AMC Networks Inc. (AMCX) on Q1 2023 Results - Earnings Call Transcript

Operator: Good day! And thank you for standing by. Welcome to the AMC Networks, First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nick Seibert, Vice President, Corporate Development and Investor Relations. Nick Seibert: Thank you. Good morning, and welcome to the AMC Networks First Quarter 2023 Earnings Conference Call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O’Connell, Executive Financial Officer and Kim Kelleher, Chief Commercial Officer. Today’s press release is available on our website at amcnetworks.com. We will begin with prepared remarks, and then we’ll open the call for questions. Today’s call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Networks SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call. Today, we will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found in today's press release. With that, I'd like to turn the call over to Kristin. Kristin Dolan: Good morning, everyone. Thank you for joining us. While I'm new to my role as CEO of AMC Networks, this is a company I know very well. I started my career here and spent the last decade serving on the Board of Directors. But more than that, my background in programming, cable operations and more recently, data and analytics around viewership and advertising gives me a clear and actionable perspective on the opportunity we have here. AMC Networks has always been known for great content and the ability to make shows that breakthrough in popular culture, receive critical acclaim and engage fans. That is the consistent theme that has defined our presence in the content landscape for years. The question today is how do we take that core competency and evolve the business for a new world of multi-platform consumption that is increasingly being driven by the consumers we serve? When I look at AMC Networks today, and I think this is key for our future, I don't just see a content company. I see a technology-focused company that delivers its content across an expanding number of platforms here and around the world. I see a nimble and fast-moving organization that relies heavily on data to grow audiences, serve fans and build value for our advertising and distribution partners. On our last call we talked about the idea of transitioning from a wholesale to a retail mindset. For us, that means reorienting our company and making sure everything we do is in service of viewers and subscribers, our customers in this new world of content consumption. We also shared our strong focus on reevaluating the pathways to content monetization as we reduce costs, streamline the organization, maintain a strong balance sheet, and drive free cash flow. Our efforts in these areas contributed to a first quarter with healthy margins and increased streaming revenue and consolidated AOI. We ended the quarter with 11.5 million streaming subscribers in aggregate, and while this represents a slight decline from last quarter, the bigger context is our focus on attracting and retaining higher-value subscribers. Building a more valuable customer base is something I'm very familiar with from my Cablevision days, where we drove higher revenue per subscriber results quarter-over-quarter and year-after-year. This growth came from a deep understanding of what it takes to acquire, serve and retain customers in a competitive environment. Although the specifics of that distribution-focused sales strategy are distinct from what we are doing here, the objectives are the same. Patrick will expand on all of this in his discussion of our financial results, which I'm pleased to say will include reaffirming our guidance for the full year. Now, I'd like to spend a few minutes talking about four interconnected areas of focus that frame our current activities and represent what I see as AMC Networks opportunity moving forward. The first is content, which has been the core competency and strength that has driven this company's success going back to the days of Mad Men and Breaking Bad. Our record of producing high-quality breakout content for adults continues with a current slate of original programming that is among the most robust and diversified in our history. In January, we premiered the second series of our expanding universe around the iconic works of Anne Rice. Mayfair Witches became the most successful premiere in the history of AMC+ and the most-watched season of any show on the platform. We've greenlit second seasons of both Mayfair Witches and Anne Rice's, Interview with the Vampire and we're in active development of a potential third series set in the world of the Talamasca, a secretive unit organization featured in a number of Rice's novels. We also continue to serve the legions of Walking Dead fans with three new shows focused on the series' most popular characters set in iconic new locations. The Walking Dead, Dead City set here in New York, premieres in June. We recently completed production in Paris for The Walking Dead, Daryl Dixon coming this fall, and we're in production on a third series that reunites stars Andrew Lincoln and Danai Gurira, you know them as Rick and Michonne; three new extensions that will engage and enthrall the millions of fans of this continuing universe. Returning this summer is our acclaimed Western noir crime series Dark Winds, starring Zahn McClarnon. And we have new AMC series on the way with Parish, starring Giancarlo Esposito, Monsieur Spade with Clive Owen and a new chapter in our Orphan Black franchise starring Krysten Ritter. We promoted all of these exciting series last month at our Upfront Event in New York and we're already seeing strong interests in or early discussions with advertisers. Our streaming strategy of super-serving fans of a particular genre represents our differentiated approach that sets us apart from the general entertainment services. With very reasonable levels of content spending, our Acorn