LIN Media’s Q2 net revenues increased 15% to $188.8 million compared to $164.3 million in Q2 2013. Net broadcast revenues increased 8% to $155.6 million in the quarter compared to $143.5 million in the Q2 2013.
Net digital revenues increased 59% to $33.2 million compared to $20.8 million in Q2 2013. Operating income increased 22% to $32.7 million compared to $26.9 million in Q2 2013. Net income per diluted share was $0.20 compared to net income per diluted share of $0.13 in Q2 2013.
LIN EPS of $0.20 missed estimated by $0.04. Revenue of $188.8M missed by $1.25M.
Noted LIN CEO Vincent Sadusky in the call: “We posted solid results this quarter. Net revenues were in line with our guidance, increasing 15% to $188.8 million compared to $164.3 million in the second quarter of 2013. Our focus on securing a higher pay TV subscriber fees and building an industry-leading digital business continues to pay off, as these were key drivers of our results this quarter.
In addition, automotive, our largest advertising category, was up for the third quarter in a row, increasing 3% over the prior year. TV advertising was up 3%, which includes $4.6 million of net political advertising sales. Core television sales were about flat year-over-year, and we attribute that primarily to the softness in national advertising. We experience growth in local advertising, driven primarily by the automotive, home improvement and services categories.
Must see live events continue to exceed historical performances on broadcast television. For example, ABC’s Billboard Music Awards garnered a 13-year ratings high. The World Cup Final scored massive ratings on ABC and FOX’s Major League Baseball All-Star game was the most watched since 2010.
Our diverse network affiliations and highly rated stations continued to maximize the record-breaking appeal of live TV events, to generate greater advertising demand.
We are also making important investments in our own content creation model. For example, KSAN-TV, launched its new local lifestyle show yesterday, and WBDT-TV in Dayton, who premieres locally produced reality show, featuring six local high school graduates next month. Our localism contributes to our television web site and mobile screens consistently generating high local market rankings.
We strengthened consumer engagement on our web sites and local properties, which delivered over 376 million page views in the second quarter. Nearly half of these page views came from mobile devices, representing a 70% in mobile consumption, as compared to the prior year.”
Local revenues, which include net local advertising revenues, retransmission consent fee revenues and television station website revenues, increased 10% to $117.3 million compared to $107.1 million in Q2 2013.
Net national revenues decreased 5% to $31 million compared to $32.6 million in Q2 2013. Net core advertising revenues (local and national) were flat compared to Q2 2013.
Net political revenues were $4.6 million compared to $1.5 million in Q2 2013.
The automotive category, which represented 25% of local and national advertising sales in the quarter, increased 3% as compared to the Q2 2013.
The company’s unduplicated desktop reach averaged greater than 100 million monthly U.S. unique visitors and over 40% of the total U.S. Internet audience. The company’s video platform ranked #14 in comScore’s Video Metrix report.
The company’s websites and mobile properties delivered over 376 million page views, with 48% coming from mobile devices, representing 70% growth in mobile consumption as compared to Q2 2013.
Total debt outstanding as of June 30, 2014, net of cash, was $911.5 million compared to $932.2 million as of December 31, 2013. Unrestricted cash and cash equivalent balances as of June 30, 2014 were $19.7 million, compared to $12.5 million as of December 31, 2013.
The company’s outstanding revolving credit facility balance was zero as of June 30, 2014, as compared to $5 million as of December 31, 2013. Consolidated net leverage, as defined in the credit agreement governing our senior secured credit facility, was 4.8x as of June 30, 2014, compared to 5.2x as of December 31, 2013. Other components of cash flow in the second quarter of 2014 include cash capital expenditures of $5.9 million and cash payments for programming of $6.9 million.
On 7/24, a joint proxy statement/prospectus was filed with the SEC and mailed to the shareholders of LIN Media announcing the special meeting of the shareholders of LIN Media to be held 8/20 for the purpose of voting on the proposal to adopt the Agreement and Plan of Merger, dated March 21, 2014, with Media General. When the transaction contemplated by the Merger Agreement are completed, Media General and LIN Media together will own and operate or service 74 stations, subject to required regulatory divestitures, across 46 markets, reaching 26.5 million or 23% of U.S. TV households.
The Company expects that net revenues for the third quarter of 2014 will increase in the range of 16% to 20% (or $25.9 million to $31.9 million), as compared to net revenues of $163.1 million in the third quarter of 2013, primarily as a result of growth in digital revenues, retransmission consent fees and political revenues.
LIN expects that its direct operating and selling, general and administrative expenses, which include variable sales-related expenses, will increase in the range of 20% to 22% (or $21.2 million to $23.2 million) in the third quarter of 2014 as compared to reported expenses of $103.8 million in Q3 2013.
Noted Marci Ryvicker, Wells Fargo Securities Senior Analyst: “LIN held a conference call to discuss its Q2 results at 9 am ET this morning. We found the following comments to be relevant as it relates to the rest of the broadcast space. National is improving. This comment primarily related to September, which is showing some strength and is consistent with our own checks across traditional media. It sounds like the weakness in Q2 and the start of Q3 stemmed from a number of factors – the economy, the World Cup, some experimentation with digital, and movement of some money into Q4 (this was actually new to us). Interestingly, the weakness in national spot was ”not across the board’ – with some markets actually UP DOUBLE DIGITS (specifically Austin Albuquerque, and Buffalo).
In total, Q3 ad sales are pacing to be up 2%. Color on ad categories for Q2: Those that were up were auto, home improvement, services, education and entertainment; while those that were down were retail, restaurants, media and communications, financial, medical and paid programming.
Political did come in lighter than expected in Q2 but Q3 seems to be consistent with 2010. It sounds like a number of races that were looking to be ”hot” ended up being uncontested, so political was a little lighter in Q2 than expected. It sounds like July political is coming in ahead of mgmt.’s internal budget and mgmt. did state that Q3 political looks pretty consistent with 2010.
Update on MEG transaction: We specifically asked about the 7 markets where there are likely to be divestitures of some sort and mgmt.’s response was ”we will have an announcement when we have an announcement,” but it also sounded like there might be something coming rather soon. We also liked the commentary regarding SBGI’s Allbritton close – it sounds like LIN is encouraged by the regulatory approval here although there was no update on the potential closing of the MEG transaction (still confirmed for Q1 2015).”
