Company reports record revenues and earnings per
share
AMC Networks Inc. (“AMC Networks” or the “Company”) (NASDAQ:AMCX)
today reported financial results for the first quarter ended March
31, 2018.
“AMC Networks delivered strong performance in the first quarter
of 2018 with record total company revenues and earnings per share.
We have grown total distribution of our networks, reflecting the
strength of our well-priced, well-defined brands; the quality of
our programming and its popularity with viewers; and the value we
create for both traditional and emerging distribution platforms.
AMC Networks has the lowest priced offering of any independent
programmer and is the most widely available independent programmer
among virtual MVPDs, an indicator of our strong position as these
emerging platforms continue to grow,” said Josh Sapan, President
and CEO of AMC Networks. “Our content continues to break through in
a cluttered environment, with recent series including BBC AMERICA’s
Killing Eve, IFC’s Brockmire, and AMC’s Fear the Walking Dead and
The Terror drawing wide critical acclaim and strong viewership, and
our streaming services, Sundance Now and Shudder, continue to gain
traction with consumers. As we focus on delivering shareholder
value in the near and long-term, we remain disciplined in our
approach to content investments and managing costs while
increasingly diversifying our revenue mix through content sales,
franchise monetization and new distribution platforms.”
First quarter net revenues increased 2.9%, or $21 million, to
$741 million over the first quarter of 2017. The increase in
net revenues reflected 2.9% growth at National Networks and 4.3%
growth at International and Other. Operating income was $234
million, an increase of 0.9%, or $2 million, versus the prior year
period. The increase reflected essentially flat operating
income at National Networks and a decrease of $2 million in
operating loss at International and Other. Adjusted Operating
Income2 was $269 million, essentially flat with the prior year
period. Results reflected a 1.1% increase at National
Networks offset by a decrease of $3 million at International and
Other.
First quarter net income was $157 million ($2.54 per diluted
share), compared with $136 million ($1.98 per diluted share) in the
first quarter of 2017. First quarter Adjusted EPS2 was $163 million
($2.65 per diluted share), compared with $145 million ($2.10 per
diluted share) in the first quarter of 2017. The increase in
adjusted EPS was primarily related to a decrease in income tax
expense and a decrease in diluted shares.
For the three months ended March 31, 2018, net cash provided by
operating activities was $117 million, a decrease of $28 million
versus the prior year period. The decrease was primarily the result
of an increase in interest payments and working capital. Free Cash
Flow2 for the three months ended March 31, 2018 was $104 million, a
decrease of $9 million versus the prior year period. The
decrease primarily reflects the decrease in net cash provided
by operating activities partially offset by a decrease in capital
expenditures and distributions to noncontrolling interests.
- Estimated U.S. subscribers as measured by Nielsen on March 31,
2018 and 2017, respectively.
- See page 3 of this earnings release for a discussion of
non-GAAP financial measures used in this release. This
discussion includes the definition of Adjusted Operating Income
(Loss), Adjusted EPS and Free Cash Flow.
Segment Results
(dollars in
thousands) |
|
Three Months Ended March 31, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
National
Networks |
|
$ |
633,028 |
|
|
$ |
615,147 |
|
|
2.9% |
|
International and Other |
|
|
111,390 |
|
|
|
106,797 |
|
|
4.3% |
|
Inter-segment eliminations |
|
|
(3,595 |
) |
|
|
(1,755 |
) |
|
n/m |
|
Total net revenues |
|
$ |
740,823 |
|
|
$ |
720,189 |
|
|
2.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss): |
|
|
|
|
|
|
|
|
|
|
|
National
Networks |
|
$ |
249,852 |
|
|
$ |
249,607 |
|
|
0.1% |
|
International and Other |
|
|
(16,814 |
) |
|
|
(19,217 |
) |
|
(12.5%) |
|
Inter-segment eliminations |
|
|
617 |
|
|
|
1,281 |
|
|
n/m |
|
Total Operating Income
(Loss) |
|
$ |
233,655 |
|
|
$ |
231,671 |
|
|
0.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
National
Networks |
|
$ |
270,874 |
|
|
$ |
267,973 |
|
|
1.1% |
|
International and Other |
|
|
(2,163 |
) |
|
|
1,078 |
|
|
n/m |
|
Inter-segment eliminations |
|
|
617 |
|
|
|
1,281 |
|
|
n/m |
|
Total Adjusted
Operating Income (Loss) |
|
$ |
269,328 |
|
|
$ |
270,332 |
|
|
(0.4%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
National NetworksNational Networks principally
consists of the Company’s five nationally distributed programming
networks, AMC, WE tv, BBC AMERICA, IFC and SundanceTV; and AMC
Studios, the Company’s television production business.
