Q3 2023 AMC Networks Inc Earnings Call
[music].
Okay.
Good day and thank you for standing by welcome to the AMC Networks, Inc. Third quarter 2023 earnings Conference call.
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I'd now like to hand, the conference over to your speaker today Ms.
Mr. Nicholas Seaberg, Vice President of corporate development and Investor Relations. Sir. Please go ahead.
Thank you good morning, and welcome to the AMC networks third quarter 2023 earnings conference call joining.
Joining us this morning are Christian Dorner, 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 Dotcom, 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 1995 <unk>.
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 the 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 required definitions and reconciliations can be found in today's press release with that I would like to turn the call over to Kristin.
Thanks, Nick and good morning, everyone I'd like to begin today by sharing some strategic and operational highlights from the quarter that underscore our continued focus on three key areas programming partnerships and profitability, which we believe are critical to the effective management of this company during a period of great change in our industry.
Start with partnerships as we look at AMC networks on the current landscape around content monetization and distribution, where arguably in a moment when the value and impact of partners has never been more important.
It applies to us to the companies, we partner with and to consumers.
Our industry is undergoing a period of experimentation and innovation.
Humor behaviors around alright, thank you.
<unk> continues to evolve these.
These changes are giving rise to new opportunities to collaborate with companies that have been long standing partners and even those who until recently credit's been viewed as competitors.
Some of our partnerships are decades old and some are very recent but theyre all critically important to our company in terms of what we can do and where we can do.
For example, this fall we partnered with Warner Brothers Discovery put previous seasons of seven of our original series on the Max streaming service for two months as a commercial product design to raise the visibility of shows and promote standpoint. This successful experiment just concluded and it was a firming 50 titles like a discovery of witches theater.
Walking dead dark wins, and Anne Rice's interview with the vampire consistently occupying multiple slot on Max's daily Top 10 series list.
And as we anticipated we saw viewership and acquisition spikes for several shows on AMC pause as a result of the increased exposure on that.
Partnering with another programmer in this way was the first for us and our ability as a pure play programmer to forge this kind of arrangement showcases many of our key strengths.
We are nimble adaptable affordable and very much complementary to other offerings.
Given these attributes and the success, we thought youre working with now I'd say, it's likely we will find imaginative new ways to work with other programmers in the future.
As far as established affiliate partners, we have long standing and uniquely strong relationships that are rooted in our deliberate strategy to it. Thank you and continually strengthened partnerships, which again benefit from our unique characteristics three of which you can create a small number of well defined networks that are offered at a low wholesale rate.
High quality programming, which we continue to feature on basic cable even as others have moved their marquee scripted shows the premium our streaming platform chipping away at the value of the traditional cable bundle.
Also our collaboration on innovative distribution models like A&P club, which was originally launched in partnership with Comcast and dish network and is now carried by all major cable providers in the U S.
I've spent most of my career working at the cable operator. So these affiliate relationships are particularly important and familiar Schmidt.
Such I am quite excited by what Comcast and charter rate hearing with BMO and the potential of the country's two largest cable company with tens of millions of customer relationships across video broadband and phone to deliver a unified content offerings to a new generation of customers.
Also worth noting these companies have large customer service organizations that can pick up the phone roll trucks and solve problems and increasingly novel concepts today.
We are pleased that our linear networks streaming services and several of our SaaS channels are featured and CMO and we're very much looking forward to being a part of the offering and seeing where this powerful combination goes from here.
Moving to programming it was great to see the WGS strikes that comes to an end last month and we are hopeful stag after and the studios can offer comes together and reach an agreement soon.
As we've mentioned on previous calls we have a robust supply of completed shows to fill our schedule well into 2024.
We've also secured interim agreements with bags the complete production on second Steve with a few of our market share and write this interview with the vampire and the walking dead now Dixon.
Both of these successful series are now back in production in Europe.
Our content continues to attract large and engaged fan bases and I'll mention just a few examples.
And one of the walking dead and Premier during the quarter and became the most viewed premier in the history of AFC plus in addition to delivering strong viewership on linear.
Two of this series will Mark the return of a fan favorite Carol play a final list of Mcbride.
