Aug 13, 2020
Operator
Good morning. My name is Cree, and I will be your conference operator today.
At this time, I’d like to welcome everyone to the Meredith Fiscal 2020 Fourth Quarter 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] I would now like to turn the conference over to Mr.
Mike Lovell. Sir, you may begin.
Mike Lovell
Good morning and thanks everyone for joining us. Our call will begin with comments from President and Chief Executive Officer, Tom Harty; followed by Chief Financial Officer, Jason Frierott.
Remarks this morning will include forward-looking statements and actual results may differ from our forecasts. Reasons for differences are described at the end of our news release that was issued earlier this morning and in our SEC filings.
Certain financial measures that we’re discussing on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of special items. Reconciliations of these non-GAAP measures are included in our slide presentation, which is available in the Investor Relations section of meredith.com.
Finally, an archive of the call will be available on our website later today. Now, I’ll turn the call over to Tom.
Tom Harty
Thank you, Mike, and good morning, everyone. I want to start by saying thank you to Mike, many of you gotten to know him over his 14 years of service in Investor Relations role.
Mike has recently taken a new communications focus role at Meredith. He will continue to support the Investor Relations function but he is expanding his scope to include other communications responsibilities.
We expect to name a new IR lead in the near further. Turning now to our results, I hope you’ve had the opportunity to see our news release issued earlier this morning.
We’ve also posted a presentation that Mike referenced to our Investor Relations website to complement our fiscal 2020 earnings release and update this morning. They include additional disclosures we think you’ll find useful.
I’ll start with slide three, COVID-19 and its impact on our business remains front center with everyone today, as it was last quarter. And our top priorities continue to be, one, keeping our employees safe, two, delivering trusted news and inspiration to our audience of more than 100 and 90 million Americans, three, supporting our advertising and marketing partners, and four, maximizing free cash flow.
Jason will take you through our financial performance in greater detail. We’ve accomplished a number of initiatives in fiscal 2020, including increasing brand engagement with consumers and advertisers, and improving our competitive position.
Let me share a few highlights. First, in fiscal 2020, we added to our digital businesses and capabilities.
For example, we built a new technology platform with robust data capabilities, supporting our expanding digital activities. This new proprietary platform which unifies legacy platforms onto the same technology stack includes not only our content management system, but also our proprietary taxonomy, our first-party data and our user identity graph.
This prepares us well for a world where third-party cookies are no longer supported. It also allows us to bring together consumer profiles, real-time insights and intent signals to predict trends and inform our editorial and product roadmap, provide personalized experience to our consumers and give advertisers the ability to tailor the right messages and products to the users most likely to buy at any given time.
We advanced our video and audio strategies. Video views grew more than 50% in fiscal 2020 across our owned and operated properties.
Responding to consumer demand, we published a third more videos during the year. We also launched a series of new podcasts under the Allrecipes, Southern Living and Parents brands as a way to tell stories in an increasingly popular way.
We have more planned including a new people podcast. We’ve added to our subscription acquisition an ecommerce capabilities, which are important avenues for growth.
Meredith first entered the ecommerce space with the acquisition of ShopNation seven years ago. Since then, revenue growth from our ecommerce activities, including digital couponing, content and affiliate commerce, have been up strong 28% in the year.
Digital advertising revenues grew to 38% of total National Media Group advertising revenue in fiscal 2020. Importantly, these content and product offerings increase engagement with our brands allow us to reach new audiences and provide new exciting high value inventory for our sales team.
They also demonstrate our brands and content are platform agnostic and trans well -- translate well across channels. Our new platform and data capabilities are already paying -- playing a role in recent wins, including an exciting new opportunity with Kroger.
This partnership brings Kroger’s household sales data and Meredith’s first-party data together to help marketers identify which shoppers are most relevant to their brand at any moment. The partnership marks the first-time brand advertisers on Meredith properties have access to close loop sales data from Kroger, allowing them to directly measure incremental sales attributable to their campaigns.
Second, we launched a series of new brands, product expansions and realignments to improve profitability in fiscal 2020. In our National Media Group, this includes the launch of Reveal, a new lifestyle magazine we’re doing with Property Brothers television host, Drew And Jonathan Scott.
