Good morning, and welcome to the AMC Networks First Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. Thank you. I would now like to turn the call over to Seth Zaslow, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the AMC Networks first quarter 2017 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 first quarter 2017 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on their 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. For further details, 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 to Josh.

Thank you, Seth, and good morning, everybody. We appreciate you joining us today. 2017 is off to a strong start. During the first quarter, we continued to execute on our strategic priorities and are well-positioned to take full advantage of the many opportunities for the business that lie ahead. Our financial results for the quarter were very much in line with our expectations, and we remain on track to deliver our full year targets. In the first quarter, we generated healthy levels of free cash flow, and we continue to use our strong balance sheet to reinvest in both our traditional and developing businesses. We also continued to repurchase our stock at what we believe are attractive levels, a demonstration of our long-term confidence in the business. In terms of content, we're off to a strong start this year across our portfolio of National Networks. In just the last few weeks, AMC capped a seventh season of The Walking Dead, which holds its place firmly as the number one show on TV. Our IFC channel launched the buzz-worthy new series, Brockmire, to outstanding critical reviews, BBC America's debut of the latest season of Doctor Who made it a top-five show on cable in key demos and WE tv's new series, Mama June, had record viewership, making it the biggest new reality series on all of cable so far in 2017. These are just a few examples of how our investments are translating into great content that attracts passionate fans, captures broad critical attention and breaks through in an increasingly crowded environment. Operationally, through AMC Studios, we continue to own and control an increasing amount of our content with a growing slate of successful shows that are across our domestic networks and many of which also populate our AMC and SundanceTV…

Thanks and good morning. As Josh highlighted, our results in the first quarter were in line with our expectations, and we're on track to meet our targets for the full year. I'll touch on the outlook for the rest of the year in more detail later on in my remarks. For the first quarter, total company revenue grew 2%, and AOI declined 6%. Adjusted EPS was $2.10, and free cash flow was $113 million. Moving to the performance of our operating segments. At the National Networks, revenues increased 3% to $615 million. AOI was $268 million, a decrease of 5% as compared to the prior-year period. Distribution revenues at the National Networks increased 10% to a total of $368 million. Affiliate fee growth in the quarter was in the mid-single digits. As expected, we saw a modest acceleration in growth on a sequential basis in the first quarter. Non-affiliate revenue continued to be a significant contributor to top-line growth with year-over-year growth in the low 20% range. The increase was due principally to the licensing of our scripted original programs in various ancillary windows, most notably, the SVOD availability of Fear the Walking Dead and Into the Badlands at AMC as well as Rectify and Hap and Leonard at SundanceTV. Moving to advertising, for the first quarter advertising revenues decreased 6% to a total of $248 million. As expected, results in the quarter were impacted by the timing of our originals, most notably Better Call Saul at AMC. We also saw increased pricing, which helped to offset lower delivery. Moving to expenses, total expenses increased 9% or $30 million versus the prior-year period. Technical and operating expenses increased 13% to $234 million, the variance principally related to our continued investment in original programming across all of our networks. Programming write-offs…

Our first question comes from John Janedis with Jefferies.

Hi. Thanks, guys. One question. Historically, you've had success with growing your linear audience by making shows' prior season available through SVOD on a delayed basis, particularly on Netflix with shows like Walking Dead and Breaking Bad and Mad Men, et cetera. So now that some of your new shows are on Hulu, as these shows are coming back for season two, do you believe that Hulu will have a similar effect on growing the addressable audience? Any differences you'd highlight in the reach you receive would be helpful, I think, and I ask in the context obviously of the broader concerns on ratings.

John, it's Josh. I think that the impact of SVOD exhibition a year later on new seasons for us is – actually it's a moving phenomenon, and it's undergoing evolution. So, I don't think anyone knows the absolute science with certainty of what sort of sampling and exposure on SVOD does and whether a platform of 12 million versus a platform of 40 million is actually helpful or occasionally hurtful. One can theorize, which I can do at some length, and say that we think we see a few trends, which are that SVOD does provide an opportunity for sampling. And if the quality of the material is good, it can create talk, subsequent buzz and referral, meaning a friend will say, oh, watch this show, and then if you're interested enough, you'll like it and you'll go watch the new season. And we've certainly seen that happen in certain instances. There's a concern that could be expressed that if there's not enough urgency in the show, people can wait a year and then pick it up later, and as sort of binging becomes a phenomenon, that's something to keep one's eye on. We do think that for us – so, that's my best answer to your question. We think that our approach is a wise approach. Obviously inherent in it are economics. We receive revenue for the syndication of our shows, and we think Hulu is a very good platform to be allied with and that frankly its footprint is probably more desirable than undesirable for us. So, that's my best answer to your question. I'm sorry it's not more definitive. I don't know if the science actually lands absolutely in one place or another.

Okay. Thanks for that. Separately maybe, there's obviously also been some concern in the market on distribution, and I wanted to ask, as penetration on YouTube and DTV NOW, et cetera, increases, how do you think about the trajectory of pay-TV subs over the long term given the recent headlines around the sub losses?

