AMC Networks Inc. (AMCX) on Q3 2022 Results - Earnings Call Transcript

Operator: Good day and thank you for standing by. Welcome to the AMC Networks Third Quarter 2022 Earnings Conference 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. 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. Please go ahead. Nick Seibert: Thank you. Good morning and welcome to the AMC Networks third quarter 2022 earnings conference call. Joining us this morning are Christina Spade, Chief Executive Officer; Patrick O’Connell, Chief 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 at the end of today’s press release. With that, I’d like to turn the call over to Chris. Christina Spade: Good morning, everyone and thank you for joining us. As I begin my new role as CEO of AMC Networks, I am proud to lead the company at one of the most exciting moments in our history on many fronts. Today, I will discuss our third quarter 2022 operating performance and our goals and strategies for future value creation based on what we are seeing in today’s landscape. Patrick O’Connell, our new CFO, who joined the company in August, will then review our financial performance in more detail. In the third quarter, we added 300,000 streaming subscribers and we now have 11.1 million total paid subscribers, representing a 44% year-over-year increase in subscribers and a 41% increase in streaming revenue. We continue to expect we will end the year with approximately 12 million total streaming subscribers. Our meaningful and consistent streaming growth has been driven by our strong content slate, coupled with our strategic marketing efforts which have been significantly evolving this year. Our third quarter results were impacted by several factors, including strong streaming growth, the timing and availability of content licensing deliveries, a softer scatter and direct response advertising market and unfavorable foreign exchange impacts. As a result of these market indicators, we expect full year 2022 revenue growth to be flat-to-low single-digits. Due to better visibility of the timing of certain production items, we also anticipate full year free cash flow to be between breakeven and $50 million for 2022. Our year-to-date adjusted operating income margin is 28%, which reflects our consistent ability to strategically manage our investments for strong profitability. Patrick will review our guidance in greater detail shortly. AMC Networks is in the midst of an important transformation with streaming growth momentum and new opportunities that are enabling us to transition to a consumer-focused multi-platform premium content company with a strategic mix of proven and new digital distribution revenue streams. In the two years since the October 2020 launch of our premium subscription AMC+ streaming offering, we have significantly grown global distribution. With AMC+, we are offering a compelling content mix to create a very specific value proposition for viewers, centered on premium content offerings for discerning adults, which is the cornerstone of our AMC brand. With the success of AMC+ and our targeted services, Acorn, Shudder, ALLBLK and HIDIVE, we are effectively executing a differentiated streaming strategy, super serving passionate audiences with highly curated content offerings. We are utilizing a broad array of our platforms to showcase and window our content as we fully monetize our content investment across our linear streaming and – expanding digital platforms. We are leading in advanced advertising as we take advantage of new revenue opportunities, particularly in the deployment of addressable advertising and programmatic buying to forge a clear path of growth in digital advertising revenue. Underlying all of this is the strength of our content curation, driven by a diverse slate of excellent storytelling that viewers fall in love with, and they can’t live without. This is our North Star that will drive our ongoing success. Against this backdrop, we are nimbly navigating secular trends, a fast-changing and competitive marketplace and ever-evolving consumer behaviors. I have witnessed firsthand particularly over the past 6 months to 12 months our ability to successfully iterate and learn from what we are seeing in the marketplace as consumers engage with our brand offering. At this juncture, we are keenly focused on – strategically operating within the digital marketplace that is taking shape for the future, while also optimizing our linear hest. Ongoing success will be driven by strong execution of three key goals. First, develop, create and curate world-class premium content tailored for our target audiences and communities to drive high engagement. Second, prioritize IP ownership to fuel our multi-platform distribution opportunities and digital growth. And third, manage winning economics and profitability for the long-term as we continue to reconstitute our revenue mix. The best and most recent example of our content strength is our successful October 2nd debut of Anne Rice’s Interview with the Vampire. We developed and launched a carefully orchestrated marketing campaign that significantly broke through to new and existing fans, utilizing our multiple distribution platforms and our awareness and performance marketing capabilities as a powerful megaphone to launch the series and our new Anne Rice Immortal Universe franchise, our campaign kicked off earlier this year at San Diego Comic-Con, and in September, our new AMC+ brand campaign with our new Above and Beyond tagline, fueled strong awareness leading into the series launch which was in tandem with the premiere of the final 8 episodes of the Walking Dead flagship series, providing us with a huge built-in audience. It