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Seizing the Targeted Media Opportunity
April, 2005
Forward Looking Statements
This presentation contains forward-looking statements as that term is used under the Private Securities Litigation Act of 1995. These forward-looking statements are based on the current assumptions, expectations and projections of the Company’s management about future events. Although the assumptions, expectations and projections reflected in these forward-looking statements represent management’s best judgment at the time of this presentation, the Company can give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company’s filings with the Securities and Exchange Commission, may cause results of the Company to differ materially from those anticipated in these forward-looking statements. Many of the factors that will determine the Company’s future results are beyond the ability of the Company to control or predict. These forward-looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company cautions you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to “Company” and “PRIMEDIA” as used throughout this presentation refer to PRIMEDIA Inc. and its subsidiaries.
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Targeted Media
A Significant Business Opportunity
“Mass advertising (and its dependent media) is in peril. Yet, the opportunity for advertisers and targeted media has never been brighter.”
—Bernstein Research, May, 2004
“In advertising, 2005 will be the year of the sharpshooter.”
—“Why Big Bucks Are Chasing Targeted Media”
BusinessWeek, January, 2005
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Seizing the Targeted Media Opportunity
Targeted Message + Engaged Audience = High ROI
Example: $35 Billion Fishing Market
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Niche Publications, |
| Focused |
| Television |
| Targeted |
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Consumers Seek Content With Highest Relevance
Alabama |
| Missouri |
Arkansas |
| New England |
California |
| New York |
Florida |
| North Carolina |
Georgia |
| Ohio |
Great Plains |
| Oklahoma |
Illinois | [GRAPHIC] | Pennsylvania |
Indiana |
| Rocky Mountain |
Iowa |
| South Carolina |
Kentucky |
| Tennessee |
Louisiana |
| Texas |
Michigan |
| Virginia |
Mid-Atlantic |
| Washington- |
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State/Region-Specific Game & Fish Outsells All Other |
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PRIMEDIA’s Business Segments
(2004, $ Millions) |
| Enthusiast |
| Consumer |
| Business |
| Education |
| Total |
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% Total Revenue |
| 55 | % | 23 | % | 18 | % | 5 | % |
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Revenue |
| $ | 694.2 |
| $ | 287.1 |
| $ | 224.9 |
| $ | 66.4 |
| $ | 1,271.3 |
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Revenue Growth |
| -0.3 | % | 3.8 | % | 1.6 | % | -16.6 | % | 0.2 | % | |||||||||
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Segment EBITDA |
| $ | 149.8 |
| $ | 81.5 |
| $ | 37.4 |
| $ | 4.9 |
| $ | 247.9 |
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Segment EBITDA Growth |
| 2.5 | % | -2.0 | % | 6.6 | % | -70.5 | % | -2.6 | % | |||||||||
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Segment EBITDA Margin |
| 21.6 | % | 28.4 | % | 16.6 | % | 7.4 | % | 19.5 | % | |||||||||
All revenue and segment EBITDA numbers in this presentation are for continuing businesses excluding About.com. Total includes Intersegment Eliminations and Corporate Overhead.
All non-GAAP terms reconciled to GAAP in the Company’s filings with the Securities and Exchange Commission.
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Enthusiast Media (55% of 2004 Revenue)
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PRIMEDIA is America’s Leading Targeted Enthusiast Media Company
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Multi-Media Offering Maximizes Connection
Between Advertisers, Enthusiasts and PRIMEDIA
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120+ |
| 115+ |
| 100+ |
| 10+ |
| 300+ |
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15+ Million |
| 10+ Million |
| 2+ Million |
| 89+ Million |
| 100+ |
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31+ Million Customer Database
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Improving Publication Quality
Redesign Program Catalyst for Growth
Newsstand | ||
Results From | ||
Five Issues | ||
Post-Redesign | [GRAPHIC] | [GRAPHIC] |
Ad Page Gains | +25% | +22% |
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Copies Sold | +17% | +28% |
6 Redesigns in 2004. 30 Planned for 2005.
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Expanding Online Extensions
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Extending Brands To New Products
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Deal Size Doubling
Annual Guarantees Tripling
2004 Licensing Revenue +22%
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PRIMEDIA’s Dominance in Male 18-34 Market Attracting Non-Endemic Advertisers
New or incremental advertisers... |
| that are targeting the 18-34 male audience. |
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| (Millions of 18-34 Male Readers) |
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| Source: Audience shown is the gross sum of 2004 Spring MRI measured readership for each company’s magazines and DJG estimates of unmeasured magazine readership based on industry norms. |
18-34 demographic considered more attractive than 34+ since 18-34’s are believed to have more disposable income, are more likely to alter spending habits, have less brand-loyalty, and are more likely to adopt new products.
