Meredith Corporation (MDP) Q3 2019 Earnings Call Transcript

Meredith Corporation (MDP)
Q3 2019 Earnings Call
May 10, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Jack, and I will be your conference operator today. At this time, I would like to welcome everyone to the Meredith Corp. fiscal 2019 third-quarter earnings conference call.

[Operator instructions] Thank you. Mike Lovell, you may begin your conference.

Mike Lovell -- Investor Relations Director

Good morning, and thanks, everyone, for joining us. Remarks this morning will include forward-looking statements and actual results may differ from our forecasts. Some of the reasons are described at the end of our news release that was issued earlier this morning, and in some of our SEC filings. Certain financial measures that we're discussing on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of special items.

Reconciliations of these non-GAAP measures are included in our earnings release, which is available in the investor relations section of our website. Finally, an archive of the call will be available on our website later this afternoon. Now I'll turn the call over to Meredith president and chief executive officer, Tom Harty.

Tom Harty -- President and Chief Executive Officer

Thank you very much, Mike, and good morning, everyone. I hope you've had the opportunity to see our news release that was issued earlier this morning. For the last year, we've been laser-focused on our plan to integrate the Time Inc. acquisition.

You'll hear from national media group president, Jon Werther, who will update the progress we've made so far. At the same time, we continue to deliver outstanding performance in our Local Media Group, and you'll hear from -- more from Patrick McCreery, our president. Finally, there's been a great deal of work done behind the scenes from our corporate staff to combine two public companies and sell non-core assets. chief financial officer, Joe Ceryanec will update those initiatives along with our fiscal 2019 outlook.

We have spent the last year focused on our integration plan, and synergies are a key part of that plan. We will deliver $550 million of cost savings from our integration work, though we are adjusting the timing of when we expect to capture those savings. That said, you can't cut your way to sustainable growth and as our work has progressed, we have targeted opportunities to position our national media group for organic growth over the long term. This includes new digital platforms, more robust video production and initiatives to grow consumer revenue such as Apple News+ and our e-commerce activities.

We're also investing in more profitable sources of subscription acquisition, particularly because we inherited some low-margin, agent-sourced subscriptions from the acquisition of Time Inc. As we have with prior acquisitions, we're in the process of transitioning those to more profitable sources, but that takes time as the opportunity for margin improvement happens when they renew. One example of our most recent subscription solicitation campaign, which Jon Werther will detail in a few moments. As a result, we expect to deliver revenue performance in line with our prior estimates, but we are reducing our adjusted EBITDA outlook for fiscal 2019 a bit.

Joe will provide more detail in a few moments as well. Before he does, there are some important accomplishments and trends to highlight from our third-quarter performance. During our last call in early February, we cited the improvement we were seeing in advertising trends in both our national and local media groups in early calendar 2019. Today, we are pleased to have delivered these results for the quarter.

In our national media group, total revenues were up 15% in the third quarter of fiscal 2019. Total advertising-related revenues grew 17%, and we're down in the mid-single digits on a comparable basis. This is a significant improvement compared to what we experienced in calendar 2018 as we work to integrate the Time Inc. brands.

While it took longer than we initially expected to turn around the advertising performance around at the legacy Time brands, we are now in line with Meredith's historical and expected long-term performance. Looking into the fourth quarter, we anticipate the national media group advertising performance being better than the third quarter. In our Local Media Group, total revenues were up 11%, nonpolitical advertising were up in the mid-single digits. For years, Meredith has been viewed primarily as an advertising-driven company, but we've always had a robust consumer business and we are very focused on growing these revenues.

Fiscal 2019 third-quarter total company consumer-related revenues grew 28%. This was driven by strong newsstand and affiliate marketing performance in our national media group, along with favorable renewal of retransmission consent agreements in our Local Media Group. We're particularly excited about the recent launch of Apple News+, a subscription service that offers digital access to more than 300 publications, including more than 30 Meredith magazines. As one of the most successful consumer-based companies in the world, Apple's launch of Apple News+ is a strong testament to the power of premium paid content from trusted brands.