has been a winning formula for us with Interview with the Vampire ranking as the most successful launch in the history of AMC+ in terms of viewership and acquisition. Parrot Analytics recently reported that since the three week, Interview has had nearly 25 times the demand for the average show in the US with week-over-week increases underscoring AMC Network’s ability to punch well above our weight and create thought-after content that garners outsized attention and engagement. The critically acclaimed series is also the number one new drama on ad-supported cable for 2022 to-date, demonstrating the continued strength of our linear platform with AMC being home to 4 of the top 15 cable dramas this year in both key demos. Overall, these results are a strong validation of the coordinated efforts that supported this launch and an indication of how we are strategizing around these big content moments in the future. The next series in our Anne Rice Immortal Universe Anne Rice’s Mayfair Witches starring Alexandra Daddario, will premiere on January 8th, 2023 on AMC+ and AMC. Our talented team has already begun early promotion to launch this series strongly, including promotion at New York Comic-Con last month and targeted awareness marketing in Q3 and Q4. As we look forward to the last weeks of the Walking Dead flagship series, the most successful show in the history of cable television, we are excited about the growth prospects of our planned expansion of this franchise, with several new series, including The Walking Dead: Dead City, which recently wrapped production, a spin-off featuring fan favorite, Darryl Dixon, set in Paris and also in 2023, we’ll have the return of Fear the Walking Dead for its eighth season, with more to come, including a new series starting Rick and Michonne. These new series in the Walking Dead universe will propel this vibrant and vital global franchise in exciting new ways, engaging loyal fans who continue to display affinity and enthusiasm for this universe while appealing to a whole new generation of viewers as well. I would like to spend a moment on how we have approached franchise management around both of these important properties. Within less than two years of buying the Anne Rice IP rights, we have begun to premiere two strong series in this franchise with more to come. The excellent creative team supporting this universe are already writing a second season of Interview with the Vampire and we have Mayfair, which is produced and ready to kick off in 2023. As for the Walking Dead, yes, the flagship series is ending after 11 seasons and more than 175 episodes. But even as we mark this epic television moment, we have new stories featuring the most enthralling characters, providing a compelling entry point for new fans. So we have two things happening at the same time in our company as it relates to effective franchise management and our long-term IP ownership strategy. The successful launch of a powerful universe and the effective management of an iconic one, enabling us to serve existing fans, while opening the door to new fans, fueling the continued growth of our franchise communities. For our targeted streaming platform, Acorn, Shudder, ALLBLK and HIDIVE, we are highly focused on acquiring, retaining and engaging subscribers with a profitable lifetime value, and optimizing our content refresh rate to give us the greatest potential to have an impact with new and existing subscribers. With our targeted strategy, we offer an array of content that is diverse and enables us to build affinity-based loyal communities in a cost-efficient manner, putting us firmly on a path for profitability and strong lifetime value of subscriber performance. Our second goal is to prioritize content ownership to fuel maximum multi-platform revenue monetization. Content ownership, including maintaining global rights provides us with key benefits to fully maximize all of the revenue streams from our content investments across all window distribution platforms. Strategically prioritizing content ownership, especially for our franchises provides optionality in terms of windowing content across their efficient and dynamic ecosystem of own platforms. And as we continue to expand internationally and creates the opportunity to license our content to third-parties when and if it makes sense to do so. As the distribution and streaming landscape continues to evolve, our digital platforms are evolving and expanding creating new avenues for monetizing our high-quality content and tying to our third goal, maximizing the value of new digital opportunities and taking full advantage of the strength of our linear television business as we manage winning economics and profitability. We are utilizing our deep content libraries as we lean into the FAST and AVOD space. And we now have 14 FAST channels on 7 leading platforms, including Roku, Pluto, Samsung, VIZIO, Plex, Sling and Comcast Xumo. Our linear networks are outpacing other cable networks by a wide margin, demonstrating the strength of our channel portfolio. For the first nine months of the year, the primetime average delivery across our five linear network matches our performance across the first nine months of 2021, outperforming the wider landscape in which cable networks on average are down 13% year-to-date. Our linear networks and our digital platforms are a complete strategic distribution ecosystem that we use in a dynamic way to elevate our popular and acclaimed content and use it to reach our fans, particularly younger and digitally savvy viewers. This ecosystem allows us to effectively and efficiently window our content. One of the foundations and core strengths of the television business, and