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| 8-K - FORM 8-K - Time Inc. | d727780d8k.htm |
 Analyst
Presentation May 14, 2014
Exhibit 99.1 |
 2
Disclaimer
This presentation contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995; particularly statements regarding future
financial and operating results of Time Inc. (the “Company”) and its
business. These statements are based on management’s current expectations or
beliefs, and are subject to uncertainty and changes in circumstances. Actual results
may vary materially from those expressed or implied by the statements in this presentation due to
changes in economic, business, competitive, technological, strategic and/or regulatory
factors, and other factors affecting the operation of the Company’s business. More
detailed information about these factors may be found in the Company’s filings
with the Securities and Exchange Commission, including its Quarterly Report on Form
10-Q filed on May 14, 2014 and its Registration Statement on Form 10 and related
exhibits originally filed on November 22, 2013 and most recently amended on May 8, 2014.
The Company is under no obligation to, and expressly disclaims any such obligation to, update
or alter its forward-looking statements, whether as a result of new information,
future events or otherwise. Non-GAAP financial measures such as operating income
before depreciation and amortization (“OIBDA”), Adjusted OIBDA and Free Cash
Flow, as included in this Presentation, are supplemental measures that are not calculated in accordance with Generally
Accepted Accounting Principles (“GAAP”). We define Adjusted OIBDA as OIBDA
adjusted for asset impairments, restructuring and severance costs, gains or losses on
operating assets, and external costs related to mergers, acquisitions or dispositions. We define
Free Cash Flow as cash provided by operations less capital expenditures. We believe that
the presentation of OIBDA, Adjusted OIBDA and Free Cash Flow helps investors analyze
underlying trends in our business, evaluate the performance of our business both on an
absolute basis and relative to our peers and the broader market, provides useful information to both management
and investors by excluding certain items that may not be indicative of the core operating
results and operational strength of our business and helps investors evaluate our
ability to service our debt. Please see the Appendix hereto for reconciliations of
these Non-GAAP financial measures to their comparable GAAP financial
measures. These non-GAAP financial measures have limitations as analytical and
comparative tools and you should consider OIBDA, Adjusted OIBDA and Free Cash Flow in
addition to, and not as a substitute for, operating income, cash provided by operations or
any other measure of financial performance or liquidity reported
in accordance with GAAP.
Throughout the presentation, certain numbers will not sum to the
total due to rounding. |
 3
Introduction
Pages 4-7
Executive Summary
Pages 8-20
Overview of Time Inc.
Pages 21-42
Financial Overview
Pages 43-51
Appendix
Pages 52-55
Agenda |
 INTRODUCTION
4 |
 5
•
Time
Inc.
is
the
largest
magazine
publisher
in
the
U.S.
based
on
both
readership
and
print
advertising
revenues
with
over
90
magazine
titles
globally,
including
PEOPLE,
Sports
Illustrated,
InStyle,
TIME
and
Real
Simple
•
On March 6, 2013 Time Warner announced plans for the complete legal and structural separation
of Time Inc. from
Time
Warner
in
a
tax-free
spin-off,
which
is
scheduled
to
be
completed
on
June
6
th
–
The
distribution
ratio
will
be
1
Time
Inc.
share
per
8
Time
Warner
Inc.
shares,
or
approximately
110MM
diluted shares outstanding
–
The Company will be listed on the New York Stock Exchange under the ticker
‘TIME’ •
Time
Inc.
generated
FY
2013
revenue
of
$3.4B,
Adjusted
OIBDA
of
$587MM
1
,
and
Free
Cash
Flow
of
$384MM
2
•
The Company is targeting an initial dividend payout of approximately 30% of Free Cash Flow
•
In connection with the spin-off, Time Inc. has raised $1.4 billion of funded debt, in the
form of a $700MM 1st lien Term Loan B (subject to closing conditions) and $700MM of
Senior Unsecured Notes –
Net proceeds from the financing will be used to purchase U.K. publishing operations from Time
Warner and pay a special dividend to Time Warner
–
The Company also has access to an undrawn $500MM 1st lien Revolving Credit Facility (subject
to closing conditions)
Spin-Off Overview
Adjusted OIBDA is OIBDA excluding asset impairments, restructuring and severance costs, gains
or losses on operating assets, and external costs related to mergers, acquisitions or dispositions;
See Appendix for Reconciliation of Operating Income to Adjusted OIBDA
Free Cash Flow is defined as cash provided by operations less capital expenditures; See
Appendix for Reconciliation of Net Income to Free Cash Flow. FY 2013 Free Cash Flow of $384MM does
not give pro forma effect to the interest expense associated with the $1.4 billion of debt
raised in 2014 1
2 |
 6
The spin-off will enable Time Inc. to benefit from the flexibility and focus of being a
stand-alone public company
Spin-Off Transaction Rationale
Provides strategic clarity and flexibility
Aligns incentives for management and employees
Creates shareholder flexibility
•
Better able to execute on strategic plans and respond to industry dynamics
•
Increased flexibility to pursue growth opportunities and direct resources
•
Incentives tied to business performance and stockholder expectations
•
Increased ability to attract and retain personnel
•
Shareholders can make independent decisions about business ownership
•
Over time, Time Inc. will align with a natural shareholder base
|
 7
Spin Timeline
•
Debt financing was completed in April 2014 (subject to closing conditions for Term
Loan B and Revolver)
•
Spin-off targeted for completion on June 6
•
Form 10 declared effective (5/9)
•
Announced Record Date,
Distribution Date and Share
Distribution Ratio
•
Distribution Date (6/6)
•
Ex-Dividend Date / Regular Way
Trading (6/9)
Transaction timeline
Holiday
May 2014
June 2014
S
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T
W
T
F
S
S
M
T
W
T
F
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30
Week of May 5th
May 19
Early June
•
When-Issued Trading begins (5/21)
•
Record Date (5/23)
th
th |
 EXECUTIVE
SUMMARY 8 |
 9
Presenters
Time Inc.’s New Senior Leadership Team
Norman Pearlstine, EVP and Chief Content Officer
Jeffrey J. Bairstow, EVP and Chief Financial Officer
Joseph A. Ripp, Chief Executive Officer
•
Mr. Pearlstine became Chief Content Officer in November 2013
•
Mr. Pearlstine is responsible for driving development of new content experiences, consumer
products and lines of business across Time Inc. brands. He also oversees the
company’s editorial policies and standards •
Mr. Pearlstine served as Time Inc.’s Editor-in-Chief from 1995 through
2005 •
From 2006 to 2008, Mr. Pearlstine served as a Senior Advisor to the Telecom and Media group
at The Carlyle Group •
Mr. Pearlstine returned to Time Inc. following a five-year stint at Bloomberg L.P., where
as Chief Content Officer, he was responsible for developing growth opportunities for
Bloomberg’s television, radio, magazine, and online products to make the most of
the company’s news operations •
Mr. Bairstow became CFO in September 2013
•
Mr. Bairstow is responsible for leading Time Inc.’s financial functions and strategies.