Early next year, we will premiere the highly anticipated third new series and Thats growing universe, the walking dead. The once your rig featuring Andy Lincoln and been agar RARA as Rick and MS. Sharon that in Philadelphia.
We just completed our annual see your first programming event, which this year became a two month celebration of <unk> that ran across all of our linear networks and streaming services.
This year's event was curated by our horror brand shutter one of the strongest brands in the World and Halloween was one of the biggest acquisition days in shutters history. The.
The combination of <unk> best in charter is a great example of the clear synergy between our targeted services and our linear networks and demonstrates our ability to utilize our content across multiple platforms to serve our passionate fans the programming they love.
However, and whenever they want it while maintaining a thoughtful curation that has become one of our core strengths in a crowded and confusing content environment.
<unk> launched a great new series with a lot of heart failure, unregistered, ne which saw linear viewership almost double over the course of the first season in its key demo.
To perform remarkably well on our all black streaming service.
In terms of advertising, we continue to make great strides in expanding our revenue growth opportunities.
During the quarter and ahead of schedule, we launched an AD supported version of AMC, plus which allows us to offer additional flexibility with subscribers and also offer advanced advertising across our entire distribution ecosystem. This is incredibly important as we continue to forge relationships with advertisers that span both linear and digital platforms.
Forms with the same high level of relevance and targeting in both distribution channels.
Having an AD supported version of ANSI pumps will also make it much easier for us to participate in innovative bundles that we believe will increasingly farm the future of content distribution in the streaming space.
Last month, we started offering our advertising clients the ability to buy programmatically on our linear networks are major technological leap for the entire industry and we already have several national brands across a wide range of categories, taking advantage of this new capability.
Programmatic buying offers enhanced targeting greater efficiency has been the preferred way to transact on digital platforms for years, but until now has never been possible for national linear television commercials.
Our rollout of programmatic on linear follows our introduction of addressable advertising across our networks a couple of years ago. Another first for the industry that significantly increases the value and relevance of our linear ad inventory.
We remain laser focused on managing our business responsibly with a focus on cost efficiency profitability and moving quickly into areas, where we see competitive advantages at the same time, we continue to be nimble opportunistic and flexible in leveraging our core strengths and seizing every opportunity to put our content and brand.
And everywhere viewers are.
Now I'd like to turn the call over to Patrick for a review of our financial results.
Thank you Kristen.
Like to start by building on what Christian discussed regarding partnerships, then I'll review, our financial results and outlook before we open it up for Q&A.
Our relationships with our affiliates are important longstanding and mutually beneficial.
We feel strongly that our type portfolio of five well defined networks continues to offer a strong value proposition to distributors and is well suited to maintain broad distribution and basic or expanded basic tiers going forward.
Our network supported by strong programming and highly regarded brands are accretive to the overall value of the video bundle.
Our best and highest value programming has remained on linear and as Christian mentioned, we have one of the only remaining sources of high quality scripted drama in the bundle.
That's reflective of our deliberate strategy to keep these affiliate relationships strong and hold our ground as the provider of Linda If a limited number of broadly appealing general entertainment brands.
To bring value to our affiliates video products.
Our NPD partners appreciate and are well aware of the value and performance our networks deliver.
I understand that our content is compelling.
Networks are high performing and there are wholesale rate is low.
Our networks account for a small slice of total industry affiliate fees and deliver almost two times that an audience share that makes us a very efficient partner.
Our partners also appreciate our ability to work together on new initiatives to drive real economic benefits for us and for them.
Such as selling our streaming services just to be in our fast channels collaborating on technical enhancements that improve the viewing experience and increasing of elements and value of TV advertising.
We expect our relationships with our affiliates, both old and new to remain fruitful and mutually beneficial for many years to come.
Onto our third quarter consolidated financial performance.
Consolidated revenue decreased 7% from the prior year to $637 million.
Consolidated adjusted operating income decreased 9% to $177 million.
Presenting a margin of 28%, which reflects our continued focus on operating efficiency and is consistent with the margin we delivered in the third quarter of last year.
Adjusted earnings per share was $1 85.
We delivered $99 million of free cash flow in the quarter, which sets us up nicely to achieve our previously stated free cash flow objectives for 2023.
Notwithstanding that we continue to operate in a difficult environment as we navigate industry wide challenges impacting both the AD market and through just the pay TV ecosystem.