PRIMEDIA’s 2004 National Advertising Revenue +15%
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Consumer Guides (23% of 2004 Revenue)
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Largest Publisher and Distributor of Consumer Guides
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Distribution is Key Competitive Differentiator
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• DistribuTech has more locations (49,000+) than competitors combined
• More community racks in retail locations (16,000+) than competitors combined
• Most leading U.S. retailers under contract
• Over 95% of contracts with retail chains are exclusive agreements
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Apartment Guide: 30 Years of Growth
#1 in 72 of 75 Markets. Most recognized name in industry.
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• Apartment Guide typically delivers 30% of a community’s leases (advertisers’ largest lease source).
• If a community receives 50 prospective tenants/month…
…and 10 were from Apartment Guide…
…12 leases were signed…
…and 4 were from Apartment Guide…
…if the community paid $900/month to advertise in Apartment Guide…
…the cost-per-lease is $225, significantly lower than almost all competitors.
If rent is $1K/month and tenant stays 18 months, $225 investment generates $18K for community.
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New Home Guide Growth
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• 2004 Launches:
Orlando, Houston;
4Q04 vs. 3Q04 Revenue +33%
• 19 Publications vs. 80 Apartment Guides
• Solid market fundamentals
• Leverages existing distribution
• Targeting 25 guides by end of 2005
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Auto Guide Growth
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• 2004/1Q05 Launches:
Charlotte, NC |
| 29 weeks to $1mm revenue run rate |
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‘Triad’, NC |
| 5 weeks to $1mm run rate |
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‘Triangle’, NC |
| Launched at $1mm run rate |
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Atlanta, GA |
| Acquired at +$3mm run rate |
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• Scalable nationally
• Enormous market
• Weekly revenue stream
• Leverages existing distribution
• Targeting 10 guides by end of 2005
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30 Years of Consumer Guides Success
• DistribuTech provides unmatched competitive advantages for existing guides and launches.
• High advertiser renewal rates driven by provable leads.
• Industry-leading web sites.
• Efficient, automated processes maximize margins.
• All three PRIMEDIA-owned products address large markets.
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Business Information (18% of 2004 Revenue)
Connecting buyers and sellers in 18 industries with 70+ magazines, 100+ Web sites, 25+ events, and 50+ subscription data products
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Revenue Turnaround
From |
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Gaining | ||||||
Electrical |
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| Electrical |
| Automotive |
Power |
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| Mining |
| Trucking |
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| Electronic |
| Information Products |
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| Printing & Packaging |
| Agriculture |
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| Communications |
| Exhibitions |
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| Financial Services |
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| Real Estate |
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Flat | ||||||
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| Meetings |
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Declining | ||||||
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Automotive |
| Information Products |
| Marketing |
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Marketing |
| Public Services |
| Power |
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Meetings |
| Apparel |
| Apparel |
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Real Estate |
| Agriculture |
| Entertainment |
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Mining |
| Electronic |
| Public Services |
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Exhibitions |
| Entertainment |
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Financial Services |
| Printing & Packaging |
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Trucking |
| Communications |
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Seizing the Business-to-Business Opportunity
Example: The DIRECT Franchise |
| U.S. B2B Direct Marketing |
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• DIRECT Magazine
• DIRECT Resource Package
• Subscriber Lists
Online
• DIRECT Newsline
• DIRECT Listline
• DIRECT Searchline
• DIRECTips
• Chief Marketer
• Directmag.com
• ListFinder
• DIRECT Webinars
• DIRECT E-Reports
• DIRECT Resource Package
• Subscriber Lists
Conference and Exhibition Series
• National Center for Database Marketing Conferences (NCDM)
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Revenue Growth From Lead Generation
Example: Launch for Recording Industry
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• Daily News
• Product Reviews
• Downloadable Spec Sheets
• Leads to Manufacturers
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Revenue Growth From Subscription Data Products
Example: EquipmentWatch
Before |
| Launched 2Q04 | |
Separate Sites/Databases |
| Integrated “Whole View” | |
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• | Custom Cost Evaluator |
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• | Rental Rate Blue Book |
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• | Market Valuation Data |
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• | Serial Number Guide |
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• | Auction Results |
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Subscription Pricing 17-25% Higher
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Education (5% of 2004 Revenue)
[LOGO]
• Improve advertising category management
• Leverage infrastructure
[LOGO]
• Provide digital delivery
• Enhance marketing capabilities
[LOGO]
• Maximizing strategic partnership with Mass General Hospital
• 2005 advance bookings exceed 2004 total revenue
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Progress Recap
• Enthusiast Media:
• Management reorganization and upgrade substantially complete.
