Good morning. My name is Shisanta, and I will be your conference operator today. At this time, I'd like to welcome everyone to the AMC Networks second quarter earnings call. [Operator Instructions] Thank you. I would now like to turn the conference over to Seth Zaslow, Senior Vice President of Investor Relations.

Thank you. Good morning, and welcome to the AMC Networks second quarter 2014 earnings conference call. Joining us this morning are members of our executive team: Josh Sapan, President and Chief Executive Officer; Ed Carroll, Chief Operating Officer; and Sean Sullivan, Chief Financial Officer. Following a discussion of the company's second quarter 2014 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at amcnetworks.com. This call can also be accessed via our website. Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of the future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update the forward-looking statements that may be discussed during this call. Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides you with useful supplemental information concerning the company's ongoing operations and is appropriate in your evaluation of the company's performance. Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information, which we'll refer to on this call. With that, I would now like to turn the call over to Josh.

Good morning, and thank you for joining us. I'll provide an update on the business and then turn it over to Sean Sullivan for some greater financial detail. AMC Networks delivered solid financial results in the second quarter, with 38% growth in revenue and 13% growth in AOCF. For the first 6 months, revenues have increased 38%, and AOCF is up 12%. These amounts include the results for Chellomedia from the acquisition date, which was the end of January through June. Today, we'd like to discuss developments that have driven our financial results in the second quarter and the performance of our business, domestically and internationally, as we continue to capitalize on the success of the content strategy we've executed and invested in over the past several years. First, if we may, let's talk about the recently completed advertising upfront. There's much industry discussion right now about the lower dollars coming into this year's upfront. At AMC Networks, we are pleased with our performance. We increased both upfront pricing and volume, with the latter growing in the double digits, and are optimistic that the strength of our shows will draw additional dollars closer to air. It's worth noting that historically, we've seen strong demand for our programming in the scatter market. Last month, we received 35 Emmy nominations at AMC, SundanceTV and IFC. These awards are significant for us, not simply because they bring industry recognition. The added attention is also important in helping us break through the clutter, further raising our profile among viewers and elevating our brands. The recognition enables us to continue to attract top-tier creative talent to our networks, and it helps us to build a stronger market and platform for our shows internationally. Our fundamental strategy continues to be to develop the best original content…

Thanks, Josh, and good morning. Turning to the financial results for the second quarter. Total company revenues grew 37.6%, and AOCF grew 13.5%. As Josh noted, these amounts include the results for Chellomedia from the acquisition date. At the National Networks, revenues increased 8.7% or $32 million. National Networks AOCF decreased 9.4% or $14 million versus the prior year period to a total of $137 million. Advertising revenues increased 11.3% to a total of $164 million. While we experienced year-over-year advertising growth at all of our National Networks, AMC was the primary contributor. At AMC, the network benefited from the performance of its original programming, most notably Mad Men, Turn and Halt and Catch Fire, despite a year-over-year decrease in the number of episodes of Mad Men that aired. Distribution revenues at the National Networks increased 7% or $15 million to a total of $234 million versus the second quarter of 2013. The second quarter results reflected the aggregate impact of several items. With respect to affiliate fees, our core growth rate for the second quarter of 2014 was in the low single-digits. As a reminder, our results in the first quarter benefited from the expiration of one affiliate agreement in 2013. This agreement was renewed in the second quarter of 2013 and had an offsetting impact on our growth rate in the second quarter. Our affiliate revenue growth rate for the first half of the year was in the mid to high single-digits, consistent with the range that we previously discussed with you. Second quarter results reflected a strong double-digit year-over-year increase in non-affiliate revenues due to increases in revenue related to scripted original programs, most notably the international distribution of the full season of Turn and a portion of the first season of Halt and Catch Fire. Expenses…

[Operator Instructions] Your first question comes from Bryan Goldberg with Bank of America Merrill Lynch.

I've got 2 quick ones. First one is on M&A. There's been a lot of talk lately on this in this space and even some recent press around you guys with respect to BBC America. So if you have any comment on that, or if you're able to, that would be great. Otherwise, could you just remind us what your philosophy is with respect to acquisitions? What are the most critical criteria you look for when evaluating opportunities? And then from a balance sheet perspective, your leverage, I think you said it was 4.1x pro forma for Chello. How should we think about your ability or your capacity right now to be active here?

