Q3 2025 AMC Networks Inc Earnings Call

Speaker #2: Good day and thank you for standing by . Welcome to the AMC networks third Quarter 2020 Earnings Call . At this time , all participants are in listen only mode .

Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one on your telephone .

Speaker #2: You will then hear automated message advising your hand is raised . To withdraw your question , please press star one one again . Please be advised that today's conference is being recorded .

Speaker #2: I'll night to hand the conference over to your speaker today , Nick Siebert , SVP , Corporate Development and Investor Relations . Please go ahead .

Speaker #3: Thank you . Good morning , and welcome to the AMC networks third Quarter 2020 Earnings Conference call . Joining us this morning are Kristin Dolan Chief Executive Officer Patrick O'Connell .

Speaker #3: Chief Financial Officer Tim Kelleher . Chief commercial officer . And Dan McDermott , president of entertainment and AMC Studios . Today's press release is available on our website at AMC Networks Inc. .

Speaker #3: 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 .

Speaker #3: 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 .

Speaker #3: Please refer to AMC Networks Inc. 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 .

Speaker #3: The required definitions and reconciliations can be found in today's press release . And with that , I'd like to turn the call over to Kristen .

Speaker #4: Thanks , Nick , and thanks , everyone for joining us this morning . We're pleased with our performance in the third quarter and our progress in several key areas .

Speaker #4: We delivered another quarter of healthy free cash flow and are on track to achieve our increased guidance of $250 million in free cash for the full year .

Speaker #4: The results we reported today mark a key milestone in our transition from a cable networks business to a global streaming and technology focused content company .

Speaker #4: Streaming revenue growth accelerated in the quarter and offset affiliate revenue declines , resulting in stable domestic subscription revenues . As we've previously discussed , we expect streaming to be our single largest source of revenue in our domestic segment .

Speaker #4: This year . This is a first for us and a meaningful inflection point as we continue to manage the business for the long term .

Speaker #4: As much larger companies spin off assets or split up to find clarity in a complicated time . We've built the components of a modern media business that is nimble , independent and well suited to today's environment .

Speaker #4: And whatever comes next . We have a successful studio that produces programming and franchises that attract passionate and engaged viewers . We're home to the world's largest collection of targeted services , bringing fans of specific genres and unmatched level of curation and depth .

Speaker #4: We window our owned content across a full distribution ecosystem of domestic and international networks , streaming services , theaters and fast channels . And we service all of this with a unified technology platform that allows us to deliver our content to viewers wherever they want to watch in a scalable way with predictable costs .

Speaker #4: A few highlights before I turn things over to Patrick . As previewed on our last call , we renewed and expanded our branded content licensing agreement with Netflix , which has been beneficial for both companies .

Speaker #4: We reserved new seasons of our most important franchises for our own platforms and get the promotional benefits of making prior seasons available to Netflix's large base of us subscribers .

Speaker #4: This new agreement also expands to select international markets with a combination of first and second window rights focused on our biggest franchises like Anne Rice , Dark Winds , and The Walking Dead .

Speaker #4: Turning to other key partnerships , we renewed a long term distribution agreement with DirecTV , which expands the availability of our networks and programming across linear , fast and streaming next year , DirecTV will hard bundle the ad supported version of AMC plus in video packages that include AMC linear Network and will also add shutter to one of their genre packages .

Speaker #4: We continue to work with charter to raise awareness among spectrum TV customers . That ad supported AMC plus is now included in their video package .

Speaker #4: More than 850,000 spectrum customers have opted into AMC plus since its inclusion in the package earlier this year . We've also expanded our relationship with Cox .

Speaker #4: All five of our linear networks are now included in their streaming only TV plan . Cox TV Lite . Just this week , we launched our first triple bundle with Amazon Prime Video , offering AMC plus , MGM plus , and Starz at significant savings over standalone pricing .

Speaker #4: During last quarter's call , as we were finalizing our upfront negotiations , we noted a more than 25% increase in digital advertising commitments .

Speaker #4: I'm pleased to say the final figure was an increase of 40% . This is meaningful growth in an increasingly important category as our digital presence expands and advertisers see the impact of reaching viewers across all platforms that feature our popular and critically acclaimed programming .

Speaker #4: Our FAST and AVOD business continues to grow. We recently renewed our distribution with CTV leaders Samsung and Roku, and expect to launch four new FAST channels by the end of the year.

Speaker #4: As discussed last quarter , we're also implementing this successful strategy internationally . We currently have fast channels in the U.K. , Canada , Germany , Spain , and Latin America .