Since July, with bestselling author, restaurant tour and television host, Ayesha Curry and a new multimedia personal finance brand Millie that’s dedicated to helping women achieve their financial goals. We realigned several brands in our National Media Group portfolio to improve efficiency.
This includes closing Family Circle magazine and transitioning Rachael Ray Every Day to a premium newsstand title published on a quarterly basis. This strategy is proven successful with other of our brands, including Coastal Living, Cooking Light and Traditional Home.
Of note, the latter three brands are now also offering subscriptions at a higher price point than under the previous advertising driven model. Finally, we completed the last of our planned asset sales in fiscal 2020.
This includes the Money Brand, FanSided and Meredith interest in Viant and Xumo. In our Local Media Group, we launched two national television shows based on the people in Southern Living brands.
People now was a weekend program during fiscal 2020 and becomes a daily primetime show across our network in early fiscal 2021. Similarly, Southern Living has been expanded to weekly syndication.
Leveraging our leading brands across additional platforms is an exciting opportunity and something we hope to scale over time. Our Local Media Group also continue to expand news and production and is now producing 745 hours of local content each week.
We’ve seen significant growth in ratings as a result of consumer interest in local news during the COVID-19 crisis. Turning to slide four, we pursued a number of initiatives in fiscal 2020 to grow engagement and revenues from the more than 190 million U.S.
consumers who regularly interact with our brands. In these challenging times, consumers are looking to Meredith trusted brands for important news and information, practical advice, home improvement ideas, recipes, inspirations and moments of escape.
For example, in our National Media Group, visits toward digital brands grew by 14% in our fiscal 2020 fourth quarter compared to the prior year period, driven by strong growth in brands focused on food, health and home, lifestyle categories that give Meredith access to an extremely wide audience. These include Allrecipes, SHAPE and Martha Stewart.
Our licensing and digital and other consumer revenues grew 8% in the fourth quarter of fiscal 2020 and 12% in the full year fiscal 2020. This growth was driven by Apple News+ royalties, ecommerce and high performance marketing activities.
It also includes stronger sales from our branded products at retail particularly Better Homes & Gardens line at Walmart. Our magazine business is the largest in the United States, reaching more than 120 million women.
This is nearly 95% of all women and it is one of the most powerful points of our differentiation. People is the industry’s largest brand, reaching nearly 90 million unduplicated consumers.
Allrecipes, which has seen strong consumer growth with an acceleration due to COVID-19 is now the industry’s number two brand. Better Homes & Gardens is also the -- in the top 10.
On average, we sell approximately 70 magazines at newsstand and 30 subscriptions every minute. We continue to see strong growth in various subscription channels that drive high lifetime subscriber value in our fiscal 2020 fourth quarter.
These include our owned and operated digital properties, paid search, direct mail and renewal campaigns. For example, demand via our digital and partner networks is strong.
Since mid-March, we’ve seen consistent year-over-year growth with conversion rates 50% higher than normal. Traditional Magazine subscription acquisition and renewal efforts for all of our major titles are up strongly as well.
For example, to direct mail campaigns for the People brand are performing more than 50% above our target. A campaign for Southern Living is performing at twice our expectations.
Other brands are seeing similar levels of performance. In addition, renewals are pacing well above historical trends.
Additionally, our newsstand business, Meredith Premium Publishing produces 300 special interest issues annually at prices ranging from $10 to $15. Our strong consumer data capability and high quality brands are competitive advantages, giving us the ability to adapt quickly to changing trends and produce content consumers want under brands that have strong consumer recognition.
During fiscal 2020, we added 13% more magazine pockets at newsstand, bringing our total to $1.9 million. In our Local Media Group, our television stations focus on their individual markets drove strong ratings performance throughout the year.
For example, during the July ratings period, our stations in seven of our 12 markets ranked number one or number two from sign-on to sign-off. It also drove digital results as the number of unique visitors to our Local Media Group sites grew 18% fiscal 2020.
We grew retransmission revenues by 10% in fiscal 2020, as we renewed 60% of our retransmission consent relationships in all of our CBS affiliations. With that overview, I’ll turn it over to Jason and I’ll come back to update the proactive steps we’re taking to address current revenue trends across our portfolio and offer closing comments.
