AMC Networks Fourth-Quarter Earnings Rise as 'Walking Dead' Boosts Ad Revenue
The cable networks company, led by Josh Sapan, exceeded Wall Street expectations.
AMC Networks on Thursday reported improved fourth-quarter financials that exceeded Wall Street expectations.
The cable networks company, led by CEO Josh Sapan, posted a profit of $77.6 million, or $1.06 per share, compared with $35.4 million in the year-ago period, or 49 cents per share. Adjusted operating cash flow, another metric of profitability, amounted to $194 million, up 96.9 percent. Revenue jumped 40 percent to $609.4 million.
Wall Street analysts had on average expected earnings of $71.1 million, or 99 cents per share, on revenue of $602.4 million.
The company in the latest quarter took a charge of $28 million related to the write-off of programming assets, which it didn't specify. The year-ago quarter had included such a charge of $52 million.
The company's advertising revenue was boosted by the start of the latest season of AMC hit show The Walking Dead, among other things. The company's U.S. networks, including AMC, WE tv and IFC, posted a 19.7 percent gain in revenue to $500 million, led by a 24.3 percent increase in advertising revenue to $255 million. "The increase in advertising revenues was due to strong demand for our original programming, primarily at AMC, as well as the inclusion of BBC America in the current year period," the firm said.
AMC Networks late last year struck a deal with BBC Worldwide to buy a 49.9 percent stake in BBC America.
Operating profit at the U.S. networks increased 75.8 percent to $178 million amid the higher revenue and expenses that were essentially flat as spending rose due to BBC America, offset by cuts in programming and marketing spending.
International and other revenue in the quarter increased by $92 million to $110 million, but the operating loss also widened by $2 million to $19 million from the year-ago period. The company's acquisition of Chellomedia from Liberty Global boosted the revenue, but also expenses. The higher operating loss was also due to an increase in depreciation and amortization expense and the impact of restructuring charges.
"The strong performance of our original programming with record ratings at our national networks has led to continued increases in affiliate fees and advertising revenues," said Sapan. "Our BBC America joint venture adds another important and valuable network to our portfolio, delivering high-quality programming that attracts audiences and will drive additional opportunities for growth domestically."
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He added: "International expansion continues to be a focus, and we believe our Chellomedia acquisition provides a strong platform for our content, enabling us to capitalize long term on international pay TV growth and drive long-term value for our shareholders."
Macquarie analyst Amy Yong on Tuesday downgraded her stock rating on AMC to "neutral" in a report entitled "Saul's on Hold." "Growth has never been an issue for AMC Networks, just costs. Be mindful that earnings volatility is high due to the expensive nature of producing scripted originals, particularly high-profile ones like Better Call Saul," she wrote.
Yong added: "Shares are now adequately pricing in potential success of new drama Better Call Saul. Our model assumes about 3 million-4 million viewers per episode and is consistent with the last two episodes."