Q2 2023 AMC Networks Inc Earnings Call
Yeah.
Okay.
Thank you for standing by and welcome to the AMC networks second quarter 2023 earnings Conference call.
At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time. Please press star one on your telephone.
As a reminder, today's call is being recorded.
Now I turn the call over to your host Mr. Nick Seaberg, Vice President of corporate development and Investor Relations. Please go ahead.
Thank you good morning, and welcome to the AMC networks second quarter 2023 earnings Conference call. Joining us. This morning are Christian Dawn, Chief Executive Officer, Patrick O'connell Chief Financial Officer.
Kim Callahan, Chief commercial officer, and Dan Mcdermott, President of Entertainment and AMC Studios.
Today's press release is available on our website at AMC networks Dot 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 1095, 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 S E 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.
Thank you.
As consumer behavior continues to evolve and the industry searches for the best approach to connect with Michelle's. They love. We remained focused on the very real advantages of our measured opportunistic and disciplined strategy.
We are continuing to deal with this company has always done best produce high quality content and make that content available across a wide array of platforms with strong brand Association and underlying economics that drive free cash flow.
Even in this industry wide challenges, we have strong confidence in our approach and are seeing the benefits of our strategy play out in our financial results, which for the second quarter include year over year increases in free cash streaming subscribers in streaming revenue as well as healthy margins Patrick will have more to say on all of this in a few minutes.
All key networks.
Thanks luxury of being flexible fast moving unable to seize opportunities in this dynamic marketplace as always constant remains at the heart of everything we do and we have a clear and focused programming strategy that runs across our linear networks are targeted streaming portfolio.
Spanning array of digital and AD supported connected TV platforms.
A highlight in the second quarter was our successful launch of the newest theory, and our expanding walking dead universe called the walking dead City.
The serious became the number one new cable drama Premier for 2023, and key demos delivering 2 million linear viewers, making it number one season premiere NHL in the history of Amphenol.
Just a fantastic start to a new era for this iconic franchise.
The next series on tap as the walking dead Theyre, all fixed them, which is set in crafts and will premiere on September 10th a third show the walking dead the ones, who live focussed on the popular Rick and Michelle and characters will premiere next year.
We just previewed both of these new titles for fans at comic Con in San Diego. The enthusiastic response on the ground online and social media with a great indication of the continued life and vitality of this remarkable IP also at comic Con, we announced that we have already renewed density and their outbreaks in for a second season. So there is <unk>.
More to come for these engaging stories and characters.
We completed production of these three walking dead expressions before the recent screen actors Guild strike and work stoppage.
Let me just take a moment to address both the current Sag and WGNA strikes we.
We greatly value the work of our creative partners and hope these disputes can be resolved as quickly and as fairly as possible in the short term. The reality for AMC networks is that we have a pipeline of finished shows that will allow us to continue to serve our viewers across all of our platforms for the remainder of this year and well into 2024.
We were proud to receive eight Emmy nominations for better call Saul, including outstanding drama series for the seventh year in a row and repeat asking nominations for Baba and Kirk and racy Horn that recognition came on the heels of 12 Hollywood Critics Association nominations for Anne Rice's interview with the Vampire.
Better call Saul Lucky Hank and documentary now.
I also wanted to note the third and final season of the British drama in Happy Valley, which is just a stunningly good piece of television performed particularly well on Acorn and UMC class on a call in the third season has been the number one acquisition drivers. So far this year and the number one series on the platform journey six episode run.
On AMC plus happy Valley was the top series for engagement outside of shows in the walking dead universe.
IFC had a hit in Blackberry, which generated strong business in critical acclaim during the quarter.
The film will return as a three part television event with additional themes on AMC and AMC plus later this year.
Theaters right now, our bio sphere, and Lakota nation versus the United States, which variety called lucid uplifting and definitive account of a very troubling piece of our nation's past we highly recommend this film.
Curious she is one of our core strengths as a company and remains a focal point across all platforms.
Obviously curation requires content. So we were very pleased during the quarter to reach an agreement with the Walt Disney Company and Hulu to re secured streaming rights for a significant number of high quality titles that we own.
Patrick will discuss the agreement in more detail in just a few moments, but the immediate highlight for us is being able to offer all seasons of shows like fear the walking dead, killing Eve brockmeyer, the tariff the Sun creature Lodge, 49, and others on our own streaming platforms.
