Scripps Networks Interactive (SNI) Kenneth Wayne Lowe on Q4 2015 Results - Earnings Call Transcript

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Scripps Networks Interactive, Inc. (NYSE:SNI)

Q4 2015 Earnings Call

February 23, 2016 10:00 am ET

Executives

Dylan Jones - Chief Communications Officer & Executive VP

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Burton Jablin - Chief Operating Officer

Lori A. Hickok - Chief Financial Officer

Jim Samples - President, International

Analysts

Doug Mitchelson - UBS Securities LLC

Michael B. Nathanson - MoffettNathanson LLC

Vasily Karasyov - CLSA Americas LLC

David Carl Joyce - Evercore ISI

Todd Juenger - Sanford C. Bernstein & Co. LLC

Amy Yong - Macquarie Capital (NYSE:USA), Inc.

Alexia S. Quadrani - JPMorgan Securities LLC

Michael Morris - Guggenheim Securities LLC

Ryan Fiftal - Morgan Stanley & Co. LLC

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Laura Martin - Needham & Co. LLC

Eric O. Handler - MKM Partners LLC

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Scripps Networks Interactive Fourth Quarter Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, this conference is being recorded.

I would turn the conference over to Dylan Jones, Chief Communications Officer. Please go ahead.

Dylan Jones - Chief Communications Officer & Executive VP

Thanks, Paul. Good morning, everyone. On the call with us this morning is Ken Lowe, our Chairman, President and CEO; Burton Jablin, Chief Operating Officer; Lori Hickok, Chief Financial Officer; and Jim Samples, President of International. We'll start the conference call with prepared remarks that should take about 20 minutes. Then we'll open it up for questions.

Let me remind you, if you prefer to listen in via the Internet, go to our website, click on the Investor button and find microphone icon on the landing page. Additionally, under the microphone icon, you'll find the fourth quarter earnings presentation materials we'll be referencing during the prepared remarks portion of our call. An audio archive will be available on the site later today, and we'll leave it there for two weeks so you can access it at your convenience.

During the Q&A this morning, please limit yourselves to one question and one follow-up so that we can accommodate as many people as time allows.

Let me remind you that our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted. Some of the factors that make cause results to differ are set forth in our publicly filed documents, including our Form 10-K.

With that, I'll turn over to Ken.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

All right. Thank you, Dylan, and good morning, everyone. We're happy that you're able to be with us today.

What a year. 2015 was a milestone year for Scripps Networks Interactive. Revenues were up 13%, hitting $3 billion for the first time. Advertising revenues were up 14%, exceeding $2 billion for the first time. Adjusted segment profits up 13% to $1.3 billion, adjusted earnings per share up 25% to $4.94, and we completed the largest acquisition in the company's history, successfully transforming our international business through the acquisition of TVN. So quite a year indeed for the company and I just like to say thanks to all the dedicated employees that helped make this possible.

We have a pretty simple business philosophy. We fortify and protect our core brands. We extend our reach by creating new connections with consumers. And finally, we generate and extract value from each of those connections, whether it'd be on a television screen, a mobile device, or even the pages of a magazine. And we're doing that around the world.

With TVN, the leading multi-platform media company in Poland, our company firmly established itself in one of Europe's most vibrant economies and created a platform for future growth in this desirable region. Here in the United States, our television networks enjoyed another strong year. We once again outperformed our peer group as we continued to attract the upscale engaged audiences coveted by our advertisers.

As you'll hear from Burton shortly, our networks continue to be an essential element in the media plans of brands and agencies everywhere. We're meeting the challenges presented by changing media consumption habits. We've broadened our horizons and we made our value content available on a growing array of delivery platforms including television, tablets, and mobile to meet clear consumer demand. We're making smart strategic business moves that further position the company to take advantage of the evolving media landscape.

We consolidated all of our U.S. television content development under a new Chief Content & Brand Officer, Kathleen Finch, who's doing a fantastic job. It's a move that really makes it easier to tap the expertise and talent previously separated by brand. Truly made us a more cohesive and holistic organization.

At the same time, we're expanding beyond traditional distribution platforms and generating more on-demand and short-form content specific to the platform on which it's consumed. Our recent launch of the Scripps Lifestyle Studios reflects our progress in this area. We made positive strides in 2015 to let consumers access our content on their delivery platform of choice, and they responded by visiting our websites and mobile apps in ever-increasing numbers.

In 2015, we experienced strong revenue growth in advertising sales and content distribution. We united those under a single Chief Revenue Officer, Steve Gigliotti, who's tasked with maximizing all the company's monetization streams. We completed a companywide cost analysis and took necessary steps to bring costs in line with projected revenue. It's made us leaner and it's really enhanced our ability to move quickly when opportunities arise. Advertisers want to work with us and distributors consider our channels as the kind of must-carry brands their consumers demand. So in summary, 2015 was truly a transformational year for our company.

Over the last 20 years, we've established powerful brands that connect deeply with consumers across the world. We're growing revenues as we monetize audiences on all platforms. The solid consistent performance that our company exhibits quarter-after-quarter, year-after-year validates the efforts of our incredibly talented teams around the world as we build value for all of our shareholders. So I want to thank you again for your interest in Scripps Networks Interactive.

And now, let me turn it over to Burton who has details on our strong fourth quarter results. Burton?

Burton Jablin - Chief Operating Officer

Thanks, Ken, and good morning, everyone. The year 2015 ended strong and that strength has continued into the early part of 2016. Here are a just few highlights.

In 2015, both the HGTV and Cooking Channel recorded their best years ever. HGTV was one of only three top 10 cable networks to grow its ratings in 2015. It completed its ninth consecutive year as the number one network for upscale women and for the second year in a row was number one with women 25 to 54 on weekends. That's a time period that really serves as a second primetime sales opportunity for us. Food Network and Travel Channel experienced strong growth in the fourth quarter. And so far this year, all six of our networks are seeing ratings growth.

On HGTV some newer shows emerged as huge hits. Fixer Upper, a series about remodeling homes in Waco, Texas, has become one of the biggest shows in the network's history. It's just one example of how HGTV taps into the Heartland of America. New seasons of Flip or Flop, Hawaii Life and Property Brothers Home on the Ranch delivered high audiences, as did House Hunters, of course, our perennial franchise that we continue to expand to great effect.