During this period of market evolution, driven by shifting consumer preferences, we have been pleased with our ability to continue to manage expenses, while remaining flexible and collaborative as the industry works through this period of transition.
I'll quickly touch on our segment financials.
Domestic operations revenues decreased 8% to $541 million for the third quarter.
This was driven by an 18% decrease in advertising revenues and a 13% decrease in affiliate revenues.
Partly offset by streaming and licensing revenue growth of 9% and 7% respectively.
Advertising revenues in the third quarter continued to be impacted by lower linear ratings, a difficult AD environment and fewer episodes of original programming, which is the anticipated result of the right sizing we have done to date in terms of programming investment.
Digital growth remains a partial offset to these headwinds.
That said, we continue to experience a similar advertising environment as our peers as scatter and direct response remains challenging given the economic climate.
Advertising partners remain conservative with their spending.
Affiliate revenue performance in the quarter was driven by continued declines in the basic subscriber universe, and a 3% impact from the strategic non renewal.
We ended the quarter with $11 1 million streaming subscribers up from $10 7 million in the prior year period and $11 million in the second quarter.
We are pleased that our focus on higher quality subscribers is working despite significantly reduced promotional activity.
In the third quarter, we grew subscribers, 4% year over year and 1% sequentially.
Domestic operations adjusted operating income decreased 10% to $185 million.
But the margin of 34%.
The decrease in NOI was largely attributable to lower revenues and was partially offset by lower SG&A expense. The result of continued cost controls across the company.
Looking at our international and other segment.
For the third quarter revenue and adjusted operating income each decreased 2% to $98 million and $13 million respectively.
Moving to the balance sheet.
We ended the third quarter with net debt and finance leases of approximately $1 9 billion and our consolidated net leverage ratio of two seven times.
We have substantial financial flexibility and total liquidity in excess of $1 35 billion.
Including $955 million of cash on the balance sheet, and our undrawn $400 million revolving credit facility as.
As noted in our earnings release. This morning, we are redeeming our 2024 senior notes at par with formal notice to orders going out today.
Regarding capital allocation, our philosophy remains disciplined and opportunistic.
First we look to support the business with a particular focus creating compelling content that resonates with our audience, while balancing overall profitability and cash flow generation.
Second we remain focused on the balance sheet and addressing upcoming maturities.
Lastly, strategic M&A and returning capital to shareholders remain further down our priority list.
Onto our outlook for the year.
In terms of our revenue outlook given the industry pressures I discussed earlier in my remarks, we are now expecting consolidated net revenue to be closer to $2 7 billion for the full year 2023.
<unk> from our prior expectation of approximately $2 8 billion.
Our decision to reduce our full year revenue outlook reflects softness we are seeing in content licensing revenues as well as the continuation of a difficult advertising environment.
Despite these headwinds we are reiterating our 2023 adjusted operating income outlook and expect <unk> to be in the range of $650 to $675 million.
Reflecting continued and better than previously anticipated cost discipline.
We are also reiterating our expectation of 2023 free cash flow in the range of $120 million to $140 million.
Note that our free cash flow guidance contemplates $115 million of one time cash restructuring payments. Excluding these restructuring payments our free cash flow would be in the range of $235 million to $255 million.
We also continue to expect to grow free cash flow going forward.
Call that this year, our free cash flow will reflect the $50 million tailwind from the Hulu transaction, we discussed last quarter.
So to be clear our expectation of free cash flow growth going forward is growth off of the base range of $185 million to $205 million.
We continue to expect cash content investment to be approximately $1 1 billion for 2023, and expect cash content investment to be in the area of $1 billion.
Thereafter.
Before I close I would like to again note that our financial approach is rooted in three foundational principles to ensure maximum flexibility going forward.
The first is ensuring that we maximize the monetization of our content across all available avenues and platforms, while preserving brand affinity.
Christian highlighted some of the ways. We have recently done this including our pop up with Max and the launch of an AD supported version of AMC plus.
The second is operating as efficiently as possible.
This is a must for all content companies and we remain focused on managing a lean and adaptable business on this front.
We are pleased with our performance since we began implementing changes around this time last year.