National Networks revenues for the first quarter 2018 increased
2.9% to $633 million, operating income increased 0.1% to $250
million, and adjusted operating income increased 1.1% to $271
million, all compared to the prior year period.
First quarter growth in revenues was led by a 10.8% increase in
distribution revenues to $407 million. The increase in distribution
revenues was primarily attributable to an increase in content
licensing revenues as well as an increase in subscription revenues.
Advertising revenues decreased 8.8% to $226 million. The decrease
in advertising revenues principally related to lower delivery as
well as the timing of the airing of original programming partially
offset by higher pricing.
First quarter operating income and adjusted operating income
reflected the increase in revenues offset by an increase in
operating expenses. The increase in operating expenses was
primarily attributable to higher programming expenses.
International and OtherInternational and Other
principally consists of AMC Networks International, the Company’s
international programming business; IFC Films, the Company’s
independent film distribution business; and the Company’s owned
subscription streaming services, Sundance Now and Shudder.
International and Other revenues for the first quarter of 2018
increased 4.3% to $111 million, operating loss decreased $2 million
to a loss of $17 million, and adjusted operating income decreased
$3 million to a loss of $2 million, all compared to the prior year
period.
First quarter growth in revenues primarily reflected the
favorable impact of foreign currency translation at the Company’s
international programming networks as well as an increase from our
subscription streaming services partially offset by the absence of
AMCNI-DMC, the Company’s Amsterdam-based media logistics facility
which was sold in July 2017.
First quarter operating loss reflected the increase in revenues
as well as a decrease in depreciation and amortization and
restructuring expense partially offset by an increase in operating
expenses. Adjusted operating income reflected the increase in
revenue offset by the increase in operating expenses.
Other Matters
Stock Repurchase Program
As previously disclosed, on March 7, 2016, the Company announced
that its Board of Directors authorized a program to repurchase up
to $500 million of its outstanding shares of common stock. In June
2017, the Company announced that its Board of Directors authorized
an increase of $500 million to its previously announced program.
The Company determines the timing and the amount of any repurchases
based on its evaluation of market conditions, share price, and
other factors. The stock repurchase program has no pre-established
closing date and may be suspended or discontinued at any time.
During the first quarter, the Company repurchased approximately 1.6
million shares for $84 million. From April 1, 2018 through May 4,
2018, the Company repurchased approximately 2.4 million additional
shares for $125 million. As of May 4, 2018, the Company had $134
million available under its stock repurchase authorization.
Proposal to Acquire RLJ Entertainment, Inc.
As previously disclosed, on February 26, 2018, the Company
announced a proposal to acquire the outstanding shares of RLJ
Entertainment, Inc. (“RLJE”) not currently owned by AMC Networks or
entities affiliated with Robert L. Johnson for a purchase price of
$4.25 per share in cash. Through this offer, the Company intends
for RLJE to become a privately owned subsidiary of AMC Networks,
with a minority stake held by Mr. Johnson. The board of directors
of RLJE has formed a special committee of independent directors to
consider the proposal. There can be no assurance that the proposal
made by the Company to RLJE will result in a transaction or the
terms upon which any transaction may occur.
Levity Live Agreement
As previously disclosed, on April 27, Company announced that it
acquired a majority ownership stake in Levity Live, a vertically
integrated media company that owns and operates comedy venues,
operates a talent management business and produces original content
for distribution on multiple platforms, including live, digital and
linear television.
Please see the Company’s Form 10-Q for the period ended March
31, 2018 for further details regarding the above matters.
