operations.
Stephen Mark Lacy - Meredith Corp.
And I think when you look at the assets that we've decided to put up for sale, we're able to go at corporate overhead and the back office operation even harder, because we won't be supporting those brands into the future. And also when you look at the previous margin, while we don't have it in front of us pro forma, the assets being held-for-sale were at a lower margin compared to the assets that we're going to be retaining.
Joseph H. Ceryanec - Meredith Corp.
And I guess, Kyle, that goes back to the first question. Stripping those out really allows the remaining business to carry a higher margin.
Stephen Mark Lacy - Meredith Corp.
Does that help, Kyle?
Kyle Evans - Stephens, Inc.
That does. Are we going to get more information on the discontinued operations, maybe in the Q?
As an analyst, it's hard for us to run our models forward on a partial quarter of a partial business, and I don't have a bottoms up model for TIME, Sports Illustrated, et cetera.
Joseph H. Ceryanec - Meredith Corp.
Yes, no, believe me, we appreciate that. And, yes, there will be more detail in the Q.
But let me give you and the rest of the guys on the phone maybe a couple data points that would help. So obviously, you've looked at TIME's public reporting in calendar 2017.
You can go back and look at Meredith's reporting. So if you go back to the March 2017 quarter and you add up the total revenue of the combined businesses, it's about $1.060 billion.
The revenue we reported today is roughly $650 million. So it's about a $400 million difference.
I'll tell you about half of that is because we did not have TIME's revenue for January. About the other half would be related to the brands that have either sold.
So remember TIME U.K. was a decent size business or the brands we're holding for sale.
So that might give you a little bit of ability to go back and do a like last year to like this quarter.
Kyle Evans - Stephens, Inc.
When we get more information in the Q, will it be specific revenue and EBITDA for discontinued?
Joseph H. Ceryanec - Meredith Corp.
It will be. We're not going to give any detail by brand, because we're obviously in a process on those brands, but it will be in the aggregate.
Kyle Evans - Stephens, Inc.
Great. Final question, and then I'll get out of way.
May be a little bit more granularity on core inside local media TV advertising. I know you were NBC light in the first calendar quarter.
May be core and then a core guesstimate ex Olympic impact and Super Bowl as well?
Stephen Mark Lacy - Meredith Corp.
So, Kyle, I want to make sure that we understand your question, you're talking about Q3 non-political advertising?
Kyle Evans - Stephens, Inc.
Exactly.
Joseph H. Ceryanec - Meredith Corp.
It was down 7% as we reported Q3 year-over-year.
Thomas H. Harty - Meredith Corp.
Yeah. While it's difficult to take out the impact exactly related to the Olympics and the Super Bowl, we feel that the number would have been down in the low single-digits excluding those.
Stephen Mark Lacy - Meredith Corp.
And again as a reminder, we have a great NBC station in Nashville, but only one.
Thomas H. Harty - Meredith Corp.
Right.
Kyle Evans - Stephens, Inc.
And then maybe...
Stephen Mark Lacy - Meredith Corp.
Right?
Kyle Evans - Stephens, Inc.
– auto within that down 7%?
Thomas H. Harty - Meredith Corp.
Automotive for the quarter was down, I believe, 15% for the quarter, and pacing better into the fourth quarter.
Kyle Evans - Stephens, Inc.
Thank you.
Operator
Our next question comes from the line of Eric Katz from Wells Fargo. Your line is open.
Stephen Mark Lacy - Meredith Corp.
Hi, Eric. Good morning.
Eric Katz - Wells Fargo Securities LLC
Good morning. I just wanted to maybe, I guess, frame a little bit what Kyle was getting at before just to clarify.
Your fiscal Q3 and fiscal Q4 guide do not include the assets held-for-sale? And I guess also, just looking at fiscal Q4.
Do you happen to have numbers handy on how much those assets held-for-sale affect the revenue and EBITDA guide?
Thomas H. Harty - Meredith Corp.
And so first of all, what you said is correct. They don't include the assets held-for-sale.
Joseph H. Ceryanec - Meredith Corp.
Yeah. So Eric, kind of like I did for Kyle on Q3.
Obviously, our guide for Q4 if you combined the National and the Local, you're going to get a range of $780 million to $795 million. Again, you can go back to last year and add TIME and Meredith, and it was a bit over a $1.1 billion.