This influx of popular and critically acclaimed content is particularly important today as we see the impact of generations of new viewers, discovering and being entertained by shows years or even decades. After they first appear.
More and more today, a premier is what happens when someone decides to watch something for the first time not when it first appears.
The return of our titles will add immediate heft and diversity to AMC clubs as we prepare to launch an AD supported version in October .
Turning to this year's upfront it will come as no surprise that the market has been challenging for all content company, but we are pleased with our performance and very much held Aro <unk>.
AMC has carved out a clear reputation as the home of very desirable as fan focused networks and the pricing and volume were able to achieve for our networks and digital distribution. During this upfront reflects that.
It's also it's also worth noting that we are one of the last major programmers to be airing high quality scripted dramas on Sunday nights every week of the year.
This is a meaningful point of differentiation that allows us to continue to drive viewer interest and value for our advertising and affiliate partners. Other networks have shifted their programming dollars and our best shows to streaming hollowing out their linear offerings, we have not.
Our <unk> network continues as one of the top destinations for unscripted reality programming with a growing list of franchise shows that attract viewers and deliver diverse and passionate audiences to advertisers.
Coming off successful season of the love after lockup franchise and season six of Mama June from not the Hot we CB is home to the top two cable original for women on Friday night Les.
Later this month the network will premiere a new series called Soya and resonate featuring Tory Johnson rushing and resonate Carter to dynamic personalities, who first appeared on growing up hip hop.
Our digital advertising business continues to grow, particularly through our expanding presence on connected TV platforms. Additionally, our leadership position in addressable targeting and new technologies like programmatic buying continues to deliver results for our partners.
Our universe of advertisers has grown exponentially over the last few years as we've opened up new platforms for our programming that made it easier to transact with us.
Launched of AD supported AMC classic will be the next step in connecting our commercial partners with the passionate fan communities we serve.
Fundamentally we want to feature our content in as many places as we possibly can while as I noted earlier protecting our strong brand Association.
One major area of focus on this front has been expanding presence on connected TV platforms. We currently have 81 channel feeds live across eight major CTV SaaS platforms by the end of the summer. We will have approximately 100 feet carried on 10 platforms meaningful growth in our space that has recently become a significant focal point.
For all programmers.
In terms of our distribution partnerships I'm pleased to say, we just launched AMC plus on charter, making it available spectrum TV customers.
We've now launched AMC plus on all major Mvpds platforms reached.
Recent customer customer research has clearly demonstrated the power of an integrated streaming cable offering which increases consumer satisfaction and lower churn.
Simply put cable customers, who access streaming as an integrated part of their cable TV service are happier with their cable provider and with their streaming service subscriptions. So we're thrilled to have AMC plus available in this way across all major providers.
We're also very excited to have partnered with Comcast on their now TV streaming product, which recently launched with 40 live channels, including all of our linear networks plus more than 20 integrated fast channels and peak hub cranes Peacock premium for monthly price of $20. Now CV is just another example of our ability to innovate with our partners and offer.
Compelling new options to consumers.
Before Patrick provides a more detailed look at our financial performance I wanted to note that as I have assessed this company over my first six months as CEO I've been so impressed by the team here at AMC networks, we continue to execute against the strategy that allows us to move quickly and opportunistically through an environment that even more.
Larger companies are finding challenging and unpredictable.
Historically AMC networks has proven its ability to make great shows and build passionate fan communities. Now we are combining those core competencies with a customer first approach that will define our future today and in the years to come.
It's clear to me that we have the programming the platforms the partners and the team necessary to continue to operate a very profitable business and deliver long term shareholder value.
With that I'll turn the call over to Patrick.
Thank you Kristen.
Our financial approach is rooted in three foundational principles that allow us to effectively operate the business as we focus on Max maximizing shareholder value during this dynamic and transformative period of change.
The first is ensuring that we maximize the monetization of our content across all available avenues and platforms, while preserving value and brand affinity.
The second is operating as efficiently as possible.
This is no longer aspirational for AMC networks or for any company in this space. It's a core objective that applies to every dollar we spend and making sure that all of our investments made to support the business are prudent and thoughtful.
And third as being highly disciplined when it comes to how we allocate our capital, including remaining opportunistic and flexible as we continue to maintain our healthy balance sheet.