The third is being highly disciplined when it comes to capital allocation, including remaining opportunistic and flexible as we continued to maintain our healthy balance sheet.
This includes being responsible with our content investments and reducing our quantum of gross debt, which we are doing today to the notice of redemption of our 2024 senior notes.
We live and breathe these financial principles throughout the organization, which allows us to manage this business profitably and sustainably.
While retaining flexibility to move quickly as we leverage our core strengths and seize new opportunities.
Operator, please open the line for questions.
Thank you.
As a reminder to ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one again standby.
Standby as we compile the Q&A roster.
One moment please for our first question.
Our first question will come from Michael Morris of Guggenheim Securities. Your line is open.
Thank you guys. Good morning, two if I could.
First maybe for Chris I'd Love to hear some more detail on how the programming.
The programmatic linear advertising works specifically.
How does it sort of fit with your direct sales organization and what kind of mechanics does it take to deliver.
Targeted advertising.
Linear audience.
What other partners do you have to work with and I guess, how does that work exactly with my first question and then second maybe for Patrick you talked about.
Softness in licensing revenue impacting the full year guide.
There seems to be a very strong appetite for license content, especially during the strike right. Now. So maybe you can help us understand how much of that has to do with the timing availability and how much of that has to do with end market demand. Thanks guys.
Great. Thanks, Michael Euro, making my day by asking you about this particular topic because it is very near and Dear to my heart.
<unk> Zhang the capacity that we have on all of our advertising.
My history recently in data and analytics like this is a super.
Enthusiastic area for me I'm going to let Tim Kelleher speak to programmatically in here just on the on the technicalities of it but also coupling that with.
With addressable and national addressable is really kind of a one two punch. So Tim you want to get into the specifics a little bit sure. Thanks, Michael.
Really excited about this is Kristen just said so.
In simplest terms, what we've done is we've enabled biddable programmatic buying capabilities within our linear inventory, which was mentioned as an industry. <unk>. This is something we've been working on for a long time.
This means digital advertisers can now purchase our national lending our inventory programmatically using the traditional buying platforms that they use today to buy all of their digital.
So what this opens up there's a lot of incremental audience and reach and it maximizes the value of our yield on our linear inventory. So it brings it brings accessibility to a longer tail of advertisers than we have traditionally worked with so this is also the first time our advertisers can manage.
Reach and frequency.
Within the same campaign and linear using an automated buying platform like the trade desk or whoever their preferred partner is.
So this is really exciting when you couple it with the advanced advertising efforts, we've taken to make all of our <unk>.
All of our inventory.
Highly targeted ball. So this really kind of rounds out the offering and just making it much more seamless and efficient to buy from us.
And just in summary, like you can an advertiser can come to us either with the segment that they define our when we help them define and then they can buy across all of our opportunities.
In a consolidated way.
Through our audience plus platform get attribution that really helps them understand what worked what didn't and they are buying across every single scenario of advertising offering that we have whether it's linear or digital.
Super exciting and I think theres a lot of upside here.
Hey, Mike It's Patrick on the content licensing question. The short answer to the question. This is more of an end market issue for us than a pricing issue for us so unpack that a little bit here. So first off I would separate the international and domestic markets I think the international market remains kind of a more robust than the domestic side at least for us and as we go to market in la.
To sort of pull forward the monetization of our content where at the same time disciplined from a price perspective. So obviously, we were able to get a bunch of additional programming kind of on the covered via the unwind of the Disney Hulu deal, we opted to use that on the pop up on Max opportunistic really put out.
Content out there hopefully driving people back into our ecosystem. We're benefiting this year honestly from a higher volume of content.
In the cupboard.
We have held back in prior years and kept that for exclusive use on our own.
That forms that's obviously no longer the case, but the reality is is that when we're in market we value our content highly and so while there is always an appetite for the content. It's not always at a price that we think its worth and so we're opting to sort of keep some powder dry doesn't mean, it the timing isn't necessarily but.
We are we are sort of guardians of our of our programming and the value thereof.
Thank you both for the details I appreciate it.
Thank you.
And one moment please for our next question.
Our next question will come from David Joyce of Seaport Research Partners. Your line is open.
Thank you I wanted to follow on the <unk>.
Romantic.
