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Outdoor Channel Holdings Inc. (OUTD)

Q3 2010 Earnings Call

November 3, 2010 5:00 pm ET

Executives

Brad Edwards - IR

Roger Werner - President and CEO

Tom Allen - EVP and CFO

Analysts

Michael Kupinski - Noble Financial

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2010 Outdoor Channel Holdings Incorporated earnings conference call. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Mr. Brad Edwards.

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 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 the 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 costs is provided in the table attached to the company's 2010 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 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 to date imply its endorsement of 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 third 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 that said, I'd now turn the call over to Roger Werner.

Roger Werner

Thanks, Brad, and welcome everybody to the call. During this quarter, Outdoor Channel's total revenues increased almost 8% due to strong advertising growth year-over-year. We also generated significant improvement in the Channel's bottomline results.

On a consolidated basis, our revenues were impacted by the planned shrinkage at Winnercomm as we work through the year-over-year impact of our efforts to downsize and refocus that segment on a higher margin business. And we're seeing good progress there which I'll update you on in a couple of minutes.

In the Channel, total ad revenues increased a nice 14% in the third quarter with increases coming on all categories except the long-form infomercial category, which as we've told you in the past is pretty flat.

We also experienced a solid triple-digit increase in our online ad revenues, and the efforts we're making to further strengthen and build out outdoorchannel.com are bearing fruit as more and more advertisers recognize the quality and targeted nature of this site.

We believe we're in a strong position to drive future ad sales growth. Year-over-year, we've expanded our distribution as well as invested in our traditional and online content offerings. We're now 100% HD and we broadcast more unique and compelling original outdoor programming than any competing network. We possess an established category leadership position across all our distribution platforms, which presents a very efficient appealing marketing channel for our advertising partners.

Turning to distribution for a moment, our reported subscriber revenue was down 5% in the quarter due to the impact of changes in our reserves for potential MFN liabilities with some of our distributors. These types of accruals have been a part of our relationship with the distributors and have occurred in the past. As we've said in previous calls, they tend to fluctuate. And these are items that we can't unilaterally control, but we always tend to take the conservative view towards accounting for these.

So we're working to resolve that issue. And if and when we're successful, we'll be able to reverse these accruals.

On our estimated Nielsen household universe for November is now 35 million homes. We worked hard to expand the network's distribution base over the past year, and our affiliate has secured a number of key system launches and tier migrations. And we're in ongoing discussions with a number of distribution partners with the goal of further growing that base.

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