AMC Networks Earnings Miss Estimates, U.S. Ad Revenue Rises Slightly

Cable channel company AMC Networks on Thursday reported lower-than-expected adjusted earnings of $113 million for the second quarter, or adjusted earnings per share of $1.93, compared with $126 million in the year-ago period, or $1.88 a share.

Analysts had on average expected earnings of $1.96 per share.

AMC early in the latest period aired the final episodes of the eighth season of hit drama The Walking Dead. The other originals that aired in the period were Fear the Walking Dead and Into the Badlands. 

AMC CEO Josh Sapan spent much of an analyst call outlining his team’s strategy to target cable users and emerging digital platforms with other premium content like The Walking Dead and Better Call Saul. Citing a diversification into ad-free and virtual pay TV deals, Sapan touted a strong and growing presence in direct-to-consumer services that complements the company’s branded cable channels, rather than bypass traditional distributors by launching a direct-to-consumer offering of its own.

Sapan told analysts that smaller is better for AMC Networks, with fewer cable channels filled with quality content doing better to sign up pay TV subscribers as his company increasingly embraces ad-free, direct-to-consumer offerings. “We think our offering of fewer channels of high quality, and a compelling price for strong content, will serve us very well,” he told analysts.

Typical of this strategy is AMC Premiere, an ad-free version of AMC that launched first on Comcast, and is headed to YouTube and fuboTV. AMC in the streaming space also has niche offerings like Sundance Now and Shudder, and more recently backed Britbox via its joint venture with BBC Worldwide for cable channel BBC America.

AMC also earlier this week finalized a deal to acquire control of Robert Johnson’s RLJ Entertainment and its growing Acorn TV and UMC SVOD services to accelerate a move towards direct-to-consumer, ad-free subscription services that the traditional cable giant owns and controls. “We’re moving towards meaningful scale” in the subscription VOD space, Sapan added.

On the content side, Sapan cited the Emmy-nominated BBC America original series Killing Eve, which debuted in the quarter and became the only scripted series in more than a decade on linear television to grow its ratings every week over its first eight week run, as a measure of the premium content that AMC continues to support and distribute. 

AMC in its financial results reported U.S. advertising revenue rose 0.6 percent to $247 million, following an 8.8 percent decline in the first quarter. “The increase in advertising revenues principally related to higher pricing partially offset by lower delivery,” the company said.

“Second-quarter advertising revenue should improve sequentially … given positive episode comparisons from The Walking Dead and Into the Badlands offset somewhat by a lack of Better Call Saul episodes in the quarter (this show returns later in the third quarter),” said Evercore ISI analyst Vijay Jayant in his earnings preview. “Average live viewership of AMC’s group of U.S. networks declined by 6 percent and 8 percent in the primetime and total-day windows, respectively, during the second quarter. The flagship AMC channel weighed on the group’s performance somewhat, finishing -12 percent and -23 percent in primetime and total day, respectively, as season eight of The Walking Dead saw live viewership fall.”

Quarterly revenue increased 7.2 percent to $761 million on a 3.7 percent gain at national networks and an increase of 32.4 percent at international and other businesses.

On the new series front, AMC unveiled a straight-to-series order for anthology Dispatches From Elsewhere, starring Jason Segel and featuring an audience engagement component.

Aug. 2, 10:00 a.m. Updated with comments by AMC CEO Josh Sapan made during an analyst call.

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