TV, ALLBLK, Shudder, and HIDIVE services are achieving strong viewership and remarkable engagement. One example is from our HIDIVE service, which is making games as an increasingly sought-after destination for passionate anime fans, a very potent category. HIDIVE’s new series, called OSHI NO KO has become a breakout hit, quickly becoming the number one series launch in the history of the platform and growing audience week over week. I do believe we've only begun to scratch the surface with all of our services, particularly in terms of our opportunity to expand the depth and breadth of our content offerings and attract larger audiences. The second area of focus relates to AMC Networks being a nimble, innovative and opportunistic company with an expanded distribution footprint and partner relationships that allow us to maximize the value and potential of our content in several ways. Our overarching goal is to distribute the shows we make as broadly as possible, to ensure that they are visible and available to viewers wherever and whenever they might want to watch, while ensuring we preserve and drive our strong brand identities across all platforms. AMC Networks has a track record as a sought-after and innovative strategic partner for distributors, and this was evidenced most recently with an agreement we reached with Dish Network and Sling for continued carriage of our U.S. channel portfolio, streaming services, and fast channels, as well as an expansion of our advanced advertising partnership with Dish. It is our longstanding distribution relationships that we believe will form the foundation of what is a forthcoming shift to streaming bundles. These bundles are beginning to gain traction as the marketplace evolves, and consumers seek a more simplified and integrated experience when it comes to managing their various services. With our high-quality content and distinct brands, AMC Networks occupies a prime position for this inevitable shift. As the models of content monetization continue to evolve, another advantage we have is a broad distribution footprint that spans linear television networks, our own digital and streaming platforms, and third-party CTV or fast platforms. With the addition of an ad-supported tier of our flagship AMC+ streaming service later this year, our entire distribution ecosystem will be ad-supported, providing us with important new opportunities to drive revenue and grow our business. This leads to our third major area of focus, and I referenced it earlier on the call, which is to drive a customer-first mindset throughout our company. This cuts across all the ways we interact with and serve our audiences, from how our shows are delivered and promoted to how our platforms and user interfaces are designed and function. Again, this is something we did successfully at Cablevision, which at the time was a mature and fully built-out service-based business. Even with that market presence, we reoriented the company around data, which helped enable us to deliver the highest levels of customer service. At AMC Networks, it's essential that we become a more customer-centric organization as we establish a direct relationship with an increasing number of viewers. This represents a significant shift in mindset from how we've operated for most of our 40-plus years as a company, and it requires a rethink across the organization to ensure we're approaching our business in a way that best serves our viewers, regardless of how, where or when they are watching our content. Our fourth area of focus, and the one I'll close on, is efficiency. We're breaking down remaining walls and silos that divided areas and categories of our business and operating as one focused company, making content and delivering it to viewers across all platforms. In so many ways and across so many shows, AMC Networks has proven its ability to punch above its weight and achieve levels of cultural impact and fan engagement that much larger content companies aspire to. It's a privilege to have the opportunity to build on this legacy as we prioritize long-term growth and subscriber quality, focus on optimizing our customer relationships, and drive audience engagement across the AMC Networks ecosystem. I'm grateful to work alongside our exceptional leadership team and every one of our employees and colleagues. I have every confidence that we have the talent and assets to grow AMC Networks into its next chapter. With that, I'll turn the call over to Patrick. Patrick O'Connell: Thank you, Kristin. As Kristin highlighted, with the strength of our programming, our nimble approach to a dynamic marketplace, and our continued focus on operating efficiency, AMC Networks is well-positioned to succeed as consumer behaviors continue to evolve. We took several steps over the past couple of quarters to recalibrate the business for increased monetization and we feel good about the progress we've made to-date. We right-sized our investments and content and streamlined costs to drive increased free cash flow in 2023 and beyond. We continue to strengthen our longstanding relationships with key distributors. As Kristin mentioned, we recently completed a multi-year renewal with Dish Networks and Sling TV for our linear networks, streaming services, and fast channels. Moving on to our first quarter 2023 financial performance, consolidated revenue increased 1% from the prior year to $717 million. Consolidated adjusted operating income increased 2% to $216 million, representing a margin of 30%, which reflects our strong focus on operating efficiency. Adjusted earnings per share was $2.62. In our domestic operations segment, first quarter revenue grew 1% to $612 million. Subscription revenue of $348 million grew 1% for the quarter. First quarters streaming revenue was $141 million representing 29% growth year-over-year. We ended the quarter with 11.5 million streaming subscribers, representing year-over-year growth of 