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Outdoor Channel Holdings, Inc. (OUTD)

Q2 2010 Earnings Call Transcript

August 5, 2010 5:00 pm ET

Executives

Brad Edwards – IR

Roger Werner – President and CEO

Tom Allen – EVP and CFO

Tom Hornish – EVP, COO, General Counsel and Secretary

Analysts

Michael Kupinski – Noble Financial

John Lewis – Osmium Partners

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Outdoor Channel Holdings Incorporated earnings conference call. My name is Tahisha and I will be your operator for today. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session.

(Operator Instructions) also, this call 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, 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 with 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 US GAAP. A reconciliation of the company's US GAAP information to EBITDA adjusted for the effects of share based compensation expense and acquisition and integration costs is provided in the table attached to the company's 2010 second 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 Neilson rated, Neilson Media Research is the leading provider of television measurements and advertising information services worldwide. Please note that Neilson estimates regarding Outdoor Channel subscriber base are made by Neilson 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 or concurrence with such information.

Finally, we've 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. Tom Allen, Outdoor Channel's Executive Vice President and Chief Financial Officer will then provide an overview of the financial results for the 2010 second quarter. Then we will open up the call 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'd now turn the call over to Roger Werner. Roger?

Roger Werner

Thank you, Brad. Welcome, everybody, to the second quarter earnings call. I particularly want to welcome our new CFO, Tom Allen, who's in his third week on the job and doing a fantastic (inaudible). So Tom, welcome to the team and we look forward to having you participate today.

Total revenues for the second quarter were down 12%, due primarily to our refocusing efforts at Winnercomm and the elimination of some of their lower margin businesses and to a lesser extent a decrease in our subscriber revenues due to changes in our potential MFN line. Results for the second quarter also reflect the ongoing recovery in the ad market; we're seeing improved results there in selected advertising categories.

At the Outdoor Channel legacy business, total ad revenues increased 2% during the second quarter. Enjoyed solid increases in our combined short form and online sales although these gains were somewhat offset by continued weakness in the long form of paid advertising category and lower time line revenues.

Overall, we're encouraged with the ad revenue performance during the second quarter, which remind you marks the end of our seasonally weaker half of the year. So while there's still some pockets of weakness, we believe the ad recovery is taking hold a little more each day and we continue to see improvement. We believe that our expanded distribution, our growing HD presence, the recognized brand and multiplatform leaderships position offer unique opportunity and value proposition for our advertising sales partners and we expect that that business will continue to get healthier. As we enter our seasonally stronger second half of the year, we remain optimistic that we will be able to achieve year over year advertising sales growth as well.

On the distribution front, reported subscriber revenue was adversely impacted as I said because of changes in our reserves for potential MFN liabilities, which is something we deal with every quarter and are inclined always to take the most conservative route for financial reporting on.

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