Cable TV content creator AMC Networks (AMCX -4.41%) reported third-quarter results early Monday morning. Both sales and earnings were down but AMC still smashed Wall Street's more pessimistic estimates in the third quarter.
AMC Networks' third-quarter results by the numbers
|
Metric |
Q3 2020 |
Q3 2019 |
Change |
Analyst Consensus |
|---|---|---|---|---|
|
Revenue |
$654 million |
$719 million |
(9%) |
$606 million |
|
GAAP net income (loss) |
$62 million |
$117 million |
(47%) |
N/A |
|
Adjusted earnings (loss) per diluted share |
$1.32 |
$2.33 |
(43%) |
$1.28 |
Data source: AMC Networks. GAAP = generally accepted accounting principles.
The company had set up a complex guidance framework for the quarter and delivered on pretty much every promise.
Advertising sales in the national networks division fell 16% year over year to $164 million. That decline was on the lower side of management's guidance, which pointed to a drop in the mid-to-high teens. The same segment's distribution revenue fell 18% year over year and 3% in comparison to the second-quarter result. Here, management expected sales to stay close to the second-quarter reading. Operating expenses in the national networks division fell 12% year over year, again in line with management's guidance of low-to-mid teen percentages.
The international and other segment's ad sales were expected to drop year-over-year, matched by lower content production expenses. All told, adjusted operating profits were expected by show a modest decline. Instead, international revenues fell 10% while operating income jumped 28% higher. This was the secret sauce in AMC's analyst-stumping results.
Streaming success
Digging further into AMC's international and other segment, it turns out that this quarter's success rested on solid ad sales for the Levity comedy business. Moreover, AMC's video-streaming services are gaining traction in a hurry. Highly targeted streaming services have become AMC's fastest-growing revenue stream, and the company is throwing more weight behind that idea. A new bundle of premium video-streaming channels named AMC Plus recently launched on several cable TV and digital streaming platforms such as Comcast and Apple TV. The bundle includes access to the Shudder horror film service and the Sundance Now art film channel.
"All of these services are performing very well for us. We're seeing very positive growth rates, and we are exceeding earlier stated targets across several metrics," AMC Networks CEO Josh Sapan said on the earnings call.
The company's portfolio of four streaming services should end the year with 4 million total subscribers. Management originally expected to hit that goal by the end of 2022. The addition of AMC Plus should accelerate AMC's streaming ambitions even further.
"We do think it's important to underscore that for a company of our size, the impact of 5 million subs today and 10 million, 15 million, or 20 million subs in the future is very, very significant in terms of transforming the composition of our top-line revenues," Sapan said.
Image source: Getty Images.
Where can AMC Networks go from here?
It was no surprise to see investors embracing AMC Networks' solid results with a promising focus on the fast-growing streaming video market. The stock rose as much as 8.3% in Monday's trading session, but it's still trading 50% lower over the last 52 weeks. AMC Networks is priced for absolute disaster at 6 times trailing earnings and 2 times free cash flows, and roughly half of its shares are sold short.
If the company can build a successful turnaround around streaming video services and a growing universe of Walking Dead spinoffs, the stock could be poised for some massive returns from this low point.