So the difference is little over $300 million. I would say above 95% of that delta is related to the assets held-for-sale.
The remaining piece is just the decline in the revenue line year-over-year.
Stephen Mark Lacy - Meredith Corp.
Okay.
Eric Katz - Wells Fargo Securities LLC
Is there anything in margin wise to think about those assets?
Joseph H. Ceryanec - Meredith Corp.
Yeah. The way I think about them is and we kind of alluded to at those assets that we've sold and the assets we're holding for sale carry kind of a high single-digit EBITDA margin.
Eric Katz - Wells Fargo Securities LLC
Got it. Okay.
Fair enough.
Stephen Mark Lacy - Meredith Corp.
Okay.
Eric Katz - Wells Fargo Securities LLC
And just looking at, I guess, your strategic rationale around digital and you guys talked to scale quite a bit. I would assume that some of the assets being sold are high traffic digital sites.
So how do you think these assets fit into the strategy of sort of using scale to drive that digital revenue?
Jon Werther - Meredith Corp.
So, this is – Eric, this is Jon Werther. We will continue to have top 10 top tier scale in digital going forward, it's about 140 million unique visitors, as Stephen and Tom highlighted.
So we think we're at sufficient scale from a macro marketplace perspective to continue to be able to drive revenue growth and take advantage of that scale in terms of striking larger partnerships with the marketers and agencies that are increasingly looking to partner with fewer and fewer companies to drive their business results. So, we don't believe that the assets that are held-for-sale from a digital perspective will affect our ability to continue to grow.
Thomas H. Harty - Meredith Corp.
And similar to the overall discussion when you look at the margins associated with those digital assets, the assets being held-for-sale have a much lower digital profit margin than the assets that we're retaining.
Eric Katz - Wells Fargo Securities LLC
Got it. Okay.
And then I guess one last one on sort of the long-term target. So, I guess, we're assuming now the $1 billion EBITDA numbers for fiscal 2020 does not include your assets held-for-sale?
And the synergy guide of $500 million plus do not include I think as you alluded to before, I'm not sure if it was so explicit that does not include – it's not impacted by the assets held-for-sale?
Stephen Mark Lacy - Meredith Corp.
You're correct on both accounts.
Joseph H. Ceryanec - Meredith Corp.
That's right.
Eric Katz - Wells Fargo Securities LLC
Got it. Okay.
That's very helpful. Thank you.
Stephen Mark Lacy - Meredith Corp.
Thank you. Thanks for your questions.
Operator
Our next question comes from the line of Dan Kurnos from Benchmark Company. Your line is open.
Dan L. Kurnos - The Benchmark Co. LLC
Thanks, good morning.
Stephen Mark Lacy - Meredith Corp.
Hey Dan, how are you?
Dan L. Kurnos - The Benchmark Co. LLC
I'm all right, Steve, thanks. So let me just again continuing sort of this line of question going back to some of your comments on the margin balance here.
Just is – I don't know how to ask it. Let me ask it this way I guess, is it almost in a way and maybe this is unfair addition via subtraction in some instances.
Understanding that you can take out some of the back office and some of the brand support around the brands that you're holding up for sale. Clearly people are sort of gauging this relative to your ability to scale the business.
These are sort of large centerpiece type brands. So are there other incremental cost benefits that you will get outside of just improving the margin profile and not having to stand up these brands?
Or do you lose some efficiencies with either material costs or publishing as you sell these brands?
Stephen Mark Lacy - Meredith Corp.
So let me take a swipe at that and then Tom and Joe may add to it. If you think about this Eric, you know that's we've done...
Thomas H. Harty - Meredith Corp.
Dan.
Stephen Mark Lacy - Meredith Corp.
I'm sorry, Dan. Excuse me.
I'm looking at my wrong notes. If you think about this, you know we've done a lot of individual tuck-in acquisitions; brand, brand, brand.
And aside from People which really stands alone as a very special and unusual large asset with a very high margin, many of the other businesses that we've acquired are not radically different than other businesses that we have acquired overtime. So the creative operation and the sales and marketing operation stays in place.
All of the other support functions already exist in Des Moines at a much lower cost and without the need to add significant head count and resources. So that support activity gets moved from New York to Des Moines and the stranded costs overtime go away.
