AMC Networks Inc. Earnings: Buying Growth
Cable network operator and content producer AMC Networks (NASDAQ: AMCX) reported third-quarter results on the evening of Nov. 1. A recent acquisition boosted the company's revenues to a 7.5% gain, and earnings per share jumped 43% higher.
AMC Networks' third-quarter results: The raw numbers
Metric | Q3 2018 | Q3 2017 | Change (YOY) |
|---|---|---|---|
Revenue | $697 million | $648 million | 7.5% |
Net income attributable to shareholders | $111 million | $87 million | 28% |
GAAP earnings per share (diluted) | $1.93 | $1.35 | 43% |
Data source: AMC Networks. GAAP = generally accepted accounting principles. YOY = year over year.
What happened with AMC Networks this quarter?
The bulk of AMC's revenue growth in the third quarter stemmed from the acquisition of comedy network Levity Entertainment Group. That unit added $39 million of top-line sales to the international segment's results, resulting in a 35% year-over-year sales surge for that division.
Without Levity, international sales held almost perfectly steady at $113 million, while AMC as a whole saw 1.5% organic growth over the year-ago period.
In early October, AMC Networks expanded an earlier investment in indie films producer RLJ Entertainment into a controlling stake, picking up the rest of the company's float for full ownership by the end of that month. RLJ's founder, Robert L. Johnson, continues to hold a 30% ownership interest in the RLJ business, which generated $94 million of revenue in its final four quarters as a stand-alone company.
Image source: Getty Images.
What management had to say
In a conference call with financial analysts, AMC Networks CEO Josh Sapan explained the moving parts within his company's domestic division:
[W]e grew advertising in the third quarter with ratings softness offset by increased pricing. We continue to evolve our advertising product offerings, which includes ramping up initiatives around addressable advertising. And we're also using new data-driven products to help advertisers better target audiences with more efficiency and more granularity.
In fact, Sapan sees AMC's strong ad sales as a serious competitive advantage in today's increasingly ad-free entertainment landscape:
As we've noted before, the rise of high-end serialized programming has largely occurred on platforms that don't have ads. So our ability to showcase this kind of content in an ad-support environment has allowed, and will continue to allow, our network to attract a healthy base of advertisers, as we increasingly become one of the very limited places to offer ads with super-great premium scripted content.
Looking ahead
AMC Networks doesn't provide quarter-by-quarter guidance, and the company is leaving long-term forecasts for 2019 and beyond for the fourth-quarter report.
In the meantime, management did add a bit of color to the company's near-term prospects.
Domestic subscription sales should continue their steady climb at mid-single-digit percentages. At the same time, the timing of AMC's content deals with other networks will work out to a year-over-year decline next quarter. The subscription growth may not be able to cover the drop in content license revenue.
Levity will continue to drive year-over-year growth in the international segment, and RLJ Entertainment should add another $25 million or so to the fourth quarter's top line. Otherwise, organic growth trends should stay close to their current levels, roughly flat when compared to the same period of 2017.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends AMC Networks. The Motley Fool has a disclosure policy.
