Scripps Networks , the owner of popular TV channels such as HGTV and Food Network, just posted its third quarter earnings results. The network giant's sales spiked higher due to a big international acquisition, but the results also included positive data from the core U.S. television business.
The raw numbers
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Source: Scripps' financial filings
What happened with Scripps this quarter?Overall, revenue soared 20% higher thanks to a huge new contribution from the international networks, along with faster growth in the U.S. market. Here are the highlights of the quarter:
- U.S. networks revenue rose 6% to $661 million as advertising sales jumped by 5% and affiliate fees climbed 6%.
- International network revenue spiked 400% to $119 million, due to Scripps' purchase of Polish media giant TVN.
- HGTV and Food Network, Scripps' two biggest channels, logged 6% and 1% sales growth, respectively. That marked a minor slowdown for HGTV and a slight rebound for the struggling Food Network.
- Mid-tier channels like DIY Network and Cooking Channel both posted double-digit growth, while the Great American Country channel slipped slightly.
- Total profit slipped by 5% as operating and interest expenses both grew at a faster pace than revenue.
What management had to sayManagement highlighted major improvements in their small but fast-growing international network portfolio. "This has been a transformative quarter for Scripps Networks Interactive. Our international business has been bolstered by the successful acquisition of Poland's leading multiplatform media company," CEO Kenneth Lowe said in a press release.
In fact, the international segment now accounts for 15% of the business, up from less than 4% a year ago. And that division posted a quarterly profit for the first time, contributing $11 million to Scripps' $312 million of segment operating earnings.
HGTV posted a 6% revenue improvement this quarter. Image source: Scripps
But the U.S. business still accounts for almost all of the company's sales and profits. And that's why the recent flat advertising growth had been such a worrying trend for investors (the stock had fallen by 20% in 2015 heading into this earnings release).
That ad market weakness changed dramatically in this quarter, management pointed out. "Our networks continue to thrive in the United States, and their success is reflected in strong growth in both advertising and affiliate revenues."
Scripps' 6% advertising jump in the U.S. came from "a strengthening in the advertising market," executives explained. And it was the exact same pace that fellow TV network giant Discovery Communicationsposted last week. Yet Discovery managed a 12% uptick in its third quarter distribution fees, compared to Scripps' 6% affiliate fee bounce. Taking a broader view, both Discovery and Scripps Networks' ad businesses are now up by the same 2% through the first three quarters of 2015.
Looking forwardScripps' management team boosted its full-year outlook to reflect a faster sales growth pace. Revenue is now targeted to improve by 13%, compared to a prior forecast of 12%.
Yet the Polish network purchase will crimp profits for some time as interest expenses tied to its funding should now reach $110 million, up from a max of $85 million that executives projected back in August. That, combined with jumping operating expenses, could mean slow profit growth over the next few quarters as Scripps works to integrate its TVN acquisition while keeping the momentum going in its U.S. networks.
The article International Business Powers Sales Spike for Scripps Networks Interactive Inc. originally appeared on Fool.com.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Discovery Communications. The Motley Fool recommends Scripps Networks Interactive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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