also to apply new tech-enabled areas of monetization. In particular, we are seeing strong growth year-over-year in digital advertising and increasingly meaningful revenue category for us. Relative to affiliate distribution, we have an expanding array of long-standing and mutually beneficial partnership relationships that bring hest and strength to everything we do. Yesterday, we expanded our partnership with Roku to feature AMC Networks’ high-quality original programming, FAST channels and targeted streaming services across Roku’s broad and growing ecosystem. This agreement highlights the value we bring to our distribution partners with our premium content and platforms. Internationally, we are proceeding with an opportunistic approach, leveraging the strength and reach of our strong global partner relationships. We are launching AMC+ in international markets, including new launches in the third quarter in Australia and New Zealand through strategic partnerships. Overall, we are mindful that the most effective way to successfully navigate the dynamic and evolving consumer landscape is to focus on the needs and interests of consumers, and on our ability to super serve fans of our content with the entertainment they love and value. We will continue to innovate strategically and opportunistically and balance the importance of driving winning economics with profitability for the long-term. I would like to take a moment to acknowledge and thank our talented global AMC Networks’ team for all they are doing to drive our success. And I would like to officially introduce Patrick as our new CFO. It is an honor to be working with Patrick again. I have no doubt that his proven track record for strong and strategic financial leadership will serve us well and will be a driving force for further value creation for AMC Networks. Patrick O’Connell: Thank you, Chris and good morning, everyone. It’s great to be working with Chris again. Having spent a couple of months taken a deep look at our business, it’s clear to me that AMC Networks’ unique assets and capabilities, coupled with our nimble strategic approach position us to succeed as the landscape shifts and consumer behaviors evolve. AMC Networks, a strong studio and original programming powerhouse occupies a unique position in the media ecosystem, punching above our weight class with culture-defining entertainment and a differentiated streaming business model that sets us apart. As Chris mentioned, our foundation rests upon carefully curated world-class programming for discerning and passionate audiences. Nevertheless, we’re keenly aware of both the secular shifts and the macro headwinds the industry faces and are taking a prudent path where we see strategic and financial opportunities as we calibrate investment levels and profitability. Strategically, we will continue to super serve our target audiences. Financially, we will continue to monetize AMC Studio’s owned IP on our platforms and on others, and maintain our disciplined approach regarding programming investments and expense management. Now I will review our third quarter 2022 financial results. Consolidated revenue decreased by 16% to $682 million, largely driven by the timing and availability of content licensing deliveries, lower affiliate and advertising revenues and unfavorable foreign currency translation, partly offset by strong streaming revenue growth of 41%. Consolidated adjusted operating income decreased by 14% to $194 million, with a margin of 28%, reflecting lower revenue, partly offset by lower operating expenses and SG&A, driven by disciplined cost management and the timing of our content and marketing investments. Adjusted earnings per share was $2.09. For our segments, domestic operations revenue decreased 14% to $587 million driven mainly by delivery and timing related to content licensing. Domestic operations content licensing revenue decreased 63% to $58 million due to fewer deliveries in the third quarter. As we have previously stated, the timing of full year content licensing revenue remains heavily weighted to the fourth quarter. In the third quarter, we delivered fewer episodes of The Walking Dead and Fear the Walking Dead, both of which were strong contributors in the prior year quarter. In 2022, these titles are delivered content licensing revenues in the fourth quarter. Domestic operations subscription revenue growth of 8% was driven by continued strong streaming performance. Paid streaming subscribers grew 44% year-over-year to $11.1 million at the end of the quarter. We are also beginning to realize the benefits of the price increases in May 2022 for Acorn and ALLBLK. Streaming revenue grew 41%, more than offsetting affiliated revenue declines. Domestic affiliate revenues declined in the mid-single digits, driven by subscriber universe declines, partly offset by contractual rate increases. Domestic operations advertising revenue decreased 10% to $180 million, primarily due to lower linear viewership, softer scatter and direct response markets, and fewer original hours, partly offset by digital and advanced advertising revenue growth. Domestic operations adjusted operating income of $207 million representing a 35% margin decreased 11%. The decrease in AOI from the prior year was primarily attributable to revenue performance and partly offset by lower operating expenses, including lower programming and marketing investments. For our international and other third quarter results, revenue decreased 24% to $99 million, the result of lower distribution and advertising revenues and unfavorable foreign currency translation. Excluding the impact of FX, revenue decreased 16%. International and other distribution revenue