AMC Networks Inc. (“AMC Networks” or the “Company”) (NASDAQ: AMCX)
today reported financial results for the first quarter ended March
31, 2020.
President and Chief Executive Officer Josh Sapan said: “In what
has been a unique operating environment, AMC Networks continues to
generate significant levels of free cash flow and remains well
capitalized with a strong balance sheet and strong liquidity. We
continue to make significant progress on our digital initiatives,
including strong subscriber growth across our Acorn TV, Shudder,
Sundance Now and UMC (Urban Movie Channel) SVOD services, as well
as Acorn TV launching in the UK. Our portfolio of networks is
delivering increased viewership in recent weeks, including a strong
debut of the third season of Killing Eve and strong performance for
the most recent and exceptional season of Better Call Saul. Our
continued investment in key areas – creating strong content and
valuable IP; growing our targeted SVOD services; and maximizing the
value of our linear channels – is enabling us to navigate this
challenging time and will continue to serve us well when this
environment stabilizes and as we look beyond this immediate period
to the remainder of 2020 and ahead to 2021.”
Liquidity Highlights:
- Access to $1.2 billion of cash and cash equivalentsº $704
million of cash and cash equivalents as of March 31,
2020º $500 million undrawn revolving credit facility
- Strong cash flowº Cash Provided by Operating Activities of
$198 millionº Free Cash Flow1 of $182 million
- No significant debt maturities in 2020 or 2021º Term Loan
A Facility payments of $56 million and $75 million in 2020 and
2021, respectively
- Opportunistic allocation of capitalº 4.0 million shares
repurchased for $103 million year-to-date 2020º $200 million
partial redemption of $600 million 4.75% notes due December 2022
completed on March 4, 2020
Financial Highlights:
- Revenues of $734 million
- Operating income of $173 million; Adjusted Operating Income1 of
$222 million
- Diluted EPS of $1.22; Adjusted EPS1 of $1.47
Operational Highlights:
- The Company continued to make significant progress on its
digital initiativesº The Company now expects 3.5 million to
4.0 million paid subscribers in aggregate for its four SVOD
services: Acorn TV, Shudder, Sundance Now and UMC (Urban Movie
Channel) by year-end 2020. A full two years ahead of the
Company’s original target of year-end 2022.º Acorn TV launched
in the United Kingdomº Furthers AVOD strategy with launch on
Pluto TV
- The Company continues to experiment with new original
programming genres and formats with the greenlighting of National
Anthem and Pantheon
- The Company’s portfolio of networks saw a significant increase
in viewership as of mid-March in connection with national social
distancing measures put in place in response to COVID-19
Consolidated Results
First quarter net revenues decreased 6.4%, or $50 million, to
$734 million over the first quarter of 2019. The decrease in net
revenues reflected a 8.0% decline at National Networks and
essentially flat revenues at International and Other. Operating
income was $173 million, a decrease of 29.4%, or $72 million,
versus the prior year period. The decrease reflected a 22.4%
decline in operating income at National Networks and an increase of
$6 million in operating loss at International and Other. Adjusted
Operating Income1 was $222 million, a decrease of 24.1%, or $71
million, versus the prior year period. Results reflected a 21.4%
decrease at National Networks and a decrease of $2 million at
International and Other.
First quarter net income was $69 million ($1.22 per diluted
share), compared with $143 million ($2.48 per diluted share) in the
first quarter of 2019. EPS primarily reflected the decrease in
operating income as well as an increase in miscellaneous expense,
net. Miscellaneous expense, net primarily reflected an unfavorable
variance in foreign currency transaction gains and losses. First
quarter Adjusted EPS1 was $82 million ($1.47 per diluted share),
compared with $152 million ($2.64 per diluted share) in the first
quarter of 2019. Adjusted EPS primarily reflected a decrease in
adjusted operating income as well as an increase in miscellaneous
expense, net.