At Food Network we've turned a corner on audience growth, especially among younger viewers. Millennial-appealing hits, like Cutthroat Kitchen, Camp Cutthroat and Worst Cook Celebrity drove 5% year-over-year growth in the valuable adults 25 to 34 age group. Family-friendly series like Halloween Baking Championship, Rachael Ray's Kids Cook-Off encouraged co-viewing by the whole family and increased younger viewers by double digits.

The 11th season of Food Network Star scored 15% higher ratings, becoming one of the summer's biggest success stories. And during fourth quarter, Food Network's overall viewership was up 5% over 2014. The network finished in the top 10 in women 25 to 54 and just outside the top 10 among adults.

Travel Channel also showed very positive movement, as some of the new shows we've been telling you about continued to gain traction. Overall, Travel Channel viewership was up an impressive 5% for the quarter and the network has maintained its positive performance into the New Year. Key contributors included Expedition Unknown, Bizarre Foods, and Booze Traveler. And we have a slate of new shows in the pipeline that we're confident will help continue the growth trend. Late last year we began to move some Travel Channel operations to our Knoxville headquarters, and we expect to gain additional creative synergies as that move plays out over the next few quarters.

Ratings at Cooking Channel continued to improve in the fourth quarter, maintaining healthy growth throughout the year. Cooking Channel finished 2015 with its sixth straight year of audience growth. For the fourth quarter, viewership soared 13% to record levels for adults and women ages 25 to 54. Moreover, the quarter was the youngest ever for primetime, thanks to strong growth in adults 25 to 54. Ratings growth resulted from successful original shows like Unique Eats and Sugar Showdown.

DIY Network had a strong 2015, the most-watched year ever for adults 18-plus and the second-highest year for adults 25 to 54, driven by shows like Rehab Addict and Barnwood Builders. And Great American Country experienced its most upscale year yet, as we continue its successful conversion to lifestyle programming.

Now, we talk a lot about television audiences, and linear television is thriving at Scripps Networks Interactive. We also benefit from the growing awareness of TV Everywhere. Usage of our watch apps increased nearly 300% in January versus a year earlier. Connected devices such as Roku, Apple TV and Amazon Fire TV already comprise more than one-third of our total TV Everywhere reach. We're working diligently to ensure that we attract the next generation of viewers and consumers. We've seen significant progress on our television networks and on over-the-top services, but we must also create content that is purposely designed for alternative formats.

At the end of 2015, we launched Scripps Lifestyle Studios. It's a dedicated editorial team that creates content specific to the platform on which it's consumed. It could be Facebook, Apple News, Snapchat or any of the many platforms that emerge every day, as well as our own digital properties, and it lets us take advantage of key audiences and advertising opportunities while also reaching digital natives.

An early example featured Chef Bobby Flay and his daughter, Sophie, starring in a series of cooking videos that aired on Snapchat. This approach to content generation gives us greater agility to take advantage of advertising opportunities. We're able to integrate advertisers into authentic storytelling. This helps clients reach high-value audiences on the digital platforms they love and translates that engagement into deeper connection and transactions.

I want to expand a little now on our international progress. TVN group closed 2015 with a strong 22% share of the adults 16 to 49 television audience in Poland and its spring season has opened with strong numbers. The program MasterChef Junior and the new drama series, Second Chance, scored the best season premier ratings since 2013 across all TV channels in Poland.

TVN continued to shine in its over-the-top strategy. More than 1.7 million people have registered with the TVN Player, making it one of the top five distribution platforms in the country. We continue to view TVN as a great asset for the engaged audiences its networks aggregate. We also see good opportunity to leverage TVN as a launch pad for expanding Scripps' presence in this important region.

Now, while TVN provided the year's big international headline, the company experienced substantial growth in other parts of the world as well. Food Network, our most widely distributed global brand, is now available in more than 150 countries. It's the top lifestyle channel in the UK and has seen substantial success in Southeast Asia and more recently in Latin America and Australia. Travel Channel, our second-most distributed brand, is viewed in more than 130 countries across Europe, the Middle East, Africa and the Asia-Pacific region. HGTV debuted on the international scene just about a year ago. It's already the number one lifestyle channel in Singapore and is growing rapidly in Malaysia and the Philippines.

Additionally, our international-only brands, Asian Food Channel and Fine Living Network, enjoyed strong growth in 2015. Asian Food Channel allows us to develop locally-produced shows specific to Asian markets, while with Fine Living Network we can showcase the best of our content from the home, food and travel categories on a single network in markets where that approach works best.

From Knoxville to New York to Warsaw and Singapore on TV screens, tablets and smartphones, we're connecting with millions of consumers worldwide every day, every way. And we're taking advantage of new ways to monetize the close relationships we develop. That's our goal. That's our commitment.

And now, I'll turn it over to Lori who'll review financial performance.

Lori A. Hickok - Chief Financial Officer

Thanks, Burton, and good morning, everyone. Since you've seen our strong results, I'll highlight the consolidated numbers that Ken mentioned, discuss our segment performance, provide guidance and then open it up for Q&A.

2015 was a great year for Scripps Networks Interactive. Revenue increased an impressive 13%, surpassing $3 billion for the first time. Driving this growth was a strong advertising market for our lifestyle brands, growth in affiliate fees and the significant expansion of our international business through TVN. This strong revenue growth, coupled with focused cost control helped in part by our 2014 announced restructuring and early retirement effort, translated to a 13% growth in adjusted segment profit and adjusted EPS growth of 25% compared with the prior year.

For the fourth quarter, total company revenue was up 27%. Contributing to this growth was the inclusion of TVN and strong advertising growth and affiliate fee increases primarily at the U.S. Networks segment, which I'll discuss in more detail later.

Total adjusted segment profit increased 19%, driven by strong revenue growth partially offset by increases in cost of services, primarily programming expense. Also contributing to the expense growth were international increases related to the inclusion of TVN. Adjusted net income attributable to SNI was $1.35 per diluted share, up 35% due to the operating improvements noted previously.

We had a great quarter at our U.S. Networks segment. Revenues increased 8%, driven by strong advertising demand for our lifestyle networks as well as continued affiliate fee growth. For the advertising revenue, improved scatter pricing coupled with CPM price increases from the 2015-2016 upfront and calendar upfront markets drove an 8% year-over-year increase in the fourth quarter. Scatter versus scatter CPM pricing was up high-single to low-double-digits year-over-year and up high teens to low 20%s over the broadcast upfront.