decreased 22% to $82 million, primarily due to the timing of production of 25/7 Media and unfavorable FX. Excluding the impact of foreign currency translation, distribution and other revenues decreased 15%. International and other advertising revenues decreased 31% to $17 million primarily due to the impact of the planned wind-down of two channels in the UK, the unfavorable impact of FX and softer ratings in the UK. Excluding the impact of foreign currency translation, advertising revenues decreased 20%. International and other adjusted operating income decreased 40% to $13 million in the quarter, reflecting decreased revenue and unfavorable impact of FX. Excluding the impact of foreign currency translation, adjusted operating income decreased 36%. Next, moving to consolidated free cash flow and the balance sheet. Free cash flow for the third quarter of 2022 was $4 million reflecting the current timing of productions for our 2023 and 2024 content slates. We ended the third quarter with net debt and finance leases of approximately $2.1 billion. Our consolidated net leverage ratio was 3 times at quarter end, and we remain comfortable with our balance sheet and current leverage ratio. Our capital allocation policy remains unchanged. First, we will look to invest organically in projects that provide attractive returns to our shareholders. This includes return-based investments in our streaming services. Second, we will maintain leverage that is appropriate for our business outlook. Third, we will consider disciplined strategic M&A. And fourth, we will be opportunistic in returning capital to shareholders. Moving to our subscriber outlook for 2022. We continue to expect that our yearend total subscribers will approximate $12 million, driven by the strength of our fourth quarter programming. Regarding our financial outlook for the full year 2022, we anticipate total company revenue growth to be flat-to-low single-digits, driven by the current ad market and foreign exchange headwinds. And we continue to expect year-over-year growth in both subscription and content licensing revenues. Adjusted operating income will be approximately 10% lower than 2021, consistent with our prior guidance due to strategic investments in programming and marketing. Moving to our free cash flow outlook. We expect to deliver free cash flow between breakeven and $50 million for the full year of 2022, reflecting our current revenue outlook and the timing of certain production items. On our programming spending, while quarter-to-quarter timing will vary, it is important to note that we do not anticipate material increases to our current full year programming investment levels. In summary, we believe in the value of world-class, carefully curated content that super served our targeted audiences and we’ll continue to be careful and thoughtful stewards of capital as we focus on balancing investments in growth and the maintenance of strong profitability. With that, operator, please open the line for questions. Operator: And thank you. And our first question comes from Tim Nollen from Macquarie. Your line is now open. Tim Nollen: Good morning. Thanks for taking the question. I’ll just ask one, but I may have a couple of parts to it. It’s about your new deal with Roku. Interesting to see 11 FAST channels, I think, launching there. Could you just maybe remind us what you have with other FAST services? And then how incremental this Roku deal might be for you? And then another part to the question is, Roku has had some issues lately with its ad revenues dropping. I think some of that is due to its reliance on insertion orders. You, by contrast, I think has some pretty interesting developed advanced advertising you know programmatic efforts underway. And I wonder if you could speak a little bit to what you might be doing in this Roku deal with those? Thanks. Kim Kelleher: Hi, Tim, this is Kim Kelleher. Thanks for your question. We’re excited about this partnership and that we announced with Roku yesterday. You’re absolutely right, it’s 11 channels, we will start to go live on the 15th of November. This does round out the 7 platforms that we’re currently on, as Chris mentioned, Pluto TV, Sling TV, Samsung TV Plus, Vizio SmartCast, Plex and Comcast Xumo. Sales rates are an important part of our strategy. We work in partnership with the platforms that distribute our channels. And one thing that AMC Networks does very differently, I think, overall than others is really optimizing our channel performance in a very concerted partnership way. We do all the programming and scheduling with our partners of these channels constantly tweaking, constantly – like regularly going back and making sure that we’re creating a viewer experience that is optimal and representative of our brands. As Chris also mentioned, these channels are drawing a very fast-growing younger new audience or viewers to our content. You know one thing that I would say to answer the second part of your question is, as we continue to roll this out, our programming strategies continue to drive the different verticals that we see, and we see a lot of opportunity for growth. You know we have other genres and segments that we have yet to launch in, and we see this continuing to be a big opportunity. Tim Nollen: Thanks. Operator: And thank you. And our next question comes from Thomas Yeh from Morgan Stanley. Your line is now open. Thomas Yeh: Thanks so much. Chris, you mentioned the success of Anne Rice on both new growth starts and existing subscribers. Can you talk a bit about how you see the overlap or the incrementality of your franchise TAMs you know between the Walking Dead and now Vampire? Is the subscriber opportunity that you