While we are not at liberty to discuss specific terms of this agreement, the economic benefits to Meredith flow from four areas: first, there are guaranteed minimum payments; second, we earn royalties based on the time consumers spend with our brands on the platform; third, we anticipate cost savings, including lower subscription acquisition expenses, and lower magazine production expenses over time; and finally, we will benefit from innovative advertising opportunities on the Apple News+ platform. Turning to shareholder return, we continue to increase the amount of cash returned to our shareholders by raising the regular dividend in February by 5.5% to $2.30 on an annualized basis. We now have paid the dividends for 72 consecutive years and raise them for 26 straight years. Importantly, since launching our total shareholder return strategy in 2011, we've more than doubled our dividend, and delivered a 17% average annual return for our shareholders.

Let me close my formal comments this morning with what we continue to believe is a compelling investment thesis for the new Meredith Corporation. The diverse set of businesses and brands we now own and operate produce consistently strong cash flows driven by national brands with an unrivaled reach to American women, particularly millennials; an attractive group of television stations in large and fast-growing markets; a highly profitable and growing digital business, now with meaningful scale; high-margin consumer revenue activities that are based on both our strong national and local brands; and a successful track record of integrating acquisitions; a history of generating strong cash flow; and growing shareholder value over time. Now I'll turn it over to Jon Werther for a review of our national media group, including our acquisition initiatives.

Jon Werther -- National Media Group President

Thanks, Tom. Fiscal 2019 third-quarter national media group operating profit was $54 million. Excluding special items, operating profit was $65 million and adjusted EBITDA grew to $120 million. Revenues rose 15% to $556 million.

These results exclude discontinued operations. As you can see in our P&L this morning, we've made significant progress on the key strategic initiatives that we put into place upon acquiring Time Inc. to integrate and maximize our new portfolio. To start, we said we would improve the print advertising performance of the acquired Time Inc.

properties to Meredith's historic levels over time, and we did. To accomplish this, we executed three key initiatives: first, we reorganized the way these brands went to market, and implemented Meredith's sales and operating strategies, standards and disciplines across the portfolio; second, we invested in sales and marketing resources and activities; and third, we aggressively marketed the new portfolio, resulting in increased access to new advertising and marketing budgets. As a result, third-quarter comparable year-over-year print advertising revenue performance improved significantly, and is in line with the performance we expect. Legacy Meredith brands have been performing consistently and the improvement we delivered in our fiscal third quarter was driven primarily by the acquired Time Inc.

brands. As we look into the fourth quarter, we anticipate further improvement driven again by many of the acquired brands, some of which look to be up in print advertising revenues year over year. Next, we said we would raise the profit margins of the acquired digital properties to Meredith's high levels. I am pleased to say that we grew comparable year-over-year digital advertising revenues in the third quarter of fiscal 2019, despite a challenging digital advertising environment.

To accomplish this, our team has consolidated our digital advertising infrastructure and scaled best audience development, and yield management practices across our expanded portfolio; extended our premium ad products to the former Time Inc. portfolio; and begun to roll out a unified content management system that will enable us to more seamlessly and efficiently extend key features and premium ad products across our entire portfolio. These actions position us well to benefit from the fastest-growing advertising products and channels, including native, video, shopper marketing, programmatic and social. Additionally, we added capabilities in the digital couponing space and we continue to evaluate new acquisition opportunities to further strengthen our digital activities.

As a reminder, these digital activities today engage approximately 140 million unique visitors per month. We generate approximately $450 million of revenues annually and operate at margins similar to the national media group as a whole. Looking into the fourth quarter, we anticipate further year-over-year revenue and margin improvement. Third, we committed to growing our high-margin consumer-related revenues by leveraging our expanded brand portfolio.

Fiscal 2019 third-quarter consumer-related revenues rose 30%. These include our magazine subscriptions, brand licensing efforts, affiliate marketing, lead generation and affinity marketing initiatives, and paid products like Cozi. Our brands continue to maintain a strong connection to the millions of consumers who interact with them daily, and consumer-related revenues accounted for nearly 50% of total national media group revenues in the third quarter. We are particularly excited at our very strong response rates for our bundled subscription offers, including those for People, Magnolia Journal, Real Simple, and Allrecipes.

For example, our most recent direct mail program generated one million new subscriptions across our portfolio at significantly improved response rates. And an investment in a social media channel generated nearly 50,000 auto-renewing subscriptions in the month of December alone. We also delivered strong growth in newsstand sales by launching new single-topic special interest publications and optimizing our current portfolio. Here, we leverage proprietary insights to identify and predict market trends.