Then we’ll invite you to join us with your questions.
Jason Frierott
Thanks, Tom. Let me begin on slide five.
Looking at 4Q 2020, consolidated performance, revenues were $611 million, down $174 million or down 22% from the prior year period. Adjusting for portfolio changes announced over the last year, total revenues would have been down 18% on a comparable basis.
As a reminder, these strategic portfolio changes lower revenue while improving profitability. These changes include transition Rachael Ray Every Day and Traditional Home to premium newsstand titles, adjusting frequency of Entertainment Weekly to a monthly publication, and closing Family Circle and Money magazines.
Advertising related was $2$60 million, down $141 million or down 35%. Of that COVID related cancellations and delays totaled an estimated $110 million across both the National and Local Media Groups.
National Media Group portfolio changes were another $18 million. On a comparable basis excluding portfolio changes, advertising related revenues were down 32%.
Consumer related revenues were $331 million, down $25 million or down 7%. Of that National Media Group portfolio changes accounted for a majority or an estimated $22 million.
On a comparable basis, excluding portfolio changes consumer related revenues were down 1%, 4Q 2020 COVID-related declines in newsstand performance total estimated $18 million. We generated earnings from continuing operations of $6 million, compared to a prior year loss of $4 million.
On a consolidated level, we estimate the COVID impact across advertising, consumer and other revenues was $136 million. So if cost actions were taken, including reductions in certain employee related costs and the deferral of certain investments, which partially offset the sales decline, resulting an estimated $77 million decline in adjusted EBITDA.
As economic activity begins to normalize, we expect these costs to return to normal levels. On a consolidated basis, adjusted EBITDA was $80 million, down $89 million or down 53%, with COVID being the largest driver of the decline.
Adjusted EBITDA results were all impacted by higher digital resource investment. Cash flow from operating activities grew 33% and free cash flow grew 52%, due primarily to working capital improvements, lower CapEx and lower restructuring cost as compared to last year.
Turning to slide six. From a segment performance standpoint, I’ll start in the left-side with the National Media Group.
Revenues were $445 million, down $143 million or down 24%. We estimate COVID-related cancellations and delays in advertising, and the impact consumer-related and other activities reduce revenues by $98 million.
The portfolio changes, I mentioned earlier, accounted for another $40 million, with slightly more impact from consumer than advertising. On a comparable basis, excluding portfolio changes, National Media Group revenues were down 19%.
To give some more contexts on brand performance during the quarter, those brands focused on what’s most important to consumers today, including food, home and lifestyle fared better than the National Media Group as a whole. As you expect, brands driven by travel, luxury and entertainment are more negatively impacted in the quarter.
Operating profit was $7 million, while slightly -- while up slightly year-over-year, the fourth quarter of 2019 included $42 million of trademark impairments that did not repeat. Adjusted EBITDA was $48 million, down $67 million or down 58%.
The key drivers were an estimated $52 million reduction due to COVID, along with higher digital resource investment. On the right side of the page, Local Media Group revenues were $167 million or down $31 million or down 16%.
COVID-related cancellations and delays and non-political advertising accounted for an estimated $38 million in reduced revenue, partially offset by growth in retransmission and political advertising revenue. Operating profit was $28 million, down $34 million or down 55%, driven primarily by COVID-related cancellations and delays.
Local Media Group adjusted EBITDA was $38 million, down $34 million or down 47%, with the vast majority due to COVID. Looking at full year 2020 consolidated performance, revenues were $2.8 billion, down $340 million or down 11% from the prior year period.
On a comparable basis excluding portfolio changes, revenues were down 7%. Advertising related revenues were $1.4 billion, down $288 million or down 17%.
We estimate COVID related cancellations and delays reduced advertising related revenues by $127 million across both the National and Local Media Groups. National Media Group portfolio changes amounted to an estimated $59 million.
On a comparable basis excluding portfolio changes, advertising revenues were down 14%. Additionally, political advertising revenues were lower by $79 million as expected in a non-political year.
Consumer related revenues were $1.3 billion, down $68 million or down 5%. National Media Group portfolio changes accounted for an estimated $67 million.
On comparable basis excluding portfolio changes, consumer related revenues were flat. COVID related declines and newsstand performance totaled an estimated $80 million.