22%. While this represents a sequential decline in subscribers from the 11.8 million we reported at the end of 2022, the decline in subscribers was largely due to our focus on higher values subscribers and a roll off of holiday promotional subscribers. The rationalization of our subscriber base along with pricing actions taken last year increased the average revenue we generate per subscriber. As we remain focused on the overall profitability of the company, we continue to program our services efficiently. If you look at the top five titles for each of our targeted services in the month of March, 18 of the 20 titles cost less than $1 million an episode and some substantial less than that. This is a powerful illustration of the economic advantage of our strategic approach to the streaming business. -: Content licensing revenue grew 69% for the quarter to $103 million. The increase in content licensing revenue was driven by the timing and availability of deliveries, including the final deliveries of SILO formerly known as Wall; a series produced by AMC Studios for Apple TV that we spoke about in detail on our last call. The deliveries of SILO represented approximately $56 million of content licensing revenue for us in the first quarter of 2023. We do not anticipate any material revenue or expense associated with this project for the remainder of the year. First quarter domestic operations advertising revenue decreased 20% to $161 million. The decline in advertising revenue is primarily due to lower linear ratings, softness in the ad market and fewer episodes of original programming, partly offset by digital and advanced advertising revenue growth. For comparison purposes, it is important to note that the first quarter of 2022 was particularly strong with a more robust ad marketplace and content, including episodes of the Walking Dead and Killing Eve. Our ad supported networks and digital ad platforms continue to experience a similar environment as our peers. For the first quarter of 2023, Scatter and Direct Response remains soft given the economic climate, with our advertising partners remain conservative with their spending. Domestic operations adjusted operating income was $219 million for the first quarter, with a margin of 36% consistent with the prior year. AOI performance was largely attributable to increased streaming revenues and lower investment in programming and marketing, partly offset by decreased advertising and affiliate revenues. Moving to international and other. For the first quarter, revenue decreased 2% to $108 million, but increased 3% on a constant currency basis. International and other revenues reflect lower advertising revenues due to the impact of the planned wind down of two channels in 2022 and lower ratings in the UK, partly offset by increased distribution revenues due to the launch of a new channel in Spain and the timing of productions at 25/7 Media. International and other AOI decreased 8% to $21 million for the first quarter, a decrease of 9% on a constant currency basis. AOI performance was driven by revenue performance and increased technical and operating expenses, partly offset by lower SG&A expenses. Moving on to cash flow and the balance sheet. As discussed on our last call, we’ve updated our free cash flow definition to no longer include distributions to non-controlling interests. Consolidated free cash flow for the first quarter was negative $144 million and reflected the timing of certain production related payments, as well as the impact of $57 million of cash payments related to our restructuring initiatives. As we stated on our last call, due to the timing of productions in 2023, we anticipate net cash outflows during the first half of 2023 and you expect to generate the majority of our free cash flow for the full year closer to year end. We ended the first quarter with net debt and finance leases of approximately $2.1 billion and a consolidated net leverage ratio of 2.8x. We have substantial financial flexibility and total liquidity of approximately $1.2 billion, including $764 million of cash in the balance sheet and our undrawn $400 million revolving credit facility. We continue to monitor the markets and will be opportunistic and active in addressing our 2024 and 2025 maturities. Our capital allocation philosophy remains disciplined and opportunistic. First, we look to support the business with a particular focus towards creating compelling content that resonates with our audiences, while balancing overall profitability and cash flow generation. Second, we remain focused on the balance sheet and addressing our upcoming maturities. Further down our priority list is the pursuit of strategic M&A and returning capital to shareholders. Moving to our outlook, we are reiterating our 2023 financial guidance today. We continue to expect consolidated net revenue to be approximately $2.9 billion, largely due to the well- understood dynamics impacting the industry. We expect moderated growth in our streaming revenue for the full year as compared to 2022, driven by lower gross additions and due to lower levels of marketing spend as we drive marketing efficiencies. Regarding affiliate revenue, we anticipate that cord cutting trends will continue and our year-over-year comparison will be incrementally impacted by several percentage points due to the non-renewal with Fubo that occurred at the end of 2022. We anticipate a decrease in content licensing revenues as our year-over-year comparison is affected by the 2022 deliveries of SILO and certain Walking Dead Universe titles, which will be partly offset by new international licensing revenues. Moving to advertising, we expect 2022 trends to continue through 2023, including lower linear ratings and a soft overall ad market, partially offset by digital and advanced advertising revenue growth. Lower linear ratings for the full year will be partly the result of fewer original hours. But notwithstanding