• Improved publication quality increasing revenue. Majority of titles still need improving.
• 2004 online page views up 29%. Revenue up 38% off very low base. Subscriber acquisition, event promotion, and
e-commerce improving. Large online opportunity unrealized.
• 2004 licensing revenue up 22%, albeit off small base. Just scratching surface of brand-leveraging opportunities.
• National advertising up 15% in 2004. Beginning to benefit from PRIMEDIA’s dominance of male 18-34 demographic.
Lot’s of progress made...
....but still more work to do than has been done.
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• Consumer Guides:
• Apartment Guide continuing 30 years of growth as advertisers’ largest lead source and most recognized print and online brand in industry.
• DistribuTech providing greater distribution than all competitors combined. PRIMEDIA continues to grow distribution.
• Strong results from New Home Guide. Adding 6 guides in 2005.
• Auto Guide opportunity larger than Apartment Guide. PRIMEDIA’s proven business model applied to Auto Guide yielding good initial results. Adding 6 guides in 2005.
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• Business Information:
• Three quarters of revenue growth after three years of declines.
• 12 of 18 categories grew in 2004. 2 categories grew in 2003.
• Negative-contributors discontinued or turned into contributors.
• Products and services aligned to how businesses market to each other. Shift from print to online increases margins.
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• Education:
• New CEO at Channel One brings new approaches for growth.
• Testing additional use of Channel One infrastructure to add incremental revenue.
• Films Media Group modernized and reintroduced. Two quarters of revenue growth after 13 quarters of declines.
• Interactive Medical Network’s 2005 bookings ahead of entire 2004 revenue.
• Sale of Workplace Learning (discontinued operation) completed April 1, 2005.
Plan to grow segment revenue in 2005 after five years of declines.
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• Improving Financial Strength:
• Net debt and preferred stock reduced nearly $1 billion since September 30, 2001. Net after-tax About.com proceeds = $402 million.
• Turned FCF-positive in 2004. Following About.com sale, modifications to the capital structure will improve free cash flow by approximately $27 million on an annualized basis.
• No significant near-term debt maturities.
• 70% of debt and preferred is fixed-rate; blended cost 7.6%.
• $300+ million cash and unused bank facilities as of 12/31/04.
• $1.7 billion net operating and capital loss carryforwards as of 12/31/04.
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Summary
• Targeted media is a significant opportunity.
PRIMEDIA is best-positioned to seize this opportunity.
• 2003/2004: Lots of challenges. 2004/2005: Overhauls and improvements.
• Affirming 2005 guidance of low-to-mid single digit revenue growth and low single digit segment EBITDA growth versus 2004 ex-About.com.
• Progress being made but not there yet.
• Growth initiatives to drive mid- and long-term momentum:
Enthusiast Media (55% of 2004 Revenue) |
| Consumer Guides (23%) | ||||
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| Improving publication quality |
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| Apartment Guide pickup |
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| Expanding online extensions |
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| New Home Guide expansion |
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| Extending brands to new products |
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| Auto Guide launches |
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| Attracting non-endemic advertisers |
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Business Information (18%) |
| Education (5%) | ||||
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| Increasing depth of offerings |
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| Invigorate Channel One |
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| Building marketing partnerships |
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| Leverage infrastructure for growth |
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| Delivering leads to manufacturers |
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| Continue Films and IMN strategy |
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| Expanding subscription data products |
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