These declines were partially offset by $31 million in retransmission consent fee growth. Other revenue was $101 million, up $16 million or 19%.
Other revenues include third-party projects, production support for brand sold and episodic programming, performance was driven by third-party video projects. For the full year 2020, we recorded $358 million of net special items, the majority of which were taken in 3Q 2020 and related to non-cash impairment of goodwill, intangibles and lease related assets.
These special items drove a loss from continuing operations of $209 million. Bringing the COVID impact together across advertising, consumer and other revenue impacting the last three months or four months of the year, we estimate revenues were down $154 million, with resulting profit declined partially offset by cost actions previously mentioned.
Given the economic uncertainty, we felt it necessary to take these actions to conserve cash until we had a better understanding of the environment. In total, we estimate the COVID impact to be $83 million decline in adjusted EBITDA.
On a consolidated basis, adjusted EBITDA was down 22% to $548 million. The decline was driven by COVID and a lower political -- and lower political advertising as expected in a non-political year.
Cash flow from operating activities grew 25% and free cash flow grew 26%, due to improve working capital, lower CapEx and lower restructuring as compared to last year. Turning to slide eight.
Liquidity and cash flow are critically important to Meredith, particularly during this time of heightened uncertainty. Starting at the top of the slide, we ended 4Q 2020 with $132 million of cash in the bank, nearly 3 times the prior year period and up to $29 million for March 31, 2020.
Our revolver balance decreased to zero at June 30th, reflecting $35 million repayment made since the end of 3Q 2020. As of today, the revolver remains unused.
As a company, we’re measuring our performance in this environment by free cash flow. We generated $124 million of free cash flow from operating activities of $114 million of free cash flow in 4Q ‘20, up 52% from the prior year.
This improvement was primarily driven by working capital improvement, lower restructuring cost and lower CapEx. We had approximately $165 million of cash in the bank at the end of July and we expect free cash flow in the first quarter of fiscal 2021 to be positive.
Turning to slide nine. During 4Q 2020, we refinanced our preferred equity, while we appreciate the partnership and support from our preferred equity partner, over the last two and a half years, this component of our capital structure was more expensive compared to the rest of our debt.
For reference, our preferred equity carried an interest rate of 8.5% that increased annually before capping at LIBOR plus 10.5%. By taking these actions, we estimate our annual cash savings at approximately $35 million through both lower interest rates and the new debt being tax deductible.
We also entered into a new amendment to our revolving credit facility that increases the consolidated net leverage ratio in the financial covenants, providing us more short-term financial flexibility. We have no immediate maturities, our revolver comes due in 2023, secured notes and term loans in calendar ‘25 and unsecured notes in calendar ‘26.
Now, I’ll turn it back to Tom for closing thoughts on slide 10.
Tom Harty
Thanks, Jason. Our consumers today are focused on food, home and the health and well being of their families along with news and information about their local communities.
These subjects are the cornerstone of the Meredith Corporation and our brands that cover these subjects including Allrecipes, Better Homes & Gardens and Southern Living are the stronger performers in our portfolio today. Since our last earnings update on May 14th, advertising trends became less negative during the course of the fourth quarter.
In July, we were seeing fewer client cancellations indoor campaign delays. RFP activity has picked up and CPMs are strengthening in our digital business.
As we look into our fiscal 2021 first quarter, assuming no changes in trajectory due to COVID-19 or other macro factors, we see National Media Group digital advertising flat to down low-single digits and comparable print advertising revenues down in the mid-to-high 20% range. We see non-political advertising in our Local Media Group down in the mid-20% range as well.
Due in part to expected crowding out by the coming political advertising cycle. We expect political advertising revenues in fiscal 2021 at level similar to fiscal 2019.
As we look ahead to full year fiscal 2021, we’re pursuing several strategies to best position Meredith for growth. First, we will continue to innovate our digital capabilities to support our advertising and marketing partners, with innovative and actionable consumer insights.
As an example, we’ve signed 15 clients to the new Meredith Audience Action Guarantee program that we launched in May. This program guarantees to advertisers that are investing in Meredith brands that a specific number of readers will take action as a result of seeing a brand campaign in Meredith magazines.