that, the programming cost savings we expect represent a multiple of the advertising revenue those titles would have generated. Regarding adjusted operating income, we are realizing the benefits of our strategic cost measures, including material year-over-year reductions in programming, marketing, staff and other costs. For the full year of 2023, we continue to expect that consolidated AOI will be in the range of $650 million to $675 million. We also continue to expect to generate free cash flow in the range of $70 million to $90 million for the full year. This range represents free cash flow on a reported basis and includes the negative impact of approximately $115 million of one-time cash payments associated with our restructuring plan. Our free cash flow outlook would be in the range of $185 million to $205 million of free cash flow, excluding these one-time items. Additionally, we believe we can maintain and grow this level of cash flow over time. Regarding content, we continue to focus on making efficient and highly curated content decisions to superserve our audiences. We are past peak content investment, and we continue to expect cash content investment to be approximately $1.1 billion for 2023. Looking out further than that, we anticipate that our cash content investment will be in the $1 billion area, consistent with our historic pre-pandemic levels. This is more than enough content to drive a strong slate of content and support our businesses, and frankly represents a rationalization for a prior period of over investment. 2023 will be a key year for AMC Networks as we execute our differentiated strategy. We are encouraged by the progress we've made, streamlining our organization and optimizing our monetization, and we continue to expect to meaningfully grow our free cash flow over time. With that operator, please open the line for questions. Operator: Thank you. [Operator Instructions]. Our first question comes from Michael Morris with Guggenheim Securities. Michael, please go ahead with your question. Unidentified Analyst: Hi, good morning. This is Charlie [inaudible] on for Michael Morris. Just a quick question from me. On the AMC+ ad support tier, can you share any more details on the anticipated price point and expected ARPU there, and just kind of your expectations about the ad ARPUs and whether those would offset a lower price point, and kind of how you're thinking about consumer choice between the multiple peers? And then, as you're making that determination, are you considering any ad-supported tiers for your other niche streaming services? Thank you. Kristin Dolan: Thanks Charlie. It's Kristin. As you mentioned, we did announce at our recent upfront ad supported tier for AMC+. We're looking at an October launch for that tier. We see it as a great opportunity to continue to superserve and expand our audiences, give more choice to consumers, and obviously provide a more holistic and robust advertising solution for our current and future advertisers. But I think it'll be probably the next call that Kim will give you more details on pricing and expectations on the ARPU front. Unidentified Analyst: Great. Thank you. Operator: All right, standby for our next question. Our next question comes from Tim Nollen with Macquarie. Tim, please go ahead with your question. Ross Compton: Hi guys. This is Ross Compton on for Tim. Thanks for taking the question. I'm interested in your background in media measurement with 605, and if you guys could discuss how you're using alternative measurements to sell ads now in your linear business or to come in the streaming business. And do you use 605 in addition to other measurement services? Are those in place? And does 605 or any other measurement services give you kind of an advantage and an increase in CPM [ph]? Thanks. Kristin Dolan: Great. Thanks Ross. It's Kristin. I'll start, and then I'll hand it over to Kim. 605 provides two services to AMC Networks. One is a measurement capability that we use internally, and the other is for attribution. I would say for the bulk of the tenure, Kim's ad sales team has used the attribution service to really validate and show the level of sophistication that our advertising team has in targeting and segmentation and then delivering results that are probably most of the time provable to be more successful than just a general ad placement. So 605 is really providing the back-end capabilities to measure and to show the attribution capabilities. But we're not currently participating in alternative measurement currencies other than to use them internally to look at our own media spend and how we can maximize that through our agency known. But I'll let Kim talk a little bit more about the integration of that and our Audience+ announcement. Kim Kelleher : Sure. Building off what Kristin was just sharing, Ross, I'd say we're very open and willing to partner with clients on alternative currency and measurement in this coming up front and year. And we're in ongoing dialogues with all the various alternative measurement companies, including iSpot, VideoAmp, Comscore, and of course 605 who we work closely with. Our standing is we've been with Nielsen a long time, and we're actively evaluating their new Nielsen ONE ad products prior to their launch. But I think that we are also following along with interest. I'm an active member on the VAB board, and we're a member of the newly formed JIC, the Joint Industry Committee. And we're taking our front row stance on witnessing the innovation that comes out in this ad marketplace for certification of unified streaming measurement. Ross Compton: Thanks. That's really helpful. Thank you. Operator: Our next question comes from Brett Feldman with Goldman Sachs. Brett, please go ahead with your question. Brett Feldman : Great. Just two questions about the evolution in your streaming strategy, if you don't mind. So the first one is kind of high level. Well