AMC Networks swung to a net loss of $29.2 million as the company recorded $97 million in impairment and other charges in its second quarter of 2024.
The loss included a $68 million goodwill impairment charge related to the devaluation of its international business, which was found during an assessment of the unit triggered by a decline in the company’s stock price. It also included a $29 million long-lived asset impairment charge at BBC America after the company performed a recoverability test and determined that the carrying
amount of the asset exceeded its fair value.
Other media giants that have taken write-downs during the second quarter of 2024 include Warner Bros. Discovery, who took a $9.1 billion write-down on its networks segment, and Paramount Global, who took a $5.98 billion write-down for its cable networks.
Declines in AMC Networks’ linear TV ratings combined with a challenging ad market also prompted an 11% year over year drop in the company’s U.S. advertising revenue to $149 million, partially offset by digital and advanced advertising revenue growth.
Here are the top-line results:
Net loss: A loss of $29.2 million, compared to a profit of $70.2 million a year ago.
Earnings per share: A loss of 66 cents per share. Adjusted for certain items, EPS came in at a profit of $1.24, compared to an estimated $1.38 per share expected by analysts surveyed by Zacks Investment Research.
Revenue: $625.9 million, down 7.8% year over, compared to an estimated $601.26 million expected by analysts surveyed by Zacks Investment Research.
Subscribers: Streaming subscribers increased 5% year over year to 11.6 million.
AMC expanded its relationship with Netflix, striking a deal to curate and window prior seasons of 15 of its branded TV shows on the streaming platform starting Aug. 19. It also entered a new licensing partnership with Sky to make it the new home of the Walking Dead Universe in the U.K.
Additionally, it implemented price increases on its Acorn TV and HIDIVE streaming services, which resulted in an insignificant impact to churn and launched branded offerings AMC Stories and AMC Reality on the ad-supported platform ITVX, greenlit “The Talamasca,” its third series in the Anne Rice universe slated for a 2025 premiere and announced a new AMC and AMC+ series from Jonathan Glatzer set inside the bubble of Silicon Valley.
“AMC Networks continues to find opportunities in a strategic plan built around programming, partnerships and profitability. Key to our plan is the creation and curation of celebrated films and series, and making them available to audiences
everywhere, including through an exciting new branded content licensing agreement with Netflix,” AMC Networks CEO Kristin Dolan said in the company’s earnings release. “In the first half of 2024, we’ve made significant progress against our strategic priority of generating strong free cash flow, and we’re well on our way to achieving our free cash flow guidance for the full year.”
Operating income fell 89.8% year over year to $10.79 billion. On an adjusted basis, operating income fell 13.6% to $152.8 million. Net cash provided by operating activities fell 33.7% to $104 million, while free cash flow slipped 35.5% to $95 million.
Domestic Operations revenue fell 7% year over year to $538 million. Subscription revenues fell 3% year over year to $323 million, primarily due to linear subscriber declines, partially offset by an increase in streaming revenues.
Streaming revenues increased 9% to $150 million driven by year-over-year subscriber growth and price increases.
Content licensing revenues decreased 18% to $67 million due to the availability of deliveries in the period. The prior period included $20 million of revenues related to the return of rights from Hulu that resulted in the acceleration of revenue previously anticipated to be recognized in 2024. Excluding prior period revenues associated with the return of rights from Hulu, content licensing revenues increased 10%.
Operating income fell 36.8% to $103 million, which included a long-lived asset impairment charge of $29 million related to the company’s BBC America joint venture. On an adjusted basis, operating income fell 16% to $155 million, primarily driven by a decrease in revenues, partly offset by continued cost management measures.
International revenue fell 9% year over year to $90 million. The prior year period included $19 million of content licensing and other revenues related to 25/7 Media, which the company divested in December.
Additionally, advertising revenue during the quarter included $13 million of revenue related to a one-time adjustment payment. Excluding revenues related
to 25/7 Media and the one-time adjustment payment, international revenues fell 4%. Subscription revenues decreased 13% to $50 million, primarily due to the non-renewal of a distribution agreement in the UK that occurred in the fourth quarter of 2023.
Content licensing and other revenues decreased 86% to $3 million due to the sale of the company’s interest in 25/7 Media. Advertising revenues increased 84% to $38 million due to a $13 million one-time adjustment payment and new
streaming offerings in the UK. Excluding the one-time adjustment payment, advertising revenues increased 18%.
The segment posted an operating loss of $44 million, which included a goodwill impairment change of $68 million related to AMCNI. On an adjusted basis, operating income grew 53% to $29 million, primarily driven by the one-time adjustment payment. 25/7 Media generated $1 million of adjusted operating income in the second quarter of 2023. Excluding the one-time adjustment payment, international adjusted operating income was $16 million.
Looking ahead, AMC Networks expects total revenue of approximately $2.4 billion for full year 2024 and adjusted operating income of $550 million to $575 million. It also continues to expect to grow free cash flow year over year in 2024 and cumulative free cash flow of approximately $500 million by 2025.
“Continued streaming and digital advertising growth, as well as prudent expense management remain a focus despite continued revenue headwinds in the business,” chief financial officer Patrick O’Connell told analysts on Friday. “Our content investments are at appropriate levels to best support our business and drive free cash flow.
Additionally, AMC expects full year 2024 cash programming spend to be approximately $1 billion and programming amortization to be similar to 2023 levels as a result of strategic programming reassessments that occurred at the end of 2022 and carryover from prior year programming investments.
“Given these dynamics, as you look to next year, anticipate a year over year increase in programming amortization expense for 2025,” O’Connell added. “It is important to note that this is non cash and does not impact our free cash flow expectation for next year, and we remain highly confident in our ability to achieve cumulative free cash flow across 2024, and 2025.”
During the quarter, the company repurchased $15 million in principal of its 4.25% senior notes due 2029 on the open market, at a discount of $4.9 million, and retired the repurchased notes. It also completed an offering of $143.75 million principal amount of its 4.25% convertible senior notes due in 2029.
It did not repurchase any shares during the second quarter and had $135 million of authorization remaining under its stock repurchase program. As of Aug. 2, AMC had 32,613,713 shares of Class A Common Stock and 11,484,408 shares of Class B Common Stock outstanding.
AMC shares climbed 1.7% during Friday’s trading session following the earnings announcement.
