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AMC Networks Posts Flattish Sales, 22% Earnings Growth

Anders Bylund, The Motley Fool

AMC Networks (NASDAQ: AMCX), which produces and distributes TV and silver screen content in a variety of channels, reported earnings on July 31. The second-quarter report reflected modest sales growth due to shifts in the content premiere schedule, though the same changes also led to lower costs and 22% higher bottom-line earnings.

Here's a closer look at AMC Networks' report.

AMC Networks' second-quarter results: The raw numbers

Metric

Q2 2019

Q2 2018

Change

Net revenue

$772 million

$761 million

1.4%

Net income attributable to shareholders

$129 million

$106 million

22%

GAAP earnings per share (diluted)

$2.25

$1.82

24%

Data source: AMC Networks. GAAP = generally accepted accounting principles.

What happened with AMC Networks this quarter?

  • AMC's national networks division saw revenue falling 4% year over year, landing at $605 million. This period contained fewer episodes of hit shows such as The Walking Dead than the year-ago quarter, resulting in 11% lower advertising sales. On the other hand, operating income rose 2% in this segment due to lower production and marketing expenses.

  • International and other sales rose 22%, powered by the acquisition of content distribution company RLJ Entertainment. That asset contributed $26 million to this division's top line. Without it, sales would have increased by 5%. The segment's operating losses expanded from $11 million to $27 million.

  • AMC invested 67% of the quarter's free cash flows in share buybacks, retiring 1.1 million shares or 2% of the total diluted share count.

Close-up shot of a hand holding a TV remote, pointed at a blurred screen in the distance.

Image source: Getty Images.

What management had to say

In the second-quarter earnings call, CEO Josh Sapan highlighted AMC's investment in streaming video-on-demand (SVOD) services.

For the past several years we've been focused on creating and growing targeted special interest SVOD services. Well, the mega caps compete in the general interest arena we believe there's a very significant opportunity for us with specialty SVOD services, that offer a new way to serve fans and we believe that the market for these types of services will continue to grow.

Today, in addition to our AMC Premiere services, we have four SVOD services targeting distinct audiences, which I'll remind you of. Shudder for horror and suspense fans, Sundance Now, which has critically acclaimed series and films, Acorn TV which has British mysteries and dramas, and Urban Movie Channel or UMC targeted to urban audiences. The latter two services we acquired as part of our stake in RLJ Entertainment.

The SVOD assets were recently organized under former RLJ executive Miguel Penella, tapping into his experience with launching Acorn TV. Sapan expects that this portfolio of services should reach 2 million subscribers by the end of the year, having added 400,000 names in the first half of 2019.

Looking ahead

AMC Networks is not known for detailed financial guidance updates, but CFO Sean Sullivan provided some color commentary on the company's near-term prospects.

In the third quarter, at the national networks, we expect revenue growth versus the prior year period. We anticipate this growth will be led by an increase in content licensing revenue. As for expenses of the national networks, we anticipate a year over year increase, due mainly to the timing and mix of originals airing on our networks.

In our international/other segment, our reported results will continue to reflect the impact of RLJE. And we expect the impact of that business will be similar in the third quarter to what we saw in the second quarter, both in terms of revenue and [adjusted operating income]. Excluding RLJE, we expect the other businesses in the segment to deliver, in aggregate, healthy growth in both revenue and AOI.

More From The Motley Fool

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends AMC Networks. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com

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