AMC Networks Fourth-Quarter Results Hit by 'Rubicon' Writedown
UPDATED: The parent company of "Mad Men" and "The Walking Dead" cable channel AMC posted higher revenue and operating profit, but programming and marketing costs affected the bottom line as CEO Josh Sapan discussed the benefits of his firm's Netflix deal.
NEW YORK - Cable channel firm AMC Networks on Thursday reported fourth-quarter financials that mostly improved, but earnings were lower amid higher programming and marketing expenses and a write-off for cancelled AMC show Rubicon.
The company, led by CEO Josh Sapan, posted a quarterly profit of $29.5 million, compared with $19.3 million in the year-ago period. But earnings from continuing operations slightly declined from $30 million to $29 million and fell below Wall Street expectations. "The decrease resulted from an increase in interest expense partially offset by growth in operating income and a decrease in income tax expense," the company said. The latest quarter also included an $18 million write-down for the short-lived Rubicon.
Operating profit of $79 million was up 12.6 percent. Revenue rose 13.6 percent to $339 million from $298 million in the year-ago period, exceeding Wall Street estimates. The increase was driven by a 14.7 percent advertising revenue gain, with affiliate fee revenue rising 10 percent.
Susquehanna Financial Group analyst Vasily Karasyov summarized the quarter in the title of his report: "Ratings at a cost."
AMC Networks' stock closed down 4.4 percent at $44 a day after hitting a new high of $46.69.
Sapan said on a conference call that the latest quarter started seeing financial benetits from a content licensing deal with Netflix, which he reiterated AMC structured in a way that should protect the cable TV eco-system. He said in the case of Mad Men, for example, having the show on Netflix likely will have a benefit by exposing new people to it, which could help drive viewership for seasone five, which debuts next week.
He also said pay TV operators appreciate AMC Networks' bigger restraint in making content available on digital platforms, helping preserve value for them.
Sapan said the company feels good about its originals and said AMC's early attempts at non-fiction shows are encouraging with Talking Dead and Comic Book Men. "We'll have to see over time" how such content performs," the CEO said. "There are some open questions But to-date, we are quite encouraged by the results."
The earnings report is the company's third since its spin-off from cable operator Cablevision Systems. AMC Networks, whose channels include Mad Men and The Walking Dead home AMC, IFC and others, is controlled by the Dolan family that also owns Cablevision. On Wednesday, the networks company struck a new carriage deal with cable operator Suddenlink. Sapan said he was pleased with the carriage deal, but didn't disclose financial details. He reiterated that he expects affiliate fee revenue to keep growing amid improved momentum at AMC and other channels.
"2011 was a landmark year for AMC Networks," said Sapan. "We completed our successful spin-off from Cablevision and achieved strong financial results, delivering double digit growth in net revenues, adjusted operating cash flow and operating income for the full year. Our national networks continued to deliver original programming that attracts a highly engaged audience and critical acclaim, including AMC's The Walking Dead, which has broken ratings records and become a global phenomenon."
Sapan added: "As we look at the year ahead, we are well positioned to continue this momentum and will maintain our focus on creating value for shareholders, advertisers and distribution partners."