He also oversees Time Inc.’s Customer Service, and Production operations
•
Prior affiliations include President of Digital First Media, a leading newspaper chain, where
he helped extend the reach of the company’s core media brands across all
platforms •
Mr. Ripp became CEO in September 2013
•
As a former top Time Inc. and Time Warner executive, Mr. Ripp spent the past decade immersed
in the intersection of digital, advertising and publishing
•
Prior affiliations include CEO of OneSource Information Services, Inc. and Cannondale
Investments, Inc. •
Mr. Ripp began his media career at Time Inc. in 1985, and held several executive level
positions there and at Time Warner including Senior Vice President, CFO and Treasurer
of Time Inc., Executive Vice President and CFO of Time Warner, CFO of America Online,
and Vice Chairman of America Online |
 Time Inc.
Overview 10
1
U.S. based on both readership and print advertising revenues
2
U.K. based on print newsstand revenues
Industry-leading collection of media brands
Largest
magazine
publisher
in
the
U.S.
and
the
U.K.
~100MM U.S. consumers in print per month
23 magazines published in the U.S.
70+ magazines published internationally (U.K., Mexico)
50+ licensed print and digital editions in 30+ countries
~70MM consumers online monthly
45+ websites globally
Offers digital magazine, websites with mobile viewing
and mobile applications for U.S. titles
2013 Revenue by Type ($MM)
2013A Revenue: $3,354MM
Advertising
$1,807
54%
Circulation
$1,129
34%
Other
$418
12%
1
2 |
 Oct 17,
2001 Acquisition of IPC
Media (U.K.), a
leading magazine
publisher with 90+
titles
11
Time Inc. Timeline
Oct 1, 2013
Acquisition of Affluent Media
Group (formerly American
Express Publishing)
1930
1930
1980
1980
1940
1940
1923
1930
1936
1954
1972
1974
1985
1987
1990
1994
2000
2004
1990
1990
2000
2000
2010
2010
Nov 28, 1922
Time Inc.
incorporated
1950
1950
1960
1960
1970
1970
Jan 1990
Merger with
Warner
Communications
2011
Time Inc. launched
tablet editions for
all U.S. titles
Mar 6, 2013
Time Warner
announced plans
to separate Time
Inc.
2014
2014
2013
2013
1996 |
 12
Investment Highlights
•
Industry leading scale and brands
•
Passionate subscriber base that can be monetized
across platforms and provides extensive consumer data
•
Strong Free Cash Flow profile
•
New management team with proven track record of
business transformation
•
Clear path to creating long-term value
–
Drive efficiencies to protect cash flows and free up
resources for reinvestment
–
Unleash entrepreneurship and create P&L
accountability
–
Extend brands and better leverage scalability of
content
–
Balanced approach to capital allocation |
 U.S. Consumer
Magazine Publishing: $24.3B Annual Revenue 13
Advertising made up 67% of all magazine industry revenue in 2013
Total: $24.3B
Magazine Publishing Revenue 2013
1
($MM)
2013 Top Magazine Industry Ad Categories
2
Beauty, 17%
Fashion/Retail
/Jewelry, 15%
Food & Bev,
11%
DTC/OTC
Drugs &
Remedies,
11%
DR, Misc &
Local Svcs, 8%
Home, 7%
Media &
Movies, 6%
Tech &
Telecom/CE,
6%
Automotive,
5%
Financial,
5%
Travel,
4%
Industry, Govt
& Org, 3%
Other,
4%
Ad Revenue
$16.3B
67%
Circ Revenue
$8.0B
33%
1
2
Source: PWC Global Entertainment and Media Outlook 2013-2017, Publishers Information
Bureau as provided by Kantar Media (“PIB”) Note: Percentages may not add to
100% due to rounding “Other” ad category includes Sporting Goods, Toys &
Hobbies, Alcoholic Beverage and Tobacco Reflects U.S. consumer magazine publishing
revenue; |
 14
Source: MPA Factbook 2013/2014
91% of all adult Americans read magazines
Print magazines rank #1 in commanding consumer attention and advertising acceptance
Magazine ads outperform other media with regard to credibility and influence
>25% of digital readers say they have increased time spent with magazines
Magazines Have a Large, Highly Engaged Audience
59% of readers took action or plan to take action as a result of exposure to specific print ads
|
 Top Magazine
Publishers are Taking Share 15
The share for the top four publishers has increased from 64% in 2009 to 68% in 2013
PIB-Measured Publishers Share of Advertising Revenue
+370bps
1
20.0%
16.4%
18.0%
13.9%
15.6%
13.2%
11.1%
36.5%
31.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009
2013
All Other
Meredith
Condé
Nast
Hearst
Time Inc.