I am happy to report that we are seeing meaningful progress on all of the above fronts, which is evident in this quarter's results most notably in the $140 million of free cash flow we reported this quarter.
As Christian mentioned, we were opportunistic in working with Hulu to reach an advantageous agreement to unwind our output deal as part of Disney's shifting content strategy.
Many significant titles were returned to us in future cash payments were accelerated and paid in the second quarter.
This gives us the opportunity to make these popular and critically acclaimed shows available to viewers on our own platforms and potentially licensed into other platforms as well.
The first manifestation of this the viewers will see is the availability of all seven seasons of spear the walking dead on AMC plus as you prepare to bring viewers. The final six episodes. This fall we are very glad to be able to give new and existing fans of this record setting franchise the ability to catch up on our own platform.
As we head to the finale.
Moving to the financial impact from Hulu.
The return of rights resulted in approximately $90 million benefit to our second quarter free cash flow.
Netting out receipts that we expected to occur later, this year and which were contemplated in our prior free cash flow guidance results in a net benefit of approximately $50 million to our full year free cash flow.
Regarding the P&L, we recognized licensing revenue upon delivery and cash receipts coming over time the.
The vast majority of revenue related to this agreement was recognized prior to the second quarter.
In the quarter, we recognized approximately $20 million in revenue that we previously anticipated to occur in 2024.
The impact is negligible as the pull forward of revenue was largely offset by accelerated amortization.
More broadly our content licensing and other revenue is largely made up of two distinct components.
First is the licensing of content rights from AMC Studios, IFC and <unk> films.
As production revenue, which is more transactional in nature, where we produced a series for someone else and earn a fee for our work.
Historically that comes from our $25 7 billion business and more recently the opportunistic production of silo for Apple where deliveries occurred.
Q1.
As has been widely reported the days of the so called streaming wars were marked by an expanding number of platforms competing for scale in both content and subscribers.
With requisite increases in content budgets and spending.
While we are benefiting this year from robust content licensing revenues, we are seeing production budgets contract.
Waning demand for new content and a handful of serious cancellations impacted $25 seven <unk> medias second quarter results.
As such we recognized a $25 million impairment charge in the second quarter.
As a reminder, 25 seven media is included into our international and other segment.
Moving onto our second quarter consolidated financial performance.
Consolidated revenue decreased 8% from the prior year to $679 million.
Consolidated adjusted operating income decreased 10% to $177 million.
Representing a margin of 26%, which reflects our strong focus on operating efficiency and it's consistent with the margin we delivered in the second quarter of last year.
Adjusted earnings per share was $2 <unk>.
In our domestic operations segment second quarter revenue decreased 6% to $582 million.
Subscription revenue decreased 4% $334 million for the quarter.
Streaming revenue was $137 million representing.
Representing 13% growth year over year.
We've updated our streaming subscriber definition to remove estimated subscriber conversions at period end.
This definitional change resulted in the removal of approximately 300000 estimated conversions from our subscriber count for the quarter.
Subscriber figures and growth rates referenced on this call and in our release reflect this new definition.
We ended the second quarter with 11 million streaming subscribers representing growth of 6%.
<unk> to $10 3 million subscribers a year ago.
On a sequential basis compared to Q1 2023 subscribers of $11 2 million. This represents a decline of 2% as we maintain our focus on higher value subscribers and allow promotional subscribers, who do not convert to our typical retail pricing to roll off.
Moving to domestic affiliate revenue.
Affiliate revenue declined 12, 7% for the quarter.
Affiliate revenue performance was driven by declines in the basic subscriber universe, and a 3% impact from the strategic non renewal with Google and was partially offset by contractual rate increases.
Content licensing revenue grew 12% for the quarter to $81 million.
The increase in content licensing revenue was driven by the timing and the availability of deliveries, including the pull forward of Hulu revenue I discussed earlier.
Second quarter domestic advertising revenue decreased 17% to $167 million.
The decline in advertising revenue is primarily due to lower linear ratings softness in the AD market and fewer episodes of original programming.
Offset by digital and advanced advertising revenue growth.
Our AD supported networks and digital AD platforms continue to experience a similar environment as our peers.
For the second quarter of 2023 scatter and direct response remained soft given the economic climate with our advertising partners remaining conservative with their spending.
