Cable network and content production studio AMC Networks (AMCX 2.22%) reported fourth-quarter results on Wednesday night. Some big tax items muddied the year-over-year comparison waters. Ad sales struggled while content distribution operations soared.
Here's a closer look at AMC Networks' Q4.
AMC Networks' fourth-quarter results: The raw numbers
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$727 million |
$730 million |
(0.4%) |
|
Net Income |
$145 million |
$14.5 million |
900% |
|
GAAP Earnings per share (diluted) |
$2.33 |
$0.20 | 1,065% |
Data source: AMC Networks.
What happened this quarter?
Unadjusted earnings were distorted by a $68 million tax benefit in the fourth quarter. This was a non-cash item, recognizing the newly enhanced valuations of the company's deferred tax assets and liabilities, which outweighed a $11 million tax expense related to AMC's foreign earnings. Adjusted to factor out these tax effects and other non-cash items, earnings rose 29% year over year to $1.68 per diluted share.
AMC's national cable networks recorded $606 million in sales, down from $614 million in the year-ago period. Within that sum, distribution revenues rose 7% while advertising sales fell 10%. The company is battling lower advertiser interest by charging higher ad fees, and this was the result of these efforts.
The international and other division saw sales rise 7% to $127 million, mostly driven by organic subscriber growth in the AMC Networks International segment, and its streaming video services, Sundance Now and Shudder.
Operating profits decreased by 7% in the national networks segment, reflecting lower revenues and increased programming costs. The international operations segment cut its operating losses from $88 million to $20 million. The big difference -- in Q4 2016, it took a big goodwill write-down on its money-losing Netherlands-based media distribution center, which it then sold in July 2017.
Image source: Getty Images.
What management had to say
In a prepared statement, AMC CEO Josh Sapan focused on his company's biggest hits.
"Our core networks continue to perform well, with AMC delivering 4 of the top 10 dramas on cable in 2017, with The Walking Dead, Fear the Walking Dead, Better Call Saul and Into the Badlands, " Sapan said. "As we continue to evolve and adapt in a world of changing viewer consumption habits, we believe AMC Networks occupies a position of unique strength."
Sapan also pointed to strong subscriber growth for Shudder and Sundance Now, though he declined to provide any firm viewer numbers.
Looking ahead
AMC Networks does not provide firm guidance targets from one quarter to the next, but management did offer some helpful comments in their conference call with analysts.
First-quarter results should trend a bit lower than normal seasonality would dictate, as the Winter Olympics induced it to push back the premiere of hit show The Walking Dead by two weeks. On the upside, the same timing shift should provide a modest boost to second-quarter numbers, as the zombie drama pushes that much deeper into the next reporting period instead.
The international and other division should continue to post improvements, thanks to the lack of that unhelpful Dutch media distribution operation and strong demand in AMC's streaming media platforms. For this strategy, the company chose to double down on top-shelf dramas and documentaries (Sundance Now) and horror (Shudder), and that effort to appeal to niche audiences appears to be paying off. One of these days, we might even see some subscriber counts reported for these small but fast-growing services.