Kristin, you've talked about being a much more customer or retail-centric oriented business. And I was hoping you can maybe elaborate a bit in terms of where you think you are on that journey to being more focused that way. So I'm thinking about it operationally. Do you think you actually have the operational structure in place to do that, as well as you think the company needs to? And is any additional investment needed? Do you potentially need any partners to do it? And maybe even at a higher level, if you just comment on culturally where you think you are in terms of this evolution of the business. And then sticking with streaming, we've seen a lot of your peers in the media space begin to consolidate their streaming services into flagship platforms. You came to market with a portfolio of niche streaming services that have done very well in their demos, but you've really started to have a lot of traction with your own flagship, which is AMC+, and I'm wondering if you can elaborate a bit around your thoughts on continuing to maintain this diverse portfolio of streaming products versus maybe potentially consolidating all of it into AMC+. Thanks. Kristin Dolan: I'm not going to ask you to repeat the question, Brett. So operationally, all right, I'll start there. So I'm an operator, that's why I was brought into this role, at a time when the industry is shifting and the company was in the midst of a lot of moving pieces, right, between the transition from linear to digital, the new different ways that we are looking at advertising, and then just having a 40-year-old company. And so for me coming in, we took a lot of pain in the fourth quarter last year. We said goodbye to a lot of colleagues that had been with us for many years, and we really needed to reorient the business. So we've moved past that. We're looking forward to new opportunities. And a lot of them do involve streamlining the operation, not from a headcount perspective, because we've done the bulk of that work, but more from looking at how we service our customers, both our distribution partners, as well as our direct-to-consumer customers. So reimagining our call center and our customer service functions in general, which is something I have a lot of experience with. Reimagining the backend. As most people know, there's not really a straight-out, off-the-shelf solution for streaming, and because we acquired certain streamers and others we built ourselves, we need to unify that backend and figure out what the most efficient and effective sort of future-proof technology we can put in place to facilitate as our streaming businesses grow. So those are two big areas really, the customer service function and the backend infrastructure. As far as additional investment, we don't see anything dramatic in either of those areas, but I would leave that to Patrick to speak to. And then the other thing I think that's really important is just overall morale here at the company. And as we said in the opening remarks, eliminating some of the silos, reimagining how we interact with each other. We had set up different swim lanes. So you had linear as one bucket of employees, you had streaming as another, and then the brands were also bifurcated and trifurcated. So we've kind of eliminated all of that sort of matrices and now put stuff into a more streamlined approach where people own the brands and the platforms that they are delivered on. And then we have what's been, I think a very forward-looking advertising sales group for the last three and a half years under Kim. So having a sales team that came from digital that understands cross-platform measurement, attribution and sales has been really beneficial, so we're in good shape there. On the distribution side, we don't – again, I'm a cable operator at heart. I would not bet against the MVPDs and the virtual MVPDs to find new and unique ways to solve kind of the customer management question of multiple services and streaming versus linear and really providing a great user experience across the board. So I love the fact that we have longstanding relationships with these distributors from a multi-platform perspective. So I think their success will be our success, and our goal is to have our brands front and center everywhere we possibly can, so that's a good piece. And then on the consolidation, as you said we have our transactional services, which are transactional VODs, which are unique in their approach and in what they deliver. But we also do have the more broad-based AMC+, which does well for us and now includes Sundance, IFC and Shudder as sub-brands within AMC+. So we don't anticipate any other combinations at this point, but AMC+ I think would be our broadest general service and the others continue to be targeted. So Kim, you want to add anything else? Kim Kelleher: The only thing I would add is, I think we're well-positioned for the emergence of the bundling that we're going to be seeing, which actually really meets a consumer need for choice. And you can see bundling as being part of our strategy going forward. Brett Feldman : If you wouldn't mind, if I could squeeze in a question on a different topic. We're starting to get asked about the rider’s strike, and I'm curious your take on at what point this could end up affecting the business, particularly in terms of a series of orders and deliveries. Thank you. Kristin Dolan: Thank you. I would say we're very well-positioned for all of this year and into next year, so we have no real concerns about the rider’s strike at this point. Brett Feldman : Thank you for taking the question. Kristin Dolan: Thank you. Operator: Our next question comes from Douglas Creutz with TD Cowen. Doug, go ahead with your question. Doug Creutz: Yes, thank you. I noticed your SG&A costs in the quarter were the lowest they had been, I think since Q3 or so of 2020. Is this a good level to use if I'm thinking about SG&A costs going forward? Anything