Description of Non-GAAP Measures
The Company defines Adjusted Operating Income (Loss), which is a
non-GAAP financial measure, as operating income (loss) before
depreciation and amortization, share-based compensation expense or
benefit, impairment and related charges (including gains or losses
on sales or dispositions of businesses), and restructuring expense
or credit. Because it is based upon operating income (loss),
Adjusted Operating Income (Loss) also excludes interest expense
(including cash interest expense) and other non-operating income
and expense items. The Company believes that the exclusion of
share-based compensation expense or benefit allows investors to
better track the performance of the various operating units of the
business without regard to the effect of the settlement of an
obligation that is not expected to be made in cash.
The Company believes that Adjusted Operating Income (Loss) is an
appropriate measure for evaluating the operating performance of the
business segments and the Company on a consolidated basis. Adjusted
Operating Income (Loss) and similar measures with similar titles
are common performance measures used by investors, analysts and
peers to compare performance in the industry.
Internally, the Company uses net revenues and Adjusted Operating
Income (Loss) measures as the most important indicators of its
business performance, and evaluates management’s effectiveness with
specific reference to these indicators. Adjusted Operating Income
(Loss) should be viewed as a supplement to and not a substitute for
operating income (loss), net income (loss), and other measures of
performance presented in accordance with U.S. generally accepted
accounting principles ("GAAP"). Since Adjusted Operating Income
(Loss) is not a measure of performance calculated in accordance
with GAAP, this measure may not be comparable to similar measures
with similar titles used by other companies. For a reconciliation
of Adjusted Operating Income (Loss) to operating income (loss),
please see page 7 of this release.
The Company defines Free Cash Flow (“Free Cash Flow”), which is
a non-GAAP financial measure, as net cash provided by operating
activities less capital expenditures and cash distributions to
noncontrolling interests, all of which are reported in our
Consolidated Statement of Cash Flows. The Company believes the most
comparable GAAP financial measure of its liquidity is net cash
provided by operating activities. The Company believes that Free
Cash Flow is useful as an indicator of its overall liquidity, as
the amount of Free Cash Flow generated in any period is
representative of cash that is available for debt repayment,
investment, and other discretionary and non-discretionary cash
uses. The Company also believes that Free Cash Flow is one of
several benchmarks used by analysts and investors who follow the
industry for comparison of its liquidity with other companies in
the industry, although the Company’s measure of Free Cash Flow may
not be directly comparable to similar measures reported by other
companies. For a reconciliation of Free Cash Flow to net cash
provided by operating activities, please see page 8 of this
release.
The Company defines Adjusted Earnings per Diluted Share
(“Adjusted EPS”), which is a non-GAAP financial measure, as
earnings per diluted share excluding the following items:
amortization of acquisition-related intangible assets; non-cash
impairments of goodwill, intangible and fixed assets and
investments; restructuring expense; and gains and losses related to
the extinguishment of debt; as well as the impact of taxes on the
aforementioned items. The Company believes the most
comparable GAAP financial measure is earnings per diluted
share. The Company believes that Adjusted EPS is one of
several benchmarks used by analysts and investors who follow the
industry for comparison of its performance with other companies in
the industry, although the Company’s measure of Adjusted EPS may
not be directly comparable to similar measures reported by other
companies. For a reconciliation of Adjusted EPS to earnings
per diluted share, please see page 9 of this release.
Forward-Looking Statements
This earnings release may contain statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are subject to
uncertainty and changes in circumstances. Investors are cautioned
that any such forward-looking statements are not guarantees of
future performance or results and involve risks and uncertainties,
and that actual results or developments may differ materially from
those in the forward-looking statements as a result of various
factors, including financial community and rating agency
perceptions of the Company and its business, operations, financial
condition and the industries in which it operates and the factors
described in the Company’s filings with the Securities and Exchange
Commission, including the sections entitled "Risk Factors" and
"Management’s Discussion and Analysis of Financial Condition and
Results of Operations" contained therein. The Company disclaims any
obligation to update any forward-looking statements contained
herein.
Conference Call Information
AMC Networks will host a conference call today at 8:30 a.m. ET
to discuss its first quarter 2018 results. To listen to the
call, visit http://www.amcnetworks.com or dial 1-877-347-9170,
using the following passcode: 5598435.
About AMC Networks Inc.
