Scripps Networks Interactive Q3 2010 Earnings Call Transcript

Scripps Networks Interactive (SNI)

Q3 2010 Earnings Call

November 04, 2010 10:00 am ET

Executives

Joseph NeCastro - Chief Administrative Officer and Chief Financial Officer

John Lansing - President of Scripps Networks LLc

Lori Hickok - Executive Vice President of Finance

Kenneth Lowe - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Mark Kroeger - Senior Vice President of Corporate Communications and Investor Relati ons

Analysts

Meghan Durkin

Eric Handler - MKM Partners LLC

John Janedis -

Benjamin Swinburne - Morgan Stanley

Anthony DiClemente - Barclays Capital

Michael Nathanson - Sanford Bernstein

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Alexia Quadrani - JP Morgan Chase & Co

Chris Marlowe

David Bank - RBC Capital Markets Corporation

Marla Backer - Soleil

Matthew Harrigan - Wunderlich Securities Inc.

Barry Lucas - Gabelli & Company, Inc.

Brian Karimzad - Goldman Sachs Group Inc.

Presentation

Operator

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Previous Statements by SNI
» Scripps Networks Interactive Q2 2010 Earnings Call Transcript
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Ladies and gentlemen, thank you for standing by. Welcome to the Scripps Networks Interactive Third Quarter Earnings Report. [Operator Instructions] I'd now like to turn the conference over to the Senior Vice President of Investor Relations, Mark Kroeger. Please go ahead, sir.

Mark Kroeger

Thank you, Lea, and good morning, all, and thanks for joining us. We'll start the conference call today with comments from Ken Lowe, our Chairman, President and CEO; and Joe NeCastro, Chief Financial Officer. Our prepared remarks should take about 20 minutes, then we'll open it up for questions. Also on the call are John Lansing, President of the Scripps Networks Operating Division; and Lori Hickok, Executive Vice President of Finance.

Let me remind you, if you prefer to listen in via the Internet, go to our website, click on Investor Relations and find the microphone icon on the landing page. Additionally, under the Presentation tab, you'll find our third quarter earnings presentation materials that we will be referring to during the prepared remarks portion of our call. An audio archive will be available on the site later today, and we'll leave it there for weeks, so you can access it at your convenience.

Let me remind you that our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted. And some of the factors that may cause results to differ are set forth in our publicly filed documents, including our Form 10-K.

And with that, I'll turn it over to Ken.

Kenneth Lowe

All right. Thank you, Mark, and good morning, everyone. Thank you for joining us. As always, we appreciate your interest in Scripps Networks Interactive.

The third quarter was outstanding, outstanding for the company and shareholders by just about every measure. Suffice it to say, the company was truly hitting on all cylinders during the three-month period. Let me give you some of the headlines. Industry-leading ad revenue growth; strong double-digit growth in affiliate fees tied, of course, to the new contracts we negotiated last year; leading competitive edge performance by our flagship networks, HGTV and Food Network; outstanding results at our two newest networks, Travel and Cooking, which are rapidly building larger audiences and expanding their base of advertisers; and importantly, a solid contribution from our online comparison shopping businesses, which reached an inflection point during the quarter and are once again beating prior-year numbers. So all in all, an excellent quarter for the company and the shareholders, and I'm happy to report that strong performance has continued right into the current quarter.

On the fundamental level, the basis of our strong growth is our focus in ownership of the Home, Food and Travel Lifestyle categories, and our expertise in engaging audiences that our advertisers absolutely desire. These are truly powerful, powerful brands. In fact, Nielsen recently ranked HGTV, Food Network, Travel Channel, Cooking Channel and DIY Network among the top 10 for aggregating upscale viewers. Now in my mind, that goes a long way in explaining our success. At Travel Channel, the audience continues to grow by leaps and bounds and our ad sales team has truly hit the ground running, significantly expanding our growing list of national advertisers at Travel.

Inventory sold as direct response advertising, which started out at about 30% of total sales when we acquired the network, is now down in the mid to high teens. Now there was a lot of low-hanging fruit to be had, and we picked it. We think Travel Channel is right on track. We're leveraging the popularity of our key talent, including Adam Richman, Anthony Bourdain and Andrew Zimmern or the three As we've come to call them, to new heights. And I can tell you that the outstanding management team at Travel is working on some very promising concepts that are currently on the pipeline we've got a lot of hope for. You'll start to see their handy work in the months to come, so stay tuned to the Travel Channel.

Turning over to the Cooking Channel, our decision to re-brand Fine Living was clearly the right thing to do. Viewership among adults 25 to 54 at Cooking has surged forward, up as much as 100% at some day parts compared with Fine Living a year ago. As we said last quarter, advertisers responded positively to the new network as well, a fact that's evident in Cooking's third quarter performance. Cooking gives us added exposure to the tremendously popular food genre in television, which as you know, we defined really by transforming the Food Network. Now we've taken great care to differentiate Cooking from Food, using the platform as an opportunity to really take a deeper dive into the genre and super serve those avid foodies out there. Cooking also gives us more flexibility in serving advertisers who want to capitalize on the popularity of food programming on TV. So far, I'd to have say that Cooking Channel has been a big win for us and our shareholders, and I hope you've had a chance to check it out.

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