This program and others help grow our share of U.S. magazine advertising by 4 points to 35% for the first six months of calendar 2020.
We are collecting data and providing real-time insights to our advertising clients about changing consumer habits and trends. This enables us to help our clients tailor their creative campaigns with messaging appropriate to the current environment.
It also helps us create direct connections between consumers and our clients to pursue purchasing products. Our Local Media Group is also creating new advertising and sponsorship opportunities based on consumer trends that have emerged during the COVID-19 pandemic.
These include a new series called, Frontline Heroes, sponsored by local clients that recognize workers who put themselves in harm’s way to help those in need. Next, we’re focused on continuing to develop our portfolio and strengthen both our competitive position in connection to the individual consumer.
Consumer demand for our brands and services remain strong and we believe offers a long runway of opportunity. Consumer related revenues now account for approximately 50% of total company revenues, up from approximately 25% over a decade ago, a consumer folks strategy offers several benefits.
These important activities are mostly contractual include retransmission, brand licensing and digital sources, along with stable subscription revenues. The consumer reach of our portfolio coupled with engagement form the basis of our value proposition to advertisers.
Our consumer engagement is a differentiator and positions us to benefit from incremental advertising spend when the economy recovers. And finally, we continue optimizing cash and costs.
We took a number of proactive steps towards this goal in fiscal 2020, including refinancing our preferred equity to lower cost of capital and amending our revolving credit facility. We also pause our common dividend, temporarily reduced the pay for 60% of the highest paid employees and reduce capital expenditures and other expenses.
These activities taken in the fourth quarter of fiscal 2020 in response to COVID-19 help drive strong growth in cash flow and provide more financial liquidity in these uncertain times. With that, we’ll open it up to your questions.
Operator
[Operator Instructions] Your first question comes from John Janedis with Wolfe Research.
John Janedis
Hi. Thanks.
Good morning. Tom, you talked about your digital platforms and strategy.
It seems like this year’s going to bring in more of a shift and then with the increase in traffic dominance in the demo, I guess, can you talk a little more about the potential to further increase monetization given your comments on first-party data? And then, secondly, on the cost side, could you guys just clarify what’s costs are in terms of the savings are permanent versus temporary?
Thanks.
Tom Harty
Sure. And I’ll ask Jason to kind of weigh in on the cost question.
But, yeah, John, we’ve been, obviously, working on. This has been a multiyear process for us and we talked about it before, the investment in this kind of unified platform.
There’s a lot of advantages that we have. We have a single editorial tool set across the entire portfolio.
We have a centralized data platform. And now we have what we would call a front-end template engine.
And this really drives brand efficiency. So now we’ll have the same platform for 40 plus of our digital brands.
We have a consolidated view of first-party data and it drives obviously faster innovation. But to your point what this really the combination and our investment in data and our first-party data, this goes back to when we hired Alysia Borsa as our Chief Data Officer.
So going back five years where we started making investments in our data. So by marrying up our view of all this data that we have first-party data, which is just billions of pieces of data and that was our platform just allows so much efficiency and then allows new opportunities for us to monetize with things like Kroger.
So, Kroger, what this is about is really it’s about content, it’s about targeting and it’s about measurement, right? So for the first time, you’re going to be able to have and we’re going to be able to offer, we’ve offered before, we’ve offered shoppable ads, but now you have target -- targeted shoppable ads that consumers can kind of seamlessly add to a shopping cart.
And then you have the closed loop of the actual data from Kroger to actually show the CPG companies how their ads are actually delivering and for their investment in the span. So we think this is a very exciting, really big opportunity and something that we’ve been working on, obviously, for a number of years.
And now I will ask Jason talk about the cost piece of it.
Jason Frierott
Yeah. John, in terms of the cost, as we said in the prepared remarks, the -- specifically when you think about employee salaries and the temporary reduction in those, obviously, that those are temporary.
As we continue to look at areas to reduce cost and those are obviously more permanent. Other areas that are more specific to COVID related items in terms of some aspects of employee compensation.
I’d say other things like travel and living are -- the travel and expenses type of thing or nobody is traveling these days. Obviously, that’s temporary, up until you find kind of a return to normalcy.
So it’s a little bit of a mixed bag there, right?