Sure, Bryan. This is Josh. We're not at -- in a position to be able to comment on anything that was recently written. I hope you understand. The overall point of view we have, I think, is somewhat informed probably by our past experience, and it's in evidence. We've made 2 acquisitions over the past several years. 5 years ago, we acquired the Sundance Channel, and then we recently acquired Chellomedia. And what brought us to those acquisitions were that they fit into what we consider to be the highest priorities of the company and the areas in which we operated, we hope, with some degree of confidence, if not excellence. And they were, in programming, upscale-oriented quality domestic networks, and that brought us to Sundance. And we thought we could add value to it and we believe we have, having grown it 30-odd million subs and really advanced, I think, its profile since acquisition. And what brought us to Chellomedia was our activities that were organic in advance of that in the development of Sundance Global around the globe and AMC Canada in Canada, along with IFC in Canada. So they were unique. They were, we think, right in our wheelhouse, if not, sweet spot. We think they were a sweet spot. And so our general point of view is informed, I think, and demonstrated by them, which is to say, we will keep our eyes open for things that we think we can do extremely well, hopefully better than others, that are very approximate to what we do today and that we can really add value to and see a great return on and in. And those things have been pretty selective and not a lot of them. And we don't anticipate, as we go forward, that there…

Yes. Yes, I don't think there's any different approach. We're taking a very disciplined view to it. As Josh said, we're comfortable with where our leverage has been, where it's going. We've obviously increased it where it made strategic sense in the examples that Josh mentioned. And I think that this team again is focused on the core business. We'll look opportunistically at nonorganic opportunities, but I don't think there's anything new in terms of our approach as it relates to leverage and deleveraging.

That's helpful. And then, I guess, my second question is on Sundance. Rectify, I think, was one of the most critically acclaimed shows on -- or was it Metacritic this year? And I was just wondering how was your investment strategy there paying off with respect to your discussions with distributors? What is -- what does the affiliate renewal pipeline look like again for the next 6 to 12 months? And how should we think about the opportunity for Sundance to maybe be more broadly distributed, I think, relative to its current 57 million reach today?

Sure. So we are particularly, by the way, pleased with Rectify. It's being applauded pretty widely as Metacritic evidences, and it's been performing well on Sundance. So it's nice to see that it's in its second season. And we do think it's consistent with and emblematic of the very type of thing that we want to do with Sundance, which is to be at the top of the heap in doing the very, very, very best, most critically acclaimed material on television. By the way, if you haven't seen Honourable Woman, I'll just take the opportunity for a 30-second commercial. Check it out. It performs, too, Bryan. I think that when we purchased Sundance, I think the subscriber count was 28 million. As you point out today, 5 years later, we're closer to 60 million. So there was a lot of work in that. And I think acceptance by the MVD community -- MVPD community of the value of Sundance and recognition that the brand, which, of course, has its own spectacular qualities, was being now more closely met with original programming and the promise of what that could mean when original programming comes to the name Sundance. So I think distributors are really recognizing it and appreciating it. They know what's going on. They're paying close attention. So probably the first thing we were looking to do, not surprisingly, was expand the footprint because it is a -- it is step 1 to economic return, and we've done it and continue to do it. We don't think we're done, the 28 million to 58 million. The second -- and I just -- I will get to advertising in a second, not in direct response to your question, but in terms of just economic return because it's part of the mix. So the big story on MVPD reception and program investment is radically expand the distribution so you can take advantage of, of course, that scale in terms of more subs paying you and also the advertising opportunity. So I'll add on to my answer. I hope it's not too long-winded, which is fairly recently after 4 years of operation and undertaking all of the efforts we had to do to make the contracts with our MVPDs allow for and embrace advertising, we put on a full load of advertising. And that playbook, if you will, is something obviously that we've experienced with AMC, WE tv and IFC. A little different with Sundance, but not too much. So we're now selling advertising on shows that are increasingly prestigious and hopefully, more widely viewed, and the Sundance viewership numbers are up dramatically. So a complete answer to your question is advertising is actually a part of it because the wider subscriber universe really does create the opportunity for monetization in a second way.

Your next question comes from Todd Juenger with Sanford Bernstein. Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division: I wanted to see if maybe you could provide some color that I think would be helpful to us as we assess the rate of investment going forward. I appreciate your comments in the prepared remarks about how you think about return on investment over time. Of course, we have to make assessments of the pace of how that will continue. And I'd like to think that maybe if we break that down a little bit, we'd love to hear your comments on how that breaks down. Because I think you could simply maybe say that there are 3 factors that sort of drive the rate of programming investment that show up in the P&L. One is the number of hours of original programming that you add over time. The second might be the percent of those hours that are owned versus licensed or acquired. And the third impact is the different amortization schedule for owned content versus acquired program in that. So all those have been growing, number of hours, percent of owned and the amortization impact. But as we think about how that progresses, even over a multi-year period, into next year and out, any color you can give on how each of those line items progresses and how sensitive the expense P&L is to those?

