GlobeNewswire Inc | May 7, 2021 07:00AM EDT

May 07, 2021

NEW YORK, May 07, 2021 (GLOBE NEWSWIRE) -- AMC Networks Inc. (AMC Networks or the Company) (NASDAQ: AMCX) today reported financial results for the first quarter ended March 31, 2021.

President and Chief Executive Officer Josh Sapan said: 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. 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.

First Quarter Financial Highlights:

-- New segment reporting structure -- Net revenues of $692 million -- Operating income of $170 million; Adjusted Operating Income(1) of $238 million -- Diluted EPS of $2.02; Adjusted EPS(1) of $2.98 -- Net cash provided by operating activities of $108 million; Free Cash Flow(1) of $97 million

Three Months Ended March 31,Dollars in thousands, except 2021 2020 Changeper share amountsNet Revenues $ 691,741 $ 734,375 (5.8 ) %Operating Income $ 169,708 $ 172,970 (1.9 ) %Total Adjusted Operating $ 237,979 $ 222,454 7.0 %Income Diluted Earnings Per Share $ 2.02 $ 1.22 65.6 %Adjusted Diluted Earnings Per $ 2.98 $ 1.47 102.6 %Share Net cash provided by operating $ 107,563 $ 198,408 (45.8 ) %activitiesFree Cash Flow $ 96,562 $ 182,411 (47.1 ) %

^ ^See page 6 of this earnings release for a discussion of non-GAAP financial(1) measures used in this release. This discussion includes the definition of Adjusted Operating Income (Loss), Adjusted EPS and Free Cash Flow.

Operational Highlights:

-- On track to achieve previously communicated 2021 and long-term financial and subscriber targets -- Expanded distribution of AMC+ with launch on YouTube TV -- Launched five free ad-supported streaming (FAST) channels on VIZIO SmartCast -- Entered into a strategic partnership with Toronto-based Shaftesbury, an award-winning creator and producer of original TV, film and digital content -- Premiered Shudders Halfway to Halloween Month in April, with Shudders biggest slate of programming ever -- Unveiled Upfront Connect 2.0, a powerful planning, creative content, and information tool for advertising clients -- Launched Acorn TV on Amazon Prime Video Channels in Spain -- Completed two first-to-market national linear addressable campaigns, a significant and long-awaited step to unleash the potential of addressable advertising on television at scale -- Completed spin-off of Levitys live comedy and talent management businesses and related lease obligations(2)

Changes to Segment Reporting:

In the first quarter of 2021, the Company changed its presentation of operating segments, reflecting a reorganized operating structure focused on a multi-platform distribution approach to content monetization. The Companys streaming services and IFC Films, previously included in the International and Other segment, are now included within the Domestic Operations segment (formerly referred to as the National Networks segment). In addition, certain corporate overhead costs are no longer allocated to the operating segments. Operating segment information for the prior period has been recast to reflect these changes.(3) The new reporting structure consists of the following two operating segments:

-- Domestic Operations: Includes activities of our five national programming networks, our streaming services, our AMC Studios operation, IFC Films and AMC Broadcasting & Technology. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, and ALLBLK), AMC+ and other streaming initiatives. Our AMC Studios operation produces original programming for our programming networks and also licenses such programming worldwide. IFC Films is our film distribution business and AMC Networks Broadcasting & Technology is our technical services business, which primarily services most of the national programming networks. -- International and Other: Includes AMC Networks International (AMCNI), our international programming businesses consisting of a portfolio of channels around the world and 25/7 Media Holdings LLC (formerly Levity), our production services business.

^(2) ^See page 4 for information related to the spin-off of the Levity LiveCo.^(3) ^See page 12 for a summary of segment reporting changes.

