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AMC Networks Swings to Q4 Loss on Higher SVOD Costs, Lower U.S. TV Ratings

Adjustments make fourth quarter more palatable, but aren’t enough to meet Wall Street’s forecast

AMC Networks swung to a loss in the fourth quarter of 2019 due in large part to higher SVOD costs and lower U.S. TV ratings.

Wall Street forecast earnings per share (EPS) of $1.76 on $773.71 million in revenue, according to a consensus estimate compiled by Yahoo Finance. On Wednesday, AMC Networks actually reported adjusted EPS of $1.69 on $785 million in revenue, up 1.6% from the $772,846 revenue the company posted in Q4 2018.

That revenue increase came about thanks to international growth of 6.5%, which more than offset a slight domestic decline.

The company’s fourth-quarter net loss was $9 million (-15 cents per diluted share), compared with a net income of $72 million ($1.24 per diluted share) in the comparable year-ago period. AMC Networks reported operating income of $42 million and adjusted operating income of $200 million.

Even with adjustments, Q4 2019 operating income was down 8.7%. Without them, the decrease would have been a whopping -69.6%.

The increase in operating expenses for AMC Network’s Q4 was primarily attributed to higher costs associated with AMC Networks SVOD services, made up of subscription streaming options Acorn TV, Shudder, Sundance Now and UMC (Urban Movie Channel), which combined to surpass 2 million paid subscribers last year. Acorn, the British-focused mysteries offering, makes up half of that total.

Q4, which included the start of Season 10 of “The Walking Dead,” was also marred by an advertising revenue decrease of 7.8% at AMC Networks’ domestic channels — AMC, WE tv, BBC America, IFC and SundanceTV — due to lower U.S. TV ratings. Those declines were partially offset by higher pricing for ads.

AMC Networks distribution revenue increased for the quarter due to a rise in content licensing revenues, which was partially offset by a decrease in subscription revenues.

For its full-year 2019 earnings, AMC Networks reported adjusted EPS of $9.27 on $3.1 billion in revenue. That marks a revenue increase of 3% over 2018, which was made up of a 1.8% decline on the domestic side and a 22.7% increase at international and SVOD.

“AMC Networks achieved its key financial targets for the year, against a backdrop of a rapidly shifting media ecosystem,” AMC Networks president and CEO Josh Sapan said in a prepared statement accompanying the financial release. “We continue to move our organization in a new strategic direction, from what has been a cable channels company into a premier targeted content company that is now inhabiting the traditional pay-TV ecosystem, the advanced advertising world, as well as the emerging targeted SVOD marketplace. A new agreement with one of our biggest MVPD partners — Dish Network — includes the launch of our full suite of targeted SVOD services and demonstrates that our distribution partners are increasingly recognizing the value of our SVOD offerings. We are seeing momentum for our targeted SVOD services, which passed two million paid subscribers in the fourth quarter, as we continue to invest in strong, desirable content and valuable IP, diversify through new areas of content monetization and maximize the long-term value of our core networks and brands.”

AMC Networks stock closed Tuesday afternoon at $33.06 per share, down 3.5% from where it opened that morning. The regular trading day for the U.S. stock markets open 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 and full-year earnings in greater detail.