John Janedis
I think it’s a [Technical Difficulty]
Jason Frierott
No. No.
John Janedis
Okay. Thank you.
Operator
Your next question is from Dan Kurnos with The Benchmark Company.
Dan Kurnos
Thanks. Good morning.
Tom, you’ll have to find someone else whose name like in picture when they announced the IR lead in.
Tom Harty
You always come again, you always come.
Dan Kurnos
Unfortunately, we didn’t get to look all this morning. Mike, you’ll be missed.
So, just a couple for me, I don’t know, Tom or Jason, is there any way to quantify the drag of People on the portfolio, obviously, it’s a big component to both revenue, and more importantly, profitability. And to the extent that it turns around or trends you’ve seen there, celebrities not in vogue at the moment, I guess, so that would be kind of one powerful piece?
And then maybe following up a little bit on John’s question around digital, look, we’ve seen a pretty big shift to digital, ecommerce in particular, Allrecipes should be doing well, I guess, I don’t know how much CPMs are down there. But just curious, A, do you have a target for how much ecom is ultimately going to be as a percentage of digital rev, and then, B, just can you maybe quantify a little bit more the trajectory of CPMs, whether it’s programmatic still lagging or what you’re seeing, are you working on getting more video out there?
Just help us understand sort of the digital trajectory?
Tom Harty
Yeah. So I’ll start out, there was a few questions, but let me start with People, obviously, People is our number one brand and profit generator.
It’s the number one brand in the industry. And to your point, early on, on the digital side of the business when the pandemic first broke, traffic from a celebrity standpoint wasn’t as hot.
We were also up against sometimes some issues that happened last year related to the oils and things like that. But we’ve actually seen the traffic come back and actually, during the month of July, there’s been a lot of believe or not celebrity activity going on and very, very important, so we are seeing that trend kind of reverse.
On digital as a whole, the trends early on were similar to the broadcast business and just to make a comment, we have Patrick McCreery who’s on the phone if we have any broadcast questions specifically, but very different than the last recession. From a broadcast perspective, I remember it, because I lived it.
It took five quarters for us to see the worst performing quarter in our Local Media business as kind of the ripple through the economy. It took a long time.
This side of the -- this time around you had the business basically stopping. So the magazine business actually early on held up better, some of it was because of timing.
But digital was performing closer to broadcast. Those trends have actually reversed quite a bit and I think you’ve heard me say in my remarks that, we’re projecting in the first quarter that we’re in currently, that our digital business is going to be kind of flat to down slightly.
And a lot of those trends have reversed to your question about programmatic. Programmatic inventory and pricing has firmed.
It’s not quite back. And again, it changes ebbs and flows.
It was really coming back really strong in June and we had a slight pullback in the beginning of July and now week-over-week it’s been up again. So we’re seeing rates firming up in that area, which is, obviously, a very good trend and shows demand in the marketplace.
On the cost side, I think you were asking about -- and let me go back, I think, I’ll take the last part of it. I think we’re not going to be able to give you an exact number today about what we’re projecting from ecommerce perspective.
But what I will say is that, that business has been up in the fiscal year over 20%, kind of mid-20%s for fiscal 2020, as we close it. But looking further out, it’s hard for me to give you a projection on exactly what that business is going to do.
But obviously, we’re leaning into it and we think that our brands inspire women to take action and we’re taking a piece of that pie now through our ecommerce activity. So that help you [Technical Difficulty]
Dan Kurnos
Yes. No.
You got to all of my 13 questions in two. Thank you.
Tom Harty
Great.
Operator
Your next question is from Davis Herbert with Wells Fargo.
Davis Herbert
Good morning, everyone. Thanks for taking the questions.
On the credit side after the transaction you guys did earlier this year. I wonder if you could talk about your debt reduction plan over time.
Is there possibilities for asset sales, things of that nature to accelerate by debt reduction and maybe talk about your free cash flow expectations over the next year or so? Thanks.
Tom Harty
I’ll let Jason get into the specifics about some of our goals on that. But our underlying goal, our top priorities I’ve said before is, obviously, to reduce our debt.
We obviously took on a lot of debt in a transformational transaction with timing and we’re firmly, that’s one of our top priorities. We just finished our Board meeting this week and that’s a top priority for us moving forward.