We expect to sell more than 20 million SIP copies this year, with almost all of them priced at $9.99 or above. Anticipating audience needs and providing 175 million consumers we serve with daily inspiration, utility, and entertainment has helped enable Meredith to become the largest brand-powered food, lifestyle and entertainment media company in the industry. Our goal is to position the national media group for organic growth over the long term in both our advertising and consumer activities. To accomplish this, we are investing in a wide variety of new products that harness new technology and create innovative consumer experiences across our brands.

Let me highlight a handful. First, we're developing advertising products that combine artificial intelligence with our proprietary first-party data to seamlessly, and authentically integrate marketer products within our own content. This includes a recently launched strategic campaign pairing wine with recipes. Suggested pairings appear adjacent to recipes and are automatically linked to nearby grocery stores or to delivery partners like Instacart and Amazon Fresh using our proprietary shopper marketing platform.

Second, we're launching smart QR codes that enhance the consumer experience across our portfolio of print titles. By simply using the camera on their iOS or Android handheld device, smart QR codes enable tens of millions of readers to connect directly with online content, videos and advertising opportunities. Third, we're enhancing our content-to-commerce experiences with shoppable video, click-to-buy offerings, and click-to-cart capabilities that drive from native content to major retailers. Fourth, we're unifying our taxonomies or content categorization across our portfolio in key categories like food.

This enables us to deepen consumer engagement, predict trends from our unique first-party data and provide richer insights to marketers that inform both media choices and product investment and launch decisions. Just last month in collaboration with a strategic marketing client, we launched a new subscription-based direct-to-consumer product, which we conceived of and developed together over the past several months. Early results have been promising. Finally, at our NewFront presentation to the advertising and marketing industry last week, we announced a new slate of video programming, including an expanded lineup for PeopleTV, our ad-supported streaming service available on all major OTT platforms that will include tripled red carpet event live coverage, the premiere of a new royal show, and the launch of a daily reality TV news show called Reality Check.

On top of the 15 Instagram TV series we've launched so far, we plan an additional five new IGTV series, plus 12 new shows across our O&O platforms and YouTube. These include SHAPE's Goal Crushers, which will showcase the paths of incredible women pursuing enormous goals for even greater causes. Lastly, a number of programs tied to our partnership with #SeeHer, an initiative inspired by the association of national advertisers to improve the portrayal of women in media and advertising. We're proud to be launching a multitude of #SeeHer-inspired content backed by the full weight of our brand portfolio.

These include #SeeHer Story, a 52-week series in partnership with Katie Couric that features remarkable women who have impacted the world. It will run through August of 2020, marking the 100th anniversary of women's suffrage. Our reach to 86% of all women, including more than 80% of all millennial women, and three fourth of all Latinas, uniquely positions Meredith to authentically pursue these initiatives in partnership with our advertising and marketing clients. We're excited about the growth opportunities that lie ahead, including the Apple News+ product Tom described earlier.

With that review of our national media group performance, I'll now turn it over to Local Media Group president, Patrick McCreery, for an update.

Patrick McCreery -- Local Media Group President

Thanks, Jon, and good morning, everyone. Fiscal 2019 third-quarter Local Media Group operating profit was $42 million, adjusted EBITDA was $52 million and revenues grew to $188 million, all records for our fiscal third quarter. For the first nine months, Local Media Group operating profit was $216 million, adjusted EBITDA $246 million, and revenues grew to $665 million, including $103 million of political advertising, all records for the fiscal nine-month period. Looking more closely at fiscal 2019 third-quarter performance, total advertising revenues grew 4% from the prior period.

Non-political spot advertising revenues grew 6%, driven primarily by strong performance from our CBS affiliated stations, which benefited from having the Super Bowl. From an advertising category standpoint, growth was broad-based as we saw increases in seven of our top 10 categories, with particular strength in professional services, media and furnishings. Consumer-related revenues increased nearly 20% to $85 million due to growth in retransmission fees from cable and satellite television operators. These increases were partially offset by higher payments to affiliated networks.

Our consumer connection remains strong. The number of pay TV subscribers across our markets was approximately even in the third quarter of fiscal 2019 compared to the prior-year period, driven by growth in over-the-top subscribers. Additionally, our stations delivered strong performance during the February rating period, with stations in eight of our 12 markets ranking either No.1 or No.2 sign-on to sign-off. And as we've stated in the past, local broadcast television is still the most effective media at driving retail traffic.