Hi, Todd, it's Sean. So I think you've got the majority of the factors, but just to -- for everybody's benefit, to review again. So certainly, the number of series on each of the channels has an impact. The number of hours, those that are owned versus those that are licensed, as you say, the timing of launch obviously matters, and the commensurate marketing dollars that we have to support those. So those are really the levers that are flowing through the income statement. Again, just for context, to give a bit more color. As you guys look back at our historical resorts, we've operated this business with a relatively stable margin historically while delivering very strong AOCF growth. As you look in any 90-day period, there's certainly volatility, and we've seen that this quarter, and I've gestured to it for the third. And -- but I think the point is, is that I think things are going well. I think we're operating according to our plan. And we're managing to a relatively stable margin in the future, and we'll reap the benefits of ownership such that we'll have strong AOCF growth and strong free cash flow. I don't know how to guide you guys relative to our posture any more than that. Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division: Fair enough. Just one quick follow-up on your comment, if you don't mind, Sean. When you talk about a relatively stable margin over time, obviously, that margin profile is different today than it was in the past. So would you be willing to say sort of what that stable margin is?

No. Of course, we're not going to give you a number with -- because things are -- things change, but at the same time, I'm talking in broad terms and trying to give you a sense that I think that the model that we use to invest in original owned content is a disciplined one relative to the ancillary revenue streams that have existed and continue to exist in very strong markets. So I think that I'm trying to leave you with a degree of confidence that we're very conscious of it without guiding to the absolute number.

Your next question comes from Anthony DiClemente with Nomura.

I have one for Sean, a similar type of line of questioning, and then one for Josh. Sean, you mentioned the third quarter, but as we look to the fourth quarter, can you kind of address the postponement of Better Call Saul from November into the first quarter of '15? And so if we look -- if we think about the number of original hours in the fourth quarter versus last year's fourth quarter, I mean, it sounds like you're more optimistic for growth in National Networks ad revenue and AOCF, sort of notwithstanding the postponement of Better Call Saul. So I'd just love to hear a little bit more color on the fourth quarter, if you can. And then one for Josh separately. You mentioned this film, Boyhood, in your press release and your prepared remarks. Can you just talk about your economics on that film? How big of a rights holder is IFC Films in the various aftermarket windows? And more broadly, is there -- would success here inform your future investment strategy just maybe on the thesis that there's an increasingly underserved portion of the movie-going audience that would be receptive to films like this one?

Hey, Anthony, it's Ed. Your first question, I'll address, looking at the fourth quarter. First of all, Better Call Saul, we moved that from fourth quarter to first quarter for creative reasons because when you're doing hopefully the quality shows that we try to do on these networks, we sort of give flexibility to the artists, and that seemed like it was in the best interest of the creative evolution of the show. So that was the reason for the move. So for fourth quarter, we'll be roughly flat on the number of original scripted hours. But we feel good about fourth quarter because we felt good about the volume in the upfront, and the Walking Dead is back, and we felt good about how we did in terms of CPMs in the upfront. So that's how we're feeling about it now.

Got it. All right, on the subject of Boyhood, it's -- the reception is great, and it's had a couple of good weeks at the box office for an independent film. It's going wider each week. It's been sold internationally reasonably well. I just would give you a couple of sort of parameters. Against the backdrop of AMC Networks, our, as we call it, IFC Films business, is not a big business. We mentioned Boyhood in the materials because it's in the "conversation," and it's doing well, but we shouldn't lead you to believe that it has a substantial effect on the aggregate AMC Networks performance. With that said, we've operated this film company for a decade, and we think it is strategic and beneficial economically for us. We -- our approach is mostly to distribute, as opposed to finance. We occasionally finance. The rights we own when we distribute are generally smaller than when you finance, but they don't need to be depending upon the arrangement we made. Specifically with Boyhood, we're essentially the owners of the film with the filmmaker, and so we will enjoy the economic benefits of it. And for what is a relatively small individual piece of business, it'll have very good performance. More broadly, it touches on something -- I think, you've touched on it about consuming appetites and where they go. And I'm going to now turn the conversation to something that's more speculative. And so I won't spend much time on it, but just to say that some of the material on the television screen that is commanding a lot of attention domestically and now increasingly internationally was not like it used to be. Meaning shows like Mad Men, Breaking Bad, Rectify are not shows that 10 years ago on television were commanding a lot of attention. And that's true out of our own channels, on the great shows being done by others. So we think the independent film world has some nexus to this because people working in, historically, in film are to some degree now interested in TV, and that will provide some benefit to us prospectively and opportunistically. But it's a sort of delicate piece of business with the creative people who are very attached to their work and wanted to be exhibited in a manner that they, frankly, often want to control. So we think it's a good thing for this company to do because of the area that we operated in, in television. We'll continue to do it. We're very pleased with Boyhood, but we're not going to pop the champagne bottle on the economic side for AMC Networks because of it.