Segment Results

(dollars in thousands)

Three Months Ended March 31, 2021 2020 ChangeNet Revenues: Domestic Operations $ 573,969 $ 611,893 (6.2 ) %International and Other 121,167 124,828 (2.9 ) %Corporate / Inter-segment (3,395 ) (2,346 ) n/mEliminationsTotal Net Revenues $ 691,741 $ 734,375 (5.8 ) % Operating Income (Loss): Domestic Operations $ 216,459 $ 224,600 (3.6 ) %International and Other (3,162 ) 4,361 (172.5 ) %Corporate / Inter-segment (43,589 ) (55,991 ) n/mEliminationsTotal Operating Income $ 169,708 $ 172,970 (1.9 ) % Adjusted Operating Income (Loss): Domestic Operations $ 242,533 $ 241,033 0.6 %International and Other 23,563 17,843 32.1 %Corporate / Inter-segment (28,117 ) (36,422 ) n/mEliminationsTotal Adjusted Operating Income $ 237,979 $ 222,454 7.0 %

Domestic Operations

-- Domestic Operations revenues for the first quarter decreased 6% to $574 million compared to the prior year quarter Advertising revenues decreased 7% to $199 million due to shifts in the timing of the airing of original programming and lower delivery, partially offset by higher pricing and ad-supported streaming growthDistribution revenues decreased 6% to $375 million Content licensing revenues decreased 54%, driven by the timing and availability of original programming, as the result of pandemic-related production delaysSubscription revenues increased 14% driven by robust growth in streaming revenues, attributable to increased paid streaming subscribers, partially offset by a low-single digit decrease in affiliate revenue, attributable to subscriber universe declines -- Operating Income decreased 4% to $216 million, and Adjusted Operating Income increased 1% to $243 million, reflecting a decrease in operating expenses including lower programming expenses, partly offset by increased marketing investments to support the growth of streaming revenue

International and Other

-- International and Other revenues for the first quarter of 2021 decreased 3% to $121 million compared to the prior year quarter Distribution and Other revenues decreased 6% to $100 million primarily due to live venue closures and the timing of productions at Levity (prior to the LiveCo spin-off) and a decrease in distribution revenues at AMCNIAdvertising revenues increased 11% largely related to the favorable impact of foreign currency translation at AMCNI -- Operating Loss was $3 million compared to Operating Income of $4 million in the prior year period; Adjusted Operating Income increased 32% to $24 million Operating Loss and Adjusted Operating Income reflected the decrease in revenues partially offset by the favorable impact of foreign currency translation and the recovery of bad debtOperating Loss reflected a $16 million charge related to the Levity LiveCo spin-off transaction

Other Matters

Levity Spin-off Transaction

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.

Amendment to Amended and Restated Credit Agreement

As previously disclosed, onFebruary 8, 2021,AMC Networksentered into Amendment No. 1 to its existing Credit Agreement. Amendment No. 1 extends the maturity dates of the$675 millionterm loan A facility and$500 millionrevolving credit facility under the Credit Agreement toFebruary 8, 2026, and makes certain other amendments to the covenants and other provisions of the Credit Agreement.

Senior Notes Issuance / Debt Redemption

As previously disclosed, onFebruary 8, 2021,AMC Networksissued$1.0 billionaggregate principal amount of 4.25% senior notes dueFebruary 15, 2029in a registered public offering and received net proceeds of$982.3 million, after deducting underwriting discounts, commissions and expenses. The Company used the net proceeds to redeem (i) the remaining$400 millionprincipal amount of the Companys 4.75% senior notes due 2022 and (ii)$600 millionprincipal amount of the Companys 5.00% senior notes due 2024 onFebruary 26, 2021.

Stock Repurchase Program

As previously disclosed, the Companys Board of Directors has authorized a program to repurchase up to $1.5 billion of the Companys outstanding shares of common stock. The Company will determine the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. The stock repurchase program has no pre-established closing date and may be suspended or discontinued at any time. During the first quarter 2021, the Company did not repurchase any shares. As of March 31, 2021, the Company had $135 million available for repurchase under the stock repurchase program.