Question, There I was just wondering how.
I guess ubiquitous is this ability.
How are we moving towards industry standards across.
Various networks and platforms in order to.
To make this efficient for the AD buyers and.
How does this work with.
If you're opening up some of your.
Yes.
Your newer services like AMC, plus the advertising or you leave it as it is it pretty seamless to be selling across platforms and if you could tie that in also to how things went in the Upfronts. This year, where these part of all of those negotiations as I presume they probably work. Thanks.
Hi, David It's Tim Kelleher.
Great question.
So.
Let's say I'm going to take it piece by piece Eric correctly.
So this is this has been a work in progress for a long time this started with addressable efforts.
That we announced two years ago with an address ability in partnership with Comcast charter and Cox.
Fast forward to today, we are we are opening up inventory that we'll be able to add to this footprint.
<unk> partner by partner.
Initially, though we are working through canoe and have started with Comcast inventory. Obviously can you also works with charter and Cox. So we anticipate expanding upon this what we do is we couple this inventory with our growing CTV inventory coming from our 17 fast channels that are currently <unk>.
Nine platforms soon to be across 12 platforms by the end of this year, which is which is giving us a huge expanse of inventory that can be transacted on digitally. So once you put all of this together youre able to do highly targeted and with the with the progress the industry.
Is made on managing reach and frequency.
Brand safety within those environments.
<unk> got he's got a very compelling opportunity.
We're excited to be leading.
Thanks, and if I could.
Second topic.
With some of the content comparisons, causing some challenges how can we and.
Obviously, given some of the strike impacts how should we think about some of your key content properties, if timing wise the cross some of your main networks over the next few quarters to think about how.
Advertising trends.
Maybe playing out thanks.
Hey, David This is Dan Thanks for the question.
We're in great shape, we have a robust slate of content.
<unk> is already finished.
Were being finished right now as Kristian said with interviews of Empire in the second season, Darryl Dixon that will take us well into 2024, So we don't expect any impact.
The the lingering Sag after strike, which we also hope is going to be resolved in the coming days anyway. So and there is no material impact to our free cash flow from the strikes.
And David It's Patrick just one sort of final footnote there from a 2023 perspective youll recognize that were cycling fairly difficult comps from a programming perspective, so I would expect that the advertising number in Q4 will reflect that.
Great. Thank you.
Thank you.
One moment please for our next question.
Our next question will come from the line of Michael Nathanson of <unk>.
Nathan Your line is open.
Hi, This is Luke granted on for Michael.
Wanted to ask in your current bundled deals with linear distributors is there any way to allocate the breakdown to streaming versus linear channels and how you expect that to shifts in the years ahead.
Hey, it's Christian.
At this point I think we look at our relationships Holistically.
And as we noted we've included AMC plus with every single partner.
Traditional as well as a lot of the newer players into the space like Amazon Apple Roku Youtube.
So I think this will evolve over time, how it gets sort of bifurcated and bifurcate it but just to restate. Our goal is always to offer the most flexibility that allows our partners to be successful and to get our content in front of as many people opportunistically in any way that they would like to consume it so.
Utilizing our content across brands across platforms across technologies, and then Bolton AD supported and non AD supported ways, but it's not specifically broken out yet in a way that we can articulate publicly.
Thank you.
Thank you.
Again, one moment please for our next question.
Our next question will come from Brett Feldman of Goldman Sachs. Your line is open.
Great. Thanks, two if you don't mind.
First on free cash flow and the outlook for growing free cash flow I was hoping you could give us some insight into how you think the cash flow equation is going to evolve meeting right. Now you guys are really doing a terrific job on the cost side of it and Thats clearly supporting our strong cash flow profile, how much longer do you think that cost.
Graham can support growth in free cash flow and how are you thinking about the path to long term revenue growth because I think most people would agree is sort of a central to sustaining cash flow growth over the long term and then the second is you've really been at the forefront of bundling your streaming services.
Other streamers and you've had some good early success. There has been this constant conversation about when are we going to see more of that happening broadly across the category I'm curious what your insights are there.
As you've done this what have you found has worked and do you see some emerging catalysts that are likely to create more of a bundling initiatives and natural facilitators sort of an open ended question, but I think you guys have a unique vantage on this thank you.