Then on the flip side from a vendor perspective, print, paper, all sorts of things you go to market with much larger scale and you have a different cost opportunity there. But that's the difference in a strategic buying a business like this than in a private equity firm.
Because we have the opportunity to eliminate all of those duplicative back office cost that neither the consumer not the advertiser is particularly concerned about.
Thomas H. Harty - Meredith Corp.
Yeah. I think in my comments, Dan, I mentioned the fulfillment operation.
TIME Inc. had an unusual set up where they had their own captive fulfillment service, that's all the customer service and billing and credit card processing in Florida themselves with close to 800 employees.
The industry as a whole, including Hearst and Condé Nast outsource it to a company actually based in Iowa called CDS, which we use and we've already announced that we're going to be moving to them. That alone, that one decision, which we'll be able to complete hopefully in the next six months is, represents 10% of our overall synergy number, just to give you an example.
Stephen Mark Lacy - Meredith Corp.
Does that help, Dan, at all?
Dan L. Kurnos - The Benchmark Co. LLC
Yes. No, that's helpful to think through that.
So then, can we just talk a little bit more about high level trends here on the print and digital sides? And just to be clear here, selling Viant, can you give us a sense of what the impact is from a margin perspective, at least may be from a high level, if you do – if that's no longer hitting the digital line?
How that would impact sort of your expectations for digital trends? But stepping away from that granular – more granular question, just – obviously, you have forecast improvement in your numbers, but maybe pace of play in what you guys are seeing, either CPMs or just sort of general trends outside of what you gave in guide for timing of top line improvement at this point in the portfolio?
Stephen Mark Lacy - Meredith Corp.
So, Joe is going to speak to Viant, and then Jon can talk about our go to market and how we see that revenue pacing going forward.
Joseph H. Ceryanec - Meredith Corp.
Yeah. So, Dan, on Viant.
If I look back at 2017 and not get too specific here, but Viant did about $135 million of revenue. And I would say marginally or slightly positive EBITDA.
So that would come out of the business, and again back to the earlier question, lifting a lower, much lower margin business out will help the margin for the go forward business. I'll let Jon speak to the – I'll call it the business rationale.
Jon Werther - Meredith Corp.
So, obviously, as a combined company we have an incredible combination of several things. First and foremost, our brands and our brand portfolio.
Second, the at scale reach against highly coveted audiences. Steve and Tom have highlighted like millennial woman, like Latinas, et cetera.
Third, a very differentiated unique set of insights and analytics that not only help inform the media decisions that our marketing partners are making, but also more strategic business decisions that they make as well from a portfolio investment perspective. And then, obviously, technology platforms and innovative immersive solutions that we create.
And we believe that those four things which have continued to drive growth at the digital level historically will be what continue to enable us to drive growth going forward. Obviously, people based targeting is important to us going forward and we're going to look to continue to lean into those areas through partnerships with Viant and others.
And video, obviously, is another big area of growth. Together with The Foundry's capabilities and our – capabilities of our editorial staff, we think that's going to be another significant differentiator for us.
So to answer your question, we think we have the portfolio that we need to be competitive and to grow going forward. And we'll look to continue to partner with Viant from a commercial perspective.
Thomas H. Harty - Meredith Corp.
And I think, Dan you asked about kind of macro print trends and it hasn't really changed for us. We believe – we had some outlier quarters like we would describe the third quarter that we just closed from a Meredith legacy perspective being a little higher than in norms.
We've had quarters where we've been up in print. We've had quarters where we've been down double-digits, but our long-term thesis remains that we're going to be down in the mid-single-digit range for print.
And our work is to get the Time Inc. legacy brands to the industry norms of what we see.
And that's what we're working on.
Dan L. Kurnos - The Benchmark Co. LLC
All right. Thanks a lot, guys.
Stephen Mark Lacy - Meredith Corp.
Thank you, Dan.
Thomas H. Harty - Meredith Corp.
Thank you.
Operator
Our next question comes from the line of Jason Bazinet from Citi. Your line open.
Stephen Mark Lacy - Meredith Corp.
Hi. Good morning, Jason.
Jason Boisvert Bazinet - Citigroup Global Markets, Inc.
Good morning. I just had a question for Mr.
Ceryanec regarding this goal to do $1 billion of debt reduction during fiscal 2019. Can I just go through a bridge and you tell me where we might be wrong?