For the three months ended March 31, 2020, net cash provided by
operating activities was $198 million, an increase of $27 million
versus the prior year period. The increase was primarily the result
of a decrease in working capital partially offset by a decrease in
adjusted operating income. Free Cash Flow1 for the three months
ended March 31, 2020 was $182 million, an increase of $38 million
versus the prior year period. The increase primarily reflects the
increase in net cash provided by operating activities as well as a
decrease in capital expenditures and distributions to
noncontrolling interests.
Segment Results
(dollars in
thousands) |
Three Months Ended March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
Change |
|
|
|
|
|
|
Net revenues: |
|
|
|
|
|
National Networks |
$ |
566,939 |
|
|
$ |
616,118 |
|
|
(8.0%) |
International and Other |
|
170,494 |
|
|
|
171,088 |
|
|
(0.3%) |
Inter-segment eliminations |
|
(3,058 |
) |
|
|
(2,985 |
) |
|
n/m |
Total net revenues |
$ |
734,375 |
|
|
$ |
784,221 |
|
|
(6.4%) |
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
National Networks |
$ |
195,224 |
|
|
$ |
251,502 |
|
|
(22.4%) |
International and Other |
|
(19,450 |
) |
|
|
(13,748 |
) |
|
(41.5%) |
Inter-segment eliminations |
|
(2,804 |
) |
|
|
7,109 |
|
|
n/m |
Total Operating Income
(Loss) |
$ |
172,970 |
|
|
$ |
244,863 |
|
|
(29.4%) |
Adjusted
Operating Income (Loss): |
National Networks |
$ |
217,587 |
|
|
$ |
276,686 |
|
(21.4%) |
International and Other |
|
7,671 |
|
|
|
9,941 |
|
(22.8%) |
Inter-segment
eliminations |
|
(2,804 |
) |
|
|
6,413 |
|
n/m |
Total Adjusted Operating
Income (Loss) |
$ |
222,454 |
|
|
$ |
293,040 |
|
(24.1%) |
1. See page 4 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.
National NetworksNational Networks principally
consists of the Company’s five nationally distributed programming
networks, AMC, BBC AMERICA, IFC, SundanceTV and WE tv; and AMC
Studios, the Company’s television production business.
National Networks revenues for the first quarter 2020 decreased
8.0% to $567 million, operating income decreased 22.4% to $195
million, and adjusted operating income decreased 21.4% to $218
million, all compared to the prior year period.
First quarter revenues reflected a 10.8% decrease in advertising
revenues to $213 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.
Distribution revenues decreased 6.2% to $354 million. The decrease
in distribution revenues was attributable to a decrease in
subscription and content licensing revenues.
First quarter operating income and adjusted operating income
reflected the decrease in revenues and an increase in operating
expenses. The increase in operating expenses was primarily
attributable to higher legal and marketing expenses.
International and OtherInternational and Other
principally consists of AMC Networks International, the Company’s
international programming business; AMC Networks SVOD, the
Company’s targeted subscription streaming services, Acorn TV,
Shudder, Sundance Now and UMC (Urban Movie Channel); Levity
Entertainment Group, the Company’s production services and comedy
venues business; and IFC Films, the Company’s independent film
distribution business.
International and Other revenues for the first quarter of 2020
decreased 0.3% to $170 million, operating loss increased $6 million
to a loss of $19 million, and adjusted operating income decreased
$2 million to $8 million, all compared to the prior year
period.
First quarter revenues primarily reflected an increase at AMC
Networks SVOD offset by a decrease at the Company’s international
programming networks. To a lesser extent, revenues also decreased
at IFC Films and Levity Entertainment.
First quarter operating income and adjusted operating income
reflected the decrease in revenues and an increase in operating
expenses. Operating income also reflected an increase in
depreciation and amortization and restructuring and other related
charges.
