AMC Networks Quarterly Profit Drops, Revenue Rises
AMC Networks, led by CEO Josh Sapan, on Thursday reported mixed second-quarter financials amid the company's continued focus on original programming.
The owner of such cable networks as AMC, IFC, Sundance Channel and WE tv with such hits as The Walking Dead and Mad Men, posted earnings from continuing operations of $58.7 million, compared with $135.7 million in the year-ago period.
Operating profit fell from $247.3 million to $129 million as the year-ago period figure was boosted by a $133 million litigation settlement gain. Excluding that gain, operating income rose 13.2 percent though. Adjusted operating income before depreciation and amortization, another profitability metric, rose 13.5 percent to $157 million.
Quarterly revenue at the company, in which the Dolan family is the biggest shareholder, rose 37.6 percent from $379 million in the year-ago period to $522 million.
Wall Street analysts had on average predicted earnings of $62.2 million and revenue of $515 million, meaning revenue exceeded expectations, while earnings fell short.
The company in the latest period aired fewer episodes of Mad Men than in the year-ago quarter. It also included new series Turn and Halt and Catch Fire, as well as Sundance's Rectify.
The second quarter followed a similar trend as the previous one as originals boosted revenue, but were a drag on earnings due to increased expenses.
National networks revenue for the quarter increased 8.7 percent to $398 million led by an 11.3 percent increase in advertising revenue due to what the company said was "strong demand for our original programming." Adjusted operating cash flow at the unit dropped 9.4 percent to $137 million though. The company said that reflected "the increase in revenues offset by an increase in expenses," which was "primarily attributable to higher programming and marketing expense.
"AMC Networks once again generated double-digit increases in revenue and adjusted operating cash flow in the second quarter as we continued to create value for our shareholders by investing in high-quality original programming that builds our brands, strengthens our relationships with distributors and advertisers and creates highly passionate and dedicated viewers."
He added: "We are proud of our 35 prime-time Emmy nominations, including 26 six at AMC, eight at IFC and one at SundanceTV."
On an earnings call, Sapan was asked about reports that AMC was interested in buying BBC America. He wouldn't comment directly on the subject, but left open the possibility of examining potential acquisitions "close to what we do, and manageable against our desired level of leverage."
As for newer shows like Halt and Catch Fire, currently up in the air for a second season, Sapan's guidance to analysts seemed to indicate he favors patience. He pointed out that scripted dramas tend to command higher fees in SVOD platforms like Netflix and Amazon Prime, that AMC shows like Breaking Bad and Mad Men gamed steam during the course of their runs, and commented, "If they are good, they might well be the beneficiaries of between season referrals," also using Metacritic as one of the things he's looking at when judging a show like Rectify.
On the other hand, despite the overwhelming critical success of the Richard Linklater film, Boyhood, produced by AMC's IFC Films, he doesn't expect it to make too much of a financial impact for the company. The film is performing well in limited release, and expanding, but according to Sapan, "We are pleased with Boyhood, but not going to pop the champagne bottle on the economic side for AMC Networks because of it."