Belo Q1 up on national spot, digital, retransmission


BeloTotal revenue for the quarter was $160.3 million–$4.4 million, or 2.8%, higher than Q1 2012. Spot revenue was up about 2% with a 7% increase in national and a 1% decrease in local spot revenue.  Spot revenue growth came primarily from strength in the automotive, retail and telecommunications categories, partially offset by lower spending in the healthcare, restaurants and entertainment categories.  Political revenue was $0.6 million, $1 million lower than Q1 2012.  Total spot revenue, including political, was up 1% in the quarter compared to Q1 2012.

Super Bowl revenue was $1.4 million higher in the quarter vs. the first quarter of 2012.

Other revenue–Internet advertising, retransmission revenue, and barter and trade advertising, was up 11% in the quarter, vs. 2012, including a 22% increase in Internet ad revenue and an 8% increase in retransmission revenue.

Said Dunia Shive, Belo CEO: “The company’s total revenue grew almost 3% in the first quarter of 2013 compared to the first quarter of 2012, with gains in core spot and total spot revenue.  Also, our ongoing investments in interactive products and services contributed to a 22% increase in Internet revenue. Combined station and corporate operating costs were 4.1% higher in the first quarter of 2013 compared to the first quarter of 2012 due primarily to higher share-based compensation expense associated with the company’s higher stock price and higher programming expense.”

Looking forward, Shive said, “Based on recent pacings, we currently estimate core spot revenue to be up 2 to 2.5% in the second quarter of 2013 compared to the second quarter of 2012.  As we cycle against $9.5 million of political revenue in the second quarter of last year, we currently estimate total revenue to be down 1.5 to 2% in the second quarter of 2013, with total revenue excluding political estimated to be up 3 to 3.5%.  Combined station and corporate operating costs are currently estimated to be up around 4% in the second quarter of 2013 when compared to the second quarter of 2012.”

Belo O&O’s 20 TV stations (nine in the top 25 markets) and their associated websites.  Belo stations, which include affiliations with ABC, CBS, NBC, FOX, and the CW, reach more than 14% of U.S. television households in 15 markets.

Marci Ryvicker, Senior Analyst at Wells Fargo Securities, noted:

“The divergence between national spot (+7%) and local spot (-1%) was primarily driven by four factors: i) a shift of some accounts from local to national, ii) a boost in national spot due to the Super Bowl, iii) weakness in healthcare (which skewed local), and iv) strength in telco (which helped national spot). Looking at the individual categories, 6 out of the top 10 were up–auto, retail, telco, financial services, grocery, and home improvement–while healthcare, entertainment, and restaurants were down. Furthermore, it appears that Q4 softness in the Northwest market carried into Q1, while Texas maintained its strong momentum.

Q2 core has accelerated from Q1. April was ”pretty strong,” and management sounded optimistic about May and June. Both national and local are pacing in positive territory for Q2.

Retrans expected to accelerate in H2 2013. Management reiterated it has 6 retrans deals up for renewal between July 2013 and February 2014. These deals are expected to cover 40% of BLC’s footprint, with half of this to be done by October. Overall, retrans revenue growth should accelerate in H2 2013 (from the +8% seen in Q1), and 2014 will likely be a strong year as all 6 deals should drive retrans growth.

BLC is still actively looking for M&A opportunities. Despite all of the M&A activity in the space, management doesn’t feel like they ”lost their chance” to participate. Management is actively pursuing M&A, noting that it is most interested in medium-to-large-sized markets, but is not completely against the idea of seeking assets in smaller markets. The priority for FCF remains with M&A and dividends, followed by buybacks.

Color on expenses: There were several factors that bumped up expenses in Q1 – i) reverse comp (as we expected and modeled), ii) costs related to higher sales in interactive (which was +22% in the quarter), and iii) higher share-based compensation related to the increase in the stock price during the quarter.”