see for AMC+ retention-based? Or are we thinking about trying to build a bigger TAM and target more audiences across different spheres? And then a follow-up. Can you talk about how unit economics for the international distribution for AMC+, I mean, in light of some of the news from Stars last night about exiting some of the international markets? It seems like it’s a tough space to scale in. So, any color on profitability abroad would be really helpful. Thank you so much. Christina Spade: Thank you, Thomas. I appreciate your questions. Your first part question about the Anne Rice IP and how it overlaps with the Walking Dead. So relative to our AMC+ and AMC brands, our new tagline is specifically designed with the testing that we did to really show that we are offering above and beyond content that everyone out there who’s consuming streaming content, you’re taking up important and precious time to watch streaming and you want an escape. You want something that’s going to take you to a different world. And so we’re really trying to you know play into that consumer’s interest in being entertained in that way. And so the Walking Dead franchise and the Anne Rice Immortal Universe franchise really play into that. So there is some overlap across the franchises, but what we’re seeing is, where we have the iconic Walking Dead franchise that there’s a lot of vested fans already in that space. Some of what I’ve honestly heard is that, you know we’re up to season 11 in the flagship series, and people are saying you know I’ve never watched Season 1, so no I’m not going to really spend the time to get into it. And the other thing we’re seeing is a lot of people are watching Season 1 and they’re getting addicted to it. And the interesting thing with the Walking Dead Universe is because it has been around for so long, and it is so iconic, even with this 11th season, we designed the 11th season in a way that you could just pick up watching episode 1 of season 11. And you may not know everything going on in episode 1, but you will pretty quickly understand who’s who. And then you will still be able to truly enjoy the finale on November 20th. And so as the flagship series comes to a close there, we are now pivoting to have additional series in that universe that we’re seeing you know will hopefully captivate new fans and engage the existing ones. And Interview with the Vampire, we are seeing that we’re captivating younger audience. We’re also captivating all the levers of the IP that have read all the books. You know I’m one of them. When I was in high school and college, I read all that IP, and I loved it. And I’m so proud of what we’ve done with Interview with the Vampire. I think Anne Rice, god rest her soul, hopefully, is proud of what we’ve done as well. So we’re really looking at expanding our TAM. You know I guess that’s a long way to answer your question that we are looking to expand the TAM and not – you know narrowly define it. Relative to international distribution, international, our strategy continues to be that we will not really spend a lot of money investing in the beginning. We will launch with our partners and it has been you know a good approach for us, because it requires low investment to launch with the bigger partners that are out there, Amazon and Apple and then even local bigger partners in each of the regions, Orange in Spain is a good example of that. And so as we see how those markets take shape, we are then selectively launching our direct-to-consumer apps in regions that we see we will have and generate good lifetime value there. But our approach is not trying to be everywhere at any cost. It’s really about what are the economics that work for us and does it make sense for us to expand there. And that will be a longer-term strategy that will play out, and we like what we’re doing there already, and I think it will continue to expand in a way that maximizes profitability. Operator: And thank you. And our next question comes from Michael Morris from Guggenheim Securities. Your line is now open. Michael Morris: Hi, thank you very much. Good morning guys. I have two questions. My first one, I guess, maybe is for Chris, and it’s about your – you know your distribution decisions of this content, right that’s you know maximizing the multi-platform sort of monetization, if I can. It feels like the industry is as complex as ever and the decisions you need to make are as complex as ever. So maybe can you update us on how you are deciding? You know how you’re prioritizing where things go? And whether that you know prioritization has shifted, if you expect it to shift? I’m really just interested in terms of how you think about making the most of this content that you decide the order in which or the destinations you want to monetize it through? And then my second question is perhaps for Patrick on free cash flow. You know the guidance for the full year is a relatively low free cash flow conversion compared to your historical trend. So I’m curious if you could just talk about why free cash flows you know kind of lower this year? And how you think about longer-term conversion, whether you think historical levels are achievable or whether there’s a new normal with respect to that metric? Thank you. Christina Spade: Thanks, Mike. I appreciate the questions. Relative to our distribution decisions for content, you know our segments are deliberately set up in the way they are with our domestic operations, including the power of all of our distribution revenue streams. You know I’ll use Interview with the Vampire as an example that we make a significant investment in the original series where we own global rights. And then we look to carefully window