23.7%
Reflects Time Inc.’s 2013 acquisition of Affluent Media Group, which represents 170 bps
of the increase Source: PIB
1 |
 16
Key Challenges and Transformational Progress
Secular Headwinds
•
Advertising revenues migrating to digital
•
Newsstand declines
•
Digital monetization underperformance
Protect the Core
•
Dissolved complex operating matrix
•
Launched program to attack processes and
structural costs
•
Developing cross-brand digital strategy
Key Challenges
Cultural and Organizational Barriers
•
Leadership transitions
•
Decentralization and bureaucracy slowed
decision-making and execution
•
Structural costs were not addressed
•
Creative misalignment with the business
Position For a Changing Marketplace
•
Hired
or
promoted
transformational
figures
1
•
Eliminated
“Church
and
State”
2
barriers
•
Designed new incentive and compensation
plans
1
EVP, Chief Content Officer Norm Pearlstine, EVP of Consumer Marketing Lynne Biggar, EVP of
Advertising Sales Mark Ford, and Chief Technology Officer Colin Bodell and others
2
“Church and State”
in magazine parlance speaks to the separation between a publication’s editorial and
business interests, defining an arms-length relationship, similar to the separation of
organized religion and the government guaranteed by the First Amendment to the
Constitution Transformational Progress
•
Manage Portfolio of Brands, Titles, Assets
•
Acquisition of Affluent Media Group (formerly
American Express Publishing)
•
Co-founder of 120 Sports (key mobile asset)
Underinvestment in Business and Brands
Underinvested in digital platforms and
infrastructure |
 17
Strategic Priorities –
Leverage Content and Brands
Drive efficiencies to protect cash flows and free up resources for reinvestment
Better align editorial function with business opportunities
Enhance effectiveness of advertising sales
Optimize subscription offers and consumer pay strategies
Maximize value of brands and scale via adjacent monetization opportunities
Innovate technology platform for consumers, advertisers and creative staff
|
 18
Adjacent Opportunities
•
Continue to invest in digital media, including mobile and video,
as well as social extensions of our brands
Monetizing audience
scale across platforms
•
Extend brands beyond print and digital magazines
•
E.g., direct sales or licensing agreements related to consumer
products and services
New consumer
products and services
•
Leverage our extensive consumer data and insights and extend
services to marketers
Data collection and
targeting
•
Expand our events and conferences
•
E.g., the
Essence
Festival
is
in
its
20
th
Year
and
is
one
of
the
largest
live consumer events in the U.S.
Experiential media
•
Expand ancillary services including end-to-end fulfillment and direct
marketing expertise to third parties
B2B services |
 Todd Larsen,
EVP Evelyn Webster, EVP
Lynne Biggar, EVP, Consumer Marketing & Revenue
Key Prior Affiliations:
American Express
Mark Ford, EVP, Advertising
19
Accomplished Management Team Driving Change
Management Team
Management Team
Colin Bodell –
EVP and Chief Technology Officer
Key Prior Affiliations:
Amazon
Greg Giangrande –
EVP and Chief Human Resources Officer
Current Role:
Oversees all aspects of Human Resources
Key Prior Affiliations:
News Corporation, Hearst Corporation
Lawrence Jacobs –
EVP, General Counsel and Secretary
Key Prior Affiliations:
News Corporation
Current
Role:
Oversees
operations
including
PEOPLE,
Sports Illustrated
and
TIME
Key
Prior
Affiliations:
Dow
Jones
&
Company
Current role:
Oversees operations including InStyle,
Real Simple
and Southern
Living and has oversight of IPC Media
Key Prior Affiliations:
IPC Media
Current Role:
Oversees consumer revenue and
supervises direct marketing company Synapse, retail
specialist Time/Warner Retail, and book publisher
Time Home Entertainment Inc.
Current Role:
Responsible for driving overall
advertising sales revenue and for building Time
Inc.’s leadership in the marketplace; oversees Time
Inc. Branded Solutions, Time Inc. Content Solutions,
and
MNI
(“Media
Networks
Inc.”)
Targeted
Media
Key Prior Affiliations:
Time Inc.
Current Role:
Responsible for shaping the company’s strategic
technology direction, day-to-day operations and acquiring and
leveraging best in breed technology
Current Role:
Responsible for leading Time Inc.'s legal affairs
and overseeing public company governance and compliance
issues
•
•
•
•
•
•
•
•
•
•
•
•
•
• |
 20
Accomplished Board of Directors Guiding Us into the Future
•
David A. Bell -
Chairman and Chief Executive Officer, Slipstream Communications, LLC
•
John M. Fahey, Jr. -
Non-Executive Chairman, National Geographic Society
•
Manuel A. Fernandez -
Former Executive Chairman, Sysco Corporation
•
Dennis J. Fitzsimons -
Chairman, Robert R. McCormick Foundation
•
Betsy D. Holden -
Senior Advisor, McKinsey & Company
•
Kay Koplovitz -
Chairman and Chief Executive Officer, Koplovitz & Company LLC
•
J. Randall MacDonald -
Former Senior Vice President, Human Resources, IBM Corporation
•
Joseph A. Ripp -
Chairman and Chief Executive Officer, Time Inc.
•
Ronald S. Rolfe, Esq. -
Retired Partner, Litigation, Cravath, Swaine & Moore LLP
•
Sir Howard Stringer -
Retired Chairman of the Board, Sony Corporation
Board of Directors
Note:
The
above
Director
slate
will
be
in
effect
on
the
spin-off
distribution
date
(June
6
th
,
2014) |
 21
OVERVIEW OF TIME INC. |
 22
Source: AAM 1H13, MRI Fall 2013, PIB, ComScore Dec. 2013
Note: Magazines Sold/Year calculated based on frequency multiplied by print circ as reported
to AAM in 1H13 and Time Inc. doesn’t include Time for Kids or SI Kids, Time Inc.
2013 PIB share includes Affluent Media Group 1
Excludes CNN/Money
Time Inc. is the across the board
industry leader
•
#1 Print Audience
•
#1 in Online Audience
•
#1 in Print Ad Share
PIB Advertising Revenue Share
Category-Leading Portfolio of U.S. Brands
MRI Print Audience (000)
Multiplatform Unique Visitors (MM)
73.9
61.5
57.3
52.3
Hearst
Meredith
Condé
Nast
1
104,665
80,730
66,470
50,313
Net Hearst
(19 titles)
Net Meredith
(12 titles)
Net Condé
Nast
(16 titles)
23.7%
18.0%
15.6%
11.1%
31.6%
5%
10%
15%
20%
25%
30%
35%
2009
2010
2011
2012
2013
Time Inc.