Our connection to our viewers, along with the strength of the People brand, led us to develop a daily syndicated show based on the People brand that we've committed to launching in fall of 2020 on all 17 of our local television stations. The show will air Monday through Friday evenings and will highlight the most popular features from People magazine, including entertainment news, exclusive interviews, feature stories, beauty, crime and more. The show will be produced by Four M Studios, Meredith's in-house television production company. Now I'll turn it over to chief financial officer, Joe Ceryanec.

Joe Ceryanec -- Chief Financial Officer

Thanks, Patrick, and good morning. I'll start with an update on our integration and asset sales. From an integration standpoint, our third-quarter accomplishments included first, finishing the wind down the Time customer service operations in Tampa. All fulfillment for all legacy Time brands has now fully transitioned to Meredith's third-party vendor.

We've consolidated all our payroll, T&E, accounts payable, and all brand-related billings to a single system. This included completing the consolidation of employee benefits with all our employees now on one program under a single vendor. And this allows us to better leverage our larger scale for cost savings. From an asset sale standpoint, recall that shortly into our ownership of Time Inc., we announced a comprehensive review of our media portfolio, and began a process to divest brands and businesses not core to our business.

So far in fiscal 2019, we've realized proceeds of $340 million with the sales of the Time and Fortune media brands, and we've used those proceeds for debt reduction. Currently, we're aggressively working on selling the Sports Illustrated brand and our 60% stake in Viant. We expect to reach successful conclusion in the near future. We've repaid a total of $700 million of our debt since closing the Time Inc.

acquisition. This includes $50 million in our fiscal 2019 third quarter, and our net debt stood at $2.4 billion at March 31st, 2019. Now turning to our outlook. We expect total company revenues for the full year of fiscal 2019 to range from $3.12 billion to $3.16 billion compared to our original range of $3 billion to $3.2 billion.

We expect national media group revenues to range from $2.26 billion to $2.29 billion, and local media revenues to range from $860 million to $870 million. Looking at expenses, we continue to expect to deliver $550 million of net annual cost synergies as a result of integrating the Time Inc. acquisition. However, we are modifying the time frame to achieve these synergies.

So far, we've realized about $320 million of annualized cost synergies through the third quarter of fiscal 2019. We expect to realize an incremental $60 million in the fourth quarter, and then an additional $170 million in our fiscal 2020. This adjustment is due to several factors, including investment spending to grow the business, keeping certain key employees longer than originally anticipated to finalize our integration and some cost savings we have not yet achieved due to holding the assets held for sale longer than initially expected. As a result, we now expect full fiscal 2019 earnings from continuing operations to range from $172 million to $180 million, and from $2.07 to $2.25 on a per share basis.

That includes a net-after-tax charge of $32 million for special items in the first nine months. Now our actual results for the full year may vary, including additional special items that we have not -- that have not yet occurred, and are difficult to predict with reasonable certainty. We expect fiscal 2019 adjusted EBITDA to range from $700 million to $710 million compared to our original range of $720 million to $750 million. And we expect adjusted earnings per share to range from $6.92 to $7.07.

Now consistent with our historical guidance practice, we expect to provide outlook for fiscal 2020 when we report our fiscal 2019 results in early August. Keep in mind that fiscal 2020 is a non-political year for Meredith, and we've generated more than $100 million of political in fiscal 2019. Additionally, we're evaluating our investment spending for fiscal 2020, particularly to grow the business -- consumer business, and consumer acquisition activities to a more profitable platform, including increased usage of credit card automatic renewals. Now I'll turn it back to Tom to lead the Q&A.

Tom Harty -- President and Chief Executive Officer

Thank you very much, Joe. We're proud of our revenue performance in our fiscal third quarter, and the trends we're seeing in the fourth quarter. Our local media team continues to perform at a very high level and our national media team is making significant progress in turning around a business that was twice its size. In closing, while there's still more to do, we've accomplished a great deal since we closed on the Time Inc.

acquisition. We're encouraged by advertising revenue trends in both our national and local media groups; consumer revenue performance across the company, including response rate to our subscription offers; the launch of the Apple News+ platform; our growing e-commerce activities; and continued growth in retransmission revenue and contribution. As a reminder, we expect to renew 60% of our retransmission consent agreements in our next fiscal year. Finally, we have a number of exciting digital initiatives under way, including those focused on new content and consumer engagement platforms, as well as those focused on new sales and marketing opportunities for our clients in areas such as voice, shopper marketing and artificial intelligence.

