AMC Networks Smashes Q2 Earnings Expectations Despite 11% US Ad Sales Decline, Miss on Revenue

New RLJ Entertainment owner rides lower income tax expenses all the way to the bank

AMC Networks cruised to a second-quarter earnings beat in 2019, but it fell shy on revenue estimates as U.S. ad sales sunk 11.1%.

Wall Street had forecast Q2 earnings per share (EPS) of $1.93 on $783.19 million in revenue, according to a consensus estimate compiled by Yahoo Finance. AMC Networks actually reported adjusted EPS of $2.60 on $772 million in revenue.

Though revenues at the national networks was ultimately down, hence the miss at the top line, operating income was up. Internationally, the story was the exact opposite, and all-in revenues ticked up from last year’s comparable quarter. Lower TV ratings at the U.S. networks — AMC, WE tv, BBC America, IFC and SundanceTV — and the timing of original programming was the culprit stateside, though fortunately an increase in content licensing revenues helped offset some of that.

Adjusted earnings per share jumped 34.7% from the $1.93 AMC Networks reported in Q2 2018.

The new RLJ Entertainment parent company enjoyed lower income tax expenses in Q2 2019 than it did in Q2 2018, which was before it owned a controlling stake in RLJE. All of that adds up, and it makes Josh Sapan pretty bullish.

“We delivered solid results in the second quarter and remain on track to deliver on our financial targets for the full year,” the president and CEO said in prepared remarks accompanying the company’s quarterly results. “We continue to make significant progress on our strategic goals, which include creating great content and diversifying our revenue. Our recently announced landmark partnership with Universal Studios for the first-ever theatrical movie set in The Walking Dead Universe underscores the high level of interest that the universe commands and the undeniable strength and vitality of this growing franchise. The recent Emmy nominations brought AMC Networks wide recognition, with nominations for four of our five networks as well as our streaming service Acorn TV, affirming AMC Networks as a company whose shows ignite audiences, critics and Emmy voters at a time that is more crowded and competitive than ever.”

“In addition, we are seeing very healthy rates of growth across our four targeted SVOD services — Acorn TV, Shudder, Sundance Now, and UMC,” he added. “As these services gain sufficient scale, we have been increasingly populating them with original content, which has been resonating with subscribers and is driving our momentum. As we continue to remain focused on creating sought-after premium content – which propels our entire enterprise – we believe direct-to-consumer, along with owning more of our intellectual property and expanding our studio, represent significant growth areas for us.”

Cable channel AMC’s key asset “The Walking Dead” is set to continue on as a TV franchise despite the recent — and sudden — end of the comic book, its source material. Interestingly, Robert Kirkman concluded his comic book on July 2 — the first issue after Q2 wrapped on June 30.

Shares of AMC stock (AMCX) closed Tuesday at $54.57, up $1.70 apiece. The U.S. stock markets reopen at 9:30 a.m. ET.

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