Scripps Networks Interactive (NASDAQ:SNI) this week posted fourth-quarter earnings results that were highlighted by a return to advertising growth in the core U.S. television market. The owner of HGTV, Food Network, and Travel Channel achieved improved ratings and a bounce in distribution fees, too, which combined to push profits higher by 25%.

Here's how the headline numbers stacked up against the prior-year period:


Q4 2017

Q4 2016

Year-Over-Year Change


$956 million

$889 million


Net income

$66 million

$52 million


Earnings per share




Data source: Scripps Networks

What happened this quarter?

Scripps Networks enjoyed a rebound in each of its two main revenue streams: advertising and distribution fees.

A woman watching TV while reclining on a couch.

Image source: Getty Images.

Key highlights of the quarter include:

  • Advertising revenue growth improved in the U.S. following three consecutive quarters of deceleration. Ad sales rose 3.8% compared to a 1% decline in the third quarter. Ratings were healthy at each of Scripps Networks' biggest channels, with HGTV and Food Network ranking in the top 10 for ad-supported cable networks in prime demographics.
  • Distribution fees jumped 10% to double the prior quarter's growth pace thanks to contractual rate increases.
  • The international division grew at a robust 12% rate as its Polish network, TVN, continued to build its audience.
  • Scripps Lifestyle Studios, the network's digital distribution arm, tripled its online viewership for the year with help from the recent Spoon University acquisition. 
  • Expenses rose at a slower pace than revenue, mainly thanks to a goodwill writedown in the prior-year period that did not recur. As a result, operating income jumped 40% to $319 million. Adjusted earnings  logged steady growth, up 9% for the quarter and 2% for the full year.

What management had to say

Executives said the network's achievements this past year translate into strong momentum heading into 2018 and the pending merger with peer Discovery Communications (NASDAQ:DISCK). "We reached new consumers through the thousands of compelling experiences created by Scripps Lifestyle Studios," CEO Kenneth Lowe said in a press release. "We invested in our core business as well as our fast-growing digital offerings, allowing us to capitalize on the popularity of our powerful lifestyle brands across the globe. And, of course, we announced our merger with Discovery Communications, creating an unmatched opportunity to deliver our real-life content to a greater number of audiences," he continued.

Regarding the upcoming merger, management expressed optimism that it will deliver the financial and operating wins that executives first outlined back in late July. "We are excited about the prospects for the combination with Discovery and are diligently working toward finalizing the transaction to bring these two great companies together," Lowe explained.

Looking forward

That $15 billion merger will create one of the biggest pay-TV content giants in the industry, with an original content production pace of 8,000 hours per year and a valuable library of over 300,000 hours of shows. The combined company should account for about 20% of all ad-supported TV in the U.S.

At closing, which is projected to happen sometime in early 2018, Scripps Networks shareholders will have the option to receive cash or a mix of cash and stock that translates into ownership of approximately 20% of the new company. The final value of that trade will fluctuate with changes in Discovery's stock price, but should end up near the $90-per-share deal that the two networks struck last summer.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Discovery Communications. The Motley Fool recommends Scripps Networks Interactive. The Motley Fool has a disclosure policy.