Domestic operations adjusted operating income decreased 12% to $185 million for the second quarter with a margin of 32%.
The decrease in NOI was largely attributable to lower affiliate and advertising revenues and was partly offset by lower SG&A, resulting from cost control and significant marketing efficiencies.
Moving to international another.
For the second quarter revenue decreased 21% to $99 million.
The decrease in revenue was largely attributable to a 54% decrease in content licensing and other revenue to $22 million. The result of series cancellations at 25, seven media I discussed earlier.
Our AMC networks International business remains healthy with subscription revenue up $57 million.
Representing growth of 1% in the second quarter.
Advertising revenue decreased 6% to $20 million, which was largely driven by the closure of certain unprofitable channels last year.
International and other segment AOE of $19 million was consistent with the prior year.
Our margin improved to 19% compared to 15% in the prior year as the year over year decrease in revenues was largely comprised of lower margin production remedies.
Moving to cash flow and the balance sheet.
Consolidated free cash flow for the second quarter was $148 million and is primarily driven by the accelerated to be turned up rights payments, partly offset by $32 million of cash payments related to our previously announced restructuring initiatives.
We ended the second quarter with net debt and finance leases of approximately $2 billion and a.
Sedated net leverage ratio of two seven times.
We have substantial financial flexibility and total liquidity of approximately $1 3 billion, including $893 million of cash on the balance sheet, and our undrawn $400 million revolving credit facility.
We continue to remain focused on our 24% 25 maturities and we'll be opportunistic in addressing them.
Regarding capital allocation, our 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 the maturities I just mentioned.
Strategic M&A and returning capital to shareholders remain further down our priority list.
Moving to our outlook.
Our expectations around AMC networks free cash flow potential over time have not changed.
That said today, we are increasing our outlook for 2023 free cash flow to reflect the acceleration of $50 million in cash payments related to.
Related to the return of rights from Hulu.
We now expect free cash flow to be in the range of $120 million to $140 million for the full year.
Excluding the impact of approximately $115 million of one time cash restructuring payments, our free cash flow outlook would be in the range of $235 million to $255 million.
We continue to expect cash content investment to be approximately $1 1 billion for 2023.
Thereafter, we anticipate our cash content investment will be in the $1 billion area going forward.
We expect to provide more than enough content to drive a strong programming slate and support our business.
We are reiterating our outlook for 2023 adjusted operating income as we realize the benefits of our strategic cost measures. We expect our consolidated AOI for the full year will be in the range of $650 million to $675 million.
We are updating our revenue guidance to further reflect current market trends.
Notably the broad based reduction in content investment dollars across the industry, which we expect to impact for your full year content licensing and other revenues.
As most recently evidenced by the handful of series cancellations at $25 seven media that I discussed earlier.
In addition, the domestic advertising marketplace is tougher than we previously anticipated and we expect these market conditions to protest.
The remainder of the year.
As such we now expect full year consolidated net revenues to be approximately $2 8 billion.
In closing 2023 will be a very significant year for AMC networks as we navigate the challenges that are being felt across our industry. While remaining focused on the unique advantages and strengths. We have that have driven this company forward.
And the foundational principles I mentioned earlier.
Effectively monetizing our content.
Operating efficiently and being disciplined regarding capital allocation.
We are encouraged by the progress we have made to date on all of these fronts and particularly in our ability to drive efficiencies and free cash flow as we focus on maximizing shareholder value during a period of change and transformation.
With that operator, please open the line for questions.
Thank you again.
Again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone again to ask a question. Please press star one one.
One moment for our first question.
Our first question comes from a line of Michael Morris of Guggenheim Securities. Your line is open.
Thank you good morning, guys two topics.
One on content licensing and one on acquisition customer acquisition.
So first on the content licensing.
No Patrick you referenced the reduced demand for content and the streaming market globally.
As the industry is rationalizing is this dynamic impacting both.
Your new first run content, the goods and services in the same way.
Impacts sort of off net or non exclusive content or both of those being impacted the same way.
And on your.
Your decision.
Early rates return.
Licensing of rights play a part strategically how much did licensing of rights play a part in your revenue future.
As opposed to using your content exclusively to drive your own streaming services.
And then if I could just add one more Chris that you mentioned.
