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Outdoor Channel Holdings, Inc. (OUTD)

Q1 2010 Earnings Call

May 5, 2010 5:30 p.m. ET

Executives

Brad Edwards - IR

Roger Werner - President and CEO

Doug Langston - CAO

Tom Hornish - COO

Analysts

Mike Kupinski - Noble Financial

James Marsh - Piper Jaffray

John Kornreich - Sandler

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2010 Outdoor Channel Holdings Incorporated earnings conference call. My name is Derrick, and I'll be your operator for today. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Brad Edwards. Please proceed.

Brad Edwards

Thank you, Derrick, 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 forward-looking 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 share-based compensation expense and acquisition and integration costs provides 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 share-based compensation expense, and acquisition and integration cost is provided in the table attached to the company's 2010 first 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 conference 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. Doug Langston, Outdoor Channel's Chief Accounting Officer, will then provide an overview of the financial results for the 2010 first quarter. Then we will open up the call to for a Q&A session. And as usual, Outdoor Channel's Chief Operating Officer, Tom Hornish, is also here with us and will participate in the Q&A. With the formalities aside, I'll now turn the call over to Roger Werner. Roger?

Roger Werner

Thank you, Brad, and welcome everyone to the first quarter earnings conference call. During this quarter we continue to witness an improving business environment across our markets. And we're pleased with the level of advertising demand growth that we're seeing in the current quarter.

First quarter results reflect the early stages of an ad market recovery, as well as our efforts to maximize our performance at the network. We continue to execute on our existing strategic plan, including building on our multiplatform leadership position in the Outdoor Segment, and strengthening relationships with viewers, advertisers and our distribution partners.

Our first quarter revenues increased 5% year-over-year. The results include a full quarter of contributions from our Winnercomm unit this year, compared to about two-and-a-half months in last year's quarter. So that accounts for a significant piece of that topline revenue growth.

At the legacy Outdoor Channel Business, total ad revenues declined 6.4% during the first quarter. Decrease reflects the reduced amount of inventory taken by a number of our time-buy producers, who were starting to feel the impact of the '08-'09 slowdown in the latter half of '09, and some lowered infomercial revenues as well. These were partially offset by higher spot sales and internet sales importantly.

I should note that in the prior year in '09's first quarter, our ad revenue actually increased year-over-year versus '08 in low single digits. So we outperformed the majority of our peers who posted declines in revenue at the height of the recession. In addition, as we stated on past calls, our business is impacted by seasonality with the bulk of our revenue occurring during the second half of the year.

So overall, we're reasonably pleased with first quarter's performance given that it's still early in the recovery and this is traditionally a lighter quarter for us in terms of ad revenue. In the current quarter, second quarter, our ad revenues are pacing up well in double digits as of May 1 and given our performance to date, importantly we remain optimistic that we can see meaningful topline growth for the full year, in ad sales.

So all in all we believe we're moving in the right direction. No doubt, the last 12 months was a tough period for most of us in the media business particularly those who are heavily dependent on ad sales. But our ad sales team under the direction of Marc Kidd and Greg Herington are doing a great job, monetizing the audience growth subscriber growth that we generated and they continue to leverage a strong brand and our unique position as a category leader, in serving the highly targeted outdoor audience.

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