Now, we'd be happy to answer any questions you might have this morning.

Questions & Answers:

Operator

[Operator instructions] Dan Kurnos with Benchmark. Your line is open.

Dan Kurnos -- The Benchmark Company -- Analyst

Great. Thanks, good morning.

Tom Harty -- President and Chief Executive Officer

Good morning.

Dan Kurnos -- The Benchmark Company -- Analyst

I was waiting for it, Tom. So look, I -- just a couple of things here. Joe, can you just -- housekeeping on the synergy delay or whatever you guys want to call it. You've got -- you called out three different buckets.

Can you kind of just size up those buckets for us just so we have a sense of you know, kind of timing on all that stuff? And how it might filter through, and what actually some of the reinvestment is?

Joe Ceryanec -- Chief Financial Officer

I guess, Dan, if you walk through kind of the numbers I gave and compare those to what we've said in previous calls as we've arrayed the synergies, there's about $20 million that we would say -- would push from 2019 into 2020. I broadly put those in a couple categories. One, the asset sales obviously have taken us longer than we originally anticipated, so there's some stranded costs. Things like facilities and keeping people around to service those brands that we would have thought would have left the organization by now.

So that, again, is a timing difference. As we're integrating all of the back-office functions to make sure we do it right, we've held some people longer than we anticipated or initially with those more in the IT, accounting and finance areas to make sure we support the business. So those are really the costs. We feel like it is a timing difference on realizing those synergies.

And so those will push into 2020. As we said, we're committed to the $550 million in total.

Tom Harty -- President and Chief Executive Officer

And Dan, when you see the Q, you'll see the detail. A lot of the expense investment has been on the subscription side and around, as we mentioned, acquiring more profitable subscriptions and swapping out lower-margin source subs that we had from Time Inc. Jon mentioned the recent direct mail campaign that we had where it was cash neutral, in other words, in year one, and then those subs become 90% margin subs when we renew them in a couple years. So I think when you see the detail of the Q, you'll see expense increases in our sub line from an expense standpoint.

Joe Ceryanec -- Chief Financial Officer

And Dan, you've heard us talk about this on many of the acquisitions, whether it was Martha Stewart or Rachel Ray or SHAPE, where we've inherited brands that have a larger mix of low to little margin customers and it does take us some time and investment to move those customers over to a more profitable platform. Interact with them whether it's through mail or through getting the online auto-renewal sub. So we're seeing a little bit of higher expenses due to the inherited base, but again, that's something we're working to shift as we move into 2020.

Tom Harty -- President and Chief Executive Officer

Yeah. And the other area that I would point out is the Apple News+ platform. If we were here a year ago, Apple hadn't even committed to buy the Texture product and committed to this. So this is something that we're very excited about.

It's really just getting going in our Q4. It took some not insignificant investment for us to get our brands on that platform. And again, we talked about some of the economics that are involved with that. But as we look into the future, obviously we're going to have to see about consumer adaption.

But from a marginal economic standpoint, we think, from a sub count, if we can get people to consume it on the Apple plus platform, it could be close to $10 increase from a margin perspective on our subscriptions.

Dan Kurnos -- The Benchmark Company -- Analyst

Got it. That's all super helpful color. Just before I get into the circ strength, which I think was kind of telling. And for what it's worth, just on your past commentary, I was less concerned with the underlying margins in the quarter.

Just trying to understand that -- the push out of the synergies. But just on the sales process, obviously you guys have talked about, you know making this one or two -- making this two stand-alone, does it go to six? Because obviously, Viant owned XUMO, you've got fan-sided within SI, I'm assuming that's probably what's dragging this out. Is there just -- I mean is there any thoughts on how you kind of wrap this up? And is that really the primary sticking point?

Joe Ceryanec -- Chief Financial Officer

Yeah, Dan, you hit that on the head. And even though we say SI and Viant, there's actually four separate processes going on with the -- I'll call them the sub brands under SI with fan-sided, and with XUMO under Viant. So that is adding to the complication.