Our top five advertising categories during the quarter were food, retail, consumer packaged goods, auto and pharmaceutical. These categories are fairly consistent with prior periods except pharma, which was stronger than normal in the fourth quarter. This strong advertising market has continued into the first quarter with scatter versus scatter CPM pricing up high-single to low-double-digits year-over-year and up teens to low 20%s over the new broadcast upfront.

For affiliate fees, contributing to the 5% growth were contractual rate escalators with our traditional distribution partners, incremental distribution increases that we negotiated in some recent renewals for both DIY Network and Cooking Channel, and new distributions related to broadband providers.

Looking at our adjusted segment profits, and as Burton mentioned for the fourth quarter of 2015, our networks realized positive ratings momentum that has continued into 2016. Helping to drive this performance was the decision to shift programming premieres to the fourth quarter, which also allowed us to take advantage of a robust advertising market. However, this record amount of new programming also drove an increase in programming expense for the quarter.

Additionally, and as indicated on previous calls, we focused on developing programming themes for the Travel Channel to develop a strong network identity. We've reevaluated our programming library and elected to write off a larger-than-normal amount of Travel Channel programming in the fourth quarter. As a result of these decisions, our adjusted segment profit was down 1% for the quarter. However, we believe the longer-term trend will be a continued deceleration in the rate of programming expense growth consistent with what we've seen over the past couple of years.

Our international revenues of $163 million increased significantly due to the consolidation of TVN, coupled with growth in our existing international business. TVN revenues were up 7% in local currency compared to the same quarter a year ago, while revenues from our existing operations were up 17% on an organic basis. International segment profit was a healthy $36 million compared with a loss of $8 million in the fourth quarter of 2014. This $44 million improvement is primarily due to the inclusion of TVN as we are still investing in our existing international lifestyle networks.

In addition to our consolidated results, we have significant international operations reported in our equity earnings. In total, our equity in earnings of affiliates was $11 million, down compared with the prior-year fourth quarter primary due to transaction-related accounting adjustments and seasonality related to the TVN minority investments we acquired.

On the balance sheet, I want to touch on a couple of items. As you've seen, reflecting the confidence management has in the business to continue to generate strong operating free cash flow, we've increased our dividend for the sixth consecutive year to $1.00 per share annually. Within our capital allocation priorities, we're focused on using operating cash flow to fund organic growth, reduce our leverage and invest in M&A, both in the U.S. and internationally.

We ended the fourth quarter at approximately 3.2 times growth leverage, and we recently notified Cox Communication of our intent to purchase their 35% stake in Travel Channel. This notification started the valuation process for the transaction and we expect the transaction will be completed by the end of first quarter.

Finally, and before we open it up for questions, we'll provide our full year 2016 guidance. All guidance is based on total company results. As a result of the strong demand for our networks from viewers and advertisers, along with an increasing contribution from international, we expect revenue growth of approximately 12%. We believe the revenue increase will be driven primarily by a full year of TVN results and growth in advertising revenue. We expect for the first half of 2016 the company will realize a higher growth rate due in part to easier advertising comps at the U.S. Networks segment and because TVN results were not included in the first half of 2015.

We expect the third quarter will be impacted by the Olympics, and to a lesser extent, the Presidential election. So it should be the slowest growth quarter of the year. Then growth should accelerate somewhat for the fourth quarter of 2016.

We expect adjusted segment profit to increase approximately 7%. Adjusted segment profit excludes TVN transaction integration costs, restructuring and reorganization costs for 2015 and 2016.

Impacting the 2016 segment profit growth will be a larger proportionate share of international revenues which have an inherently lower segment profit profile compared to our U.S. Networks, a change in our program amortization policy and estimation rate for certain programming across the network, and the likely impact from a one-time rate equalization process due to the expected renewal of certain distributor agreements that are being consolidated. After this initial period, we expect to realize mid- to high-single-digit annualized pricing increases per subscriber. These three items impact our estimated adjusted segment profit growth by 500 basis points to 600 basis points.

We expect depreciation and amortization expense to be $120 million to $125 million. This estimate excludes $52 million of TVN purchase price adjustments. We will also exclude purchase price adjustments from our adjusted earnings per share calculation.

We expect interest expense to be approximately $135 million, and lastly, our tax rate should be 30% to 32% for the year.

And with that, we're ready for your questions.

Question-and-Answer Session

Operator

This question is from Doug Mitchelson with UBS. Please go ahead.

Doug Mitchelson - UBS Securities LLC

Oh, great. Thanks so much. I mean, I think a couple of things pop out. One, with advertising being this strong, can you just give us a sense of, if you would, how the calendar upfront sort of ended up in terms of rate or volume and what your thinking is as you head into this year's upfront? I mean, it was helpful getting the cadence around how you think advertising flows for the year, but as we just sort of think about the setup going forward with your ratings doing a bit better. And then any detail that you have on change in programming amortization, the rationale and sort of what you changed from and to would be helpful?

And then if you wouldn't mind me throwing a third in there, just anything in terms of new entrants into distribution that you would comment on at this point. It seems like there's a lot of conversations going on and by the middle of the year, we might have some new entrants launch. Do you think you'll be available on any new platforms or bundles that launch or is that something that's still uncertain at this point? Thank you.

Burton Jablin - Chief Operating Officer

All right. Well, great, Doug. We'll tackle all three. This is Burton to start on the ad sales, and then we'll go to Lori and then Ken for the others.

The calendar upfront was very strong for us. With scatter pricing where it is, I think the advertisers want to get their money down and try to not play in that scatter market if they can avoid it because pricing is so high. But calendar is always strong for us because especially on the home side, it's where endemics in the home category really put their money down. That's the way they're buying calendar works.

And so, we're seeing that continued strength. We're very happy with it. And I have to say going into the upfront, we're feeling good. Ratings at all six of our networks are up. That's a great position to be in as we tout the strength of our brands and the quality of our audience.

We're still upscale. We've got a great story. In fact, our ad sales group is meeting this week for their national sales meeting. I was with them yesterday. I'll be with them this afternoon. And they're as upbeat as they can be given where we are with our networks and where they are in the marketplace.

Lori A. Hickok - Chief Financial Officer

Yeah, Doug. And I'll tackle the program amortization question as it should be no surprising when we periodically look at how we're estimating our amortization, how it matches with revenue and how shows are being premiered. And as a result, we're accelerating our amortization in the first year for certain networks and it's having a one-time adjustment as we change the policy.

