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Scripps Networks notches 7.6% Q4'17 revenue advance, behind ad, affiliate gains

Scripps Networks Interactive Inc., in what is likely its last reporting period before its acquisition by Discovery Communications Inc., posted almost an 8% year-over-year increase in operating revenues, with gains in both advertising and distribution during the fourth quarter of 2017.

The programmer, which did not hold an earnings call or provide guidance for 2018 owing to its pending $11.76 billion purchase by Discovery that is expected to close by the end of the first quarter, reported consolidated operating revenues of $956.1 million, a 7.6% increase from the $888.7 million in the fourth quarter of 2016.

Advertising revenues grew 5.7% to $678.1 million, while distribution revenues improved 10.5% to $244.3 million.

Domestically, operating revenue increased 3.8% to $758.7 million during the three months ended Dec. 31, 2017. Advertising revenue edged up 1.3% to $529.9 million, reflecting continued strong pricing, countered to some degree by the lower delivery of impressions.

Distribution revenue pushed ahead 10.5% to $213.6 million, emanating from higher annual rates that included an adjustment related to an affiliate agreement negotiated during the quarter that yielded 400 basis points of growth. Scripps also benefited from revenues generated by its networks' inclusion on over-the-top and nonlinear platforms, offset to some degree by subscriber declines.

Scripps' International Networks registered a 23.2% increase in operating revenues to $203.7 million, buoyed by positive foreign currency effects. Operating revenues at Poland’s TVN increased 11.7% in local currency compared with the prior year period.

Fourth-quarter net income attributable to Scripps increased 26.5% to $65.9 million, or 50 cents per share, from $52.1 million, or 40 cents per share, in the year-earlier quarter. Results reflected the increase in operating revenues, higher foreign currency transaction gains, lower interest expense and a decline in goodwill and other intangible asset write-downs. Conversely, results were partially offset by increased investments in programming, marketing and data, merger-related expenses, as well as a higher effective tax rate driven by the impact of new tax laws in the U.S. and Poland.

The S&P Capital IQ consensus EPS estimate for the just-ended quarter was $1.18 on a GAAP and $1.19 on a normalized basis.

For full year 2017, Scripps notched a 4.7% increase in consolidated operating revenues to $3.56 billion from $3.40 billion in 2016. Advertising revenues improved 3.7% to $2.50 billion, while distribution revenues grew 6.8% to $955.4 million.

Consolidated net income attributable to Scripps decreased 7.4% to $623.9 million, or $4.76 per share in 2017, versus $673.6 billion, or $5.18 per share, in 2016.

The bottom line reflected higher programming, marketing and data costs, merger-related expenses, and a higher effective tax rate tied to the enactment of new laws in the U.S. and Poland. These unfavorable variances were countered to some extent by increased operating revenues, higher foreign currency transaction gains, lower interest expense and a decline in goodwill and other intangible asset write-downs.

The S&P Capital IQ consensus EPS estimate for 2017 was $5.54 and $5.46 on a normalized and GAAP basis, respectively.

The company said that in 2017, HGTV (US) ranked as the top ad-supported cable network for upscale women 25 to 54 for an 11th consecutive year and finished second overall among women 25 to 54. Food Network (US) closed 2017 as the eighth-ranked service against the latter demo, while Travel Channel (US) improved its adult 25-to-54 prime-time ratings by 5%. TVN grew its audience share by 5% among those 16 to 49.

Scripps Lifestyle Studios, the company’s digital content division, reported a record year, generating more than 19 billion global video views on various digital platforms, nearly three times more than in 2016.

"Scripps Networks Interactive finished a pivotal 2017 year with a strong fourth quarter, executing on our strategic objectives and delivering financially with record revenue and growing segment profit. We reached new consumers through the thousands of compelling experiences created by Scripps Lifestyle Studios," Scripps Chairman, President and CEO Ken Lowe said in a statement. "We invested in our core business as well as our fast-growing digital offerings, allowing us to capitalize on the popularity of our powerful lifestyle brands across the globe. And, of course, we announced our merger with Discovery Communications, creating an unmatched opportunity to deliver our real-life content to a greater number of audiences."

Lowe continued, "We have great momentum as we head into 2018. Our incredible teams remain intently focused on doing what we do best: creating great lifestyle content that connects with audiences through ideas, information and inspiration. We are excited about the prospects for the combination with Discovery and are diligently working toward finalizing the transaction to bring these two great companies together."

Discovery is slated to announce its earnings Feb. 27.