Restructuring and Other Related Charges

In November 2020, management commenced a restructuring plan (the 2020 Plan) designed to streamline the Companys operations through a reduction of its domestic workforce. The 2020 Plan is intended to improve the organizational design of the Company through the elimination of certain roles and centralization of certain functional areas of the Company. In connection with the 2020 Plan, in the first quarter 2021, the Company incurred severance and other personnel costs of $4.1 million. Additional restructuring and other related charges for first quarter 2021 were $4.5 million, which related to costs associated with the termination of distribution in certain territories.

Please see the Companys Form 10-Q for the period ended March 31, 2021 for further details regarding the above matters.

Description of Non-GAAP Measures

The Company defines Adjusted Operating Income (Loss), which is a non-GAAP financial measure, as operating income (loss) before depreciation and amortization, cloud computing amortization, share-based compensation expense or benefit, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges, and including the Companys proportionate share of adjusted operating income (loss) from majority owned equity method investees. Because it is based upon operating income (loss), Adjusted Operating Income (Loss) also excludes interest expense (including cash interest expense) and other non-operating income and expense items. The Company believes that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of the various operating units of the business without regard to the effect of the settlement of an obligation that is not expected to be made in cash.

The Company believes that Adjusted Operating Income (Loss) is an appropriate measure for evaluating the operating performance of the business segments and the Company on a consolidated basis. Adjusted Operating Income (Loss) and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in the industry.

Internally, the Company uses net revenues and Adjusted Operating Income (Loss) measures as the most important indicators of its business performance, and evaluates managements effectiveness with specific reference to these indicators. Adjusted Operating Income (Loss) should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), and other measures of performance presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Since Adjusted Operating Income (Loss) is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. For a reconciliation of operating income (loss) to Adjusted Operating Income (Loss), please see page 9 of this release.

The Company defines Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less capital expenditures and cash distributions to noncontrolling interests, all of which are reported in our Consolidated Statement of Cash Flows. The Company believes the most comparable GAAP financial measure of its liquidity is net cash provided by operating activities. The Company believes that Free Cash Flow is useful as an indicator of its overall liquidity, as the amount of Free Cash Flow generated in any period is representative of cash that is available for debt repayment, investment, and other discretionary and non-discretionary cash uses. The Company also believes that Free Cash Flow is one of several benchmarks used by analysts and investors who follow the industry for comparison of its liquidity with other companies in the industry, although the Companys measure of Free Cash Flow may not be directly comparable to similar measures reported by other companies. For a reconciliation of net cash provided by operating activities to Free Cash Flow, please see page 10 of this release.

The Company defines Adjusted Earnings per Diluted Share (Adjusted EPS), which is a non-GAAP financial measure, as earnings per diluted share excluding the following items: amortization of acquisition-related intangible assets; impairment and other charges (including gains or losses on sales or dispositions of businesses); non-cash impairments of goodwill, intangible and fixed assets; restructuring and other related charges; and gains and losses related to the extinguishment of debt; as well as the impact of taxes on the aforementioned items. The Company believes the most comparable GAAP financial measure is earnings per diluted share. The Company believes that Adjusted EPS is one of several benchmarks used by analysts and investors who follow the industry for comparison of its performance with other companies in the industry, although the Companys measure of Adjusted EPS may not be directly comparable to similar measures reported by other companies. For a reconciliation of earnings per diluted share to Adjusted EPS, please see pages 11 of this release.

Forward-Looking Statements

This earnings release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results or developments may differ materially from those in the forward-looking statements as a result of various factors, including financial community and rating agency perceptions of the Company and its business, operations, financial condition and the industries in which it operates and the factors described in the Companys filings with the Securities and Exchange Commission, including the sections entitled "Risk Factors" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" contained therein. The Company disclaims any obligation to update any forward-looking statements contained herein.

Conference Call Information

AMC Networks will host a conference call today at 8:30 a.m. ET to discuss its first quarter 2021 results. To listen to the call, visit http://www.amcnetworks.com or dial 833-714-3268, using the following conference ID: 4983104.

About AMC Networks Inc.