it out that we can go across each of the windows of the platforms to optimize the return that we’re going to get on investment over the life cycle of the show, which the Anne Rice IP, as it’s coming together, especially with that show, and as we have more seasons of it, it will become important evergreen content for the future as well. So as you think about the windowing, we make an investment in original series or even original films for the IFC films where we have long-term rights, for example, and then we look at each window. You know we will – right now, our approach is that we, for AMC and AMC+ series, we put it first on AMC and AMC+ and use that megaphone and that’s in the US. And then we’re also doing it on a linear basis in international markets that we’re in. And then where we have selectively launched AMC+ elsewhere. But then as it moves through the windowing chain, we will look to monetize it in any way we can. So also for Interview with the Vampire as an example, any place that we don’t have AMC+, we will look to optimize and license those rights if we’re not going to be in that market anytime soon. And so we’re constantly looking at all of that. But we’re looking at our windowing and our optimization more for the long-term and the short-term. We’re not kind of really looking at like, hey, we can quickly sell this and get some more money for the quarter. We’re really looking at how do we make the most of this for the long-term and then make sure that it will be there for us in our library that we can also benefit from it for the future. And it is shifting. You know I think your point is right on. It continues to shift, and it will continue to shift. And that’s where I think our nimbleness is very important in the sense that we’re constantly looking at what is happening in the marketplace, and how can we possibly make the most of it with what’s going on in a way that stays true to our long-term strategy. Michael Morris: Thanks, Chris. Patrick O’Connell: Michael, on your free cash flow point, you know obviously we took the guidance down for this year. There’s a couple of factors in there. If I unpack it a little bit. Some of it is just a flow through, obviously you know from the weaker revenue we see on the advertising side. There’s a bit of noise on the production side. We don’t time productions over quarters or years. And so there’s a bit of that. And frankly, there’s a little bit of kind of working capital where we don’t always control the timing of certain tax credit receipts, et cetera. So that’s the reason we’re taking the free cash flow guidance down a little bit this year. In terms of going forward, obviously we’ve made the decision to be very disciplined in our content and programming investment. We think we will – that will certainly continue to be the case. We are also taking a focused and disciplined approach to programming individual channels across our channel efficiency. And I think as these products sort of evolve and we continue to see the programming efficiency that’s sort of – and that is attached to these sort of super-served platforms, we think we’ll see the benefits of that. You know going forward as you’ve heard us say, we’re very much focused on a multi-platform monetization model. And so we’re very much focused on driving margins going forward and driving as much margin and free cash flow out of the business as possible. Operator: And thank you. And our next question comes from Michael Nathanson from MN Research. Michael Nathanson: Great, thanks. Good morning everyone. I have three for you on streaming. The first is, you noted you took a price increase in the spring. I’m wondering, any update on churn post the price increase? What have you seen? Secondly, an update internationally on what markets you’re going to launch in Q4? And any outlook on ‘23 what markets that you still have to come for international launches for streaming? And lastly, one of the pictures we’ve heard on FAST is that, it helps to be a linchpin or launching pad for new streaming subscribers. So can you talk a bit about what you’ve seen in your other platforms as you’ve launched FAST and what has been the conversion rate from FAST to paid subscribers? Christina Spade: Good morning, Michael. Thanks for your questions. Relative to the price increases that we took for Acorn and ALLBLK, we really didn’t see any significant churn. It was fairly stable. I stick to what I said on the last call that I was really thinking that maybe we should have increased it by $2, because it has been stable. And so I think that was a good move for us. And we continue to look at pricing and how the pricing relates to our subscribers. We obviously want to have the best value proposition we can for our subscribers, but we also want to maximize our top line performance. And so churn as you indicate, is a key part of that. And it is the key factor to think about when we’re looking at what our price point should be. On the international front, we don’t really have any additional news to put out for what’s coming down the pike. But as we look to what our partners are doing and as we explore different markets, you know there will be more to announce there for the future. And then I’ll turn it over to Kim for the FAST question. Kim Kelleher: Thanks, Chris. It’s a great question. You know on certain closed-loop distribution platforms like Samsung TV Plus and the other OEMs where you can watch supported AVOD channels or FAST channels and subscribe to our services, we’re seeing real benefits to those closed-loop systems. And we’re seeing – actually, it’s really the funnel of younger, more digitally savvy viewership coming in through the top of the funnel and then being