So what you'll see is an impact when you see our cost of sales numbers and the growth rate, probably call it from a 1 point to 2 points impact for the year, depending on when the shows premier. So, again, we get past 2016, it'll be no longer an impact. So I'd call it a non-cash amortization impact. So I hope that helps you a little bit, but we continue to look at these things.

And again, I think with the collapse of the networks all under Kathleen's leadership, we might continue to relook at how we're using programming and how that might impact. So we'll keep you in tune, but on a ongoing basis, our investment is still moderating from a cash basis. So, again, if you look at what the dollars going out the doors, we're still moderating. If we go back in time, we were probably, as we brought in Travel, we were more at the high teens. We've moderated that to the low teens, and now we're in the – I would call we're closely, and without this adjustment, probably in the high-single digit zone, which is what we've been striving to do over the last couple of years.

Doug Mitchelson - UBS Securities LLC

And maybe, Lori, it would be helpful, if this is sort of new original programming, are they've been amortized now sort of over a two-year period rather than three-year period? I mean, if you can you give us a sense of just how much is amortized in the first year versus what it was prior.

Lori A. Hickok - Chief Financial Officer

Yeah. Again, it's on network-by-network so I can't give you a blanket answer. But I would say for certain of our bigger networks, what we're doing is that the life is the same, but we're amortizing more in the first year. So what's happening as that first year that's being amortized, you're going to see a bigger chunk. So for the premieres in 2016 for certain networks, some of our larger ones, they'll going to take a bigger proportion of that amortization year one, which they'll get the benefit in year two, three, and four. So, again, anytime we make changes in the amortization, it takes some time to funnel through and that's why I point back to the cash investment because that's the better indicator of what we're spending and what you'll see over time.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

And, Doug, since you were able to slide that third question in on potential new entrants regarding distribution, instead of speculating that, I think the best way to answer that question is up to this point, we've been included in each and every so-called skinny bundle or going back to DISH's Sling, which in some ways started some of the alternative distribution delivery systems.

We're across the board. And you heard me say in my comments we're must-have. So I think it's safe to say that any alternative distribution platforms going forward, high likelihood that we'll be in those. But at this point, that's pretty speculative as to who they will be and where they will be and when they will launch. But we should be there.

Doug Mitchelson - UBS Securities LLC

All right. Thanks so much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure, Doug.

Operator

A question from Michael Nathanson with MoffettNathanson. Please go ahead.

Michael B. Nathanson - MoffettNathanson LLC

Thanks. Just a quick follow-up on Doug's second question on amortization and one for Burton. Lori, when you look at the relationship between cash spending on programming and your program amortization, this year it's about 12% greater, so cash spend was 12% greater than the amort level. So I wonder if you just look at it that way, do we think it looks like mid to high-single digits next year in that relationship? Because it's really coming down every year. So is that the right way to think about the balance between cash spending and amortization?

Lori A. Hickok - Chief Financial Officer

What I would say, including the impact of this amortization, you probably see that moderating down from what you're seeing. So we're, again, depending on the timing of premieres and what we're planning which always changes throughout the year, I would say we are hovering right around that 10% range and making the way down to like the 8% to 10% range. So, again, say we were at the 10% to 12% a year ago, now we're 9% to 10% with this impact in there. So, again, we're continuing to moderate.

Michael B. Nathanson - MoffettNathanson LLC

Okay. And, Burton, let's go to Travel for a second. You guys recently named Courtney White to be the Head of Programming at Travel. I noticed since you acquired Travel, there's been a lot of changes in divisions. I wonder what's division now – what's Courtney's division? And then what kind of program expense growth do you expect at Travel distinctly, given the reboot?

Burton Jablin - Chief Operating Officer

Program expense should continue very much along the lines that we have always said. We had invested more. As Lori just said a few moments ago, the percentage growth there was higher, but that's been moderating. We expect that moderation to continue. And the reason is that even though Courtney is new coming in to Travel, what we've learned about the Travel audience and Travel programming over the last 18 months is what we intended. You may recall over the last several quarters, we've been saying that we're going to put a lot of programming on, new programming in the fourth quarter. We did. We learned a lot about what we put on. As always in TV, some worked, some didn't. So now we have better direction going forward.

Courtney, she's got a long history with us, 10 years. Long history in the business before that. She is very adept at articulating a very clear rationale for why programs need to be on the air. And so she's very craftily divided what's working on Travel into several groups of kinds of shows. And we're going to be pursuing those because we've seen that they work. You'll see a lot of adventure quest shows in the guise of Expedition Unknown. We like seeing personalities like Andrew Zimmern and others like in Booze Traveler and Bizarre Foods going out and exploring the world. You'll see more of that. You'll see more pairs of people traveling because we like dynamics between them.

And we're going to bring a little dose of celebrity to the network as well. We've got Queen Latifah with a new show, she'll start off in South America. And then we've got other celebrities coming on, too. So a lot of what we learned from the current programming at Travel that's working, what Courtney learned at HGTV, we're going to bring to bear. And I have to tell you, she is moving forward at a very fast pace to make all this work.

Lori A. Hickok - Chief Financial Officer

And, Michael, I just want to clarify, when I've been talking about that, that's been U.S. Networks. You got to keep in mind, we're bringing in international and when you're looking at the balance, you've got the six-month impact of TVN. So I just want to make sure that that's clear.

Michael B. Nathanson - MoffettNathanson LLC

Okay. Thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Michael.

Operator

A question from Vasily Karasyov with CLSA. Please go ahead.

Vasily Karasyov - CLSA Americas LLC

Thank you. Good morning. A quick follow-up on the guidance. Can you please tell us when the rate equalization will start impacting the growth rate and when we will lap it?

And then on advertising, it used to be the case that cable networks argued that their advertising pricing is only a fraction of what broadcast networks get for similar programming. So I was wondering if you could give us an idea where you are in that relationship in pricing and if there is still a headroom for you to catch up with that and what's driving those discount.

Lori A. Hickok - Chief Financial Officer

On your first question on the timing of the rate equalization, we're really going to stay somewhat silent on that. This is just our estimated impact for the year as we're still negotiating that. I think you're quite familiar with all of the mergers going on, but we expect that to have an impact throughout the year. And that when we get to next year this is a one time and done and we will start to see those mid to high-single digit pricing increases. So we really look at this as a one-time item, 2016, and then we're back to normal rates of growth next year.