Hearst
Condé
Nast
Meredith
All Other
AMEX (20 titles)
+ |
 Time Inc.
titles rank #1 or #2 in advertising revenue share in 15 of the 18 PIB categories in which
we compete BRANDS
CATEGORY
2013 AD RANK
CATEGORY SHARE
Celebrity Weekly
#1
58%
Sports –
General
#1
66%
Women’s Fashion
#1
19%
Weekly news magazine
#1
74%
Women’s Lifestyle
#2
19%
Entertainment
#1
41%
Sports –
Golf
#1
55%
Travel
#1
35%
Epicurean
#1
21%
Personal Finance
#1
85%
African American
#1
56%
Hispanic
#1
51%
Business –
Corporate
#2
30%
Regional
#2
33%
Kids
#2
39%
Source: PIB
Category-Leading Portfolio of U.S. Brands (Cont’d.)
23 |
 Time Inc. Has
Diverse Ad Categories and Accounts in the U.S. Key Advertisers
No single advertiser represents more than 5% of domestic revenues
Time Inc.’s Portfolio Draws a Diverse Ad Base
No single advertising category represents more than 16% of domestic revenues
24
•
Female-oriented brands are the financial engine of Time
Inc.’s portfolio
PEOPLE
(71%
female
audience),
InStyle
(91%), Real
Simple (88%), Southern Living
(79%), and Cooking
Light (84%)
1974:
PEOPLE
1987: Cooking
Light 1990: Entertainment Weekly
1994: InStyle
2000: Real Simple
2004: All
You Unparalleled advertiser opportunity to reach target
audiences across key categories
•
Investments in lucrative categories draw advertisers:
entertainment, fashion, and women’s lifestyle •
Reaches ~50% of all U.S. adults each month and more
women than Hearst or Meredith |
 Strong ROI
Drives Advertiser Loyalty Source: Results based impact from the halo effect of 14
campaigns measuring both subscribers and newsstand buyers •
Nielsen Catalina Pinpoint establishes the ROI magazines present to advertisers:
–
Leverages shopper data from over 60MM households to measure the sales impact of print
and digital advertising
–
Created a single source approach to measuring cross platform (TV, Print, and Digital) sales
impact
–
Demonstrated that a combined Print/Digital campaign can add a significant incremental
sales impact to a large TV effort
18
11%
Studies Time Inc. has conducted with Nielsen
Catalina Solutions to date
Average incremental sales lift, proving positive
impact on in-store sales
25 |
 Magazine
Effectiveness Case Study – Top 5 Beauty Advertiser
26
Note: Data is Delta=Control-Exposed; number of respondents: magazine n=49,965, online =
119.901, TV = n-79,375 Source: ORC Caravan, Feb 2013; Adobe Click Here Study, 2012;
InsightExpress, 2013 Anti-Wrinkle +
Firming Eye
Cream
Foundation Liquid
Face Makeup
Vivid Lip
Color
Collection
Cream Lip Color
Product type
Outcome
Campaign
Print:
Entertainment
Weekly,
Essence,
InStyle, PEOPLE, People StyleWatch
Print:
Health,
InStyle,
PEOPLE,
Real
Simple
Print:
All
You,
Essence,
InStyle,
PEOPLE,
PEOPLE en Español, PEOPLE StyleWatch
Print:
Essence,
InStyle,
PEOPLE,
PEOPLE
en Español, PEOPLE StyleWatch, Real
Simple, Time
•
Sales
Lift:
5%
•
Payback:
9.4x
•
Sales driven by HH penetration &
purchase frequency
•
Share gain from key competitors
•
Sales
Lift:
5%
•
Payback:
14.2x
•
Share gain from key competitors
•
Sales
Lift:
2%
•
Payback:
7.7x
•
Sales driven by HH penetration &
purchase frequency
•
Sales
Lift:
5%
•
Payback:
11.5x
•
Share gain from key competitors |
 ranks
#1
among
women
Exceptional Content & Access
27
Frequency
53x
per
year
8.3MM
followers
2.8MM
likes
19MM
monthly
multiplatform
unique visitors
43MM
audience
per week
$101.54
annual
subscription
price
47%
over average
of top peers
Circulation and audience
40 years since its inception, PEOPLE remains the leading celebrity news
and entertainment magazine brand in the U.S.
Reaches
1 in 5
women
each week
Photo credit: Johnny Vy/©A.M.P.A.S
Other takeaways
Editorial
Director
of
PEOPLE
and
EW
Jess
Cagle
co-hosted
ABC’s
Oscars
Red
Carpet
Live
PEOPLE’S
Royal
Baby
Collector’s
issue
was
the
only
celebrity
magazine
to
feature
a
photo
of
William
and
Kate
with
their
newborn
son
Adjacent
Adjacent
Opportunities
Opportunities
Digital Scale
New Franchises
Events
Multimedia
Unparalleled
access
to
celebrity
and
red
carpet
events
Product Sales
Publishes
six
annual
special
double-issues
–
World’s
Most Beautiful, Sexiest Man Alive, Celebrity Body
Slimdown, Best & Worst Dressed, Best (& Worst!) of the
Year, and Half Their Size
Source: MRI Fall 2013; ComScore Multiplatform February 2014; AAM Circulation Report December
2013 |
 20MM
audience
per week
Exceptional Content & Access
28
•
New Franchises
•
Events
•
Multimedia
Frequency
56x
per
year
14MM
monthly
multiplatform
unique visitors
$41.55
annual
subscription
price
58%
over average
of top peers
Other takeaways
•
In
2013,
Sports
Illustrated
was
ranked
among
the
industry’s
hottest
brands
by
Advertising
Age
and
AdWeek
•
SI
franchises
and
extensions
include
Swimsuit,
Sportsman of the Year, Extra Mustard, The MMQB
and Swim Daily
•
SI’
s Peter
King
was
named
2013
Sportswriter
of
the
Year
by
the
National
Association
of
Sportswriters
and
Sportscasters.
An
SI
writer
has
won
the
award
four
years
in
a
row
and
nine
times
in
the
last
12
years
Circulation and audience
SI’s
readers are more loyal
than any other men’s sports
magazine
1.2MM
followers
4.1MM
likes
SI is the most respected voice in sports journalism, and has been published continuously since
1954 Adjacent
Adjacent
Opportunities
Opportunities
Source: MRI Fall 2013; ComScore Multiplatform February 2014; AAM Circulation Report December
2013 |
 Exceptional
Content & Access 29
Source: GfK MRI Fall 2013; comScore Multiplatform March 2014; AAM Circulation Report December
2013 Frequency
13x
per
year
Circulation and audience
Other takeaways
•
InStyle
is known for driving product sales
•
InStyle
readers
purchase
an
average
of
8
advertised
items
per
issue
•
Offers
360-degree
experience:
monthly
magazine,
bespoke
supplements, InStyle.com, social media, reader events, celebrity
parties and awards
•
InStyle’s
Best
Beauty
Buys
are
the
Oscars
of
the
beauty
world
•
Significant
brand
licensing
opportunities
(e.g.