AMC Networks is a global entertainment company known for its popular and critically-acclaimed content. Its portfolio of brands includes AMC, BBC AMERICA (operated through a joint venture with BBC Studios), IFC, SundanceTV, WE tv, IFC Films, and a number of fast-growing streaming services, including the AMC+ premium streaming bundle, Acorn TV, Shudder, Sundance Now and ALLBLK. AMC Studios, the Companys in-house studio, production and distribution operation, is behind award-winning owned series and franchises, including The Walking Dead, the highest-rated series in cable history. The Company also operates AMC Networks International, its international programming business, and 25/7 Media, its production services business.

Contacts

Investor Relations Corporate CommunicationsNicholas Seibert (646) 740-5749 Georgia Juvelis (917) 542-6390nicholas.seibert@amcnetworks.com georgia.juvelis@amcnetworks.com

AMC NETWORKS INC.CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)(unaudited)

Three Months Ended March 31, 2021 2020Revenues, net $ 691,741 $ 734,375 Operating expenses: Technical and operating (excluding depreciation and 280,572 344,060 amortization)Selling, general and administrative 191,535 184,649 Depreciation and amortization 25,246 26,730 Impairment and other charges 16,055 ? Restructuring and other related charges 8,625 5,966 522,033 561,405 Operating income 169,708 172,970 Other income (expense): Interest expense (34,742 ) (37,564 )Interest income 2,342 4,555 Loss on extinguishment of debt (22,074 ) (2,908 )Miscellaneous, net 5,406 (29,939 ) (49,068 ) (65,856 )Income from operations before income taxes 120,640 107,114 Income tax expense (25,915 ) (33,588 )Net income including noncontrolling interests 94,725 73,526 Net income attributable to noncontrolling interests (7,704 ) (4,859 )Net income attributable to AMC Networks? $ 87,021 $ 68,667 stockholders Net income per share attributable to AMC Networks? stockholders:Basic $ 2.08 $ 1.24 Diluted $ 2.02 $ 1.22 Weighted average common shares: Basic 41,930 55,477 Diluted 43,171 56,061

AMC NETWORKS INC.SUPPLEMENTAL FINANCIAL DATA (Dollars in thousands)(Unaudited)

Three Months Ended March 31, 2021 Domestic International Corporate / Operations and Other Inter-segment Consolidated EliminationsOperating income $ 216,459 $ (3,162 ) $ (43,589 ) $ 169,708 (loss)Share-based 5,639 1,231 6,576 13,446 compensation expenseDepreciation and 13,373 4,949 6,924 25,246 amortizationImpairment and other ? 16,055 ? 16,055 chargesRestructuring and 2,427 4,490 1,708 8,625 other related chargesCloud computing ? ? 264 264 amortizationMajority owned equity 4,635 ? ? 4,635 investees AOIAdjusted operating $ 242,533 $ 23,563 $ (28,117 ) $ 237,979 income (loss)

Three Months Ended March 31, 2020 Domestic International Corporate / Operations and Other Inter-segment Consolidated EliminationsOperating income $ 224,600 $ 4,361 $ (55,991 ) $ 172,970 (loss)Share-based 2,724 609 12,179 15,512 compensation expenseDepreciation and 10,951 8,896 6,883 26,730 amortizationRestructuring and 1,482 3,977 507 5,966 other related chargesMajority owned equity 1,276 ? ? 1,276 investees AOIAdjusted operating $ 241,033 $ 17,843 $ (36,422 ) $ 222,454 income (loss)

AMC NETWORKS INC.SUPPLEMENTAL FINANCIAL DATA (In thousands)(Unaudited)

Capitalization March 31, 2021 Cash and cash equivalents $ 993,123 Credit facility debt ^(a) $ 675,000 Senior notes ^(a) 2,200,000 Total debt $ 2,875,000 Net debt $ 1,881,877 Finance leases 30,093 Net debt and finance leases $ 1,911,970 Twelve Months Ended March 31, 2021 Operating Income (GAAP) $ 439,382 Share-based compensation expense 50,842 Depreciation and amortization 103,122 Impairment and other charges 138,282 Restructuring and other related charges 37,727 Cloud computing amortization 464 Majority owned equity investees 12,317 Adjusted Operating Income (Non-GAAP) $ 782,136 Leverage ratio ^(b) 2.4 x