Other Matters
COVID-19
As previously disclosed in the 8-K filed March 27, 2020, the
impact of COVID-19 and measures to prevent its spread are affecting
the Company’s businesses in a number of ways. Beginning in
mid-March, the Company experienced adverse advertising sales
impacts and suspended content production, which has led to delays
in the creation and availability of some of its television
programming. Operationally, nearly all Company employees are
working remotely, and the Company has restricted business travel.
The Company has evaluated and continues to evaluate the potential
impact of the COVID-19 pandemic on its consolidated financial
statements. The ultimate impact of the COVID-19 pandemic, including
the extent of any adverse impact on our business, results of
operations and financial condition, will depend on, among other
things, the duration and spread of the pandemic, the impact of
governmental regulations that have been, and may continue to be,
imposed in response to the pandemic, the effectiveness of actions
taken to contain or mitigate the outbreak, and global economic
conditions. Although the effect of the pandemic may not be fully
reflected in the Company’s business until future periods, the
Company believes that the adverse impact of the COVID-19 pandemic
will be material to its results of operations. The Company does not
expect the COVID-19 pandemic and its related economic impact to
affect its liquidity position or its ongoing ability to meet the
covenants in its debt instruments.
Stock Repurchase Program
As previously disclosed, the Company’s Board of Directors
authorized a program to repurchase up to $1.5 billion of its
outstanding shares of common stock. The Company will determine 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 3.3 million shares for $86
million. From April 1, 2020 through May 1, 2020, the Company
repurchased approximately 688,000 additional shares for $17
million. As of May 1, 2020, the Company had $386 million available
under its stock repurchase authorization.
Debt Redemption
As previously disclosed, on March 4, 2020, the Company redeemed
$200 million of the outstanding $600 million principal amount of
its 4.75% Senior Notes due 2022. In connection with this
redemption, the Company recorded a charge of $3 million related to
a loss on the extinguishment of debt.
Please see the Company’s Form 10-Q for the period ended March
31, 2020 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, cloud computing amortization,
share-based compensation expense or benefit, impairment and related
charges (including gains or losses on sales or dispositions of
businesses), restructuring and other related charges, and including
the Company’s proportionate share of adjusted operating income
(loss) from majority owned equity method investees. 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 operating income (loss) to Adjusted Operating Income (Loss),
please see page 8 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 net cash provided by operating
activities to Free Cash Flow, please see page 9 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; impairment
and related charges (including gains or losses on sales or
dispositions of businesses); non-cash impairments of goodwill,
intangible and fixed assets; restructuring and other related
charges; 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 earnings per diluted share to Adjusted EPS,
please see page 10 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 2020 results. To listen to the
call, visit http://www.amcnetworks.com or dial 1-877-347-9170,
using the following passcode: 8975473.
About AMC Networks Inc.
AMC Networks is a global entertainment company known for
delivering high-quality content to audiences and a valuable
platform to distributors and advertisers. The Company, which
operates several of the most recognizable brands in entertainment,
manages its business through two operating segments: (i) National
Networks, which principally includes AMC, BBC AMERICA, IFC,
SundanceTV and WE tv; 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; AMC Networks SVOD, the
Company's targeted subscription streaming services, Acorn TV,
Shudder, Sundance Now and UMC (Urban Movie Channel); Levity
Entertainment Group, the Company’s production services and comedy
venues business; and IFC Films, the Company's independent film
distribution business. For more information on AMC Networks, please
visit the Company’s website at www.amcnetworks.com.