Joseph H. Ceryanec - Meredith Corp.
Okay.
Jason Boisvert Bazinet - Citigroup Global Markets, Inc.
So I start with about $370 million of cash on the balance sheet. I add about $500 million of cash flow over the next five quarters.
I subtract about $125 million for the dividend over the next five quarters. And to do $1 billion of debt reduction, the plug implies about $250 million of potential proceeds from asset sales.
And if I take the $300 million roughly of revenues from the assets held-for-sale at your high single-digit OCF margin, that implies something like an 8 times EBITDA multiple, is that – where would I be wrong?
Joseph H. Ceryanec - Meredith Corp.
I think you're pretty close, Jason. I would say our expectations on the asset sales may be a little peppier.
On the flip side, there's going to be cost of severance and cost of synergies that you may not have picked up. But I mean, your math is generally correct.
I'd probably be more bullish on the cash from the asset sales, but that offset by some cash in order to realize the synergies.
Jason Boisvert Bazinet - Citigroup Global Markets, Inc.
Perfect.
Stephen Mark Lacy - Meredith Corp.
Not bad for early in the morning, Jason. Not bad.
Jason Boisvert Bazinet - Citigroup Global Markets, Inc.
Thank you so much. Thank you.
Joseph H. Ceryanec - Meredith Corp.
Thanks, Jason.
Operator
Our next comes from the line of David Farber from Credit Suisse. Your line is open.
David Scott Farber - Credit Suisse Securities (USA) LLC
Hi, guys. Good morning.
How are you?
Stephen Mark Lacy - Meredith Corp.
Hi, David.
Thomas H. Harty - Meredith Corp.
Hi, David.
David Scott Farber - Credit Suisse Securities (USA) LLC
Hi. A lot of my questions have been asked and answered, but I had a couple.
It was promising to hear about the synergy number. And my question is I'm curious, given how active your M&A process has been on the divestiture side, does your timeline change at all with respect to how long you think it will take to achieve the synergies?
And maybe just update us on the timing of cash cost versus realizing the synergies on the P&L, and then I had a couple follow-ups? Thanks much.
Thomas H. Harty - Meredith Corp.
You know, I think, our stated goal has been to realize the synergies in the first 2 full years of operation. I think, why we're putting out $1 billion in fiscal 2020 is we're optimistic that we can get the vast majority of those out in the next fiscal year.
So, between – by the close of fiscal 2019 next June, we'll have the vast majority of the synergies out. And then have a go forward run rate that we hope will just be a little bit less.
(47:26)
David Scott Farber - Credit Suisse Securities (USA) LLC
Okay. And then the timing of the cash cost you think are consistent with what you said recently as well?
And then I had some follow-ups.
Thomas H. Harty - Meredith Corp.
Yeah, I'd say most of the cash costs will be gone by the end of our fiscal 2019. And why I say that is a lot of the head count reductions will be later this calendar year as a lot of the integration work will take place.
And so once we get the businesses combined, and a lot of those head count will come out again later this calendar year or early calendar 2019. And then if you think of the tail on severance and things like that, it takes you out to kind of the end of fiscal 2019.
The cash burn on the synergies really shouldn't carry much into our fiscal 2020.
David Scott Farber - Credit Suisse Securities (USA) LLC
Okay. Very good.
And then on guidance that you provided, which was helpful, obviously in the Q&A, you've walked through the revenue and the assets being disposed at high single digit margins. I get all that.
But perhaps maybe just directionally, you can help us think about the business on a same-store basis year-over-year, because I think some of us are struggling a little bit with what was reported pro forma Meredith and Time. (48:54) So, if you could just help us think about directionally how EBITDA is trending, that would be helpful.
And I had one other question on asset sales.
Joseph H. Ceryanec - Meredith Corp.
Okay. So, again I'll go back and I'll start with revenues.
So if you go back a year ago and combine the two businesses, it did a little over $1.1 billion. And what we just reported now was an $800 million.
So, we did about – there was about $400 million less of revenue. And again about half of that – I'm sorry, I was looking at the Q4 sheet, let me go to my Q3 sheet.
$1.060 billion last year, and $650 million this year, so about $400 million difference. Again, about half of that is not having the month of January for Time or about $200 million.
And a little under $200 million would have been assets either held-for-sale or assets sold. And just to remind everybody, Time Inc., before the closing, sold Essence and Sunset and SI Play.