Your next question comes from Ryan Fiftal from Morgan Stanley.

Two questions, if I may. First, just to follow up on the earlier question on the M&A side. So as you look at your portfolio and the landscape and opportunities that are out there, do you have any bias, or maybe preference is a better word, towards international versus domestic expansion at this point?

I think it's fair to say that, well, if you just look our past behavior, we spent the most significant amount of money we've ever spent on an international acquisition. That was $1 billion. Sundance Channel was less than half of that. We probably do have a bias toward international versus domestic. There may -- there could be anomalies that would cause us to focus on domestic if the circumstance was extraordinary and singular. Describing it, absent a singular circumstance, responding generally, I would say generally, we think the international market is more opportune, specifically in terms of what's likely to come forward and where growth prospects are that would create, as you called it first, a bias or a preference, but it wouldn't necessarily rule out something singular if it had the right attributes. I'm sorry to be vague, but that's sort of exactly the way we would think of it.

Okay. No, that is helpful. And then I have a question on the relative bargaining power between SVOD distributors and content owners and how that's evolving. I mean, there are a lot of puts and takes. Obviously, Netflix is growing. It could be -- it's starting to achieve some real market power. But there are other SVOD bidders out there for content, but dollars are moving back and forth in the allocation for originals. And there's more supply probably for original-scripted out there. So a lot of puts and takes. So I was just wondering how you see that evolving and netting out and how it impacts the value of your content in that window.

Right. So I think that the first thing that's probably worth noting is that it's a growing market, obviously. There are now a few big ones, Netflix, Amazon Prime, Hulu, Hulu Plus. And then there are smaller ones that have tended to be more niche-oriented in terms of content options. It doesn't mean they always will be. So it's, to state the obvious, rapidly evolving SVOD marketplace domestically, and it's moving internationally because I'm sure, as you know, those same companies are operating overseas. So against that backdrop of very significant growth, a few phenomenon. I think one is that I think it's the case generally agreed to that scripted dramas probably have among the highest value on an SVOD service in which people are paying, a, monthly bills, and b, consuming in a manner commonly referred to as binging. And so that material is high up in the food chain and very different than in a linear environment where it coexists with what we commonly call reality, which can yield a pretty good return. I think reality plays generally less well in SVOD services. I think the second thing is, as it's grown, there's increased competition. And so that if you're a seller to it, which we are, it's a nice thing. And the third is the degree to which those services are manufacturing their own, and that probably has a mildly -- if you looked at it in the macro, a moderating effect, probably truer over the long term than the immediate on appetite because as you grow, as we've seen with ourselves, we became happier to make our own, rather than so-called rent. So it's all in the mix. I think if we were to describe it today, because you -- and you mentioned all the pulls and pushes and ins and outs, I think -- we think we're in a nice position for the foreseeable future being a producer of the right spectrum of material for our base business and having a pretty good track record of consistency in that material and that the market will be rewarding for it. And so I hope that answers your question.

Your next question comes from Michael Morris with Guggenheim Securities.

Two questions. One, Josh. Your recent -- your more recent scripted originals on AMC have not achieved the same ratings levels that your big 3 programs have. And I don't know that that's a fair comparison, but I'm wondering if you just talk about why you think that is, whether it's the competitive environment, whether it's simply just popular acceptance of the programming, whether it has to do with time shifting. I'm curious, your thoughts on the ratings levels there. And then secondly, for Sean. I appreciate the color on the trends in the coming quarters. Can you help us a little bit with maybe an estimate of how much of the advertising historically comes from the scripted originals on the AMC Network and also whether we should also expect a lower marketing spend in conjunction with the fewer original episodes?