Contacts |
|
Investor Relations |
Corporate Communications |
Seth Zaslow (646) 273-3766 |
Georgia Juvelis (917) 542-6390 |
seth.zaslow@amcnetworks.com |
georgia.juvelis@amcnetworks.com |
AMC NETWORKS
INC.CONSOLIDATED STATEMENTS OF
INCOME(In thousands, except per share
amounts)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
Revenues, net |
|
$ |
734,375 |
|
|
$ |
784,221 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Technical and operating (excluding depreciation and
amortization) |
|
|
344,060 |
|
|
|
340,148 |
|
Selling, general and administrative |
|
|
184,649 |
|
|
|
172,512 |
|
Depreciation and amortization |
|
|
26,730 |
|
|
|
24,056 |
|
Restructuring and other related charges |
|
|
5,966 |
|
|
|
2,642 |
|
|
|
|
561,405 |
|
|
|
539,358 |
|
|
|
|
|
|
Operating income |
|
|
172,970 |
|
|
|
244,863 |
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
Interest expense |
|
|
(37,564 |
) |
|
|
(39,645 |
) |
Interest income |
|
|
4,555 |
|
|
|
4,200 |
|
Loss on extinguishment of debt |
|
|
(2,908 |
) |
|
|
- |
|
Miscellaneous, net |
|
|
(29,939 |
) |
|
|
(12,785 |
) |
|
|
|
(65,856 |
) |
|
|
(48,230 |
) |
|
|
|
|
|
Income from operations before income taxes |
|
|
107,114 |
|
|
|
196,633 |
|
Income tax expense |
|
|
(33,588 |
) |
|
|
(46,476 |
) |
Net income including noncontrolling interests |
|
|
73,526 |
|
|
|
150,157 |
|
Net income attributable to noncontrolling interests |
|
|
(4,859 |
) |
|
|
(6,760 |
) |
Net income attributable to AMC Networks’ stockholders |
|
$ |
68,667 |
|
|
$ |
143,397 |
|
|
|
|
|
|
Net income per share attributable to AMC Networks’
stockholders: |
|
|
|
|
Basic |
|
$ |
1.24 |
|
|
$ |
2.53 |
|
Diluted |
|
$ |
1.22 |
|
|
$ |
2.48 |
|
|
|
|
|
|
Weighted average common shares: |
|
|
|
|
Basic |
|
|
55,477 |
|
|
|
56,588 |
|
Diluted |
|
|
56,061 |
|
|
|
57,725 |
|
AMC NETWORKS
INC.SUPPLEMENTAL FINANCIAL
DATA (Dollars in
thousands)(Unaudited)
|
Three Months Ended March 31, 2020 |
|
National Networks |
|
International and Other |
|
Inter-segment eliminations |
|
Consolidated |
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
195,224 |
|
$ |
(19,450 |
) |
|
$ |
(2,804 |
) |
|
$ |
172,970 |
Share-based compensation expense |
|
12,465 |
|
|
3,047 |
|
|
|
- |
|
|
|
15,512 |
Depreciation and amortization |
|
8,389 |
|
|
18,341 |
|
|
|
- |
|
|
|
26,730 |
Restructuring and other related charges |
|
1,509 |
|
|
4,457 |
|
|
|
- |
|
|
|
5,966 |
Majority owned equity investees AOI |
|
- |
|
|
1,276 |
|
|
|
- |
|
|
|
1,276 |
Adjusted operating income (loss) |
$ |
217,587 |
|
$ |
7,671 |
|
|
$ |
(2,804 |
) |
|
$ |
222,454 |
|
Three Months Ended March 31, 2019 |
|
National Networks |
|
International and Other |
|
Inter-segment eliminations |
|
Consolidated |
|
|
|
|
|
|
|
|
Operating income (loss) |
$ |
251,502 |
|
$ |
(13,748 |
) |
|
$ |
7,109 |
|
|
$ |
244,863 |
Share-based compensation expense |
|
16,269 |
|
|
3,630 |
|
|
|
- |
|
|
|
19,899 |
Depreciation and amortization |
|
8,612 |
|
|
15,444 |
|
|
|
- |
|
|
|
24,056 |
Restructuring and other related charges |
|
303 |
|
|
3,035 |
|
|
|
(696 |
) |
|
|
2,642 |