Right after the closing, Golf and Time UK came out. And then you got to take out the brands we're holding for sale right now.
And again if you add the two businesses EBITDA, I believe, Time reported $22 million of EBITDA in the first quarter. I'm trying to remember ours, but if you look at the EBITDA we just reported, ours was $83 million.
So combined on a, I'll call it, pro forma basis, we were about $107 million. And we just reported, I believe $111 million.
So we actually were a little bit ahead of a pro forma combined last year.
Stephen Mark Lacy - Meredith Corp.
That make sense?
David Scott Farber - Credit Suisse Securities (USA) LLC
It does. I was actually more talking about the guidance for the upcoming quarters versus the 3/30 quarter?
Joseph H. Ceryanec - Meredith Corp.
Okay. Again on revenues...
David Scott Farber - Credit Suisse Securities (USA) LLC
But we can do this offline, if it's easier.
Joseph H. Ceryanec - Meredith Corp.
Well, let me just correct, so everybody is – on the revenue side for Q4. Again last year the combined businesses did $1.139 billion.
We're guiding to just under $800 million, so, a little over $300 million of delta. As I said about 95% of that delta is assets held-for-sale with the remainder mostly the TIME business revenue, the remaining business revenue being down.
And EBITDA, again, on a pro forma, our guide would be a little lower than the combined last year and that really is some of the EBITDA tied to the brands that are held-for-sale.
David Scott Farber - Credit Suisse Securities (USA) LLC
Understood. Okay.
Thanks for that.
Stephen Mark Lacy - Meredith Corp.
Okay.
David Scott Farber - Credit Suisse Securities (USA) LLC
And then on asset sales, can – perhaps you spoke about it. But one thing I was curious about is expectations for proceeds.
You talked about debt paydown. Would you also consider buybacks given the stock performance or M&A perhaps in the broadcasting sector?
I just would sort of love to hear your updated thoughts given the magnitude of the asset sales and how they've been trending higher than maybe original expectations? And that's it for me.
Thank you.
Stephen Mark Lacy - Meredith Corp.
Yeah. Obviously we continue to be very open minded to accretive property acquisitions across the portfolio.
But our priorities continue to be supporting and increasing the dividend on an annual basis, and aggressively de-levering. And that's where the $1 billion of debt reduction in fiscal 2019 comes from, and those are the marching orders.
Joseph H. Ceryanec - Meredith Corp.
And David let me just go back to one because I know everybody is going to try and model and it's going to be a little tough with all the moving parts. But, as I said that assets that are held-for-sale in Q4, the revenue would be a little under $300 million at about an 8% EBITDA margin.
So maybe that helps go last year to our fourth quarter this year guidance.
Stephen Mark Lacy - Meredith Corp.
Okay?
David Scott Farber - Credit Suisse Securities (USA) LLC
It helps. Thank you.
Stephen Mark Lacy - Meredith Corp.
All right. Thank you.
Operator
Our next question comes from the line of Barry Lucas from Gabelli & Company. Your line is open.
Barry L. Lucas - Gabelli & Company
Thank you, and good morning.
Stephen Mark Lacy - Meredith Corp.
Yeah, hi, Barry. How are you doing?
Barry L. Lucas - Gabelli & Company
I'm doing okay, Steve. I hope things are well with you.
I just want to come back to the top line again. We talked a lot about the synergies and the pace therein.
But the degradation of TIME's business that started after they changed the go-to-market strategy and the whole thing just sunk. How quickly can your new publishers, if they are new and new sales strategy have a more favorable effect?
And other than page sales or revenues, what are the kind of guidepost that would tell you that you're moving in the right direction ahead of that? And at this juncture just a few months in, are there any specifics successes that you can point to and identify and say, yep, this is what we need – we need to do more of – it's working and we need to do more of this.
Thomas H. Harty - Meredith Corp.
Yeah. Barry, this is Tom.
As we've talked about before, it isn't an overnight switch that you flip to make this happen. But we're really, really confident that we're going to see improvement quarter-to-quarter.
There is a little bit of a settling time that goes into play. So I would say that it's going to take three quarters for us to get into the range that we see at Meredith.
But we're going to see quarter-over-quarter kind of sequential improvement on the TIME legacy brands. The good news is that we have – there were a lot of the former publishers and former sales leaders were still in the company.