But maybe Jason can give you a little bit more specifics.
Jason Frierott
Yeah. I mean, in terms of our debt reduction, with -- in terms of free cash flow right now our main priority, as Tom said, is to reduce debt.
In terms of specific, non-core assets sales are possibilities. We’re always evaluating the portfolio in terms of what fit -- what fits, what doesn’t, et cetera.
So that could create opportunities. But those are more ad-hoc and not really planned at this time.
So I wouldn’t want to give you a specific direction. But we do evaluate it in terms of the overall portfolio.
So as of right now, it’s more of a free cash flow generation in terms of reduction of debt. And obviously, we will prioritize the debt in terms of most expensive to focus on first in terms of reduction of interest.
But really the key point right now is to focus on cash conservation and really liquidity and the unknown market is here. Looking forward in terms of either COVID and the advertising environment.
Having more liquidity at this point in time is obviously important to us and everybody else in terms of that priority. But over the long-term definitely debt reduction is the number one priority for us.
Davis Herbert
Okay. And just following up on that note on the most [Technical Difficult] debt, I mean, your bonds traded at a discount to par right now.
So is that -- do you have the flexibility from restricted payment perspective to buy back bonds in the open market? Is that something you will consider?
Jason Frierott
Yeah. We would absolutely consider it.
But I think the consideration is at the point in time when we have more transparency and clarity into the future. I wouldn’t be in -- we wouldn’t want to be in a situation where we pay down the unsecured at a cheap rate, but something changes in the market that increases our need for liquidity.
So it is the balance of timing, I’d say.
Tom Harty
I mean, I think, just you, probably, living is, obviously, also, listen our optimism ebbs and flows, right? So, I think, right now we have some, we’re cautiously optimistic that we’re seeing kind of sequential improvements in advertising.
But it’s still down year-over-year, but we think we’ve kind of maybe crossed the worst time that we experienced earlier in the beginning of COVID. But it’s hard to know.
So I think that what we’re doing is we’re being prudent where our cash position to Jason’s point. And if you look at the numbers recorded today, we’ve been really improving our cash position in one of the most difficult times for the company.
So we’re going to kind of look and adjust as we look out and see some of the trends as we enter our new fiscal year and then act appropriately on our debt.
Davis Herbert
Great. And I did have a couple of follow ups.
On the retrans side, can you talk about the AT&T renewal, where that stands and the percentage of subscribers you have coming up this fiscal year for renewal?
Tom Harty
Yeah. Yeah.
So we have Patrick McCreery on the phone who runs the Local Media Group and I’ll ask Patrick to take that.
Patrick McCreery
Hi, Davis. Thanks for your question.
Yeah. We’ve successful renewal with AT&T in this last cycle and coming up in fiscal ‘21, we have about 7% of our subs up for renewal.
Davis Herbert
7%, so you’ve gotten AT&T and DirecTV all wrapped up?
Patrick McCreery
Yes, sir.
Davis Herbert
Okay. Great.
And then my last question is the guidance or pacing you gave for the advertising piece. That was for the first fiscal quarter.
Correct, that was not over a longer period, just for that period, correct?
Jason Frierott
Yes. That’s the first quarter ending in September.
That’s correct.
Davis Herbert
Okay. Okay.
Great. Just want to confirm that.
Thank you guys so much. Appreciate it.
Operator
Your next question is from Kyle Evans with Stephens.
Kyle Evans
Hi. Thanks.
Mike, congrats. I am glad Patrick is on the call, I have a lot of Local segment questions.
Maybe start with core down 40 with a down mid 20s 1Q guide, could you tell us what you saw intra-quarter for fourth quarter and give us a July pacings number?
Tom Harty
Yeah. For -- Kyle, hi.
How are you doing?
Kyle Evans
Great.
Patrick McCreery
For second calendar fourth fiscal we -- and I’ll give you a month-by-month breakout, April was minus 49, May minus 43 and June minus 28, and July is even better yet. We are seeing month-over-month sequential improvement.
Kyle Evans
Okay. No number for July?
Patrick McCreery
I don’t have a specific number for July. Are you really seeing that?
I’m sorry.
Tom Harty
Yeah. You can give that, Patrick.