Speaker #4: Globally , as of the end of September , we have 33 fast channels distributed across 22 platforms , totaling 215 active channel feeds combined .

Speaker #4: Our portfolio of streaming services , delivered in all time high in viewership during the quarter , including the highest ever viewership of AMC plus , Acorn TV , our streaming service focused on international crime dramas and mysteries , is having its best year ever .

Speaker #4: We're thrilled with the new talent , energy , and momentum we're bringing to this beloved service . Now , in its second decade and one of the world's first and most successful targeted streaming services , Irish Blood , the new series starring and executive produced by Alicia Silverstone , premiered in August and is already Acorn's number one series ever and has been renewed for a second season .

Speaker #4: We're currently in production in Nova Scotia on a new series called You're Killing Me , starring and executive produced by Brooke Shields . We just completed another successful Fear Fest , one of our biggest programming events of the year .

Speaker #4: Now spanning thousands of hours of programming across AMC , AMC plus and Shudder . Brand partnerships included an integrated show sponsorship with Hyundai , a Universal Studios promotion on shudder for Black Phone two , and multi-platform partnerships with Bacardi and Kraft Heinz .

Speaker #4: Anchored by full week placements on sphere , as well as on our linear streaming and social platforms on AMC and AMC plus , we just brought fans a third series in our popular Anne Rice Immortal universe , Anne Rice's Talamasca The Secret Order .

Speaker #4: The first episode has already been seen by 2 million viewers across all platforms , and is pacing as the most watched series premiere since The Walking Dead .

Speaker #4: The ones who live interview with the vampire will return next year with a new season called The Vampire Lestat , focused on the popular character Lestat as the world's first truly immortal rock star .

Speaker #4: We've completed production of a new series that will premiere next spring on AMC and AMC plus , called The Audacity . Written and produced by Better Call Saul and Succession writer Jonathan Glatzer .

Speaker #4: It's a provocative , timely and darkly comedic series featuring an amazing cast including Billy Magnussen , Sarah Goldberg , Zach Galifianakis , Rob Corddry , and Simon Helberg .

Speaker #4: Next year , we're planning to go into production on a new franchise , Great American Stories . The first season of which will be focused on John Steinbeck's The Grapes of Wrath .

Speaker #4: Our film group is experiencing one of the most successful years in its history, with the recent theatrical release "Good Boy." Joining this summer's "Clown in a Cornfield" to deliver two of the three highest-grossing opening weekends we've ever had.

Speaker #4: Dangerous Animals also saw solid box office results this summer , just as important as the theatrical success is the impact these films have when they move to streaming on AMC Plus and Shudder , extending the reach of our high quality IP with minimal audience duplication .

Speaker #4: Earlier , I spoke about the strategic components of our business and our commitment to remaining fast moving and adaptable as our industry evolves .

Speaker #4: Our achievements are only possible because of our people , and I'm extremely proud of the work we're doing and the culture we have built together to support our employees during this dynamic period .

Speaker #4: In media , and to advance our company with dedication and focus . We recently offered a voluntary buyout program to most of our US workforce .

Speaker #4: This program did not have specific financial targets , rather , its purpose was to strengthen our talent base and ensure we have the right skills for the future .

Speaker #4: The result of this initiative is a less than 5% reduction in our total employee base . We are thankful for the contributions of those who have chosen to pursue new opportunities and of course , those who are driving this new era of the company .

Speaker #4: AMC networks continues to differentiate itself during this challenging time in media . As I said at the top of the call , when I look across our business , I see a company that has the pieces and the people necessary to succeed in this environment and to move quickly to find new and better ways to bring engaged fans .

Speaker #4: The they love . And now I'll turn the call over to Patrick .

Speaker #5: Thank you . Kristen . We are pleased with our third quarter performance , and today we are reiterating our outlook for the full year .

Speaker #5: We delivered another quarter of healthy cash flow generation with free cash flow totaling $42 million in the third quarter . We remain well positioned to achieve our 2025 outlook of approximately $250 million of free cash flow .

Speaker #5: Third quarter consolidated net revenue declined 6% year over year to $562 million. Favorability in foreign exchange rates resulted in an approximately 65 basis point tailwind to our consolidated revenue growth rate.

Speaker #5: Consolidated A.Y. declined 28% to $94 million , with a 17% margin and adjusted EPs was $0.18 per share . I'll now review our segment results .

Speaker #5: Domestic operations revenue decreased 8%

Speaker #5: to $486 million . content Subscription revenue was flat year over year , with streaming revenue growth of 14% , partly offset by a 13% decline in affiliate revenue .