AMC Networks owns and operates several of cable television’s
most recognized brands delivering high quality content to audiences
and a valuable platform to distributors and advertisers. The
Company manages its business through two operating segments: (i)
National Networks, which principally includes AMC, WE tv, BBC
AMERICA, IFC and SundanceTV; and AMC Studios, the Company’s
television production business; and (ii) International and Other,
which principally includes AMC Networks International, the
Company’s international programming business; IFC Films, the
Company’s independent film distribution business; and the Company’s
owned subscription streaming services, Sundance Now and Shudder.
For more information on AMC Networks, please visit the Company’s
website at http://www.amcnetworks.com.
ContactsInvestor RelationsSeth Zaslow (646)
273-3766seth.zaslow@amcnetworks.com
Corporate Communications Georgia Juvelis (917)
542-6390georgia.juvelis@amcnetworks.com
AMC NETWORKS INC.CONSOLIDATED
STATEMENTS OF INCOME(In thousands, except per
share amounts)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
Revenues, net |
|
$ |
740,823 |
|
|
$ |
720,189 |
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
Technical
and operating (excluding depreciation and amortization) |
|
|
320,365 |
|
|
|
298,612 |
|
Selling,
general and administrative |
|
|
166,449 |
|
|
|
163,709 |
|
Depreciation and amortization |
|
|
20,354 |
|
|
|
23,493 |
|
Restructuring expense |
|
|
- |
|
|
|
2,704 |
|
|
|
|
507,168 |
|
|
|
488,518 |
|
|
|
|
|
|
Operating
income |
|
|
233,655 |
|
|
|
231,671 |
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
Interest
expense |
|
|
(38,205 |
) |
|
|
(30,500 |
) |
Interest
income |
|
|
5,019 |
|
|
|
3,493 |
|
Miscellaneous, net |
|
|
16,946 |
|
|
|
11,049 |
|
|
|
|
(16,240 |
) |
|
|
(15,958 |
) |
|
|
|
|
|
Income from operations
before income taxes |
|
|
217,415 |
|
|
|
215,713 |
|
Income tax expense |
|
|
(56,879 |
) |
|
|
(73,082 |
) |
Net income including
noncontrolling interests |
|
|
160,536 |
|
|
|
142,631 |
|
Net income attributable
to noncontrolling interests |
|
|
(3,666 |
) |
|
|
(6,414 |
) |
Net income attributable
to AMC Networks’ stockholders |
|
$ |
156,870 |
|
|
$ |
136,217 |
|
|
|
|
|
|
Net income per share
attributable to AMC Networks’ stockholders: |
|
|
|
|
Basic |
|
$ |
2.57 |
|
|
$ |
2.00 |
|
Diluted |
|
$ |
2.54 |
|
|
$ |
1.98 |
|
|
|
|
|
|
Weighted average common
shares: |
|
|
|
|
Basic |
|
|
60,967 |
|
|
|
68,020 |
|
Diluted |
|
|
61,719 |
|
|
|
68,764 |
|
AMC NETWORKS INC. SUPPLEMENTAL FINANCIAL
DATA (Dollars in
thousands)(Unaudited) |
|
|
|
|
|
Three Months Ended March 31, 2018 |
|
|
|
Adjusted Operating Income (Loss) |
|
DepreciationandAmortization |
|
Share-Based Compensation Expense |
|
Restructuring Expense |
|
OperatingIncome (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Networks |
|
$ |
270,874 |
|
|
$ |
(8,495 |
) |
|
$ |
(12,527 |
) |
|
$ |
- |
|
|
$ |
249,852 |
|
|
International and
Other |
|
|
(2,163 |
) |
|
|
(11,859 |
) |
|
|
(2,792 |
) |
|
|
- |
|
|
|
(16,814 |
) |
|
Inter-segment
eliminations |
|
|
617 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
617 |
|
|
Total |
|
$ |
269,328 |
|
|
$ |
(20,354 |
) |
|
$ |
(15,319 |
) |
|
$ |
- |
|
|
$ |
233,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017 |
|
|
|
Adjusted Operating Income |
|
DepreciationandAmortization |
|
Share-Based Compensation Expense |
|
Restructuring Expense |
|
OperatingIncome (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Networks |
|
$ |
267,973 |
|
|
$ |
(8,404 |
) |
|
$ |
(9,908 |
) |
|
$ |
(54 |
) |
|
$ |
249,607 |
|
|
International and
Other |
|
|
1,078 |
|
|
|