sort of noteworthy in the quarter you caught that might make it abnormal? Patrick O'Connell: Hey Doug, it's Patrick. Thanks for the question. Over the last quarter or so, we've taken significant steps to take costs out of the business. That starts with both programming and marketing. Those are the two kind of biggest cost levers that we've had. So we've sort of done what we said we're going to do in that regard. A part of that to Kristin's point earlier was having to say goodbye to a number of our colleagues in Q4 and so you see the results of that kind of flowing through into the Q1 numbers here. So I would say, yes, that's a reasonable number to use going forward here. And I think more broadly, what you should understand from us is that we are very much driving this business for our margin, and so as a result of some of the cost actions we've taken, both on the programming side and on the marketing side, we're seeing those reductions yield margin and AOI in this quarter and we expect that to continue on through the balance of the year. So while we recognize it's a balancing act between investing in the business and having kind of growth levers to continue to attract the audiences and the partners that we have, that there's also an imperative here to drive the business for free cash flow today. So that's kind of in summary where we stand from an overall kind of cost kind of apparatus. Doug Creutz: Okay, thank you. Operator: Our next question comes from Robert Fishman of MoffettNathanson. Robert, go ahead with your question. Robert Fishman : Good morning, everyone. Can you provide some more detail behind the strategic non-renewal at the end of ‘22 that impacted the affiliate fees and whether we should expect more of these decisions going forward? And then on the international strategy, just given the focus on cash flow, does it make sense to pull back on investing outside the U.S. and even sell some of these international linear networks? Thank you. Patrick O'Connell: Yeah, hey Robert. It's Patrick. On the strategic non-renewal, we have identified that as Fubo. I consider that – we consider that to be a one-off. I think Fubo had a strategic imperative to drive their business more towards live sports programming. We were one of the last remaining entertainment bundles that they carried. Obviously, we have an imperative to maintain kind of price discipline in the market as well. So as sorry as we were to see them go, it didn't make sense to continue the relationship kind of given the economics that were on offer. Kim Kelleher : And I would just add to that. This is Kim, Robert. I'd just add, obviously in Kristen and Patrick's remarks around Dish, we are well into conversations with all our key partners and anticipate long and successful partnerships. Kristin Dolan: Great. And on the international plan, I would just say international is really interesting. We serve a variety of different regions and they have very different constructs than the U.S. right now. So for example, Northern Europe is very – Hungary and Romania and those areas, basic cable is $20 to $22 a month. There continues to be healthy margins coming from the international businesses that we have. Spain, we just had a major renewal in Spain that – sorry, I just wanted to confirm I'm allowed to speak about that. So we're widely distributed throughout Spain, and we will grow some streaming there. The U.K. is a little bit different, so we're working through that. But overall, even though it's a small percentage of our business, international is very healthy. It throws off very reasonable margins and we continue to plan on spending time and energy there as appropriate. Robert Fishman : Thank you. Operator: And our next question comes from David Karnovsky with JPMorgan. David, go ahead with your question. David Karnovsky: Just on domestic advertising, I wanted to see if there was any color you can give on how demand trended through the quarter or into April. And then Kristen, I wanted to get your view on the content direction of the company. You're arguably at a time of transition with Walking Dead ending and some spinoff series beginning. So I guess first, what gives you kind of confidence in the health of that franchise? And then secondly, are there areas from a programming perspective where kind of you see room for improvement? Thanks. Patrick O'Connell: Yeah. Hey David, it's Patrick. I'll start on the ad side and throw it to Kim for some additional color. Obviously, the decline in this quarter was expected on our part. It was due to lower linear ratings, softness of the ad market, which we've spoken to, and few episodes of some of our tentpole franchises, including the Walking Dead. In particular, we were lapping a tough comp in Q1, in ‘22 I would say, with both Walking Dead and Better Call Saul. So these were anticipated. And frankly, we did a little bit better than we expected. So we feel actually pretty good about it. As I said earlier, there's an immediate return on these reductions in programming that is significantly in excess of the foregone ad revenues. So clearly driving the business for near-term ROI, balanced against continued prudent investment. I'll let Kim talk to the color. Kim Kelleher : Yeah. Frankly David, I mean just building off what Patrick just shared. I'd say, yes, we're seeing a similar environment to competitors in our space, the soft scatter and marketers really being conservative with their spending right now because of the economic uncertainty. That being said, we are seeing real category strength in both health and pharmaceutical spending, as well as telecom, personal care, and to your point about early April, we're seeing signs of life and spending from automotive coming back. So a trend we very much hope to see continue. The only other thing I’d just mention is, we're also seeing very strong growth from our automated programmatic partnerships, which is enabling us to capture many