Burton Jablin - Chief Operating Officer

Vasily, this is Burton. Thanks for that question because it gives me a chance on behalf of our ad sales team to say there still is a gap in pricing and we are working very hard to close it, but we think we have some tremendous advantages to be able to do that. The quality of our audience is unmatched in television. High income, highly educated with a great preponderance to buy the products that they see advertised on our networks. That's indisputable and based on outside research, not our own research. And we are at the top in those attributes.

Moreover, as data becomes more of a commodity in the selling of advertising, we're going to excel. Purchasing data, our audiences buy stuff. They have the money, they have disposable income, they go out and buy things. You're seeing pricing increases, as Lori pointed out in our scatter, we think we're going to continue to close that gap and we think we have a lot of headroom to do so because of the quality of our content, the nature of our environment in which the ads run and, most importantly, the quality of that audience.

Vasily Karasyov - CLSA Americas LLC

Thank you.

Operator

We have a question from David Joyce with Evercore ISI. Please go ahead.

David Carl Joyce - Evercore ISI

Thanks. So I was wondering if you could provide some more color on the seasonality of your various international businesses, particularly TVN, both on the advertising programming expenses, how that should phase throughout the year and then anything we should think about in terms of affiliate deals coming up. Thank you.

Burton Jablin - Chief Operating Officer

In terms of seasonality, I think particularly related to TVN, you'll see not unlike U.S. networks that there will be increased programming spend typically in the fall and leading into the fourth quarter when new premieres are on the air, as well as in the first quarter when we premier our spring seasons. So you'll see some seasonality there. Obviously, TVN as a group has 12 channels and so among the thematic channels, less seasonality more typical of cable networks.

David Carl Joyce - Evercore ISI

Thank you.

Operator

We have a question from David Juenger (sic) [Todd Juenger] (34:24) with Sanford Bernstein. Please go ahead.

Todd Juenger - Sanford C. Bernstein & Co. LLC

This is Todd Juenger, I guess David's brother. A couple quick ones. Listen, one quick one on guidance and then want to explore a little bit on the programming side. So, I know you're giving guidance on a consolidated basis now and that's fine. I just wondered, just deducing what that means for sort of U.S. domestic, I think it's pretty clear that if we were to think about what U.S. domestic advertising growth rate is embedded in the guidance you gave, it seems like it might be the same or maybe a slight acceleration from this year, maybe the higher end of mid singles. If you'd comment on that in any way, I think it'd be helpful.

And then kind of related to that, anybody who wants to just help opine on the theory here, we've been observing – when we see your ratings go up, which is rare in this world, it seems to be tied very closely to when you put new episodes of your TV programs on the air, which is great news because it shows when you have a hit show and you put a new episode on, people watch it. It also begs the question of how – are you more dependent than ever before on having to have new episodes and what does that mean for rate of continued spend in investment? Is the world different now, do you think, than it was a couple of years ago in how sensitive the audience is to new programming versus the life span of reruns of those? Thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

That was a good question. You're also smarter than your brother. Go ahead, Lori.

Lori A. Hickok - Chief Financial Officer

Yeah, I will give you a little color on the total company revenue guidance. And, yes, on the U.S. Networks, we are seeing acceleration year-over-year, which would not be surprising on the growth rate coming out of the fourth quarter. Again, we saw strong pricing coming out of the upfront versus our peer set. We've got great demand with impressions. So, yeah, I think it's the story of pricing. And just like you're seeing, we're seeing strong scatter.

We're seeing – the calendar was very strong. Options are at normal levels. So we're feeling again that it's going to be a very good year. It's going to be better than last year. But unlike last year, which I think we talked a lot about, that acceleration throughout the year where we started out slow, it's the first half we think is going to be very strong due to some of the things I said in my prepared comments is that it was softer in the first half so we got pricing plus our impressions are all up. So all very good. And we're seeing a little more strength there than we did last year.

Burton Jablin - Chief Operating Officer

And, Todd, on programming, you and I could probably have like an hour-long discussion about that because it's such a nuance question. In general, though, I would say your premise is right that television audiences, in general, have less tolerance for reruns. And that's why you're seeing a lot of what's going on in the television industry, overall. It's also why we responded many years ago in fact, when Jim Samples was running HGTV, to that by putting into production 300 episodes and 400 episodes a year of House Hunters. Very reasonably priced show for us, drives a lot of viewing, we decided that's worth the investment in original content.

It becomes more nuance, though, because each network is a little different in our mix and even within a network, different kinds of shows are different when it comes to repeatability. Competition shows like the Food Network Star, they don't repeat very well. And so over time, I'm sure you've observed, you've seen us do fewer and fewer big stunt-type shows. HGTV, in fact, is backing off a lot on that; Food Network is scaling them down a little bit. They don't repeat as well. They're great when they run, but they don't repeat as well.

On the other hand, a show like Fixer Upper, which is far and away right now the number one show on HGTV, the team there is so good in understanding when audiences are watching the network on certain nights that they realize that Fixer Upper on Tuesday night was getting an audience, but Fixer Upper reruns on Wednesday – on Thursday night, rather, could get a difference audience that haven't seen it. Sure enough, they put it on Thursday night, we actually promoted it, the first time we've ever promoted repeats of a show, and the ratings were nearly 100% as what they were on Tuesday night.

So there are ways for us to utilize reruns, recognizing the way audiences view in different patterns on our networks. So, yes, you'll see more original programming. Although, as Lori said, we're not going to go crazy on our program budgets. We think we have the right number of hours and we can make the mix work.

Todd Juenger - Sanford C. Bernstein & Co. LLC

I will definitely take you up on that hour-long conversation on the (38:57) topic. Thank you very much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

All right, Todd. Thanks.

Operator

A question from Amy Yong with Macquarie. Please go ahead.

Amy Yong - Macquarie Capital (USA), Inc.

Thanks. I was wondering if you could talk a little bit about your capital allocation priorities. I guess on the slide, there's a mention on M&A. On just high-level, can you talk about your appetite for traditional and digital assets, I guess particularly on the domestic front and what types of characteristics you're looking for? And then secondly, how might the buy-in or the Cox transaction impact your guidance or leverage? Thank you.

Lori A. Hickok - Chief Financial Officer

Okay. Well, as I said earlier, I think when we look at our capital allocation priorities, it's starting with just organic growth which is embedded in the guidance we gave you, highly continue to grow international. We're focused on delevering.