(a) Represents the aggregate principal amount of the debt. Represents net debt and finance leases divided by Adjusted Operating Income(b) for the twelve months ended March 31, 2021. This ratio differs from the calculation contained in the Company's credit facility. No adjustments have been made for consolidated entities that are not 100% owned.

Free Cash Flow Three Months Ended March 31, 2021 2020Net cash provided by operating activities $ 107,563 $ 198,408 Less: capital expenditures (8,537) (12,916) Less: distributions to noncontrolling interests (2,464) (3,081) Free cash flow $ 96,562 $ 182,411

Adjusted Earnings Per Diluted Share Three Months Ended March 31, 2021 Income from Net income Net income Diluted EPS operations Income tax attributable attributable attributable before expense to to AMC to AMC income noncontrolling Networks' Networks' taxes interests stockholders stockholdersReported Results $ 120,640 $ (25,915) $ (7,704) $ 87,021 $ 2.02 (GAAP)Adjustments: Amortization ofacquisition-related 9,541 (1,496) (3,027) 5,018 0.11 intangible assetsImpairment and 16,055 (3,824) ? 12,231 0.28 other chargesRestructuring andother related 8,625 (986) (29) 7,610 0.18 chargesLoss onextinguishment of 22,074 (5,257) ? 16,817 0.39 debtAdjusted Results $ 176,935 $ (37,478) $ (10,760) $ 128,697 $ 2.98 (Non-GAAP)

Three Months Ended March 31, 2020 Income from Net income Net income Diluted EPS operations Income tax attributable to attributable attributable before expense noncontrolling to AMC to AMC income interests Networks' Networks' taxes stockholders stockholdersReported Results $ 107,114 $ (33,588 ) $ (4,859 ) $ 68,667 $ 1.22 (GAAP)Adjustments: Amortization ofacquisition-related 12,132 (2,023 ) (3,027 ) 7,082 0.13 intangible assetsRestructuring andother related 5,966 (1,458 ) ? 4,508 0.08 chargesLoss onextinguishment of 2,908 (693 ) ? 2,215 0.04 debtAdjusted Results $ 128,120 $ (37,762 ) $ (7,886 ) $ 82,472 $ 1.47 (Non-GAAP)

Summary of Segment Reporting Changes

The following tables present a reconciliation from our historical segments to our new segments for three months ended March 31, 2020. Segment changes consist of the following:

-- The Companys streaming services and IFC Films, previously in International and Other are now included within the Domestic Operations Segment (formerly referred to as the National Networks segment) -- Corporate overhead costs will no longer be allocated to the operating segments. Corporate overhead includes such costs as executive salaries and benefits, costs of maintaining corporate headquarters, facilities and common support functions (such as human resources, legal, finance, strategic planning and information technology).

Three months ended March 31, 2020 As Segment Corporate / Originally Changes Inter-segment Recast Reported EliminationsRevenue National Networks/Domestic $ 566,939 $ 51,042 $ (6,088 ) $ 611,893 OperationsInternational and 170,494 (51,042 ) 5,376 124,828 OtherInter-segment (3,058 ) ? 712 (2,346 )EliminationsTotal Consolidated $ 734,375 $ ? $ ? $ 734,375 Revenue Adjusted Operating IncomeNational Networks/Domestic $ 217,587 $ (3,731 ) $ 27,177 $ 241,033 OperationsInternational and 7,671 3,731 6,441 17,843 OtherCorporate /Inter-segment (2,804 ) ? (33,618 ) (36,422 )EliminationsTotal ConsolidatedAdjusted Operating $ 222,454 $ ? $ ? $ 222,454 Income