Discovery Communications, Inc. (DISCA)

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Discovery Communications (DISCA)

Q1 2013 Earnings Call

May 07, 2013 8:30 am ET


Craig Felenstein

David M. Zaslav - Chief Executive Officer, President, Director and Member of Executive Committee

Andrew C. Warren - Chief Financial Officer and Senior Executive Vice President


David Bank - RBC Capital Markets, LLC, Research Division

Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Richard Greenfield - BTIG, LLC, Research Division

John Janedis - UBS Investment Bank, Research Division

Anthony J. DiClemente - Barclays Capital, Research Division

Michael C. Morris - Davenport & Company, LLC, Research Division

Tuna N. Amobi - S&P Equity Research



Good day, ladies and gentlemen, and welcome to the Q1 2013 Discovery Communications, Inc. Earnings Conference Call. My name is Allison, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd now like to turn the call over to Mr. Craig Felenstein, Executive Vice President of Investor Relations. Please proceed, sir.

Craig Felenstein

Good morning, everyone. Thank you for joining us for Discovery Communications 2013 First Quarter Earnings Call.

Joining me today is David Zaslav, our President and Chief Executive Officer; and Andy Warren, our Chief Financial Officer. You should have received our earnings release. But if not, feel free to access it on our website at www.discoverycommunications.com.

On today's call, we will begin with some opening comments from David and Andy, after which, we will open the call up for your questions. [Operator Instructions] Before we start, I would like to remind you that comments today regarding the company's future business plans, prospects and financial performance are forward-looking statements that we make pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on management's current knowledge and assumptions about future events, and they involve risks and uncertainties that could cause actual results to differ materially from our expectations.

In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our annual report for the year ended December 31, 2012 and our subsequent filings made with the U.S. Securities and Exchange Commission.

And with that, I would like to turn the call over to David.

David M. Zaslav

Thank you, Craig. Good morning, everyone, and thank you for joining us. Discovery is off to another great start in 2013, building on the sustained operating momentum we generated across our balanced portfolio throughout 2012.

Our unwavering belief that investing in high-quality content with real stakes, superior storytelling and compelling characters is paramount to long-term value creation continues to pay off. The larger audiences we are delivering around the world are translating into significant advertising gains, while at the same time, the appeal of our content is providing additional opportunities to capitalize on our diverse distribution platform and the further evolution of the global pay television market.

As we focus on capturing market share and maximizing the full organic growth potential inherent in our asset portfolio, we're also beginning to dig into the operations of our recent acquisitions, so we can create additional value and further strengthen our long-term sustainable growth profile.

With our strong market share growth and the recent acquisitions, we now reached more than 2 billion subscribers, up from 1.8 billion last year.

Before I turn the call over to Andy, so he can take you through our financial results, let me take a few minutes to discuss a few of the initiatives driving our strong organic growth, as well as some of the opportunities we expect to focus on as we integrate our newly acquired businesses.

I mentioned on our year-end call that we have delivered 4 consecutive years of viewership growth across our domestic portfolio, and that momentum has certainly continued into 2013 as we deliver the best first quarter in the company's history. Viewership across our U.S. Networks was up 3% this past quarter among key adult 25 to 54 demo, led by the growth at our flagship network, the Discovery Channel.

Discovery built upon its record fourth quarter with 10% growth in Q1, led by Gold Rush, Bering Sea Gold and Yukon Men, all of which contributed to Discovery's #1 ranking on Friday nights in the quarter, outpacing even the broadcast networks.

Several of our other networks also delivered meaningful growth these past quarter, including Animal Planet, which increased its audience another 6%, building upon the 17% growth it generated in 2012 and making it a top 20 network for men in the U.S.

In fact, Animal Planet has now delivered 16 consecutive months of growth. Among its key demo and with returning hits like River Monsters capturing more viewers than it did a year ago, the network is poised for continued success.

Two of our recently re-branded networks are also continuing to show real audience gains. Destination America is quickly becoming a lifestyle destination for viewers, with double-digit growth this past quarter, following its 35% growth in 2012. And Velocity, while in only 45 million homes, grew its viewership by over 50% year-on-year, delivering a highly coveted upscale audience to our advertisers.

Driving the potential of our valuable distribution real estate by investing in new brands and breaking new ground that ignites viewers' curiosity remains a priority, and we will continue to invest incrementally in these new networks if they demonstrate the ability to attract larger audiences and deliver real value to our advertisers.

Similarly, our domestic joint ventures are also continuing to develop their audiences. The Hub was up over 50% this past quarter among kids 2 to 11 for total day. Separately, OWN viewership was up 3% in its key women 25 to 54 demo despite the difficult comparisons to a year ago, which included the highest viewed program in the network's history, Oprah's interview with Whitney Houston's daughter.

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