Sure. So I think a few things. One is, I do think that there are certainly more options for scripted originals on the TV dial and on demand than there were 8 years ago. So consumers do have more options, and that's a factor. I think it's probably worth pointing out that the -- that our experience with our scripted originals, Mad Men and Breaking Bad, is they began small and they accelerated in Seasons 2, 3, 4 and 5. So what's curious about all that, and I think it applies to, potentially, to our shows, Turn, Halt and Catch Fire, Rectify, et cetera, is that if they're good, they may well be the beneficiaries of between-season referral, social media recommendations among friends, frankly, from references to things like Metacritic, there's a lot of inside baseball being played by people who like this stuff, and by SVOD-sampling because it provides a wide platform for people to be introduced. And not everybody has the time to watch day 1 in Linear. I'll give you a -- I can give you a stupid anecdote, which I'm sure you've all experienced. I was on the subway this morning, ran into a woman I know, and she said, yes, I'm starting on episode -- Season 1 of, and she mentioned one of our old shows. So she's 5 or 6 years behind. So we do see that phenomenon occurring, but it really does occur. So I think that our creative efforts have been recognized with these shows that are being praised. I think they have really good creative quality that can be looked at in reviews or Metacritic. They have strongly appealing qualities, and they are different marketing animals. So the story won't be told for a bit of time, and it doesn't mean…

So Mike, on your second question. In terms of the marketing, I think as you think about the future, marketing is probably driven more by the number of premieres in a quarter as opposed to the number of episodes. So that's how I would think about it. And two, in terms of advertising, certainly, the number of scripted episodes impacts the results. But as we look forward, I mean, I'm not -- I'm certainly not going to guide you. And we don't necessarily sell the way you're asking the question. So if you don't mind, I'll leave it at that.

Your next question comes from the line of Vasily Karasyov with Sterne Agee. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Josh, I have a question on programming scheduling, and I'm swimming at the deep end of the pool here, but it seems that your regional strength will be concentrated on Sundays. So I'm wondering what is the magic of Sunday for you because it's almost like a pay-TV -- a premium pay-TV channel strategy. And then, would you, as you grow your originals lineup, would you be interested in expanding into other days of the week? Or do you think this is the right niche for you? And why? I'm just curious about your strategy there.

Sure, Vasily. It's Ed. So we've had success on Sunday nights since where the -- it's where we started with Mad Men and where we followed with Breaking Bad. And so we do think that we've developed some loyalty among audiences that AMC is at the top of the set of networks, that people who like, hopefully, high-quality drama becoming a habit of checking out. Now we are -- we did move Hell on Wheels to Saturday nights and we just premiered Season 4 actually last week, and it did very, very well. And so we think that's a good night for Hell on Wheels. Interestingly, we're following Hell on Wheels by resequencing Turn, and it seems to be opening up a whole -- a sampling by a whole new group of folks who hadn't seen it when it premiered on Sunday night. So hopefully, there's a good story they're making there. But generally, we like Sunday night because it's treated us well historically, but we are open to looking at new nights. And as we contemplate our 2015 schedule, it is something that we're considering on AMC. With our scripted originals on other networks, on Sundance and on WE, we have not -- we've actually steered clear of Sunday nights for competitive reasons, and we have chosen to premiere them on other nights.

Your final question comes from Ben Mogil with Stifel. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: So in terms of -- less has been asked on issues I care about. So I'm just more curious, in terms of the upfront, maybe you can give us a sense compared to last year. I think you sort of said CPMs were up, I believe, it was high single-digits. And I don't know if you talked about volume. Maybe you can sort of give us a sense of where volume and rate card was up on a year-over-year basis.

Well, the overall market was less robust than we have seen in recent upfronts. There's no question about that. We are very pleased with our own performance. We were able to achieve double-digit increases in volume, which I think situates us quite well among our peers. We also did see CPM increases. And the demand really continues to be driven by demand for our original content. And that continues to be the key for us. And anticipating your next question, no, we didn't sell it all. We held some back for scatter. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: So I mean, you're going into the year, and this is not bias, sort of with just a little bit less -- with less scatter exposure than prior years?

No. I think we're in the same range.

All right. Well, thank you, everyone, for joining us on today's call and for your interest in AMC Networks. Operator, you can conclude the call.

Thank you, ladies and gentlemen, for joining today's call. You may now disconnect.