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AMC Networks Misses Q1 Revenue Estimates as US Ad Sales Drop 7%

But the company smashed Wall Street’s earnings expectations

AMC Networks missed revenue expectations for the first quarter of 2021, when the company’s U.S. ad sales dropped 7%, according to its Q1 2021 earnings report released Friday.

However, AMC Networks smashed Wall Street’s earnings estimates for the quarter and also says its on track to hit its projected 9 million paid streaming subscribers target by the end of the year.

Wall Street forecast earnings per share (EPS) of $1.87 on $722.32 million in revenue, according to a consensus compiled by Yahoo Finance. AMC Networks reported adjusted EPS of $2.98 on $692 million in revenue.

The company reported an operating income of $170 million, down 1.9% from Q1 2020. After some adjustments, that figure changed to $238 million.

The 7% decrease in domestic advertising revenue counts all of AMC Networks’ “Domestic Operations,” which after a reorganization this quarter now includes the company’s national networks — AMC, WE tv, BBC America, IFC, and SundanceTV — as well as its streaming services — AMC+, Acorn TV, Shudder, Sundance Now, and ALLBLK — plus AMC Studios, IFC Films, and AMC Networks Broadcasting & Technology.

Overall, revenues at AMC Networks’ domestic operations were $574 million for the quarter ended March 31, -6% compared to Q1 2020. Ad revenue was down the above-mentioned 7%, while distribution sales fell 6%.

Content licensing revenues plummeted 54%, due to the timing and availability of original programming as a result of COVID-related production delays, according to the company.

Meanwhile, subscription sales spiked 14%, driven by growth in streaming revenues from increased paid streaming subscribers, which was partially offset by a small decrease in affiliate revenue.

AMC Networks’ domestic side saw an operating income decrease of 4% to $216 million. With some favorable adjustments, that rose to $243 million.

As of this quarter, AMC Networks’ “International and Other” segment no longer includes streaming services and IFC Films, and instead counts just AMC Networks International (AMCNI), the company’s international programming businesses consisting of a portfolio of channels around the world, and 25/7 Media Holdings LLC (formerly Levity), the company’s production services business.

In that division, revenue was $121 million, down 3% compared to the prior year’s comparable quarter. Distribution and “other” revenues were -6%, which AMC Networks attributes to live venue closures and the timing of productions at its Levity Entertainment Group, prior to the LiveCo spinoff in March.

International ad sales increased 11%, which is largely related to the favorable foreign currency translation at AMCNI.

The segment saw an operating loss of $3 million, reflecting a $16 million charge related to the Levity LiveCo spinoff transaction, compared to Q1 2020’s operating income of $4 million. With adjustments, operating income rose to $24 million.

Regarding the Levity spinoff transaction, AMC Networks said: “In March 2021, the Company completed a spin-off of the live comedy venue and talent management businesses (“LiveCo”) of Levity Entertainment Group, LLC. In connection with the transaction, the Company effectively exchanged all of its rights and interests in LiveCo for the release of its obligations, principally related to leases. As a result of this divestiture, the Company recognized a loss on the disposal of $16.1 million reflecting the net assets transferred (consisting of property and equipment, lease right-of-use assets and intangibles, partially offset by lease and other obligations), which is included in Impairment and other charges. The Company retained its interest in the production services business of Levity Entertainment Group, LLC, which was renamed 25/7 Media Holdings LLC following the spin-off.”

“AMC Networks had solid performance in the first quarter and we are on course to meet our 2021 financial and streaming targets, including reaching at least 9 million paid subscribers by year end,” president and chief executive officer Josh Sapan said in prepared remarks accompanying the financials. “The transition of the company to be the worldwide leader in targeted streaming on the strength of our focused, strong content continues on track. The support of our distribution partners for our streaming efforts and our advanced advertising strides are providing us with both stability and momentum. We believe the high viewer engagement, efficient economic model, and pricing power of our streaming offerings provide us with important strategic advantages which, when coupled with our valuable linear channel offerings, will fuel our growth and continue to position us very well over the near and long term.”

AMC Networks stock closed Thursday at $45.55 share. The regular U.S. stock markets will reopen at 9:30 a.m. ET.

Sapan and other AMC Networks executives will host a conference call at 8:30 a.m. ET to discuss the quarter in greater detail.