AMC Networks saw its U.S. ad sales rise 13% in the second quarter of 2021 compared to the prior year’s Q2, the first full quarter of 2020 in which the effects of COVID-19 were felt throughout the entertainment industry, the company revealed in its earnings report Friday.
The 13% increase in domestic advertising revenue counts all of AMC Networks’ “Domestic Operations,” which 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.
During Q2, the dark dramedy “Kevin Can F**k Himself,” starring “Schitt’s Creek” alum Annie Murphy, debuted on AMC+ and AMC. Also in the period ending June 30, AMC Networks expanded international distribution of Acorn TV with Amazon Prime Video Channels and Orange TV in Spain and launched AMC+ on YouTube TV.
AMC Networks reported an operating income of $68 million, up 40% from Q2 2020. After some favorable adjustments, which included accounting for the $143 million impact from the July 16 settlement of the company’s long-running “Walking Dead” profits participation lawsuit with Frank Darabont, that figure changed to $251 million, up 11% to the comparable adjusted figure from the year prior.
Regarding the settlement, AMC Networks said in its earnings release: “On July 16, 2021, the Company entered into a settlement agreement (the “Settlement Agreement”) with Frank Darabont, Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (together, the “Plaintiffs”) in actions brought in connection with Frank Darabont’s rendering services as a writer, director and producer of the television series entitled The Walking Dead. The consolidated cases were initially brought in 2013 and 2018 and the trial of the consolidated cases was scheduled to commence on April 4, 2022. The Settlement Agreement provides for a cash payment of $200 million (the “Settlement Payment”) to the Plaintiffs and future revenue sharing related to certain future streaming exhibition of The Walking Dead and Fear The Walking Dead. With regard to the Settlement Payment, the Company recorded a charge of $143.0 million, included in Impairment and Other Charges in consideration for the extinguishment of Plaintiffs’ rights to any compensation in connection with The Walking Dead and any related programs and the dismissal of the actions with prejudice, which amount is net of $57.0 million of ordinary course accrued
Overall, revenues at AMC Networks’ domestic operations were $639 million for the quarter ended June 30, up 14% compared to Q2 2020. Ad revenue was up the above-mentioned 13%, while distribution sales rose 14%.
Subscription revenues increased 21%, driven by “robust growth in streaming revenues, attributable to increased paid streaming subscribers, as well as the one-time beneficial impact of a distribution agreement renewal,” per the company. Content licensing revenues dipped 10%, due to the timing and availability of original programming as a result of COVID-related production delays.
AMC Networks’ domestic side saw an adjusted operating income increase of 6% to $250 million. Without the adjustment, which includes a $143 million impact from the settlement of “The Walking Dead” lawsuit mentioned above, the operating income for the U.S. segment was $88 million, down 60% from last year’s Q2.
In Q2, AMC Networks’ “International and Other” segment — which includes 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 — revenue was $138 million, up 53% compared to the prior year’s comparable quarter. Distribution and “other” revenues were +48%, which AMC Networks attributes to the resumption of production at 25/7 Media, as well as the favorable impact of foreign currency translation at AMCNI.
International ad sales increased 75%, which is also largely related to the favorable foreign currency translation at AMCNI, plus higher pricing and better ratings.
The international segment saw an operating income of $20 million, compared to Q2 2020’s operating loss of $126 million. With adjustments, operating income rose to $25 million.
All in, AMC Networks beat analysts’ predictions for the quarter.
Wall Street forecast earnings per share (EPS) of $1.90 on $687.37 million in revenue, according to a consensus compiled by Yahoo Finance. AMC Networks reported adjusted EPS of $3.45 (a mega adjustment from its diluted EPS of 83 cents) on $771 million in revenue.
“AMC Networks had a strong second quarter with impressive financial results domestically as well as internationally, driven by robust growth in revenues for our targeted streaming services, particularly strong advertising growth, and high demand for our world-class content.” AMC Networks president and chief executive officer Josh Sapan said in prepared remarks accompanying the financials. “We continue to advance our position as the worldwide leader in targeted streaming, with high subscriber satisfaction and strong consumption for our services. AMC+, our premium bundled offering, has quickly become our fastest-growing service, driven by expanding distribution and the strong, character-driven dramas that power it. Our streaming momentum and our expanding advertising efforts are enabling us to continue to meaningfully reconstitute the revenue mix of our company and to deliver continued growth and shareholder value.”
AMC Networks stock closed Thursday at $49.53 per 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.