AMC Networks Reports Higher Second-Quarter Earnings
UPDATED: The cable networks company, whose hit shows include "The Walking Dead" on AMC, warned though that Dish's decision to drop its channels will affect future earnings.
AMC Networks on Thursday reported improved second-quarter earnings but warned again that its future financials will be negatively affected by satellite TV giant Dish Networks' decision to drop its cable channels.
"The termination of Dish Network's carriage will have a material impact on our revenues, adjusted operating cash flow and operating income in future periods," AMC Networks said. "Although Dish Network's termination has reduced the company's total subscribers by approximately 13 percent, the impact on our adjusted operating cash flow and operating income, if it continues, will be materially higher."
The networks company, led by CEO Josh Sapan, posted a profit of $41.5 million for the latest quarter, compared with $27.2 million in the year-ago period. Quarterly revenue rose 12.2 percent to $328 million.
The results exceeded Wall Street expectations as analysts had on average forecast earnings of $40.4 million on revenue of $324 million.
Second-quarter profit from continuing operations was $41 million, compared with $27 million in the year-ago quarter. "The increase resulted from the growth in operating income and the absence of costs related to the redemption of debt in connection with the spinoff from Cablevision partially offset by an increase in interest expense," the company said.
At the company's four core networks -- AMC, IFC, WE tv and Sundance Channel -- revenue growth was driven by a 13.4 percent advertising increase to $130 million and a 15.2 percent gain in affiliate and other revenue.
"In the second quarter, AMC Networks delivered solid financial results," Sapan said. "The results were driven by continued advertiser demand and renewals with distributors, most recently AT&T, with whom we reached a new long-term agreement."
He also mentioned the Dish carriage dispute, saying Dish dropped the firm's channels "to gain leverage in an unrelated lawsuit." Sapan in a statement didn't comment on the legal case further, only saying that "the trial is scheduled to begin Sept. 18 in New York State Supreme Court."
On the earnings conference call, Sapan said, "Dish has not discussed rate with us at all." But he didn't want to say whether there has been any contact between the companies about a potential new carriage agreement.
Sapan got several additional questions about the potential financial fallout from the carriage dispute, but he simply said that its financial impact would depend on how long Dish doesn't carry the AMC Networks channels. The trial could last four to six weeks, he said.
Otherwise, he only said that about 60 percent of AMC Networks revenue comes from carriage fees, with 40 percent from advertising. Ad trends are somewhat weaker in the current third quarter than in the second quarter, with some negative effect from being off Dish, Sapan said.
He reiterated that digital licensing arrangements that AMC Networks has struck are accretive to its financials. Its delayed windowing, which makes shows available online nine to 12 months after their TV premiere, has even helped increase linear TV viewership, Sapan argued.
On the call, management also was asked why The Killing wasn't renewed for another season. Top executives called it a good show but argued that it just didn't make sense to renew. The company didn't announce a write-down on the drama, which ended after its sophomore season.
Asked about Lionsgate's deal with FX for Anger Management, management said that deal was unique. AMC Networks isn't likely to replicate that, the firm said.