InStyle’s
2014
shoe
collection for Nine West)
2.7MM
followers
3.3MM
likes
InStyle
was
launched
in
1994
as
a
spin-out
of
PEOPLE
magazine’s
“Star
Tracks”
column.
It emphasizes celebrity and style.
Adjacent
Adjacent
Opportunities
Opportunities
•
Product Sales
•
Digital
Innovation
•
E-Commerce
•
Events
9.6MM
audience
per month
88%
over average
of top peers
2.5MM
monthly
multiplatform
unique visitors
$22.74
annual
subscription
price
20MM
consumers
worldwide |
 Exceptional
Content & Access 30
1
Includes Populist App and LIFE App
Adjacent
Opportunities
•
Contributor
Network
•
Events
•
Time for Kids
Extension
Frequency
53x
per
year
5.6MM
followers
3.4MM
likes
Other takeaways
•
In
the
past
six
months,
TIME
has
had
exclusive,
rare
interviews
with Prince Charles, Janet Yellen, Edward
Snowden and French President Francois Hollande
•
TIME
was
featured
75
times
on
the
major
network
Sunday
shows in 2013, with 42 guest appearances
•
Contributors
to
TIME
in
2013
included:
President
Barack
Obama, Hillary Clinton, Claire Danes, Bono, Jon Stewart
•
TIME
recently
launched
Red
Border
Films,
a
documentary
film
unit
hosted
on
Time.com
Circulation and audience
TIME magazine was ranked as America’s #1 trusted news brand in 2013 (GFK/Roper), and has
been published continuously since 1923
18.7MM
audience
per week
24MM
monthly
multiplatform
unique visitors
11MM
mobile unique visitors
and
7MM
App download
1
$29.35
annual
subscription
price
Source: MRI Fall 2013; ComScore Multiplatform February 2014; AAM Circulation Report December
2013 |
 Exceptional
Content & Access 31
Frequency
12x
per
year
Other takeaways
•
Bed Bath & Beyond carries 900 nationwide SKUs branded as
Real Simple Solutions
•
Real
Simple
apps
include
“No
Time
to
Cook?,”
which
offers
850+
easy-to-prepare
recipes,
“To
Do
Lists”
and
a
“Gift
Guide”
featuring Real Simple editor gift picks
•
Real
Simple
programs
and
events
include
the
Beauty
&
Balance
Weekend
in
partnership
with
Exhale
Spa,
Pops
on
Nantucket in partnership with Coastal Living, and Big Apple
Barbeque
Circulation and audience
Real Simple, launched in 2000, offers today’s time-pressured woman a guide she can
trust to make her life a little easier
661K
followers
1.1MM
likes
8.1MM
audience
per week $20.02
annual
subscription
price
41%
over average
of top peers 5.4MM
monthly
multiplatform
unique visitors Affluent audience: $97.8K median household
income (vs. $62.8K for Better
Homes and Gardens)
National Magazine
Awards for
General
Excellence Finalist
since 2010 Adjacent
Opportunities
•
E-Commerce
•
Product Sales
•
Contributor
Network
Source: MRI Fall 2013; ComScore Multiplatform February 2014; AAM Circulation Report December
2013 |
 IPC
– U.K.’s Leading Consumer Multi-Platform Publisher
Source: ABC Jan-Jun 2013, Nielsen Ad Dynamix Jan-Dec 2012, NRS JD 2012, Comscore
March 2013, NRS PADD Jan-Jun 2013 32
#1
#1
#2
•
Acquired in 2001
•
56 titles in 20 sectors; #1 or #2 in 18
sectors
•
Main business segments
#1
#2
Multi-platform publisher measured by de-
duped online and print reach
Connect: Mass market women
Southbank: Upmarket women
Inspire: Affluent men and young men
Marketforce: Magazine distribution
ABC volume share (28.3%) & value share (21.9%)
Print advertising share: 30.4% paging
Subscription volumes
Online publisher vs. other consumer magazine publishers
Reach
nearly
half
of U.K.
population
63 Brands
across print, web,
mobile, tablet and
events
4.5MM unique
Users
10% reach of U.K.