able to, within the same ecosystem, push them through promotion in partnership with the platform directly into our services targeted and AMC+. So we are starting to see the FAST channels are driving subscriptions within the platform environment. Michael Nathanson: Okay. And can you just go back to a question for Patrick. On – Patrick a question on free cash flow. You know on my last question, the question I have is, are you looking to actually optimize free cash flow? Or is this psychology of, look, we have an opportunity to keep growing you know managing the cash the way we used to do in the business may not be the most strategic decision given the opportunity you have to grow. So how do you balance kind of the need to deliver cash flow for us versus the opportunity you see in reinvesting that cash flow for growth, which you’re sharing today? Patrick O’Connell: Yeah, sure. Thanks, Michael. Listen, from a capital allocation standpoint, we’re – you know we clearly continue to invest in the business. I would say we are titrating that investment, however. You know, obviously we’ve got a linear ecosystem that is shrinking. And we’ve got a digital ecosystem that is side that programming works largely across . Christina Spade: And we still have a good runway for streaming growth to come. And so we’re going to be very diligent and thoughtful about how we prioritize you know what we lean into. But as the digital and streaming revenue becomes stronger and even more meaningful, it’s already at a very healthy level. And so we’re very proud to see where it’s at. But as it continues to strengthen and grow in the long-term you know we are going to look to have that cash come back and drop down and you know it is about optimizing the cash flow. Michael Nathanson: Thanks. Operator: And thank you. And our next question comes from Steven Cahall from Wells Fargo. Your line is now open. Steven Cahall: Thank you. Maybe first just a little bit of context on the advertising market. Could you remind us how your linear ad revenue splits in terms of how much you’re able to sell in the upfront and then how much you sell in the scatter market? And it would be great to hear some of your latest thoughts on the scatter market. We’ve heard from some peers that there is some softness there, whether that’s due to macro or AVOD launches like Netflix. So I would love to get your update there and how you see that trending as we get into next year? And then, Patrick, I know you’re not guiding to 2023 free cash flow. It seems like there’s a big emotional line for investors that when free cash flow is trending down or going negative. Stocks tend to follow. And then when it reverts, they can go up again. So I’m just curious if you think this is the trough free cash flow year for AMC? Or as you continue to invest and make the pivot to direct-to-consumer that could still be to come? Thank you. Kim Kelleher: Thanks, Steven. This is Kim. It’s like you said, broadly, our ad-supported networks are experiencing the same environment as others in the space. The scatter markets have been soft. The climate of economic uncertainty has really resulted in our marketing partners and everyone’s marketing partners being more conservative with their spend. I think that while the prevailing conditions are subject to outside factors, we’ve really been leading the industry in a lot of critical ways that we’re going to stay myopically focused on. We’re trying to maximize the strength and potential of our existing linear television business through our advanced advertising efforts, initiatives and build-outs. We’re building the tools and technologies we need to build our digital business now and into the future. And we’re also seeing real positive impact from what we talked about earlier this year on our automatic – our automated programmatic partnerships, which really enables us to capture larger amounts of advertisers with a lower barrier of entry. So that is truly growing the pool of marketers that we work with from the traditional linear sense in the past. I would say from – in regards to the upfront, we saw strong CPM increases, and we are going to see that actually continue from the ‘22-’23 upfront through the first three quarters of next year. We were at the high end of the cable market for several of our networks. That being said, our revenue outlook going forward reflects what we’re seeing in the current ad market. And we’re going to remain kind of cautious and very attentive around the broader macroeconomic environment. Patrick O’Connell: And on your – it’s Patrick speaking. On your cash flow question, I would say, listen, as it relates to you know free cash flow, we’re obviously, as I said before, being very cautious in titrating our investment into additional programming. And so you know going forward, we will monitor that investment very carefully. We’ve drawn a line in the sand that, that’s not going to increase materially. And we’re going to invest on a – when we see results, we continue to push in for growth, but not at the expense of driving significantly negative free cash flow. So we’re absolutely focused on it. We want to sort of invest where we see opportunity and we see sort of growth in near-term profits, and I’ll leave it there. Steven Cahall: Thank you. Operator: And thank you. And I am showing no further questions. I would now like to turn the call back over to Nick for closing remarks. Nick Seibert: Thank you very much, everyone for joining us today and thank you for the interest in AMC Networks. This concludes the call. Have a good day. Operator: Thank you. This concludes today’s conference call. Thank you for participating. 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.