AMC Networks(US:AMCX)2024-05-10 20:02PART I. FINANCIAL INFORMATION Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, including balance sheets, income statements, and cash flows Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4,911,556 | $4,969,787 | | Cash and cash equivalents | $690,522 | $570,576 | | Program rights, net | $1,753,270 | $1,802,653 | | Goodwill | $622,190 | $626,496 | | Total Liabilities | $3,607,281 | $3,710,544 | | Long-term debt, net | $2,279,086 | $2,294,249 | | Total Stockholders' Equity | $1,106,905 | $1,073,946 | Condensed Consolidated Statements of Income Condensed Consolidated Statements of Income (in thousands, except per share) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenues, net | $596,461 | $717,447 | | Operating income | $110,178 | $173,304 | | Net income attributable to AMC Networks' stockholders | $45,803 | $103,610 | | Diluted EPS | $1.03 | $2.36 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $150,869 | $(132,519) | | Net cash used in investing activities | $(2,784) | $(7,005) | | Net cash used in financing activities | $(23,133) | $(28,310) | | Net increase (decrease) in cash | $124,952 | $(167,834) | Notes to Condensed Consolidated Financial Statements - The company operates through two segments: Domestic Operations (including national networks, streaming services, and AMC Studios) and International (international programming businesses)19 - In Q1 2023, the company recorded restructuring charges of $5.9 million, primarily for severance and personnel costs, with no such charges in Q1 20243233 - Subsequent to quarter end, in April 2024, the company undertook significant debt refinancing activities, including issuing $875 million of 10.25% Senior Secured Notes due 2029626567 - The company is involved in the "MFN Litigation" with plaintiffs claiming over $200 million in damages, with trial scheduled for May 6, 202586 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting a 16.9% revenue decrease to $596.5 million, driven by declines in subscription and content licensing, while generating positive operating cash flow Consolidated Results of Operations Consolidated Results of Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues, net | $596,461 | $717,447 | (16.9)% | | Operating income | $110,178 | $173,304 | (36.4)% | | Net income attributable to AMC Networks' stockholders | $45,803 | $103,610 | (55.8)% | - The 16.9% decrease in total revenues was driven by declines across all major categories, including a 7.6% decrease in subscription revenue and a 53.9% decrease in content licensing revenue121122 - Technical and operating expenses decreased by 16.9%, largely in line with the revenue decline, reflecting lower costs associated with content deliveries and the 25/7 Media divestiture121123 Segment Results of Operations Domestic Operations Segment Results (in thousands) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues, net | $524,226 | $611,854 | (14.3)% | | Segment adjusted operating income | $162,319 | $219,388 | (26.0)% | - Domestic streaming revenues grew 3.0% to $145.1 million, while affiliate revenues declined 14.1% due to basic subscriber losses, with aggregate paid streaming subscribers increasing 2.4% year-over-year to 11.5 million98131 International Segment Results (in thousands) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenues, net | $75,605 | $108,072 | (30.0)% | | Segment adjusted operating income | $13,400 | $21,137 | (36.6)% | - The significant decrease in International revenues and expenses was primarily due to the divestiture of the 25/7 Media business and the non-renewal of a distribution agreement in the U.K136137 Liquidity and Capital Resources - The company significantly improved its cash flow, with net cash provided by operating activities at $150.9 million in Q1 2024, compared to a use of $132.5 million in Q1 2023, driven by cost management145146 Free Cash Flow Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $150,869 | $(132,519) | | Less: capital expenditures | $(6,720) | $(11,498) | | Free cash flow | $144,149 | $(144,017) | - In April 2024, the company executed a series of refinancing transactions to extend its debt maturities, including issuing $875 million in new Senior Secured Notes and amending its credit facility142 Quantitative and Qualitative Disclosures About Market Risk The company discloses its exposure to market risks, primarily from changes in interest rates and foreign currency exchange rates - As of March 31, 2024, the company had $2.4 billion of debt outstanding, of which $590.6 million was subject to variable interest rates166 - A hypothetical 100 basis point increase in interest rates would result in an approximate $5.9 million increase in annual interest expense166 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period168 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 14 of the financial statements for details on legal matters, including the "MFN Litigation" and Video Privacy Protection Act claims - For a detailed description of legal proceedings, the report refers to Note 14 in the financial statements170 Unregistered Sales of Equity Securities and Use of Proceeds The company discusses its stock repurchase program, noting no shares were repurchased during Q1 2024, with $135.3 million remaining authorized - The company did not repurchase any of its Class A common stock during the three months ended March 31, 2024171 - As of March 31, 2024, $135.3 million of authorization remained under the company's stock repurchase program171 Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, debt-related indentures, and certifications by the CEO and CFO