Our premier is more about when someone engages with the piece of content on a streaming service as opposed to when it's actually released.
It's a competitive streaming market how are you thinking about customer acquisition going forward the amount that you need to spend and any tweaks to your strategy. Thank you.
Okay.
Thanks, Mike It's Patrick I'll take the first two here on.
The licensing market dynamics, I think it's fair to say that.
There is always a strong bid in the market for premium content, we've seen incredible demand.
Our content I would highlight particularly strong appetite internationally.
I think this year, we are benefiting from higher volumes as well.
<unk>.
The last few years, we've eaten more of them cooking and used it internally on our existing services.
We've unleashed.
More content into the market. So we're seeing the benefit of that increased volume.
But I would also say that buyers are being maybe a bit more kind of tactical.
And so strategically where we're signing more smaller deals rather than sort of fewer larger deals in order to in order to maximize price in the market and that's the approach we've taken.
On the second question in terms of the strategic import of licensing going forward I think it will continue to be.
Quite important.
Andre here is we're trying to kind of pull forward the monetization of content licensing is as one of the ways, we're doing that and.
Obviously, we're going to.
Use a handful of the titles that we've.
Since recaptured from the from the Hulu deal on our own services, but we will be opportunistic in using those.
In service of our license revenues going forward.
Okay.
Thanks, Patrick.
Okay.
On the sub acquisition question.
Amir just being a premier that's something we've done we've been doing a lot more research using our data and aggregating information around who is watching what when and where and we definitely see that people are leaning into content that they may not have lapsed the first time around.
That's sort of part of what we love about our strategy with scripted dramas and with high quality content is that you can basically engage with this content at any point in time when it works for you and the level of engagement continues to be really solid so.
Getting some of this content back from who really some of the great series like killing Eve Brockmeyer, we feel like we can reintroduce them to whole legions of fans multi generationally and introduce people in for the first time. So a lot of franchise, where it can be significant utilization of data and I've been really pleased over the.
<unk> quarter with our subscriber acquisition efforts that we're spending less but we are spending smarter and that's proving out really well in both our levels of engagement and also subscriber acquisition and retention.
Great. Thank you both I appreciate it.
Interesting.
Thank you.
One moment please.
Our next question comes from the line of Robert Fishman.
Most of it.
Your line is open.
Yes.
Alright. Thanks. This is Luke Lantus Entre Robert Fishman, Thanks for taking my question.
We'd love to get your take on what the pressures we're seeing in advertising.
How much of that do you think is secular versus cyclical.
I'll grab that one Luke this is Tim Kelleher.
I would say a combination of things are challenging right now.
<unk>, our AD supported networks as Patrick and Christian referenced are experiencing the same environment as everyone else in this space.
It's a soft scatter market marketers are being relatively conservative with their spending we are seeing some modest improvements in scatter, but overall, we expect as Patrick said the landscape to continue to be challenging through the remainder of this year.
That said in our upfront conversations we are very pleased as Kristin mentioned with the results of our upfront and the strength of our pricing around are our key products like AMC BBC America, we TV and then the huge reception we received to AMC pluses newly launched AD supported.
Tier coming in October so we.
To address your questions specifically I would say we are feeling that the marketplace should improve as as we get into 2024.
Thank you.
Thank you.
One moment please.
Our next question comes from the line of Doug Cruet Cowen Your line is open.
Yes.
Hey, thanks.
Youre about exactly halfway to your revenue guide for the year and you're quite a bit over halfway to your NOI.
Why guide, which obviously suggests your margins are going to be lower in the second half is that just a function of higher programming cost in the second half or is there anything else going on.
Thanks for the question, Doug It's Patrick.
On the revenue guide I would unpack it in the following away obviously, we're seeing some softness in the AD market, which you referenced.
We're impacted by.
The cancellations at $25 seven as well.
Thats offset partly by kind of some of the revenue acceleration that we saw with Hulu.
Those are those are the larger kind of contributors to the to the $2 $8 billion guide on on revenue.
Fortunately given the nature of <unk>.
Those two those two kind of revenue streams.
Collectively they have relatively low impact on OE.
Kind of given the margin structure of that revenue.
So we benefit in that regard.
We're obviously seeing a little bit.