On the M&A side, we're looking on the digital front for opportunistic more tuck-ins, I would say, than outright big things. Again, in these high valuations, those valuations may come down but they're not of as actionable.

And then on the international front, we just did the big TVN transaction, and Jim and his team are focused on making that work as successfully as possible, taking the benefit of that. And, again, there's not a lot of big international opportunities that come on the horizon. So, of course, anything that comes, we will take a look; keeping in mind that we're trying to delever so that we can take advantage of those opportunities when they come.

Again, our priority is on investing our cash flows for things that generate growth and cash flow. So, again, we've always got a 6-month to 12-month window that we're looking. Also, on the Travel, that's already embedded in our delevering plan. We think that we can ingest that and really take care of that so we continue to delever. That's our focus. We think we'll be in great shape as we continue throughout the year and when we round out 2016.

Amy Yong - Macquarie Capital (USA), Inc.

Perfect. Thank you.

Operator

We have a question from Alexia Quadrani with JPMorgan. Please go ahead.

Alexia S. Quadrani - JPMorgan Securities LLC

Thank you. If you could just please remind us I guess where we are in the cycle of affiliate renewals, sort of what percentage are left in sort of plan? And do you think there's further opportunity ahead for, I guess, more distribution like we just saw on the smaller networks just sort of combat maybe the overall industry shrinkage?

Lori A. Hickok - Chief Financial Officer

Hi, Alexia. On the renewal cycle, I think we've talked that we're in a new renewal cycle that started in 2014. It was a two- to three-year process that, as you know, what you expect to do and how those negotiations go change over time, dates change, rights that people want are different. But I think we've got a year with some negotiations that will moderate over the next few years and then, again, we'll hit another renewal cycle. So I would say we're probably rounding the curve on this renewal cycle and ready to maybe be more moderate for the next couple of years.

Alexia S. Quadrani - JPMorgan Securities LLC

And in terms of the distribution?

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah, Alexia. I think if you think of my remarks this morning, what we're doing as a company is transforming to a certain degree to different platforms. So, while the overall traditional distribution model that we all have admired for 20 years has come under some scrutiny in the last year or so as far as growth and stagnation, we're finding new ways to reach consumers in different platforms in different packages. And I think Doug upfront mentioned maybe some new entrants coming on.

So, if you look at our total business operation domestically and you realized we're having probably in 21 years some of our best ratings years ever, it's because we're attracting newer audiences and growing still even though some of the distribution, as I said, has waned a bit on the traditional platforms. But as we see opportunities on alternative distribution platforms, we're going for them.

I mentioned the Scripps Lifestyle Studios that we've created to do more short-form programming. We're very much about taking our content and our categories and continuing to grow it but now on different distribution platforms. And we're having enormous success on the TV Everywhere model as far as take rates and SVOD in general. So, we think the future for us is a bright one, but we're going to have to be more creative and ingenious in how we do reach future consumers on their platform of choice, if you will.

Alexia S. Quadrani - JPMorgan Securities LLC

And just a follow-up, if I might, and I think you did speak about the buy-ins for the rest of Travel and, of course, the focus on international growth as well. Is it possible, I guess, Food Network – the rest of Food Network buy-in still sort of on the horizon, albeit probably not near term?

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah. Alexia, we've been answering this question a long time. It's somewhere on the horizon. It's out there. But, look, it's a broken record. You've heard us say it many times. At the right price and at the right multiple, it makes all the sense in the world, just like bringing in the rest of Travel does. And if that opportunity ever presents itself, we will be prepared.

Alexia S. Quadrani - JPMorgan Securities LLC

Thank you very much.

Alexia S. Quadrani - JPMorgan Securities LLC

Sure. Thank you.

Operator

A question from Michael Morris with Guggenheim. Please go ahead.

Michael Morris - Guggenheim Securities LLC

Thanks. Good morning, guys. Two topics. First, on the rate equalization process, just a follow-up there. The impact that you're anticipating in the coming year, is that only related to the major consolidation that we saw over the last year and there's another major consolidation – distribution consolidation in the marketplace right now? Would you anticipate a similar impact from that consolidation as well? Or is there something unique about that that wouldn't have the same type of impact?

And then my second question, you spoke a couple of times about content being specifically designed for other platforms, a unique approach. It seems like other platforms would be more competitive. It seems perhaps an easier place for a third-party to come in and try to maybe take some share for you. So can you talk strategically why you're better positioned to create that? Like what are you doing that's unique that maybe somebody, a new entrant coming into the space couldn't do? Thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Yeah. Michael, why don't we go with the second part of that question first? Burton, go ahead.

Burton Jablin - Chief Operating Officer

Sure. You're right. There are not as many barriers to entry on other platforms, although it does depend on the platform.

Our basic position is we don't automatically win on other platforms the way we do in television. We have to be incredibly competitive. We have to look at what competitors are doing. We have to understand audiences, particularly younger audiences who may not in some cases be as familiar with our TV brands, although I'd point out we told you today that millennial audiences actually are growing on our TV networks and we do attract them there.

And so, the way we talk about it internally strategically is we're in the same business we were in television when it comes to new platforms. We create great content. We attract desirable audiences, branded content in many cases, and we've got to compete just as aggressively on new platforms as we did on TV. No guarantee that we'll win, but we have a long history of success of knowing audiences in our categories, of sticking to our categories, of researching our categories and knowing advertisers in our categories.

And so I have to say, we bet on ourselves to do well in those environments. Maybe not everyone, but the preponderance I think I will be very well.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

And, Michael, if I might add, this goes both ways. You heard me mention Kathleen Finch's name earlier. One of the things that Kathleen and her team are doing now in looking at new talent, we'll go out to social media, we'll go out to the YouTubes. We will actually recruit talent because their ultimate goal is to be on our networks. And you will see more of that in the future.

We've already looked at some of the programming lineups that's coming up I hope, I guess, in the next few months, Burton, where we'll tapping into some of this talent. So it's not just for us to try to create content for those platforms, we'll find out what's working. And in some areas where we can recruit the talent, bring him in to our company. We can enhance that talent by offering them larger platform and different social media outlets to expand their personality, their brand, their talent as well. And so far, we've had a pretty good success rate with the ones we've recruited in.