Speaker #5: Streaming revenue growth in the quarter benefited from the implementation of rate initiatives , as well as year over year streaming . Subscriber growth of 2% .

Speaker #5: We ended the third quarter with 10.4 million streaming subs . We've implemented price increases across all of our streaming services this year . Retention and engagement remain healthy across our portfolio of services , and we continue to anticipate an acceleration in our streaming revenue growth rate for the fourth quarter .

Speaker #5: As Kristin highlighted earlier , streaming revenue is expected to be our largest single source of revenue this year . In this segment . Moving to advertising .

Speaker #5: For the third quarter , domestic operations , advertising revenue decreased 17% due to linear ratings declines and lower marketplace pricing . The ad market remains challenging for everyone , but we are encouraged by our strong upfront performance .

Speaker #5: The strength of our programming , and our significant , advanced and digital advertising capabilities . As Kristin mentioned , we are pleased to have renewed and expanded our licensing agreement with Netflix in the third quarter .

Speaker #5: Recall that licensing revenues often vary quarter to quarter due to the timing of agreements and delivery schedules . For the third quarter , content licensing revenue was $59 million , reflecting the timing and availability of deliveries in the period .

Speaker #5: Demand for our high-quality content remains healthy, and we now anticipate that domestic operations and content licensing revenue will exceed $250 million for the full year.

Speaker #5: Domestic operations . A.Y. was $112 million for the quarter , representing a decrease of 25% . The decrease in A.Y. was largely driven by continued linear revenue headwinds .

Speaker #5: Moving on to our international segment, third quarter international revenues were $77 million. Excluding the favorable impact of foreign exchange in the current period, international revenues decreased approximately 50 basis points.

Speaker #5: Subscription revenue , excluding FX , decreased 6% due to the non-renewal , with Movistar in Spain , which occurred in the fourth quarter of 2020 .

Speaker #5: For advertising revenue , excluding FX increased 10% due to strong ad performance in the UK and Ireland . International A.Y. for the third quarter was $12 million , with a 15% margin .

Speaker #5: Turning to the balance sheet , we remain focused on continuing to reduce gross debt and extend maturities . We ended the quarter with net debt of approximately $1.2 billion , a consolidated net leverage ratio of 2.8 times , and approximately $900 million of total liquidity .

Speaker #5: We continue to believe that our securities will offer attractive opportunities to deploy cash across the capital structure to create meaningful equity value over time .

Speaker #5: In the third quarter , we repurchased $9 million of our unsecured senior notes due 2029 at an average price of $0.84 on the dollar .

Speaker #5: Subsequent to the end of the quarter , we also paid down approximately $166 million of our term loan , a and amended our credit facility to push the maturity of the majority of our revolver availability to late 2030 .

Speaker #5: Regarding capital allocation , our philosophy remains consistent . First , we look to support the business by creating and acquiring compelling programming that resonates with our audiences while maintaining healthy levels of free cash flow generation .

Speaker #5: Second , we remain focused on reducing gross debt and extending debt maturities , as evidenced by our third quarter open market repurchases and recent partial repayment and extension of our credit facility .

Speaker #5: Lastly , acquisitions and share repurchases will be opportunistic and measured . Moving to our outlook . We are reiterating our 2025 outlook . Today , we remain confident in our ability to drive free cash flow and are on track to deliver approximately $250 million of free cash flow in 2025 , with $232 million already generated in the first nine months of the year .

Speaker #5: We are well on our way to achieving this goal . We continue to expect consolidated revenue of approximately $2.3 billion , reflecting continued linear headwinds , partially offset by streaming and content licensing strength .

Speaker #5: And we also expect consolidated A.Y. in the range of 400 million to 420 million for the full year . We are proud of the meaningful progress we've made in transitioning our business .

Speaker #5: We've built all the necessary components of a nimble and opportunistic modern media business . All the while , we've continued to create and curate the high quality content that engages fans and builds valuable , lasting franchises .

Speaker #5: We remain grounded in our consistent strategy of making great content , distributing that content broadly , generating meaningful free cash flow , and being prudent in how we allocate our capital .

Speaker #5: With that , I'll hand the call back to Nick .

Speaker #3: Thank you . Patrick . Well , operator , we'll now open the line for questions , please .

Speaker #2: Thank you . At this time , we'll conduct the question and answer session . As a reminder to ask a question , you will need to press star one on your telephone and wait for your name to be announced .

Speaker #2: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . And our first question comes from the line of Charles Wolber of Guggenheim Securities .

Speaker #2: Your line is now open .