Hey, Brad it's Patrick I'll start on the free cash flow question.
Listen we've been taking steps over the course of the last three or four quarters frankly to set ourselves up in this way and so.
We will have essentially doubled run rate free cash flow from 'twenty two into 'twenty, three and we feel quite good about continuing to grow that into 'twenty. Four obviously the biggest lever we've had to pull there is on the programming side and so we've we've set up.
The 'twenty three 'twenty four and we're looking towards 25 slates in order to ensure that.
That run rate continues obviously there are revenue challenges in the business. We expect those to continue into 2020 for particularly on the traditional side of the business.
One of the ways, we've been able to grow to grow free cash flow is not just on expense management, which to your point is.
As finite but I would also point at our efficiency on the marketing front and so thats been one lever that we've pulled this year that's been particularly.
<unk>.
Effective for us and obviously, we've moderated the growth in our streaming subscribers and Thats decelerated to a degree but its been offset by significant increases in the efficiency of that marketing spend so we're being much more tactical on spending against CPA is where we see value and so I think to the extent we can get into continued.
Do that and frankly as the ecosystem evolves towards bundles and we can have.
No.
More sort of innovative and imaginative imagine native kind of revenue streams as Christine alluded to.
I think.
From that obviously.
And free cash flow growth will continue.
On the bundling side, Brent I would just say, there's real opportunity here around pricing and packaging. We are as we've stated before our pure play programmers. So we have I think more flexibility to experiment, we have longstanding relationships in the industry. So it's kind of fun to get together and brainstorm and think about opportunities.
And put them in the marketplace, and then sort of as part of an answer to both of your questions. Our goal here is really to get to be sort of a lean mean distribution machine to create great content and get it out everywhere, we possibly can.
Yes.
Our ability to be innovative our ability to move quickly and our ability to partner.
And engages people in all different types of ideas and then culminate that.
Really intense utilization of data and technology to really understand the opportunities.
Articulate an attribute what the results were and then kind of roll those forward into expansion of the opportunities around bundling around technological distribution around AD supported capabilities are all again bright future spots that we see.
And in addition to the efficiencies that we're finding in the organization and just getting smarter and more nimble and faster in everything that we do so we've made a lot of progress. There I think we have more opportunities to do so in ways that benefit the company without cutting bone.
Thank you.
Thank you.
And one moment for our next question.
Our next question will come from Thomas.
Morgan Stanley Your line is open.
Thanks, So much I wanted to ask more about the Max experiment, especially in the contrast comments about the lower industry appetite for licensing it seemed like it was more promotional than economic in nature. I'm wondering if there is any opportunity to monetize that more directly in the future and do you think the value lies.
Yes, more and driving attention to your own services as opposed to the kind of a direct licensing.
I'd say, it's a combination of both I mean, we did see obviously as we said.
Thrilled with the volume of viewership of our titles on unmatched, including things that were not current current so we got a lot of exposure for our brands.
We then saw uptick again in utilization on AMC plus of the current seasons of shows like dark wins and some.
On the other shows that we put on Max and then where the experiment just ended a couple of days ago. So we're now working with Warner brothers on results from them to see how we can again sort of parlay. This forward and think about ways that we can opportunistically continue to expand the visibility of our content and partner with others.
To help kind of serve the customer best and bundles everything all of this is new again, when you talk about bundles and whether it's the triple play of telecommunications offerings or neatly package set of programming offering as it benefits the consumer.
And we want to play in that space.
Great makes sense and then recognizing it's still early days on the <unk> launch the OTT subscriptions I noticed did stabilize in the quarter I'm wondering if there was a contribution or a mixed shift from that and it sounds like you see this as a potential tool to find more ways to bundle is the expectation that the mix of subscribers.
Shifts more towards an emphasis on <unk> as an opportunity over time.
Thank you, yes, yes, Hey, Thomas Fitzpatrick, yes, thanks, recognizing.
Yes.
The sequential growth there as I referenced before.
It's really early days on the AD tier so it's it's it's.
It's tough to draw any.
Kind of lessons from that yet.
That being said I think I would point to efficiency in kind of marketing spend cadence of content et cetera on the on the subscriber growth.
On the subscriber side.