Tom Harty -- President and Chief Executive Officer

And also, most of these, just like we did with FORTUNE and TIME, both purchases don't have a publication platform to take these businesses forward. So it's a very complicated negotiation as we're going to continue to do some back-office operations for them under a GSA contract. So we have multiple parties still very interested in the process for all of these brands, and we're looking forward to bring it to the end in the near future.

Dan Kurnos -- The Benchmark Company -- Analyst

Got it. Jon or Tom, I do -- I'd love to get some more color on the circ strength in the quarter. In National, it was -- that was, I think, where most of the upside came versus our expectations anyway and seem to drive some margin accretion there. Can you just help us a little bit understand better was it renewals of TIME products? Was it better improvement as you guys mentioned in shift to auto-renew in the customer channel and in that profile? Just help us kind of understand exactly what drove the circ strength and sort of what you're seeing on a go-forward even without, say, Apple plus?

Tom Harty -- President and Chief Executive Officer

Yeah. I think, I think, obviously there's a lot of things that go into the circulation business. There are a variety of different things and actually there is -- this year, we faced a little bit of an accounting change from revenue recognition and how we recognize some of the revenue associated with our subs. Historically, Meredith has always grossed up the sub price of our agent sources.

This was something that historically the industry didn't do, including Time Inc. Well, lo and behold, Meredith was right, because when the new accounting standard came out, the entire industry has to switch to that. So part of that is -- some part of it is driven by that, other parts of it are driven by, you know the direct mail campaign. So one source that we talked about, we mailed close to 27 million pieces of mail during the winter campaign.

This was the first campaign that we did for the new Time Inc. acquired brands. Some of these were where we would actually -- the Meredith standard of actually bundling different magazines together to create more value for the consumer, and their response rates to this were close to 4%, which is just incredible. And we've had certain titles, like Southern Living magazine had a 47% increase in their response rate under the Meredith standard.

At the same time, that direct mail campaign that we executed was 14% cheaper for us to do as a combined company with the strength of our sourcing activity, so that's one way we added the margin. And Jon also mentioned that our team has finally cracked the code on looking at direct-to-publisher using social media, Facebook ads, and December was our best month in the history of the company where we generated 50,000 paid orders through that source that will become all automatic credit card renewals into the future. So the circulation side of our business is really, really strong. We've talked about that for a long period of time.

Women still love magazines. And then we also have a lot of different consumer activities around e-commerce, and other things. So we're very excited and we've been talking about this for a while, and it's great to start seeing the -- see the top line growing.

Dan Kurnos -- The Benchmark Company -- Analyst

Perfect. Super helpful. Just -- Joe, just a housekeeping. What was print and digital on a comparable basis? The decline and the growth?

Joe Ceryanec -- Chief Financial Officer

In digital, we're combined I think down about five -- I think we said mid-single --

Dan Kurnos -- The Benchmark Company -- Analyst

You said down mid-single, but each one individually, I think, Jon said up slightly, and so, you know print was what, down like kind of mid to high single?

Tom Harty -- President and Chief Executive Officer

Q4 -- I'm sorry, Q3 as a combined portfolio, print was down minus 7% and digital was up a couple percentage points. That's how you got that kind of 4%, 4-ish down, but significantly improved. When you look at the last two-trailing quarters for the print combined portfolio, it was down 16%. So from 16% down to minus 7%, and actually we see trending in the fourth quarter that it's going to improve again.

So we're finally getting the portfolio of the Time Inc. side turnaround. I'll turn it -- Jon will give you some color.

Jon Werther -- National Media Group President

Yeah. One thing I would add again to that is, one of the key reasons for our course correction is that we can print it. So we continue to take share in the market place through large agency holding company, strategic deals and client-facing efforts. And if you look at the first three quarters of our fiscal '19, we picked up nearly two points of share from both an industry and comp set perspective.

But particularly if you look at the first three months of this calendar '19, where these strategic deals are largely kicking in, we picked up two point five points of share against the industry but nine points against our competitive set. So we're really starting to see the impact of these large wins that we've secured, and we're very, very excited about that, and look forward to continuing to grow our entire portfolio or operate our entire portfolio in line with historic trends from a print advertising perspective.

Dan Kurnos -- The Benchmark Company -- Analyst

Yeah. No doubt, people didn't think you guys would be able to do that. So congrats at least on that front. All right.

Thanks for bearing with me guys. Appreciate all the color.

Joe Ceryanec -- Chief Financial Officer

Thanks, Dan.

