Scripps Networks Interactive Posts Record Advertising Sales

Revenue

$893 million

$732 million

22%

Net income

$185 million

$194 million

(5%)

Earnings per share

$1.42

$1.49

(5%)

Source: Scripps' financial filings.

What happened this quarter?

Scripps' growth was powered by healthy gains in the U.S. advertising market and improving profitability in the international segment.

Key highlights of the quarter include:

• U.S. advertising revenue grew by 9%, representing a slowdown from the prior quarter's 14% spike. Still, it marked the first time that Scripps has generated $500 million in ad sales in a quarter. The result also beat rivals like Discovery (NASDAQ: DISCK) and Time Warner (NYSE: TWX), which posted 7% and 6% ad gains, respectively.
• Ratings rose across SNI's six biggest networks, with HGTV leading the way. Food Network and Travel Channel each grew at a 5% pace, while the DIY Network posted a slight decline despite attracting record ratings.
• Distribution fees declined slightly as part of a one-time pricing shift.
• The international business soared by nearly 600% thanks to the contribution from recently acquired Polish media assets. That segment swung to an adjusted profit of $37 million from $10 million in the prior-year period.
• Adjusted profit, which strips out restructuring costs and merger fees, rose 14%, to $419 million.

What management had to say

"Scripps Networks Interactivegenerated another quarter of strong operating performance," CEO Kenneth Lowe said in a press release. "I am particularly proud that we achieved our first ever$500 millionquarter in U.S. ad sales, and that the importance advertisers place on our networks has continued with a record breaking upfront," Lowe said, referring to demand for airtime during the coming TV season.

The international business can thank the acquisition of Poland's TVN network for its turnaround. "TVN has proven to be a transformative acquisition for the company, converting our International Networks segment into a growing and profitable endeavor," Lowe explained.

Finally, executives believe the company is adapting well even as subscribers continue to trickle away from pay-TV packages. "Digital engagement is at its highest level ever," Lowe said. "Our company remains well positioned to excel in the evolving media landscape."

Looking forward

Scripps isn't immune to risks from a long-term shift away from pay-TV packages. This quarter, for example, a shrinking subscriber base pinched results by pushing ad volume down.

Peer Time Warner recently responded to this same pressure by moving to place all of its networks on the Hulu streaming service

Overall, the results bolster management's case that the U.S. business will remain highly profitable for some time even as cable TV subscribers move away from pricey packages. To that end, SNI affirmed its full-year profit outlook, which it raised in May

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