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Outdoor Channel Holdings, Inc. (OUTD)

Q3 2008 Earnings Call Transcript

October 30, 2008, 5:00 pm ET

Executives

Brad Edwards – IR, Brainerd Communicators, Inc.

Roger Werner – President and CEO

Shad Burke – CFO and Chief Accounting Officer

Tom Hornish – COO, EVP of Corporate Development, General Counsel and Secretary

Analysts

Michael Kupinski – Noble Financial

Bryan Goldberg – JP Morgan

Zack McAdoo – Zanett Group

Andrew Cowen – Tricadia

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2008 Outdoor Channel Holdings, Inc. earnings conference call. My name is Amity, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of this conference.

(Operator instructions) I would now like to turn the presentation over to your host for today's call, Mr. Brad Edwards. Please proceed sir.

Brad Edwards

Thank you, operator, and good afternoon everyone. Before we begin, please recognize that certain statements on this conference call are not historical fact. They may be deemed, therefore, to be forward-looking statements under the Private Securities Litigation Reform Act of 1995.

In particular, statements about future results expected to be obtained from the company's current strategic initiatives are forward-looking statements. Many important factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements.

These risks and uncertainties are described in further detail in the company's filings with the SEC. You are directed to these filings for more detailed information. Outdoor Channel Holdings undertakes no obligation to publicly update or revise its forwardlooking statements.

Please also note that we will be discussing non-GAAP financial measures within the meaning of the SEC rules. The company believes that earnings before interest, taxes, depreciation, and amortization or EBITDA, adjusted for the effects of discontinued operations and share-based compensation expense provide a greater comparability regarding its ongoing operating performance. This information is not intended to be considered in isolation or as a substitute for net income or loss calculated in accordance with U.S. GAAP. A reconciliation of the company's U.S. GAAP information to EBITDA, adjusted for the effects of discontinued operations and share-based compensation expense is provided in the table attached to the company's 2008 third quarter earnings release, distributed earlier today and available on the Investor Relations section of the company's website at www.outdoorchannel.com.

Outdoor Channel is Nielsen-rated. Nielsen Media Research is the leading provider of television audience measurements and advertising information services worldwide. Please note that Nielsen estimates regarding Outdoor Channel's subscriber base are made by Nielsen Media Research and are theirs alone and does not represent opinions, forecasts or predictions of Outdoor Channel Holdings or its management. The company does not, by its reference today, imply its endorsement of or concurrence with such information.

Finally, we have allotted one hour for today's call. Outdoor Channel's President and CEO, Roger Werner, will begin with a brief overview of the ongoing progress being made with strategic initiatives being implemented at Outdoor Channel. Shad Burke, Outdoor Channel's Chief Financial Officer, will then provide an overview of the financial results for the 2008 third quarter. Then we will open up the call to for a Q&A session. As usual, Outdoor Channel's Chief Operating Officer, Tom Hornish, is also here with us and will participate in the Q&A. With that said, I will now turn the call over to Roger Werner. Roger?

Roger Werner

Thank you, Brad, and welcome everybody. Results for the third quarter end and for the nine-month period year-to-date are pretty good. Shad is going to detail in a minute or two during the quarter we continue to demonstrate improving fundamentals across the business, we continue to report strong top line growth, we are controlling our cost pretty well, and that net improved our profitability.

Top line performance was driven by continued growth in the advertising sales revenue line as we capitalized on fairly dramatic ratings improvements and our ability to generally deliver a highly targeted male audience to our advertiser. Despite the economic slowdown that we are all experiencing and a generally weak advertising market across most of the traditional media, we continue to enjoy double-digit growth in ad sales. And in fact, have now generated eight or nine consecutive quarters of double digit year-over-year ad sales growth.

At the core of the success, as I mentioned on the consorted efforts, we have taken over the last two years to strengthen the brand and improve our product offering, and that has led to significant increases in our viewing audience. And during the third quarter, I am happy to say that household delivery is up 39% year-over-year with primetime up 20%. So as we seek to monetize that growing audience, we have also got to continue to focus on controlling cost. And as I said, I think we have done a reasonably good job there. We remain committed to driving growing profitability for our shareholders by exploiting the inherent operating leverage in our model.

Looking ahead, we remain focused on executing a growth plan which will include securing and building on the relationships that we have with our distribution partners; expanding the advertiser base, a number of companies actually doing advertising with us; further strengthening our programming menu and hopefully growing audience share in a meaningful way; and finally, continuing to build and monetize our digital presence, principally, the online broadband companion channels that we have. We also remain committed to maintaining a strong balance sheet, in addition to controlling cost. Needless to say, we believe our healthy current financial position is a key asset in this kind of environment and while we continue to review potential acquisitions, the growth strategy, it is important to know is not dependent on making acquisitions. So this is an area where we are moving ahead but we are moving cautiously.

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