Tom Harty -- President and Chief Executive Officer

Thanks, Dan.

Operator

Kyle Evans with Stephens. Your line is open.

Kyle Evans -- Stephens Inc. -- Analyst

Hi, thanks. Good morning, guys. Jon, maybe a little bit more on the underlying trends in the national media group. An update on pharma and other key verticals? And then you also mentioned the challenging digital backdrop, could you provide a little bit more detail on what you meant by challenging?

Jon Werther -- National Media Group President

Sure. You know obviously, there's more -- there's a number of trends that we're seeing in the marketplace from shift to performance from a more of a branding perspective, from video continuing to be in high demand across platforms, from a desire for greater transparency, and demand for higher quality first party gated insights and obviously a continued desire for big ideas, innovative insights across the board. Obviously, there's formidable competitors in the marketplace, we also partner with them in the triopoly. And I think those are some of the trends that continue to create challenges for us.

From a print perspective, I think what we're seeing in terms of Q3, we've had some strength in nonprescription drugs, travel and home. And you know in Q4, those travel trends in particular we expect to continue. In terms of some of the challenges, as you can imagine from a print perspective, food and beverage, direct response to a degree, retail CPG have been challenged categories and those are some of the areas that we continue to navigate through from a print perspective. It's up and down a little bit on the digital side.

Digital pharma has actually done a little bit better for us there, and there are some categories that are improving. But by and large, those are some of the trends that we're seeing across both platforms.

Tom Harty -- President and Chief Executive Officer

Yeah. Kyle, when we say you know the marketplace for digital, obviously is challenges when I look at it two perspective. Obviously, Amazon coming in and the big guys taking more share. Also, there's a trend on the programmatic side of driving down some CPMs.

But we're rock-solid from an engagement perspective, and when you look at our performance recently, actually Q3 was significantly better than what we saw in Q4, where we -- I'm sorry, Q2 where we were down slightly and then we were actually flattish in Q1. So up 2% is a great trend for us and actually we see Q4 actually being better than Q3. Now on the pharma side, one thing I'd like to mention on print, which is an interesting development, and you might have saw it this week. But there's been a big push from a regulatory perspective that you actually have to put pharma pricing in television advertising.

And we're actually starting to hear from some of our bigger pharma clients that they may be interested in shifting some media dollars away from television and back into print because of this development. It's much easier for them to disclose former pricing in print than to actually do it in audio on television.

Jon Werther -- National Media Group President

And one other thing I would add to is that you know, we continue to focus. And there's another reason why we still feel very good about our future. Obviously, our ad scale brand portfolio we think is second to none. We have merged the cross channel experiences that really reach consumers that represent $2 of every $3 spent in every key category.

We have a real 360 degree focus on consumers that Tom alluded to. As consumers can shift their consumption behavior, we're staying with them where they go, whether it's OTT, whether it's voice, etc. And we have really differentiated data insights around our 175 million consumers that allow us to predict trends. Those types of things are what we feel will continue to position us for growth.

And one other thing I would add is that when you factor in our advertising growth with our digital consumer revenue growth, our actual growth rate for the combined digital business is really trending more toward the higher single digits for Q3 and that's how we look at the digital business and its entirety.

Kyle Evans -- Stephens Inc. -- Analyst

Got it. A few questions for Patrick on the local side. Maybe some commentary on core in the quarter. Could you please quantify the Super Bowl since we're going to be backing it out a year from now? And then talk a little bit about the pacing in the current quarter? And then also just phasing on the 60% of renewals on subs?

Patrick McCreery -- Local Media Group President

Sure. Got it. So core for third quarter was up plus six, and you know, that obviously was heavily impacted by the Super Bowl because we're a CVS-heavy affiliate group. So I'd say without the Super Bowl, it was up slightly.

The retransmission 60%, we have 60% of our renewals coming up in fiscal '20, and that's spaced throughout the year pretty evenly with some up at the end of this calendar, some up at the beginning here in July, then at the end of the calendar, and then in May of next year. So that 60%, it's for virtually 20-20-20.

Joe Ceryanec -- Chief Financial Officer

Yeah. Kyle, I think you asked about where we're pacing. And I mean, right now for Q4, we're pacing up slightly. And that's probably where we would expect to end the quarter.

Tom Harty -- President and Chief Executive Officer

Consistent with the Q3 without the Super Bowl.