Internet population
Reach
Almost
60%
Upscale
women |
 33
Brand Extension Case Study |
 •
Live streaming network delivered to mobile devices
•
Access to original sports programming in two-minute
segments 24 hours a day:
Hosted programming
Interactive narratives
Game footage
Analysis
Conversation
Social commentary from players, newsmakers
and fans
•
Partners:
NHL, NBA, MLB.com, NASCAR
Leading collegiate conferences via Campus
Insiders, IMG College and Silver Chalice
Brand Extension Case Study
34
Overview
120 Sports will be a Unique Platform
•
Multi-sport:
The
first
time
leagues
have
joined
together for a multi-sport digital experience
•
Digital
first:
Not
repurposed
TV
content
•
No
authentication:
No
cable
subscription
required (unlike Watch ESPN)
•
Social
&
community:
Deep
social
integration
using patented technology
•
Personalization:
Customizable
based
on
personal team & athlete preferences
•
Estimated launch is Spring 2014
Expected to be an ‘always-on’
product to provoke fan engagement |
 •
Essence
was created as a forum that would enrich and improve the day-to-day lives of
women •
Essence Festival now hosts nearly 550,000 attendees, making it one of the largest live
consumer events in the country •
Past Festival performing artists and speakers have included PRINCE, Beyoncé, Aretha
Franklin, John Legend, Kanye West, Lionel Richie, Rihanna, Stevie Wonder, Usher, Bill
Cosby, Tyler Perry, Steve Harvey, Reverend Al Sharpton, Vanessa Williams and Hillary
Rodham Clinton •
Essence
now touches an audience of over 3B with our rich media and PR campaign and strategic
partnerships with media networks
•
The
first
official
Festival
App
garnered
over
15,000
downloads
and
tripled
Essence
mobile
consumption
•
In
2013,
Essence
partnered
with
MSNBC
for
live
coverage
throughout
the
weekend,
with
a
content
partnership
continuing into the 20
th
anniversary
•
Essence
Festival trended across social media with ~55,000 Instagram posts and more than 24,000 uses
of #essencefest on Twitter
•
The Festival provides our nearly 35 sponsoring partners rich consumer engagement
opportunities, with over 25 minutes spent engaging with their brands
35
Brand Extension Case Study
Source: 2013 Attendance and Impressions Report
It’s one of the largest Live
Events
in the U.S. |
 36
Strategic Rationale
•
Acquisition of iconic, premium brands with opportunities to leverage growth
through new platforms
•
Ad sales opportunity based on expanded reach with Food & Wine
and Departures
•
Broadens exposure to the important luxury category
Cost / Operational Reasons
•
Operational synergies identified upfront through back office functions
•
Time Inc. was previously providing operational support, though the Company still
expects to achieve multi-million dollar run-rate synergies
Benefits
of
Scale
–
Affluent
Media
Group
Acquisition
Case
Study |
 37
Benefits
of
Scale
–
Vertical
Integration
•
Vertically integrated with best-in-class subscriber acquisition, fulfillment and
distribution operations •
Ability to offer third party services to publishers and other sub-scale businesses
•
Fixed costs of operating scale provide real synergies for acquisitions
•
Third party services include:
Production (e.g., direct mail materials, premiums, wraps)
Corporate and digital ad sales and books and digital publishing
Customer service and consumer marketing
Magazine fulfillment services for
publishers
•
Subscription management
•
Credit card processing
•
Circulation statistics
Multichannel marketing of
subscriptions
through
3
rd
parties
Customer targeting to increase
circulation for publishers
Wholesale retail marketing and
distribution services to publishers
•
Logistics
•
Consumer insight
•
Retail strategy
•
Category management
•
PoS analytics
Built For Scale |
 Subscriber
Relationships Provide Extensive Consumer Insight and Data 38
•
Transaction database of 150MM U.S. individuals
•
Offline
transaction and demographic information
•
20 years
of magazine subscribers and book buyers
•
Digital
direct and opt-in 3
rd
party data
•
Clickstream data
from digital properties
•
Third party data used for demographic, behavioral, and
geographic targeting
Time Inc. Database
Data Currently Leveraged for…
Consumer Marketing
Modeled direct mail and email campaigns
Segmentation & targeting for retention efforts
Customized marketing (e.g., SI
Favorite Team)
Targeted advertising (print)
Selective binding for print ad campaigns
ROI analysis to determine campaign effectiveness
Offline to online targeting segments
And Will Drive Future Monetization Strategies
Smarter Online
Marketing
•
Behavioral and website engagement data drives enhanced subscription targeting and Paid
Content strategies •
Explore
modeling
efforts
to
drive
more
effective
lead
generation
campaigns
Enhanced Offline
Marketing
•
Incorporate new data into direct mail, email and retention models and marketing efforts
•
Move toward multi-channel marketing for customers interacting with our content on
multiple platforms “Portfolio Marketing”
•
Target customers by profitability potential across Time Inc. portfolio, rather than
individual brands •
Adopt “portfolio”
marketing across areas of interest; offer products from multiple brands
•
Enhanced cross-selling/up-selling by prioritizing offers based on lifetime value for
Time Inc. Targeted Advertising
•
Combine data, context and content to drive addressable media opportunities for clients
•
Offline to online targeting
Time Inc. understands what people like and what they engage with |
 39
•
Enhance portfolio of digital products and drive
digital magazine revenue
•
Increase recurring/automated billing and drive
online/credit card purchases
•
Reduce costs in traditional circulation acquisition
efforts
•
Maintain premium pricing
•
Modernize customer communications
•
Improve customer targeting
•
Consumer shift from print to digital
•
Continued pressure on conversion rates and
economics of circulation acquisition
•
Rising median age of magazine subscriber
•
Limitation of digital magazine “all access replica”
strategy
Tactics
Challenges
Time Inc. Subscription Overview
Subscription Revenue ($MM)
$754
$748
$721
2011A
2012A
2013A
Note: 2013A includes Affluent Media Group for the portion of the year after which it was
acquired |
 40
•
Aggressively pursue consumer activation
–
Consumer marketing techniques (value added
promotions, register messaging, couponing)
•
Continue to grow bookazine publishing unit at
newsstand
•
Implement selective price increases
•
Expand All You magazine nationally
•
Focus on local market interests
•
Inventory management
–
Reduce marginal draw
–
Maintain prior issue remnant inventory to
produce a longer on sale period
•
Declining channel, sales and profit
•
Supply chain faces declining revenues against a
largely fixed cost base
•
Regional business interruptions are possible if a
wholesaler exits the market suddenly
•
The loss of publishers could further erode
wholesaler overhead contribution until costs can
be rationalized to reflect lower outbound volume
•
Continued sales declines could affect publisher
rate base
•
Magazine SKU’s are increasingly facing
competition including other products at
checkout, such as soda and gum
Tactics
Challenges
Time Inc. Newsstand Overview
Newsstand Revenue ($MM)
$498
$447
$389
2011A
2012A
2013A
Note: 2013A includes Affluent Media Group for the portion of the year after which it was
acquired |
 41
•
Re-focus on selling and communicating benefits
of print
•
Improve ease of access for agencies and other
large advertisers
•
Continued growth in programmatic advertising
as demand for ultra-premium inventory grows
•
Ad rates (CPM) for ultra-premium digital
inventory growing in concert with rising demand
•
More effective utilization of first-party data
proving to be a critical competitive advantage
over other ad networks and content publishers
•
Shift toward digital with subsequent decline in
demand for print
•
Premium inventory levels are decreasing as
advertiser's ability to measure viewable ad
impressions improves and they demand higher
levels of viewable inventory
•
As mobile page views continue to grow rapidly
and at the expense of desktop, premium
inventory levels are declining
•
A lack of optimization technology impedes Time
Inc. from attracting the largest performance
advertisers
•
Mobile monetization rates do not sufficiently
replace web display
Tactics
Challenges
Time Inc. Advertising Overview
Advertising Revenue ($MM)
$1,923
$1,819
$1,807
2011A
2012A
2013A
Note: 2013A includes Affluent Media Group for the portion of the year after which it was
acquired |
 Digital
Strategy for Growth 42
•
1.1B monthly pageviews with 915MM minutes spent on our sites
•
45+ websites with 73.9MM
1
monthly unique visitors in the U.S., 42MM of which were mobile
•
Database
of
150MM
U.S.