Touching further softness on the affiliate side and obviously streaming is decelerating slightly but we're getting the benefit of improved customer acquisition costs as Christian mentioned, so we're able to manage the business for improved margin on that side going forward. So hopefully that gives you a sense for.
How we're managing the revenue.
AOI together.
Yes, I guess I was just curious as far as your margins based on your guide seem like Theyre going to be lower in the second half and that implies higher costs. So.
Just wondering if those are higher programming costs or something else.
Doug we're managing this business for margin so we held margin constant.
Year over year.
The margin last year.
On a whole was 24%.
At the midpoint of the guidance right now we'd be at 24% as well. So there is obviously sort of lumpiness kind of quarter to quarter. So I'm not going to comment on the specific kind of cadence of cost at this point, but.
But we feel good about kind of where we've where we're going to land.
Alright, thank you.
Yes.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press star one wanting your telephone again to ask a question. Please press star one one.
One moment please.
Our next question comes from the line of Thomas <unk> of Morgan Stanley . Your line is open.
Thanks, so much.
Wanted to ask about just the strategic path forward for streaming there seems to be a clear focus on streamlining and a priority towards higher quality subscribers does that change your view on the global opportunity in international market launches and on the AD tier any expectations on pricing yet and if the goal is Tam expansion.
Or maybe driving accretive <unk>.
And then a second one I just wanted to follow up on the content licensing side in particular in light of the success of silo on Apple TV and the recent renewal what are your thoughts on leveraging your expertise on high quality content.
Going into producing more for third party players or are the challenges at $25 seven media an indication that maybe that's not the path you want to go down. Thank you so much.
Sure Hey, Thomas this is Kristen.
On the streaming economics, we've said it before we really have a different different sort of economic structure with our services that are more targeted towards specific genres and specific types of subscribers.
So distinct audience is we don't try to be something for everyone. Our pricing is lower.
And I think our overall goal is to just make sure that we can.
Serve avid fans with with significant valuable content, so high quality subscribers equals lower churn less price sensitivity, if theyre pleased with the product.
And the majority of our top titles on our targeted services are produced at less than $1 million in episodes. So we feel like we have a pretty.
Sort of structured way to approach what we are doing and we can move with intention very specifically to preserve what we think is a very quality.
Quality products at a reasonable price point, so on AD supported I'll, let him speak to that and then I think Jan can speak a little bit more too.
The actual content.
Tom This is Ken.
We're really excited about the AD supported tier and importantly, our advertising and marketing partners are as well, we're seeing a lot of demand and interest as I mentioned in the upfront. So this is driving a lot of exciting conversation that said it is early days to be making predictions and address specific we launch it we start rolling through when we start launching.
In October .
And we are going to have more news to share on the specifics pricing et cetera, as we get closer to that consumer launch so more to come on this front.
Hey, Thomas This is Dan speaking to your question about licensing in silo.
Specifically <unk> is focused primarily on producing four or five linear and <unk> streaming platforms. However.
We will be opportunistic when the circumstances arise and specifically in the case of silo.
That was a show that was developed by Amc's amc's use for AMC.
We realized at a certain point that it wasn't a good fit for AMC, So we pivoted and.
And shopped it to outside platforms and received enthusiastic interest from Apple and subsequently closed a co production deal for Apple TV. So.
That worked out great for US we're pleased with how <unk> performed its the most watched new drama on Apple TV on that platform.
As we know they have ordered a second season. We're currently pause in production due to the strike, but we're on our way we continue to be a meaningful co producer with Apple on that however.
While the renewals is beneficial for us we adjusted the deal structure for season, two so that we're not internally financing that production. We're just not sure. It makes us less sense for us to tie up all that capital. So for season, two were meaningful cooperating producer, but the impact on our financials won't be as great and going forward we will.
Look for strategic opportunities when it makes sense for us to produce were outside platforms.
Do you see that as ramping source of potential allocation of resources over time.
I wouldn't say, it's ramping I would say, we're going to we're going to be strategic about it and when the opportunities arise.
Okay understood. Thank you so much.
Okay.
Thank you.
That does conclude our Q&A portion of the call today I would like to turn the call back over to Nick Seaberg for any closing remarks.
Thank you everyone for joining us today have a good day. Thanks. This concludes the call.
Ladies and gentlemen, this does conclude today's conference you may all disconnect have a great day.
Okay.
[music].
Okay.