Joe Ceryanec -- Chief Financial Officer

Yeah.

Tom Harty -- President and Chief Executive Officer

Some of the final force.

Joe Ceryanec -- Chief Financial Officer

Up a bit.

Kyle Evans -- Stephens Inc. -- Analyst

Got it. And then lastly, auto and the LMG. Where it was last quarter? Or where it's pacing in your outlook for the calendar year? Thank you.

Patrick McCreery -- Local Media Group President

Yes. So auto last quarter was minus six, and that's -- breaking that out domestically and foreign, domestic was flat and foreign was minus 10. And we really see that pacing continuing into the fourth quarter. I think right now we've got auto down seven.

Tom Harty -- President and Chief Executive Officer

Professional services.

Patrick McCreery -- Local Media Group President

Yeah. But it's offset by professional services, which was up 18 in third quarter, and it's pacing plus 26 in fourth quarter.

Operator

Eric Katz with Wolfe Research. Your line is open.

Eric Katz -- Wolfe Research, LLC -- Analyst

Hey, good morning all. It sounds like there's quite a bunch of exciting things going on your product offerings and with regard to investment. So I'm just trying to understand how much of this is new versus maybe originally built into your guide? And how much is I guess incremental versus maybe repurposing your typical organic investments? And then just sort of looking further out, are these the type of ongoing investment sort of at these levels that you'd expect going forward?

Tom Harty -- President and Chief Executive Officer

Yeah. So this is Tom. So I think when -- not tying it out to the penny, but I would say that, you know all or almost all of these investments that we're talking about weren't in our original guide. Obviously, we gave that guide at the beginning of the fiscal year last August and when things come up, we're running this business to maximize shareholder value for the long term, and when something like Apple News+ comes about and Apple engages and buys Texture, we've got to lean in because you heard about the economics that we have about that.

When we got in and we start running the Time Inc. side of the business, some of their circulation practices weren't best practices from our perspective. So you can cut short-term investment and add sources that aren't going to be as profitable longer term. So as mentioned, the circulation business of our business historically has always been that usually you're investing upfront and those subs, as they love our products and renew down the road, that's where you really start to print money.

So those were things that we looked at as we got into the source files and really started running the business that we decided to make investments in. So it's always hard in some of the digital stuff that Jon is developing. We're going to be in front of our board and we're kind of finishing the fiscal year, we're going to make some of those trade offs on, you know long-term investment. But I wouldn't think that it's going to be that much more significant than what we've done this year.

Eric Katz -- Wolfe Research, LLC -- Analyst

Got it. I'm going to take a shot here. I know you've historically said you were a buyer of TV stations and there's been some speculation out there that you're looking to potentially sell now. Is there anything that would cause you to sort of rethink your strategy on the broadcast side?

Tom Harty -- President and Chief Executive Officer

Well, we were expecting that question. So there's -- I know there's been a lot of rumors out there, there's been some stuff in the press, but you know we are not, and I underline not, pursuing a sale of our broadcast business. We continue to be excited about both sides of the business and we continue to have long-term goals of growing the national media group and the Local Media Group. Obviously, the last year, the Time Inc.

acquisition was the biggest acquisition in the history of the company and the management team has been laser-focused on making sure that we get this integration and this acquisition done right. And at the same time, Patrick and his team, for the first time in Meredith's history, are really seeing opportunities between the Local Media Group and the national media group with some of the brands we acquired a la PeopleTV and things like that. So we continue to watch the marketplace, but again, we maximize shareholder value over time and we're looking every single deal that comes up on the broadcast side, we're participating and reviewing those and deciding if we're going to participate.

Eric Katz -- Wolfe Research, LLC -- Analyst

All right. Sounds like some big news out there. Thank you very much.

Tom Harty -- President and Chief Executive Officer

OK. Thank you very much. Thanks for everyone for participating on our call this morning, and we look forward to having future discussions, and we'll get back to work here at Meredith. Thank you very much.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Mike Lovell -- Investor Relations Director

Tom Harty -- President and Chief Executive Officer

Jon Werther -- National Media Group President

Patrick McCreery -- Local Media Group President

Joe Ceryanec -- Chief Financial Officer

Dan Kurnos -- The Benchmark Company -- Analyst

Kyle Evans -- Stephens Inc. -- Analyst

Eric Katz -- Wolfe Research, LLC -- Analyst

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