So it's a little bit of the two-way street. This is new territory for us in some ways, but pretty exciting. And I think, Lori, you're going to take the second part of the question.

Lori A. Hickok - Chief Financial Officer

Yeah, Michael. To try to give you some help on your equalization question because we really don't talk about specific negotiations and where they are, but I think maybe this will help you get to where you are by triangulating what I'm saying. One, you heard from an earlier question that we're rounding the bend on our last large grouping of affiliate renewals. Not much in the horizon past 2014 for some time. And that we, of course, are estimating that there's going to be an impact from these consolidations that are happening. And that's embedded in that 500 basis points to 600 basis points, which includes the other things where we've got an increasing amount of internationals in the first six months as well as the program amortization. So there's an impact there.

But I would like to stress again it's a one-time item. And then we get to 2017, again, we're looking for mid to high-single digits. So we really just have to get through this year. We tried to give you enough color based on what we're seeing and what's in our pipeline to help you work on your models for 2016.

Michael Morris - Guggenheim Securities LLC

Okay. Just to be clear, though, it includes both completed consolidations and any potential from contemplated consolidations in the marketplace right now is what's embedded in your outlook for the 2016 and then sort of the 2017 dynamic?

Lori A. Hickok - Chief Financial Officer

Again, the way I would answer that is this is our last year of probably a big round of negotiations and it calms down considerably after this year.

Michael Morris - Guggenheim Securities LLC

Great.

Lori A. Hickok - Chief Financial Officer

So you could deduce that.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Qualify it.

Lori A. Hickok - Chief Financial Officer

Yeah.

Michael Morris - Guggenheim Securities LLC

Okay. All right. Thank you.

Operator

A question from Ryan Fiftal with Morgan Stanley. Please go ahead.

Ryan Fiftal - Morgan Stanley & Co. LLC

Great. Thank you. Two, if I may. One, you mentioned I think it was a 300% increase in the use of TV Everywhere apps. Can you talk about what was driving that step function increase? And then more broadly, can you talk a little about the relative monetization of viewers on your TV Everywhere apps versus your linear networks?

And then second, I just had a clarification for Lori. You mentioned after the rate equalization you expect to return to mid to high-single digit growth. Is that a comment on rate or revenue? Thanks.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure.

Burton Jablin - Chief Operating Officer

Well, let me tackle TV Everywhere first. Last summer, and I believe we talked about this on calls, we started aggressively promoting our TV Everywhere watch apps, primarily on our three big networks, HGTV, Food Network and Travel Channel. We began to see significant downloads of our own watch apps at that point. And they're growing by tens of thousands of additional downloads each month.

The Roku, Amazon Fire and Apple TV apps are connected devices, so you watch through a television. Those have a very large existing base already. So the goal there was to make the existing users of those devices aware that our apps were now available. They became available toward the end of last year. And we're seeing huge downloads of those apps over the first three months that they've been available.

The viewing, of course, is another matter. Once you have the apps, you then have to view. So the viewership we're pushing aggressively on air as well. So we have a two-part promotion message on TV. One is get the app. The second is now you can watch your favorite programs anytime, anywhere, any device if you have the app, and that's both live viewing and delayed viewing. And so it really is a very coordinated promotional effort to try to get viewers to understand you can watch us now more often anywhere, anytime on any device. And I have to say it's early days, but we're seeing it work.

On monetization, these are still small numbers against the overall linear television universe. So monetization will come. We have to start getting the habit in their now. It comes in a couple of ways. Of course, in C3 we can monetize all those connected devices right away because Nielsen measures anything that comes through a TV. On the apps that people are viewing on their pads or phones, C3 will be a little bit of a wait to monetize until Nielsen gets the measurement in order and we sign up for that additional measurement product.

However, on insertion after C3, that's all monetizable. Now, again, that's small right now, but we see that as a potential growth area for the insertion dynamic, insertion of ads. So we're getting the habits in place now for viewing, but we expect to see monetization grow as time goes on.

Jim Samples - President, International

Brian, this is Jim Samples. I would just add at TVN in Poland, we're seeing tremendous response to our non-linear offering there. We have 1.7 million registered users already for the TVN Player. And because TVN produces and owns much of its content, we have a lot of flexibility both to put that content out there and to monetize it through their ad sales house. So it's a terrific market for us to explore and to understand the dynamics of user behavior off of the television.

Lori A. Hickok - Chief Financial Officer

And then, Ryan, on your question about was that percentage a rate or a revenue number, it is a pricing (53:11) and then of course you'd have to factor in your point of view on what you think is going to happen on the subscriber growth or not. But, again, I would remind you that of course we've been very successful in getting into those skinny bundles and really keeping our numbers more whole than maybe some of our other competitors.

Ryan Fiftal - Morgan Stanley & Co. LLC

Okay. That's very helpful. Thank you.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Ryan.

Operator

Next question is from Ben Mogil with Stifel. Please go ahead.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Great. Good morning. Thanks for taking the question. On the Cox deal, can you remind us again, is it an arbitration, what the mechanism around the buyout is, if you will?

Lori A. Hickok - Chief Financial Officer

There is a process. There's a prescribed process in valuation. It's a typical one where we get a value, they get a value. And if they're within a certain amount, you're fine. If not, there's a third. So it's a very orderly process.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

And just tied to that as well, are there any cost savings we should expect now that you take it all in, maybe don't have some governance or duplicative costs from there?

Lori A. Hickok - Chief Financial Officer

Not that would be of any material nature.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Okay. Thank you very much.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Sure, Ben.

Operator

Question is from Laura Martin with Needham. Please go ahead.

Laura Martin - Needham & Co. LLC

Yeah. Good morning, guys. Great numbers. Congratulations.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thank you.

Laura Martin - Needham & Co. LLC

So I want to go back to. you were one of the few – as you said, all six of your channels are up in ratings. And you highlighted some of these younger demos, which we're still fighting over whether kids watch TV. So what I am really interested in is how much of your digital experimentation do you think is driving those numbers? Or to refer to a prior question, is it just that you're doing more episodes online? Is it 90% because of what you're doing on the air is driving these ratings higher? Or do you think some of these digital initiatives that you've had in place for years are actually – we're seeing it in the Nielsen numbers on your channels? I'm very interested in that.

