Cash flow at OWN turns positive, CEO Zaslav tells investors
Discovery Communications said net income rose slightly in the second quarter as its cable networks in the U.S and abroad continued to generate more revenue from advertising and distribution. Even so , Discovery reduced its guidance for the year, citing its recent purchase of the SBS TV and radio networks in Europe.
The Silver Spring, Md., owner of the Discovery Network, TLC and Investigation Discovery cable networks, said net income in the period rose about $7 million, to $300 million, or 82 cents a diluted share, compared with $293 million, or 76 cents a share.
Revenue in the period rose $341 million, or 30%, to about $1.47 billion from $1.13 billion, due to 62% revenue growth at its international TV networks and 13% revenue growth at its U.S. networks.
During a conference call with investors, Discovery CEO David Zaslav cited ratings performance at its Animal Planet cabler and said cash flow at OWN, the joint-venture it holds with Opran Winfrey’s Harpo Productions, had turned cash-flow positive and was helping to pay down the investment DIscovery had made in the network.
At Discovery’’s U.S. networks, second-quarter revenue rose to $793 million from $700 million, Advertising revenue increased 10% mainly due to higher delivery and increased pricing, the company said. Distribution revenue increased 17%, largely due to $37 million of additional revenue from licensing agreements versus last year’s second quarter. The current quarter also included higher rates and subscriber growth primarily from networks carried on the digital tier. Excluding licensing revenues, distribution revenues grew 5% and total revenues grew 8% compared with the second quarter a year ago.
At the company’s international networks, second-quarter revenue for the second quarter increased 61% to $652 million from $405 million. Advertising revenue rose 119% while distribution revenue rose 29%. The company said it had secured higher pricing and increased viewership in Latin America as well as higher pricing in Western Europe., while seeing better distribution at its Discovery Japan operations.
Discovery reduced guidance for the year. Discovery said it expected revenue of about $5.5 billion to $5.6 billion, compared with previous guidance of between $$5.625 billion, down from a previous expectation of about $5.58 billion and $5.7 billion. The company said it expected earnings for the year to come in between $1.1 billion and $1.15 billion, compared with previous guidance of $1.2 billion to $1.3 billion
The company’s results came in slightly below Wall Street expectations. An analyst consensus had expected net income of 90 cents a share, eight cents greater than the company’s results, and revenue of $1.48 billion, compared with the $1,47 billion it reported.