(15,089 |
) |
|
|
(2,556 |
) |
|
|
(2,650 |
) |
|
|
(19,217 |
) |
|
Inter-segment
eliminations |
|
|
1,281 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,281 |
|
|
Total |
|
$ |
270,332 |
|
|
$ |
(23,493 |
) |
|
$ |
(12,464 |
) |
|
$ |
(2,704 |
) |
|
$ |
231,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC NETWORKS INC.SUPPLEMENTAL
FINANCIAL DATA (In
thousands)(Unaudited) |
|
Capitalization |
March 31, 2018 |
|
|
Cash and cash
equivalents |
$ |
529,200 |
Credit facility debt
(a) |
$ |
750,000 |
Senior notes (a) |
|
2,400,000 |
Total
debt |
$ |
3,150,000 |
|
|
Net debt |
$ |
2,620,800 |
|
|
Capital leases |
|
30,004 |
Net debt
and capital leases |
$ |
2,650,804 |
|
|
|
Twelve Months Ended March 31, 2018 |
Operating Income
(GAAP) |
$ |
724,343 |
Share-based compensation expense |
|
56,400 |
Restructuring expense |
|
3,424 |
Impairment and related charges |
|
28,148 |
Depreciation and amortization |
|
91,499 |
Adjusted Operating
Income (Non-GAAP) |
$ |
903,814 |
|
|
Leverage ratio (b) |
2.9 x |
(a) Represents the aggregate principal amount of the debt. (b)
Represents net debt and capital leases divided by Adjusted
Operating Income for the twelve months ended March 31, 2018. This
ratio differs from the calculation contained in the Company's
credit facility. No adjustments have been made for consolidated
entities that are not 100% owned, such as BBC AMERICA.
|
|
Free Cash
Flow |
Three Months Ended March 31, |
|
|
2018 |
|
|
|
2017 |
|
Net cash provided by
operating activities |
$ |
116,972 |
|
|
$ |
144,870 |
|
Less: capital
expenditures |
|
(11,942 |
) |
|
|
(20,206 |
) |
Less: distributions to
noncontrolling interests |
|
(1,435 |
) |
|
|
(11,712 |
) |
Free cash flow |
$ |
103,595 |
|
|
$ |
112,952 |
|
|
|
|
|
|
|
|
|
AMC NETWORKS INC.SUPPLEMENTAL
FINANCIAL DATA (In thousands, except per share
amounts)(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings Per Diluted Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018 |
|
|
Income from operations before income taxes |
|
Income tax expense |
|
Net income attributable to noncontrolling
interests |
|
Net income attributable to AMC Networks’
stockholders |
|
Diluted EPS attributable to AMC Networks’
stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported results
(GAAP) |
|
$ |
217,415 |
|
$ |
(56,879 |
) |
|
$ |
(3,666 |
) |
|
$ |
156,870 |
|
$ |
2.54 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangible assets |
|
|
9,331 |
|
|
(1,773 |
) |
|
|
(970 |
) |
|
|
6,588 |
|
|
0.11 |
Restructuring expense |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
Adjusted
results(Non-GAAP) |
|
$ |
226,746 |
|
$ |
(58,562 |
) |
|
$ |
(4,636 |
) |
|
$ |
163,458 |
|
$ |
2.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017 |
|
|
Income from operations before income taxes |
|
Income tax expense |
|
Net income attributable to noncontrolling
interests |
|
Net income attributable to AMC Networks’
stockholders |
|
Diluted EPS attributable to AMC Networks’
stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported results
(GAAP) |
|
$ |
215,713 |
|
$ |
(73,082 |
) |
|
$ |
(6,414 |
) |
|
$ |
136,217 |
|
$ |
1.98 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangible assets |
|
|
9,054 |
|
|
(1,745 |
) |
|
|
(970 |
) |
|
|
6,339 |
|
|
0.09 |
Restructuring expense |
|
|
2,704 |
|
|
(612 |
) |
|
|
(1 |
) |
|
|
2,091 |
|
|
0.03 |
Adjusted
results(Non-GAAP) |
|
$ |
227,471 |
|
$ |
(75,439 |
) |
|
$ |
(7,385 |
) |
|
$ |
144,647 |
|
$ |
2.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMC Networks (NASDAQ:AMCX)
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AMC Networks (NASDAQ:AMCX)
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