more advertisers, which is giving our business more predictability and a solid foundation on the digital side. Kristin Dolan : Great. And then I'll take the content question. You know David, the Walking Dead continues to be a very popular universe. And I just watched, I just screened the two, Dead City, the first two that will be premiering next month and that's the one that features New York City in the background. And the show is as compelling and engaging and dramatic as it's ever been, so we're excited to continue that franchise. I will say, we were really, really pleased with the performance of Interview with the Vampire and particularly Mayfair Witches and we have very high hopes for continuing to activate the Anne Rice universe and grow a whole other franchise through that acquisition, of all of that IP. And then looking at the slate coming up that we spoke about in opening comments, Monsieur Spade with Clive Owen is killer. The show Parish with Giancarlo is amazing. It's another New Orleans set, kind of fast action, really interesting drama. And then Lucky Hank, which we had our final episode last Friday did incredibly well and actually grew audiences week-over-week as people became more enamored, particularly for those of you that watched it after episode five, which is like the pivotal point of the series. And then, on the other, on the streaming services, we have some great films that we've acquired. So Corsage, The Lost King, and I think a lot of people read and heard about Skinamarink, which was a sort of breakout horror film that we acquired this year that did really well. Between that and just as we mentioned, some of the anime content like Oshi No Ko and some of those shows, we're feeling really strong. The other great premiere that's coming up later this month is on Acorn, which is Happy Valley, which is season three of a really good British crime drama. That was like the top of the conversation when season three premiered in the U.K. a couple months ago. So I feel really good about our slate as Patrick mentioned, like really settling down at around $1 billion market investment is where we were successful throughout the teens and into the early 20’s. So like we feel very comfortable that that's an appropriate level that we can maintain and still present everything that really speaks to our success in the past as creating great franchising and really delivering excellent high quality breakout content, so feeling really good about the content. Operator: Our next question comes from Ryan Gravett with UBS. Ryan, please go ahead with your question. Ryan Gravett: Great. Thank you. Maybe just on the licensing business. You mentioned that it would be down this year just given the deliveries that you had towards the end of 2022. But just curious how you're thinking about approaching licensing in ‘23 and beyond, especially with some of your big franchise IP coming back. And I guess you see more opportunities to leverage your production capabilities like you did for the Apple TV series. Thanks. Kristin Dolan : I think that's like a three-parter. So I'll start overall. We're definitely sort of walking the line between we don't want to be an arms dealer. We have very strong brands and very strong franchises. So what we're doing I think is looking at optimizing the distribution of our franchises and our films everywhere that we can in a way that still allows us to preserve the brand equity that's associated with each of those series. So you'll know it's coming from AMC. You'll know it's coming from any of our brands, because we will make the effort, and particularly with franchises that we already own that are visibly AMC content like The Walking Dead, we will continue to distribute those and monetize them as much as possible. But I think the main thing is to preserve the brand equity and to keep doing what we're doing on linear and also on our streaming services. Kim Kelleher : The only thing I'd add to Kristin's point is we're thinking it's with our portfolio of content, we think show by show and what is the best way to monetize that and making sure that it is in front of the fandom and the viewers that want to see it. So at the international level, that means going region-by-region more so than globally right now. But we're open to those conversations on certain shows. Domestically, it's very much the same approach. We consider each show and map a plan to how we're going to distribute and perhaps license that show. So while it's down year-over-year with the SILO comps, which Patrick will talk to in a second, I actually feel like we are optimizing and maximizing the yield in our content licensing strategy. Patrick O'Connell: Yeah. Hey Ryan, it's Patrick. The only thing I'd add there in terms of our tactical approach to the market vis-a-vis being in a “arms dealer” is that we will take a – I will characterize it as highly tactical approach. There's no project that we have to do, right. We program our own networks, that gives us a fantastic sort of perch and a web of relationships that we can monetize. Our production of SILO which premiered a couple of days ago is evidence of that. If there's an economic equation that makes sense and we can earn a reasonable margin at a reasonable risk, we will take those swings. But we don't have to be in the market chasing deals to generate revenue, because we produce for ourselves. So again, highly tactical and the economics have to make sense. Ryan Gravett: Great. Thank you all. Operator: This concludes our question-and-answer period. I would now like to turn it back over to Nick Seibert for closing remarks. Nick Seibert : Thank you everyone for your time today. This concludes the call. Operator: Thank you for your participation in today's conference. This does conclude our program. You may now disconnect.
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AMC Networks Inc. Faces Financial Challenges Despite Strong Brand Presence

