AMC Networks(AMCX) - 2024 Q1 - Quarterly Results

Q1 2024 Results Overview AMC Networks reported a 17% revenue decrease in Q1 2024, offset by strong free cash flow and strategic operational achievements Financial and Operational Highlights AMC Networks reported a 17% revenue decrease to $596 million in Q1 2024, with strong free cash flow and strategic operational gains Q1 2024 Financial Highlights (vs. Q1 2023) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $596.5M | $717.4M | (16.9)% | | Operating Income | $110.2M | $173.3M | (36.4)% | | Adjusted Operating Income | $149.1M | $215.8M | (30.9)% | | Diluted EPS | $1.03 | $2.36 | (56.4)% | | Adjusted EPS | $1.16 | $2.62 | (55.7)% | | Free Cash Flow | $144.1M | ($144.0M) | n/m | - The new series "The Walking Dead: The Ones Who Live" became AMC's best-performing series since the original's final season and the 1 season of all time on AMC+ in viewership and acquisition[2] - The company executed a multi-year renewal with Verizon for continued carriage of its linear networks and streaming services[2] - Announced plans to roll out standalone ad-supported versions of Acorn TV, Shudder, ALLBLK, and HIDIVE in 2025, expanding the ad-supported distribution ecosystem[2] - Strengthened the balance sheet through financing transactions in April, reducing gross debt by over $500 million since Q3 2023[2] Segment Results The company's Q1 2024 segment results show domestic revenue declines offset by streaming growth, while international revenue was impacted by divestitures Domestic Operations Domestic Operations revenue decreased 14% to $524 million, primarily due to content licensing, while streaming revenue grew 3% with 11.5 million subscribers Q1 2024 Domestic Operations Performance (vs. Q1 2023) | Metric | Q1 2024 (in millions) | YoY Change | Note | | :--- | :--- | :--- | :--- | | Total Revenues | $524M | (14)% | Down 6% excluding prior-year Silo deal | | Subscription Revenues | $323M | (7)% | Driven by linear subscriber declines | | Streaming Revenues | $145M | +3% | Driven by subscriber growth and price increases | | Advertising Revenues | $140M | (13)% | Due to linear ratings declines | | Adjusted Operating Income | $162M | (26)% | Margin of 31% | - Streaming subscribers increased 2% year-over-year to 11.5 million as of March 31, 2024[9] - Content licensing revenues decreased 40%, but increased 31% when excluding the prior-year delivery of the Silo series to a third party[9] International Operations International revenues decreased 30% to $76 million, mainly due to divestitures, though advertising revenues grew 16% Q1 2024 International Performance (vs. Q1 2023) | Metric | Q1 2024 (in millions) | YoY Change | Note | | :--- | :--- | :--- | :--- | | Total Revenues | $76M | (30)% | Down 3% excluding divested 25/7 Media | | Subscription Revenues | $51M | (10)% | Due to non-renewal of a U.K. distribution deal | | Advertising Revenues | $22M | +16% | Due to increased ratings and market growth | | Adjusted Operating Income | $13M | (37)% | Margin of 18% | - The significant revenue decline was primarily due to the sale of the 25/7 Media business on December 29, 2023, which contributed $30 million in revenue in Q1 2023[11] - Advertising revenue growth was attributed to increased ratings, growth across Central and Northern Europe, and digital advertising growth in the U.K.[11] Financial Condition and Other Matters This section details AMC Networks' debt refinancing, capitalization, and stock repurchase activities, highlighting balance sheet management Debt Refinancing Activity In April 2024, AMC Networks refinanced debt by issuing new notes, redeeming existing ones, and extending credit facility maturities to strengthen its balance sheet - Issued $875 million of 10.25% Senior Secured Notes due January 15, 2029[13] - Completed a cash tender offer and redemption of all outstanding 4.75% Senior Notes due 2025[14] - Extended the maturity dates of $325 million in term loans and $175 million in revolving credit commitments to April 2028[15] Capitalization As of March 31, 2024, AMC Networks reported $1.67 billion net debt and a 2.8x leverage ratio, which remained stable post-refinancing Capitalization as of March 31, 2024 | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $690.5M | | Total debt | $2,365.4M | | Net debt | $1,674.8M | | Leverage ratio | 2.8x | Pro Forma Capitalization (As Adjusted for April Refinancing) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $601.2M | | Total debt | $2,300.0M | | Net debt | $1,698.8M | | Leverage ratio | 2.8x | Stock Repurchase Program AMC Networks did not repurchase shares in Q1 2024, with $135 million remaining under its authorized repurchase program - No shares were repurchased during the quarter ended March 31, 2024[16] - As of March 31, 2024, the Company had $135 million of authorization remaining for repurchase under the Stock Repurchase Program[16] Financial Statements and Reconciliations This section presents AMC Networks' consolidated income statements and reconciliations of GAAP to non-GAAP financial measures for Q1 2024 Consolidated Statements of Income For Q1 2024, AMC Networks reported $596.5 million in net revenues, a 16.9% decrease, with diluted EPS falling to $1.03 Q1 2024 Consolidated Income Statement (vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Revenues, net | $596,461K | $717,447K | | Operating income | $110,178K | $173,304K | | Net income attributable to AMC Networks' stockholders | $45,803K | $103,610K | | Diluted EPS | $1.03 | $2.36 | Description of Non-GAAP Measures The company defines key non-GAAP measures like Adjusted Operating Income, Free Cash Flow, and Adjusted EPS to provide supplemental performance insights - Adjusted Operating Income (AOI) is defined as operating income before share-based compensation, depreciation and amortization, impairment charges, and restructuring charges[19] - Free Cash Flow is defined as net cash provided by operating activities less capital expenditures, serving as an indicator of liquidity[21] - Adjusted EPS is defined as earnings per diluted share excluding amortization of acquisition-related intangible assets, impairment charges, and restructuring charges[22] Reconciliation of Non-GAAP Measures This section reconciles GAAP results to non-GAAP metrics, showing how operating income, cash flow, and EPS are adjusted for Q1 2024 Q1 2024 Reconciliation of Operating Income to AOI | Metric | Amount (in thousands) | | :--- | :--- | | Operating income (GAAP) | $110,178 | | Share-based compensation | $6,075 | | Depreciation and amortization | $25,826 | | Cloud computing amortization | $3,548 | | Majority owned equity investees AOI | $3,497 | | Adjusted operating income (Non-GAAP) | $149,124 | Q1 2024 Reconciliation to Free Cash Flow | Metric | Amount (in thousands) | | :--- | :--- | | Net cash provided by operating activities (GAAP) | $150,869 | | Less: capital expenditures | ($6,720) | | Free Cash Flow (Non-GAAP) | $144,149 | Q1 2024 Reconciliation of GAAP EPS to Adjusted EPS | Metric | Per Share Amount | | :--- | :--- | | Diluted EPS (GAAP) | $1.03 | | Amortization of acquisition-related intangible assets | $0.13 | | Adjusted EPS (Non-GAAP) | $1.16 |