Speaker #6: Hi . Good morning . Just wanted to ask . I was hoping you could talk about your partnership with the Sphere and promoting Fearfest .

Speaker #6: How are you thinking about similar partnerships in the future for other promotions like Best Christmas Ever or content premieres ? And then on Aoy margins decrease in the quarter to mid-teens range .

Speaker #6: I believe in the past you guys have talked about long term margins in the mid to high 20% range . Is that still how you're thinking about margin potential over the long term ?

Speaker #6: And what steps do you need to take to drive margin expansion ?

Speaker #4: Great . Hi Charles , it's Kristen , thanks for the question on sphere .

Speaker #7: As you know , we sell cross-platform . All of our inventory and we do it against specific audiences . And having the opportunity to integrate with the exosphere capabilities in Vegas has been really attractive to a variety of advertisers , particularly those in packaged goods where we can work with sphere Studios to create an interesting component companion on the sphere to their linear , fast and Avod purchases with us .

Speaker #7: So Kim can expand a little bit , I think on on who we work with and how that's come together .

Speaker #8: Sure. I just add it's an incredible way to mark the campaign in a marquee global way, where the exosphere goes global on social. It really marks that kind of signature moment for the advertiser.

Speaker #8: So most recently with Fearfest , we did Bacardi and Kraft Heinz with and to a great deal of success . And we do have partnerships in discussion for best Christmas Ever and into other signature time frames for 26 .

Speaker #5: Charles on the margin question . You know , I think what we've been what we've said in the past is that we're trying to do two things at once .

Speaker #5: We're trying to on one hand , it continue to invest heavily in premium programming and at the same time drive significant free cash flow through the business .

Speaker #5: You have seen over the last couple of years that our free cash flow conversion has increased materially , you know , it's quite high , over 60% in 2025 .

Speaker #5: And that will continue to be the focus going forward . So I would I would pay particular attention to the free cash flow in the business .

Speaker #5: Obviously in the last quarter we actually increased the guide for the year , you up from an implied 225 million to 250 million this year .

Speaker #5: And so that's that's really the watchword . I focus on the free cash flow generation .

Speaker #6: Great . Thank you .

Speaker #2: Thank you . One moment for our next question . Our next question comes from the line of Doug Kurtz of TD . Your line is now open .

Speaker #9: Hey . Thank you . Just as you become less of a linear business and more of a streaming business , how does that affect your overall cost structure ?

Speaker #9: Are there are there are there ways that it's going to help you ? Are there ways where it's going to hinder you ? Can you talk to how about how you expect that to continue to evolve over the next couple of years ?

Speaker #9: Thanks .

Speaker #5: Sure . Hey , Doug , you know , I think we've got one of the most efficient models out there . You know , when you think about how hard our programming dollars work against multiple distribution platforms , right ?

Speaker #5: So when we program for AMC linear , it goes on AMC plus , and the amount of incremental programming that's on AMC plus exclusively is relatively small from a dollar perspective .

Speaker #5: Certainly, there are lots of episodes. There's a lot of content, etc. For subscribers there, so there's always something new and different. And exclusive.

Speaker #5: But from a financial standpoint . The the preponderance of our our programming investment on AMC really does double duty across both linear and streaming .

Speaker #5: And then secondly , I'd point out some of the other , more targeted streaming businesses where like Acorn , for example , where the unit economics from a cost structure are quite advantageous , you know , the cost of production on those series is is much , much lower .

Speaker #5: Than on , you know , kind of other larger streaming services . The audience , are audiences are are extremely kind of tuned in .

Speaker #5: And I think we've got good engagement churn metrics , etc. . So we feel really good about the efficiency from a cost perspective of the way we approach the streaming business .

Speaker #5: And I would say kind of broadly across the the overall business , you know , we continue to have levers to pull , but we are primarily focused on continuing to invest in in premium programming across all of these businesses .

Speaker #5: And we think we do it well . And that we get it to work hard for us .

Speaker #7: I would just add , Doug , thanks for the question on the operating side , you know , we continue to remind people that our strategy is to be a wholesale streamer .

Speaker #7: And in doing that , a lot of the costs end up on the sides of our distribution partners , whether it's for acquisition or for customer service or for promotion and bundling .

Speaker #7: And then the technology work that we've undertaken over the last 12 to 18 months is driving a very predictable approach . Right ? So digital , when you're doing streaming , we have all of our content is is nicely tucked away with Comcast technology services .

Speaker #7: And then back supported with their second , you know , their second location cloud location . So we know that our content is safe .