  • AMC Networks Inc. (NASDAQ:AMCX) was downgraded by Morgan Stanley to "Underweight" due to concerns about its future financial performance.
  • The company reported an EPS of $0.91 for Q3 2024, surpassing estimates but showing a significant decline from the previous year.
  • Despite a slight increase in stock price, analysts predict a decline in future earnings, reflecting challenges in sustaining growth.

AMC Networks Inc. (NASDAQ:AMCX) is a prominent player in the entertainment industry, known for its popular television channels and original programming. Despite its strong brand presence, the company faces challenges in maintaining its financial performance. On November 11, 2024, Morgan Stanley downgraded AMCX to "Underweight," with the stock priced at $8.45, indicating concerns about its future prospects.

During AMC Networks' Q3 2024 earnings call on November 8, 2024, key executives, including CEO Kristin Dolan and CFO Patrick O'Connell, discussed the company's financial results. The earnings per share (EPS) for the quarter were $0.91, surpassing the Zacks Consensus Estimate of $0.86. However, this figure represents a significant decline from the $1.85 EPS reported in the same quarter the previous year.

The earnings call, attended by analysts from firms like Morgan Stanley and Wells Fargo, highlighted concerns about AMC Networks' future earnings. Analysts predict a decline in earnings in upcoming reports, suggesting that the company may not meet expectations. This outlook aligns with Morgan Stanley's decision to downgrade the stock to "Underweight."

Despite the downgrade, AMCX's stock price has seen a slight increase, currently trading at $8.65, up by approximately 1.05%. The stock has fluctuated between $8.55 and $8.75 today, with a market capitalization of around $381.4 million. Over the past year, AMCX has experienced significant volatility, with a high of $20.97 and a low of $7.08.

AMC Networks' trading volume on the NASDAQ exchange is 133,774 shares, reflecting investor interest amid the company's financial challenges. As the company navigates these difficulties, stakeholders remain cautious about its ability to improve earnings and sustain growth in the competitive entertainment industry.

AMC Networks Plunge 28% After Announcing $125 Million Convertible Notes Offering

Shares of AMC Networks (NASDAQ:AMCX) fell over 28% intra-day today after the company announced plans to offer $125 million in convertible senior notes due 2029 through a private placement.

The company mentioned that it might grant the initial buyers an option to purchase up to an additional $18.75 million in notes. The proceeds from this offering are expected to be used for general corporate purposes, which could include debt repayment.

In May, Morgan Stanley analysts maintained an Underweight rating on both Paramount Global and AMC Networks, citing ongoing challenges in traditional media. They highlighted concerns such as declining linear network revenues, the migration of sports rights to streaming platforms, and diminishing pricing power with multi-channel video programming distributors (MVPDs).

AMC Networks Inc. (NASDAQ:AMCX) Faces Challenges in Q1 2024

  • AMC Networks Inc. (NASDAQ:AMCX) reported earnings per share (EPS) of $1.16, missing the anticipated $1.79, and revenue of approximately $596.46 million, slightly below the forecast of $602.6 million.
  • The company highlighted its commitment to maintaining healthy free cash flow and producing compelling content despite lower-than-expected financial results.

AMC Networks Inc. (NASDAQ:AMCX), a prominent player in the entertainment industry, faced a challenging first quarter in 2024. The company, known for producing and distributing content across various media platforms, reported earnings per share (EPS) of $1.16, falling short of the anticipated $1.79. Additionally, its revenue for the quarter was approximately $596.46 million, slightly missing the forecast of $602.6 million. This performance indicates a notable deviation from expectations set by analysts and investors alike.

During the earnings call, as highlighted by Seeking Alpha, AMC Networks' executives, including CEO Kristin Dolan and CFO Patrick O'Connell, discussed the company's strategic initiatives and financial outcomes. Despite the lower-than-expected financial results, the company emphasized its commitment to maintaining healthy free cash flow and producing compelling content. This approach is crucial as AMC Networks navigates the evolving media consumption landscape, aiming to adapt to consumer-driven changes in the industry.

The company's operational highlights included the debut of "The Walking Dead: The Ones Who Live" on AMC and AMC+, which has become one of AMC’s best-performing series. This success underscores AMC Networks' ability to continue delivering popular content that resonates with its audience, a key factor in its strategy to strengthen its financial position and enhance flexibility.

However, the financial metrics reveal a significant decline compared to the previous year, with a 16.9% decrease in revenue and a sharp decrease in EPS from $2.62 a year ago. These figures, reported by Zacks Investment Research, indicate that AMC Networks underperformed compared to Wall Street expectations, delivering an EPS surprise of -35.20% and missing the Zacks Consensus Estimate for revenue.

Despite these challenges, AMC Networks is focusing on strategic priorities, including the completion of financing transactions that extend debt maturities. This move is part of the company's efforts to adapt to the industry's consumer-driven changes, highlighting its proactive approach to navigating the competitive entertainment landscape.