individuals
including
offline
transaction
and
demographic
information
•
Tablet versions and mobile apps for all U.S. magazines
•
Digital
and
mobile
unique
visitors
grew
17%
and
72%
in
the
last
10
months
2
,
respectively
Digital and
Mobile
Foundation
Source: ComScore
1
Excludes CNN/Money
2
Through February 2014; ComScore began providing YOY comparisons for multiplatform audiences
in April 2013 Multi-media
Strategy
•
Investment in video drove 50% YOY growth in in-house original production and more than 75%
YOY growth in user initiated streams
•
Hiring entrepreneurial digital talent
•
Developing cross-brand video aggregator that brings together the best content from across
the Time Inc. portfolio
Scaling for
Mobile and the
Social Web
•
Brand presence across all major social networking platforms
•
Preferred partners with Facebook and Twitter for launching and testing new products
•
Driving increased engagement by enabling “contributor”
platforms across many of our brands
Monetization
and Innovation
•
Opportunities exist for product extensions including new mobile-first brands,
e-commerce, etc. •
Build on strength of: a) high-touch direct, custom and native advertising sales programs;
and b) benefits of scale and access to data for exchange/programmatic sales
•
2014 innovation runway includes testing new social networks and developing next-gen
Apps •
Fostering an “Innovation Hub / Council”
and a digital-first culture |
 FINANCIAL
OVERVIEW 43 |
 44
Ability to Transform Cost Base to Maintain Profitability
Strong Free Cash Flow Profile to Fund Transformation
Strong Balance Sheet
Focused on Balance Between Reinvestment in the Business
and Returning Capital to Shareholders
Key Financial Highlights
Increase Monetization of Adjacent Opportunities |
 45
Historical Financials
Revenue ($MM)
Adjusted OIBDA
1
($MM)
Note:
2013A
includes
Affluent
Media
Group
for
the
portion
of
the
year
after
which
it
was
acquired
1
Adjusted
OIBDA
is
OIBDA
excluding
asset
impairments,
restructuring
and
severance
costs,
gains
or
losses
on
operating
assets,
and
external
costs
related
to
mergers,
acquisitions
or
dispositions;
See
Appendix for Reconciliation of Operating Income to Adjusted OIBDA
2
Adj. OIBDA margin is defined as Adjusted OIBDA divided by revenue
2
$1,923
$1,819
$1,807
$754
$748
$721
$498
$447
$389
$502
$422
$437
$3,677
$3,436
$3,354
2011A
2012A
2013A
Advertising
Subscription
Newsstand
Other
$740
$617
$587
20.1%
18.0%
17.5%
2011A
2012A
2013A
Adj. OIBDA margin |
 •
Streamline the edit process and eliminate duplication across brands
46
Ability to Transform the Cost Base
Our operating plan includes substantial cost efficiencies
Organizational restructure
Editorial
Process re-engineering and global sourcing
•
Dissolve complex operating structure into a single portfolio of U.S. brands
•
Drive efficiencies and take out layers of overhead
•
Realign compensation and incentive policies
•
Synergy from Affluent Media Group acquisition
•
Review of functional areas (finance, consumer marketing, operations, research and IT)
Procurement
•
$500MM of annual addressable spending
•
Renegotiation of multi-year print contracts in the U.S. and U.K.
Real Estate
•
Time
&
Life
Building
lease
ends
2017;
expect
annual
real
estate-related
savings
of
~$50MM
1
•
Anticipate incurring ~$120MM in costs primarily related to tenant improvements in order to
achieve such annual savings
•
Vacate existing floors in current space
1
Exploring potential scenario to accelerate real estate move and potential savings into
2016 |
 Strong Free
Cash Flow Profile 47
Capital Expenditures ($MM)
Free cash flow
1
($MM)
Note:
2013A
includes
Affluent
Media
Group
for
the
portion
of
the
year
after
which
it
was
acquired
1
Free Cash Flow is defined as cash provided by operations less capital expenditures; See
Appendix for Reconciliation of Net Income to Free Cash Flow 2
Adjusted
OIBDA
is
OIBDA
excluding
asset
impairments,
restructuring
and
severance
costs,
gains
or
losses
on
operating
assets
and
external
costs
related
to
mergers,
acquisitions
or
dispositions;
See
Appendix for Reconciliation of Operating Income to Adjusted OIBDA
•
Minimal ongoing operating capital expenditure requirement excluding
approximately $120MM of tenant improvements related to new lease
•
Substantial capacity to reinvest in the business and adjacent opportunities
•
Significant cash conversion to fund return of capital to shareholders
Low capital requirements provide
flexibility for deleveraging,
reinvestment in the business and
capital distribution to shareholders
2
$48
$34
$34
2011A
2012A
2013A
$426
$427
$384
57.6%
69.1%
65.4%
2011A
2012A
2013A
Cash Conversion (% of Adj. OIBDA) |
 48
•
In connection with the spin-off, Time Inc. has raised $1.4 billion of funded debt, in the
form of a $700MM 1st lien Term Loan B (subject to closing conditions) and $700MM of
Senior Unsecured Notes Net proceeds from the financing will be used to purchase U.K.
publishing operations from Time Warner and pay a special dividend to Time Warner
The Company also has access to an undrawn $500MM 1st lien Revolving Credit Facility (subject
to closing conditions)
•
Moody’s and S&P credit ratings
Corporate ratings of Ba3 and BB, respectively, both with stable outlook
Senior Secured Credit Facilities ratings of Ba1 and BBB-, respectively
Senior Unsecured Notes ratings of B1 and BB, respectively
Capital Structure
($MM)
Amount
x 2013 Adj. OIBDA
Cash (estimate)
$150
$500MM Revolving Credit Facility
-
Term Loan B
700
Secured Debt
$700
1.2x
Senior Notes
700
Total Debt
$1,400
2.4x
Net Debt
$1,250
2.1x
2013
Adj.