Speaker #7: It's stored efficiently and successfully thru CTS . And then our distribution for streaming and for digital is , is is on the back of that deal , which as we always say , it's a deal that we know what it can , what it will cost us to deliver and that it is scalable for as large as we want to grow .

Speaker #9: Great . Thank you .

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of David Joyce of Seaport Research Partners.

Speaker #2: Line is now open .

Speaker #10: Thank you . Thinking about advertising with the components of the upfront commitments you mentioned and the 850,000 AMC plus sign ons with Charter Spectrum , what would be the glide path ?

Speaker #10: Do you think with this increased streaming presence to turning advertising into a growth business again ? Granted , the advertising level because of , you know , linear is is half of what it was like 8 or 9 years ago .

Speaker #10: But what can what can make this a growth revenue stream ? Again ?

Speaker #8: Hi , Charles , it's Kim . I would point to the number Kristin shared in our successful upfront tied to the 40% growth in our digital advertising , which really aligns actually aligns and includes that 850,000 AD supported charter subscribers .

Speaker #8: We continue to kind of expand the inventory . We have through our partners of AMC plus . So we we really are continue down the road of focusing on making our our inventory digitally or dynamically ad inserted , which actually allows us an opportunity to cross-sell across all our platforms , including CTV , our streaming services that are ad supported , which we continue to add to with shutter ad supported coming shortly .

Speaker #8: It's just it's growing that overall pool and that will align over time .

Speaker #10: Thank you .

Speaker #2: Thank you . One moment for our next question . Again , as a reminder to ask a question , you will need to press star one on on your telephone .

Speaker #2: Our next question comes from the line of Steven Carl of Wells Fargo . Your line is now open .

Speaker #11: Thanks . I wanted to ask about the advertising as well . So you talked about the growth in the fast channels . I was wondering if you could give us the percentage of of either domestic or total advertising revenue .

Speaker #11: You're now recognizing from those fast channels , just so we get to the relative size as it grows . And then just on the upfront , we've heard from some peers that at least entertainment linear pricing might have been down year on year .

Speaker #11: So was wondering if you could give us any color there . And then finally , you've talked about streaming revenue as your biggest revenue bucket .

Speaker #11: Can you just confirm if that's subscription and advertising ? And if we compared streaming subscription and advertising to linear subscription and advertising , is is streaming now bigger , which I think would be a big turning point ?

Speaker #11: Thank you .

Speaker #5: Hey , Steven , it's it's Patrick . I'll do the the third piece first and I'll flip it over to Kim on the advertising side of the business , our streaming revenue is , is streaming revenue only .

Speaker #5: There's not the digital advertising embedded in that . So that's a that's you know , you can call it kind of a clean or pure number .

Speaker #5: You know , obviously we've got a number of products in the market from an ad supported basis . But those dollars get captured in our advertising dollars , not the streaming dollars .

Speaker #5: So hopefully that clears up .

Speaker #8: And I would just mention, as Christine pointed out in her comments, we do have 33 FAST channels now across 22 platforms with over 250 global feeds.

Speaker #8: And that's creating a great deal of streaming , digital inventory for us . We don't break that out , Stephen . That's included in the overall digital inventory that we sell cross-platform .

Speaker #8: But what I would add is this is not just an advertising venture for us . We look at at the fast and Avod marketplaces as an opportunity for us to garner interest for our programming .

Speaker #8: With early seasons that actually help drive awareness and and promotion and marketing towards our streaming services . So the majority of the new fast channels we've launched recently are channels that actually sample our , our targeted streaming services like Acorn , Acorn Mysteries or scares by Shudder or All Black Gems .

Speaker #8: These services sample sample content from our streaming services and give us an opportunity to drive that . That kind of non-chord connected audience to our streaming services directly .

Speaker #8: So, we're really seeing them beyond just an advertising generator, but more of a marketing and promotional opportunity for us in streaming.

Speaker #7: And I would just add , we have one partner right now who's trialing with us the opportunity to click through a fast channel to purchase the corresponding TV , ts , VOD .

Speaker #7: So that's an interesting experiment for us . So it goes beyond just using fast as a Barker channel . It's actually a interactive mechanism to purchase the correlated streaming service .

Speaker #7: So we're excited about that and hoping for some positive results .

Speaker #12: Thank you .

Speaker #2: Thank you . This concludes the question and answer session . I would like to turn it back to Nick Siebert for closing remarks .

Speaker #3: Thank you, everyone, for joining us this morning. We appreciate you giving us the time and your continued interest in AMC Networks.

Speaker #3: Have a nice day .