Q4, we will see what that looks like.
It's still it's still too early I think to attribute much on the on the AD supported tier.
I'll, let Tim comment as well hi.
Hi, Thomas I would just add to the second part of your question I think it's very important for us to have this AD supported tier now because it allows us to participate in future bundling partnerships with parity across non AD supported tier or an AD free tier and <unk> tier so making it seamless.
For the consumer and giving them that choice, regardless of the tier they decided to come in.
Okay.
Makes sense. Thank you so much.
Thank you.
Again to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one one again standby for our next call.
Standby.
As we compile the Q&A roster.
Okay.
Okay.
One moment. Please next question.
Hey can you hear me.
Yes.
We have D. Cahill of Wells Fargo. Your line is open.
Thank you so Kristen you've talked a lot on this call about the important of partners importance of partnerships and I know the Max relationship has come up a lot and this seems to be a bigger theme that we're seeing with more content heading onto bigger platforms to maximize its value and reach.
So the question I wanted to ask you you seem to hold nothing sacrosanct within the business in terms of.
How to best position going forward, how important is AMC plus to the long term strategy of AMC. It seems like the linear network is still a great place to premier content and engage with subscribers.
But AMC plus is competing against some of these bigger platforms that youre finding partnerships with so how do you just think about the strategic nature of that asset going forward and then Patrick I might be doing the math wrong here, but I think your guide implies a very small Q4 for OE versus the last three quarters.
Can you just talk about if there is any content amortization timing shift in there is it a conservative guide or something else. Thank you.
Great. Thanks, Steve on the AMC plus front.
A critical piece of what we do because it's again, we've always coupled it with the linear network, we have in particularly in the last year.
Things on AMC, plus that we wouldn't put on the linear networks. So we see it more as it as an extension of our linear offering that is available to people who consume television in a different way that's why we're so excited.
<unk> launch and our partnerships with the virtual Mvpds and the traditional Mvpds that include AMC plus.
But also this is it's it's interesting just to have products that appeal to different segments of the audience, depending on their age and their habits, but each of them contain what we've been working on for 40 years, which is curated amazing scripted dramas and the great thing for US again as Patrick <unk>.
<unk> is were reasonably priced across all of our products and what we deliver is general entertainment. So we believe by being good partners in having great content, we can hold a good position.
Sort of expanded basic traditional Stanley cable type of package, whether it's something that is traditional linear or in the more advanced kind of feature looking bundles.
Still a bond village just delivered over IP. So it's a critical piece, but again I think you have to think about it as a different.
Transmission Forum of what we've always done really well.
Yes.
Hey, Steve It's Patrick on the on the Q4 question.
You answered your own question. So your instincts are correct there'll be a substantial.
Amount of amortization, it's the P&L.
And if I can sort of qualify the nature of the guide I would say I expect us to be within the range thats not necessarily conservative.
But yes, youll look at kind of last year, we had a similar dynamic in terms of the Q4 margin being kind of materially lower.
And then the balance of the year, so there's nothing more than that in there.
Great and maybe just to follow on with that Patrick I think the domestic margin year to date, it's about four percentage points higher than last year.
With less revenue.
I know you all have done a lot on cost do you think you can continue to expand margin.
Domestics over the longer term thanks.
I'm not sure expanding margins over time, that's going to be as as.
Easy, but we're going to we're going to give it.
But expanding margins could be challenging I think.
But I would add we still see some significant opportunities to streamline our expenses, particularly around technology and distribution and that's sort of that's not unique to us the marketplaces evolving capabilities are evolving there is opportunities for different cloud vendors and different.
Distribution capabilities that that really can allow us to be more efficient in the actual mechanics of delivery on a go forward basis, and we're looking at that really closely.
Yes, you've actually one more point on the margin there that I would point to would be no. We're focused on free cash flow and so.
Sort of amortization has a has been.
A big impact on our P&L from an OE perspective.
As we go forward, we're more focused on free cash flow than than ours. So we're not managing the business for margin, we're managing it for free cash flow right now.
Okay.
Very clear thank you.
Thank you.
I'm seeing no further questions in the queue.
This will conclude today's conference call. Thank you all for participating you may now disconnect have a pleasant day and enjoy your weekend.
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