Patrick McCreery
Yeah. I believe our July number down -- I want to say it’s 25.
Kyle Evans
Okay.
Tom Harty
You got right? That’s correct.
Patrick McCreery
Yeah.
Kyle Evans
Great. And well, I have you, Patrick, a flat political guide for fiscal ‘21 off of fiscal ‘19, despite Presidential this cycle versus last.
Could you help us think about the puts and takes on the down ballot there?
Patrick McCreery
Yeah. Absolutely.
In the last cycle, we had 14 Senate seats and 11 Governor’s races. This time around, we’ve got 11 Senate seats and three Governor’s races across our footprint.
A majority of our political dollars really come from those two categories, senatorial and gubernatorial races. About 10 to 15% of our political money comes from the Presidential race.
That’s why we’re seeing that that flat guide cycle-to-cycle. But what you’ll see if you look back to fiscal ‘17, you’ll see about a 55% growth over the fiscal ‘17 Presidential cycle and political spend.
Kyle Evans
Got it. So 55% growth off of last Presidential?
Patrick McCreery
Yeah.
Kyle Evans
Got it. That makes sense.
Maybe moving on to National, the People now in Southern Living TV efforts, this sound very interesting. Are there -- what’s the distribution plan there?
What’s the revenue model on those and are there other titles that have similar potential?
Tom Harty
Yeah. So I will let Patrick take that question, because we’re actually, he’s responsible for that in the Local Media Group.
So Patrick?
Patrick McCreery
Great. Yeah.
So really the big focus is on People. We have our show launching September 14 into syndication.
So that will be a very traditional syndicated television business model with what I consider to be and I think everyone else does the strongest entertainment brand in the industry. Moving that brand from the pages of our magazine onto television makes a lot of sense.
The contents -- the rich content that Tom talked about with our other brands are Southern Living, which is a frankly a little bit easier lift to get on the air, which is why we started with Southern Living. I see that expanding over the next year, year and a half, and we’d like to take that to the marketplace as well, but we don’t have a rollout plan for that today.
Kyle Evans
Great. Well, I’ll have you one more question and this one you may not want to answer.
But with only 7% renewing on the sub side for retrains, do you think you can put up net growth in retrans for ‘21? Thanks.
Patrick McCreery
I think the answer to that is short, yes. We have no network contract affiliation renewals coming up in this fiscal year.
And the way this cycle works is, these are all the small guys in our markets, 87 different cable operators across our footprint is what’s being renewed, but that’s only, as I mentioned, 7% of our total footprint. So I think the short answer is, yes, you will see some growth.
Kyle Evans
Great. Thank you.
Operator
And your final question comes from Jason Bazinet with Citi.
Tom Harty
Good morning, Jason.
Jason Bazinet
Good morning. I just have a longer term question, not for this fiscal year, next, but given that you’ve said that is a priority and you’ve described the dividend as being on pause.
Is the Board sort of thinks about a resumption of the dividend? Is it more about getting a sufficient quantum of cash flow such that the dividend isn’t an outsize portion of the cash or was the ending the pause more about getting leverage back to a level that was closer to pre-time acquisition pre-COVID and broad brushstrokes [ph]?
Tom Harty
Yeah. I think it would be latter.
In other words, we’re -- we would look at it from as a percentage of what the free cash flow that we’re generating, and obviously, with a lot of uncertainty we’re being cautious. So we -- and then, in the short-term, our number one priority for us is, is to reduce debt and now also right behind that number one -- number two priority right behind our one thing is to bring back our dividends to our shareholders.
But we just finished our Board meeting. We took -- it’s -- we presented our three-year plan and had a robust discussion about what cash we’re going to generate from our three-year plan, again, with a lot of market uncertainty and then we’re going to adjust as we go forward.
But dividend remains a top priority for the company to bring it back to our shareholders, absolutely.
Jason Bazinet
Okay. Thank you very much.
Operator
At this time…
Tom Harty
Okay. That…
Operator
… there are no questions.
Tom Harty
Great. So that concludes our call.
Thank everyone for participating and I hope that you all stay healthy and safe and enjoy the rest of your summer. Thank you very much.
Operator
This concludes today’s conference. You may now disconnect.