Majority owned equity investees AOI |
|
- |
|
|
1,580 |
|
|
|
- |
|
|
|
1,580 |
Adjusted operating income (loss) |
$ |
276,686 |
|
$ |
9,941 |
|
|
$ |
6,413 |
|
|
$ |
293,040 |
AMC NETWORKS
INC.SUPPLEMENTAL FINANCIAL
DATA (In
thousands)(Unaudited)
Capitalization |
March 31, 2020 |
|
|
Cash and cash equivalents |
$ |
704,129 |
Credit facility debt
(a) |
$ |
721,875 |
Senior notes (a) |
|
2,200,000 |
Other Debt |
|
5,000 |
Total debt |
$ |
2,926,875 |
|
|
Net debt |
$ |
2,222,746 |
|
|
Finance leases |
|
33,147 |
Net debt and finance
leases |
$ |
2,255,893 |
|
Twelve Months Ended March 31, 2020 |
Operating income
(GAAP) |
$ |
553,384 |
Share-based compensation expense |
|
59,746 |
Depreciation and amortization |
|
103,772 |
Restructuring and other related charges |
|
44,238 |
Impairment and related charges |
|
106,603 |
Majority owned equity investees AOI |
|
5,661 |
Adjusted operating
income (Non-GAAP) |
$ |
873,404 |
|
|
Leverage ratio (b) |
2.6 x |
- Represents the aggregate principal amount of the debt.
- Represents net debt and finance leases divided by Adjusted
Operating Income for the twelve months ended March 31, 2020. 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.
Free Cash
Flow |
Three Months Ended March 31, |
|
|
2020 |
|
|
|
2019 |
|
Net cash provided by
operating activities |
$ |
198,408 |
|
|
$ |
171,687 |
|
Less: capital
expenditures |
|
(12,916 |
) |
|
|
(22,053 |
) |
Less: distributions to
noncontrolling interests |
|
(3,081 |
) |
|
|
(5,629 |
) |
Free cash flow |
$ |
182,411 |
|
|
$ |
144,005 |
|
AMC NETWORKS
INC.SUPPLEMENTAL FINANCIAL
DATA (In thousands, except per share
amounts)(Unaudited)
Adjusted Earnings Per Diluted
Share
|
|
Three Months Ended March 31, 2020 |
|
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) |
$ |
107,114 |
|
$ |
(33,588 |
) |
|
$ |
(4,859 |
) |
|
$ |
68,667 |
|
$ |
1.22 |
Adjustments: |
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangible assets |
|
12,132 |
|
|
(2,023 |
) |
|
|
(3,027 |
) |
|
|
7,082 |
|
|
0.13 |
Restructuring and other related charges |
|
5,966 |
|
|
(1,458 |
) |
|
|
- |
|
|
|
4,508 |
|
|
0.08 |
Loss on extinguishment of debt |
|
2,908 |
|
|
(693 |
) |
|
|
- |
|
|
|
2,215 |
|
|
0.04 |
Adjusted
results(Non-GAAP) |
$ |
128,120 |
|
$ |
(37,762 |
) |
|
$ |
(7,886 |
) |
|
$ |
82,472 |
|
$ |
1.47 |
|
|
Three Months Ended March 31, 2019 |
|
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) |
$ |
196,633 |
|
$ |
(46,476 |
) |
|
$ |
(6,760 |
) |
|
$ |
143,397 |
|
$ |
2.48 |
Adjustments: |
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangible assets |
|
10,255 |
|
|
(1,861 |
) |
|
|
(1,507 |
) |
|
|
6,887 |
|
|
0.12 |
Restructuring and other related charges |
|
2,642 |
|
|
(399 |
) |
|
|
(77 |
) |
|
|
2,166 |
|
|
0.04 |
Loss on extinguishment of debt |
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
Adjusted
results(Non-GAAP) |
$ |
209,530 |
|
$ |
(48,736 |
) |
|
$ |
(8,344 |
) |
|
$ |
152,450 |
|
$ |
2.64 |
AMC Networks (NASDAQ:AMCX)
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AMC Networks (NASDAQ:AMCX)
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