- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
AMC Networks, the cable networks company that operates AMC, IFC, WE tv, BBC America and SundanceTV, on Tuesday reported lower second-quarter earnings and said U.S. advertising revenue fell 14.6 percent, less than previously feared, in the first quarter that was fully affected by the novel coronavirus pandemic.
The stock rose before the market open.
The company said “the decrease in advertising revenues was primarily related to the impact of the COVID-19 pandemic, which resulted in lower demand, as well as the timing of the airing of original programming.”
The second quarter included such originals as one episode of The Walking Dead, three episodes of Better Caul Saul, two episodes of NOS4A2 and several episodes of Dispatches From Elsewhere.
The company, led by CEO Josh Sapan, had previously said that second-quarter U.S. ad revenue would be down about 30 percent given demand problems amid the virus crisis and the fact that it forced the season 10 finale of The Walking Dead to be pushed back along with the debut of new spin-off series World Beyond. Advertising has been particularly hard hit in such categories as travel, auto, restaurants and movies, the firm has said, while highlighting that it has “relatively less exposure” to ad revenue than its entertainment peers.
For the current third quarter, management on Tuesday’s earnings conference call forecast a U.S. ad revenue decline in the mid to high teen percentage range, with CFO Sean Sullivan saying that while the overall U.S. ad market “looks to be improving,” the delay in original content, particularly Fear the Walking Dead. Executives also signaled the upfront advertising market was developing more slowly this year amid the pandemic, but said scatter market ad sales had been relatively healthy in some categories.
Second-quarter total revenue dropped 16 percent to $646 million, led by an 18 percent decline at the U.S. networks unit. Operating income fell 71 percent to $49 million, while adjusted operating income was down 3 percent to hit $225 million.
AMC Networks also recorded $130 million in impairment charges in the latest quarter related to its AMC Networks International unit. “As a result of the continuing impact of the COVID-19 pandemic, management assessed the value of the goodwill and long-lived assets recorded on its balance sheet,” the company explained.
AMC Networks in its first-quarter earnings report had said it expects to reach 3.5 million to 4.0 million paid subscribers in aggregate for its four niche streaming services, namely Acorn TV, Shudder, Sundance Now and UMC, by the end of 2020, “a full two years ahead of the company’s original target of year-end 2022.” Sapan said Tuesday that his team was comfortable that it would finish the year near the “higher end” of the subscriber target range.
“We have made particular progress during this COVID period with strong growth across our targeted SVOD services … as consumers increasingly subscribe to both our targeted offerings in addition to general entertainment SVOD services,” he said, highlighting particularly strong momentum for March through June, with Shudder having had its strongest quarter ever in terms of trials, paid subscribers and amount of time spent on the service. “We are not competitive with the large [streaming] services, we are compatible with them.”
COO Ed Carroll said that the company’s streaming business was running “significantly” ahead of its previously shared 2024 year-end target for revenue of $500 million-plus and 5 million-7 million subscribers.
Sapan on the call provided an update on his team’s latest plans for a return to production on key shows, saying Fear the Walking Dead in Texas is eyeing a late August restart of production for season 6, new series Kevin Can F*** Himself is planning a late September start in Boston, and The Walking Dead in Georgia is scheduled to go back to production, of season 11, in October. He said the company would continue to monitor and adjust plans as needed.
The CEO also touted the company’s position overall. “Amidst a continuing challenged and uncertain environment, AMC Networks delivered solid results in the second quarter, exceeding our financial expectations for the quarter and expectations on several key metrics, including advertising,” Sapan said. “We continue to maintain a strong financial profile, with a solid balance sheet and liquidity, and we continue to generate healthy levels of free cash flow. We remain focused on our strategic priorities and are making progress on our major initiatives – which include creating great content and monetizing that content across an expanding array of platforms.”
Sapan also highlighted that last week, AMC Networks was recognized with 18 Emmy nominations, “including two out of the eight nominations for outstanding drama, for our original series Better Call Saul and Killing Eve, demonstrating our continued ability to stand out in a crowded landscape with compelling character-driven stories that drive the cultural conversation.”
Management didn’t comment on an analyst question about how the company feels about remaining a publicly traded company versus possibly going private.
Sign up for THR news straight to your inbox every day
The Lost Daughter