And then sort of two others. Lori, one for you. Could you remind us the impact of political in your fourth quarter historically so we can build that into our fourth quarter model? I noticed you called out Olympics as being a negative in the third quarter, but remind us how political affects you guys. And then C7 versus three C3, we're hearing a lot of people say they think this upfront, they can move to C7. Is that a goal of yours or do you prefer to stay at C3? Are you pushing for C7 in this upfront?

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

All right, Laura. Let me take a swing at the first question, which is a good one, and then I'll pass it on to Burton. I think it's both. I think it's both the areas that we've moved into in digital, what we're finding. We'll call it experimentation because it is a little bit. This works – maybe this doesn't work, but more emphasis here.

But I also think it underscores the fact that millennials watch television and are going to continue to watch television, much of it for us, Laura, has to do with 25- to 34-year-olds growing into the category. Once they start to become interested in the design of their apartment or their condo or if they're fortunate enough, their home, food, similarly once you start preparing meals, once it becomes a little bit more of a family environment, then our content just naturally kind of clicks in. And so what we've seen is not only the increases in ratings overall but the increases, as you mentioned, in millennials, but a lot of it has do with traditional television watching.

Now, no question they're using mobile in different ways. They're using other platforms in different ways. And we're experimenting over there and we're also using the investments that we've made in Tastemade, Refinery29 to see how those take rates are among millennials who's responding there. So I don't know if you agree with that, Burton, but I think it's a mixture of both.

Burton Jablin - Chief Operating Officer

Correct. I agree. Well said.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Okay. All right.

Lori A. Hickok - Chief Financial Officer

And then on your political question, Laura, really it's two parts. One, it's more about viewership during the – and again, it's not as big as the Olympics, but basically when there's debates going on and you get close to the elections, we expect there may be some impact on our networks and viewership, probably more HGTV than others. And then again on the revenue side, again, that's more of a local play than a national play. That's why you see usually a big lift on the broadcast players versus us.

But if there gets to be lots of demand and they can't get all their local and you might see a little spillover on us. But really, again, it's more of a viewership and impact on our top line and that's why we've got just a little bit of a hedge, for lack of a better word, built into our plan for 2016.

Burton Jablin - Chief Operating Officer

Yeah. And I should just reiterate, it's Burton, we don't hate political advertising nationally. You may see political ads on our networks, but those are in local insertions. But we've kept our networks politics-free for a good reason.

On C3 versus C7, I was just talking to our ad sales team a couple of weeks ago at our strategy meeting on that question. No, we're not expecting a big move to C7 for us. Remember, a huge percentage anywhere upwards of 90% of viewing of our networks is live and advertisers like that because they can make sure their messages are appearing when they intend them to. So we will not expect to see, for us, anyway a big shift to C7 in the coming upfront.

Laura Martin - Needham & Co. LLC

That's helpful. Can you follow up on Snapchat specifically? What sort of view have you learned from your Snapchat experimentation on the Discover platform? And what surprised you there?

Burton Jablin - Chief Operating Officer

It's been a great learning experience. And in fact, it was sort of the initial impetus for forming the Scripps Lifestyle Studios. And what we learned was that we really do have to produce content in a different way for that particular format. And I'm not just talking about vertical versus horizontal shot video, but the way the video is created.

And so, we have gone to school very quickly. We worked very closely with the Snapchat team. They're very good partners in helping us understand that audience. And we want to work together to do a better job in attracting audiences there.

So we have gone to school. We have reoriented some of our creation of content to be much quicker in producing a lot of short-form video in our offices with a phone and using our staff to do it and it's really paid off.

Oh, and we're actually doing a little experiment with Snapchat coming up later this week at the South Beach Food Festival. You'll be able to see live feeds from the South Beach Food Festival that we're doing in partnership with Snapchat and we're kind of excited about that, too.

Kenneth Wayne Lowe - Chairman, President & Chief Executive Officer

Thanks, Laura.

Operator

Our last question today will come from the line of Eric Handler with MKM Partners. Please go ahead.

Eric O. Handler - MKM Partners LLC

Yes. Thanks for fitting me in there. Two quick questions for you. First, looking at your international set networks, the segment profit margin for that line item, I'm just curious what's the normalized margin that you can look at going forward from this business line? And then, secondly, where do you think it can trend over the next couple of years? And then as a follow-up to that, when you look at your corporate expense line, is that – should we think of that like a stable expense item now on the EBITDA line? Or how should we be looking at that line?

Lori A. Hickok - Chief Financial Officer

Okay, Eric. Just a couple of things and I'll let Jim chime in. On the International Networks, I think we have to go out a year or two to probably give you what we're striving for because we're continuing to invest. So I think, again, we're striving to get closer to those 30% margins over time, maybe getting to 25% before that.

So I'd look at milestones. And again, you could look at TVN when we acquired it and look at what kind of margin it was doing, which, of course, it's going to proportionally contribute more than the other things that are growing. But it's still an investment story. But, of course, we think that we're going to see margin growth over the coming years, but we're going to balance that with investments.

I don't know, Jim, if you want to add anything.

Jim Samples - President, International

And if you look at sort of the last two quarters of 2014, I think you'll get a feel for the scale of where we're investing beyond TVN in those networks that we've been launching around the world. Obviously very different financial profiles from the networks that we launched from scratch versus those more mature networks that we have acquired, but very good progress in revenue growth in those networks that we've launched as the distributions increase and as we've brought advertisers on board.

Lori A. Hickok - Chief Financial Officer

And then regarding your question on is corporate stable, I hope we're stable. But corporate, I would say those costs are pretty good indicator of where we're going. Of course, as we've tried to do over the last couple of years, we continue to look at how we can be more efficient and operate including the corporate lines. But as we become more global, we've added staff and functions to support that.

But I think if you look at what we have in the plan and even if we're substituting certain comps for others as we grow, I think it's a deal. You can use that as your proxy.

Eric O. Handler - MKM Partners LLC

Thank you.

Dylan Jones - Chief Communications Officer & Executive VP

Thanks, everyone. As a reminder, Mike Gallentine will be available for follow-up calls through the rest of the day. I'll now hand it back to the operator for replay information.

Operator

Ladies and gentlemen, this conference will be available for replay after 12:15 PM Eastern Time today through midnight Eastern Time on Tuesday, March 8. You may access the AT&T Executive playback service at any time by dialing 1-800-475-6701, entering access code 384375. International participants dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844, access code 384375.

That does conclude our conference for today. Thank you for your participation and for using AT&T TeleConference Services. You may now disconnect.

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