They were just off in these sales verticals and not representing the brand. So we could actually put them back.
The publisher from Sports Illustrated, the publisher from – we moved somebody to SHAPE. So we feel really confident that we have the team in place and while it's not a quantifiable response, the response that we've gotten from the soft response from the marketplace is incredible.
Like our publisher for REAL SIMPLE sent me an email last night that from a client just saying, it's so refreshing to have someone actually making a sales call. We know who to call, who's representing REAL SIMPLE.
So it's in place, it's happening. We did that last month and we're confident we're going to see improvement over the next three quarters and you kind of think about calendar 2019 as kind of the run rate to go forward.
Stephen Mark Lacy - Meredith Corp.
And I think, Barry, we've talked about this many times over the years, the TIME Inc. portfolio standalone was always the very best media portfolio in the marketplace, and we competed against them for years and years and years and the opportunity to put these two portfolios together and to have People as the leader along with the other great brands is in all sincerity unparalleled in our industry.
And we just had our board meeting, the last couple days and the middle evening we had all of the sales leadership that have been put in place from all of these brands together. And I think, you would have been extremely impressed with not only the energy in the room, but also the high quality of these individuals.
And again, you know this very well, but when Tom and the team took over, the 1st of February, we're out 60 to 60 plus days on that sales cycle. So the ability to impact that is really now and going forward.
So I think Tom's cadence makes a lot of sense. That as you think about three quarters moving ahead.
And then you get to the second half of our fiscal which is early calendar 2019, the goal is to be in line with historic Meredith performance.
Barry L. Lucas - Gabelli & Company
Okay.
Stephen Mark Lacy - Meredith Corp.
Okay?
Barry L. Lucas - Gabelli & Company
Thanks for that. Last one from me.
Announced as the buyer of the CW affiliate in St. Louis, other opportunities to create duopolies that outright purchases or any – are you in discussions on swaps or trades that could help the portfolio economically if not the reach?
Stephen Mark Lacy - Meredith Corp.
Well, Barry, we are always, always excited about the opportunity to expand that portfolio with this high margin and obviously, duopolies are a plus. We're not in any other active conversations right now, but I can tell you we're actively interested should they present themselves.
Barry L. Lucas - Gabelli & Company
Thanks, Steve.
Stephen Mark Lacy - Meredith Corp.
Thank you.
Operator
And our final question today will come from the line of David Saber from Wells Fargo Securities. Your line is open.
David Saber - Wells Fargo Securities LLC
Good morning, everyone.
Stephen Mark Lacy - Meredith Corp.
Hi.
David Saber - Wells Fargo Securities LLC
Thanks for taking the question. One last one from the credit side.
I definitely appreciate the targeted debt reduction and leverage ratio over the next couple of years. But I wanted to ask what leverage are you at now, and I don't know if that's a bank compliance certificate leverage or how should we be thinking about – how should we think about given the pro forma adjustments leverage at this point?
Joseph H. Ceryanec - Meredith Corp.
Yeah, David, it's Joe. So if we just go back and this may not be exactly on the definition under the credit agreements.
But I did do a calculation where I went back and took the trailing 12 months of both businesses on a pro forma basis. And if you layer in the $500 million of synergies you get to a pro forma leverage ratio of 2.7 times for the business as of March 31.
So again trailing 12, both businesses layering in synergies 2.7 times.
David Saber - Wells Fargo Securities LLC
Okay. So that $500 million...
Stephen Mark Lacy - Meredith Corp.
Does that help?
David Saber - Wells Fargo Securities LLC
Yes it does. And the $500 million is it 100% incremental to your LTM EBITDA that you're calculating?
Joseph H. Ceryanec - Meredith Corp.
Correct.
David Saber - Wells Fargo Securities LLC
Okay, understood. Thank you so much.
Joseph H. Ceryanec - Meredith Corp.
Thank you.
Stephen Mark Lacy - Meredith Corp.
So again I hope everyone can feel on the call this morning the tremendous excitement and enthusiasm across the Meredith team to deliver on the promise, with I think some aggressive and bold goals, but goals that are absolutely achievable as we move forward. So we appreciate your participation and support.
And we're going to get back to work. So have a great day.
Thank you very much.
Operator
This concludes today's conference call. You may now disconnect.