OIBDA¹
$587
Pro Forma Capitalization as of December 31, 2013 (unaudited)
Note:
2013A
includes
Affluent
Media
Group
for
the
portion
of
the
year
after
which
it
was
acquired;
Time
Warner
will
retain
liability
of
the
This
Old
House
Note
maturing
in
2017
1
Adjusted
OIBDA
is
OIBDA
excluding
asset
impairments,
restructuring
and
severance
costs,
gains
or
losses
on
operating
assets,
and
external
costs
related
to
mergers,
acquisitions
or
dispositions;
See
Appendix for Reconciliation of Operating Income to Adjusted OIBDA
|
 49
•
Maintaining strategic flexibility and adequate access to debt capital markets
2.4x gross leverage and 2.1x net leverage at spin with no significant
maturities before 2019
Target 2.0x -
2.5x long-term leverage
Maintain ample liquidity from strong Free Cash Flow and committed
revolving credit facility
•
Allocating capital to create value
Investment in the business
Strategic acquisitions
Direct returns to shareholders
Repayment of debt
Balanced Approach to Capital Allocation
Conservative balance sheet
Balanced capital policy |
 50
Time Inc. Outlook for 2014
($MM)
2013 ACTUAL
2013 ACTUAL
2014 RANGE
2014 RANGE
Revenue –
as reported
$3,354
Flat to +2%
Revenue ex. Time Inc. Affluent Media Group
$3,282
(3%) to (5%)
Adjusted
OIBDA
1
margin
(%)
17.5%
16.25% to 17.0%
Public company costs
$8
$27 to $32
Share-based compensation expense
$18
$35 to $40
Interest expense, net
$3
~$45
Depreciation
and
amortization
2
$127
$160 to $165
Capital
expenditures
2
$34
$35 to $40
1
We
define
Adjusted
OIBDA
as
OIBDA
adjusted
for
asset
impairments,
restructuring
and
severance
costs,
gains
or
losses
on
operating
assets,
and
external
costs
related
to
mergers,
acquisitions
or
dispositions
2
Does
not
reflect
any
impacts
from
(a)
the
anticipated
relocation
of
our
headquarters
building,
(b)
possible
future
sales
of
operating
assets,
(c)
possible
future
acquisitions
and
dispositions
(including
costs
related
thereto)
or
(d)
restructuring
and
severance
actions
that
may
be
initiated
in
the
future |
 51
•
Industry leading collection of media brands
•
Large, highly engaged audience
•
Brands represent consumer passions that can be monetized across platforms
•
Subscriber relationships provide extensive consumer insight and data
•
Experienced management team with proven track record to drive
transformation
•
Unleashing entrepreneurship and driving P&L accountability
•
Focus on brand extension and content scale opportunities
•
Strong Free Cash Flow profile to fund our transformation
•
Balanced approach to capital allocation
Summary Highlights |
 APPENDIX
52 |
 53
Reconciliation of Operating Income to OIBDA and Adjusted OIBDA
Note:
2013A
includes
Affluent
Media
Group
(AMG)
for
the
post-acquisition
period;
1
Asset
impairments
for
each
year
are
primarily
trade
name
impairments;
2
Restructuring
and
severance
costs
for
each
year
primarily
reflect
headcount
reductions
and
lease
exit
costs;
3
For
the
year
ended
December
31,
2012,
the
$36MM
pretax
loss
relates
to
the
sale
of
our
school
fundraising
business,
QSP.
For
the
year
ended
December
31,
2013,
the
$13MM
pretax
gain
relates
to
the
settlement
of
a
contractual
arrangement
with
AMG
that
pre-dated
the
acquisition;
4
For
the
year
ended
December
31,
2012,
the
$1MM
charge
relates
to
unconsummated
acquisitions.
For
the
year
ended
December
31,
2013,
the
$1MM
charge
relates
to
the
AMG
acquisition
($MM)
2011
2012
2013
Actual
Actual
Actual
Operating Income
$563
$420
$330
Depreciation
100
91
85
Amortization
42
36
42
OIBDA
$705
$547
$457
Asset impairments
1
17
6
79
Restructuring and severance
2
18
27
63
Gains/losses on operating assets
3
—
36
(13)
External costs related to mergers, acquisitions or dispositions
4
—
1
1
Adjusted OIBDA
$740
$617
$587 |
 54
Reconciliation
of
Operating
Income
to
Adjusted
OIBDA
-
2014
Outlook
Note: When providing a projection for a non-GAAP measure, a reconciliation to the most
directly comparable GAAP measure is required to the extent available without unreasonable efforts. In such reconciliations, we may indicate an
amount or range for GAAP measures that are components of and that arithmetically add up to the
non-GAAP financial measure. Our indications of the GAAP components must not be interpreted as explicit or implicit projections of those
components. We have made numerous assumptions in preparing our projections, including those
described on the 2014 Outlook slide. These assumptions, including the amounts of the
various components that comprise a financial measure, may or may not prove to be
correct. We will consider our projection of a non-GAAP financial measure to have been achieved if the statement we
make about that non-GAAP measure is satisfied, even if the GAAP components
differ materially from those indicated in an earlier reconciliation
($MM)
2013 Actual
Low
High
Operating Income
$330
$204
$231
Depreciation
85
85
89
Amortization
42
76
76
OIBDA
$457
$365
$396
Asset impairments, restructuring and severance,
gains/losses on operating assets, and external costs related
to mergers, acquisitions and dispositions
130
180
186
Adjusted OIBDA
$587
$545
$582
2014 Guidance |
 55
Free Cash Flow Reconciliation
1
Note: 2013A includes Affluent Media Group for the post-acquisition period
($MM)
2011
2012
2013
Actual
Actual
Actual
Net income
$368
$263
$201
Depreciation and amortization
142
127
127
Asset impairments
17
6
79
Loss on disposal of QSP Business
—
36
—
Equity-based compensation
41
39
18
All other, net, including working capital charges
(94)
(10)
(7)
Cash provided by operations
1
$474
$461
$418
Capital expenditure
(48)
(34)
(34)
Free Cash Flow
$426
$427
$384
Includes foreign net income taxes paid of $7MM, $12MM and $13MM for the years ended December
31, 2011, 2012 and 2013 |