Sure. Again, I think the history would probably say very broadly that over the past four or five years, there's been somewhere of about 5% or so total decline in what were, if you can call them, conventional pay-TV subs, non-virtual, in cable and satellite, and then telcos, whichever category you want to put them in. And to-date, I think if you count up the virtual MVPDs which we mentioned, DIRECTV NOW, Sling, Sony, Google, YouTube, and the new ones that are emerging, I think you get a number between 2 million and 2.5 million. So I don't think we see a final pattern in terms of where it all nets out. I think the data today would say, round numbers, you're down 5% on a universe, and then you're offsetting that about 2.5%, where about half of it's made up through virtual MVPDs. And so that is mitigating a decline that might be occurring in the conventional universe. I think it's early days, and there's a lot to be revealed about price on virtual MVPDs, call it $35 or $40 on average and how sustainable those subscriber numbers are. They're obviously today not bundled with broadband, which is the case in cable TV. And just an anecdote to your opening question, you saw the cable numbers reported this quarter, they were relatively stronger than satellite numbers. So I think those are the trends. I think one of the things to keep in mind for us is – I mentioned in our prepared remarks that the four channels, not AMC, our other four channels have all grown subscribers over the past four years, and so there's also the question of how these services are positioned in any package that they're in, which receives probably inadequate attention. And so we have been successful in getting our other services better positioned and positioned with greater levels of penetration where they're carried, and that's had a beneficial effect on our entire exposure and subscriber count.

Thank you.

Our next question comes from Anthony DiClemente from Nomura Instinet.

Thank you for taking my questions. Just one clarification for Sean and then one for Josh. Sean, on the 2Q outlook for National Networks advertising revenue, you said you expected a sequential improvement relative to the quarter you just reported. Is that an improvement in the year-over-year? Or are you signaling that you actually expect year-over-year growth in the second quarter in terms of ad dollars? I would just assume that given the increase in new programming hours that you meant growth, but just wanted to try to clarify. And then Josh, in the quarter you struck an agreement, AMC did, to develop and coproduce original programming with exclusive content for Charter's Spectrum platform. I thought that was interesting. So with Charter having the exclusive initial window in the U.S. to that content, does that tell us anything about where your thought process is headed in terms of content and distribution? Will we start to see a little bit more of this where the distributors are trying to really decommoditize their offerings via original exclusive content from the likes of AMC, for example? Thanks.

So we did, against the backdrop of our good Charter relationship, which happy I think overall affiliate relationship, we did enter into an agreement with Charter to coproduce content. I guess I could just say one thing, which is I think informing at least from our point of view, you heard us talk about and you've heard us talk about AMC Studios. So we have been putting a fair amount of effort and have succeeded in growing the revenue and the footprint and the ownership of shows that come out of AMC Studios. So we have an initiative to be in the content ownership and exploitation business on various and multiple platforms domestically and internationally and have been in aggressive pursuit of that and have driven our top line as a consequence of that pursuit. So I just wanted to give you that background. So that's a broad initiative of ours. So enter Charter and our conversations with them in which they expressed an interest in just what you said, which is doing something with exclusive content on a first window basis. We see that as an expansion of our AMC Studios operation and a new outlet and a new partner to expand our operations with and for. And that is we think good business for us; A, because it's studio business and B, because it's Charter and they are a cherished client, affiliate, and partner. As to the question of exclusivity specifically and the early window they'll get on this new content, I don't know where that whole subject will end up. I'd point you to just as a point of interest outside of the U.S., platforms in the UK and in Europe have increasingly been platforms, premiering original content that is proprietary in an effort to distinguish themselves from their competition. And I think they'd probably say that they've succeeded at least by a degree with drama and sports. And so I think Charter probably is thinking the same thing, and I wouldn't comment on exactly how well it will go against expectations, but it's certainly something that we'd like to be in for all those multiple reasons and we'll monitor it, and we hope that our studio will expand in multiple ways, not just with MVPDs.

Thanks.

Anthony, this is Sean. So to your first question, so just to clarify again, my comment was sequential improvement Q1 to Q2. Obviously, we sit here today in May. As I look at the quarter, we have episodes that are relatively flat year over year. Obviously, we have some big shows that are premiering in June. So the guidance for the quarter is really just sequentially improvement off of the first quarter.

Okay.

Our next question comes from Michael Morris with Guggenheim.

Thank you. Good morning, guys. Two topics if I could. First, just to talk a little more about the subscriber trends, pay-TV subscriber trends, they seemed weaker in the first quarter I think based on the publicly reported numbers. And I'm curious your thoughts on what you think is driving that. Do you really feel like it's weaker and whether that sort of impacts your thoughts on your strategy going forward? And then my second question is, there was some press speculation around potentially creating an ad-free AMC-branded product that could be purchased by consumers through the pay-TV providers. Any thoughts you have on how that might fit in strategically as another way to keep your product in front of consumers? Thanks.

Sure. So, Mike, just on the ad-free rumor, we do have nothing to announce, so there is no information and there is nothing hard related to that. The only thing I would say, if you don't mind a general comment, is I think the speculation is indicative of – I do treat it positively the desirability of AMC TV shows, AMC Networks' TV shows. And the reason I think that people are paying attention to that subject is while there have been some pressures on linear consumption ratings and advertising and of course we're working through all that, there's also extraordinary demand and desirability for our TV shows. And you see it reflected in multiple ways. It's just something that catches my attention while The Walking Dead does a 6.9 million demo number within some period after it premieres some 20 million Americans, irrespective of what demo they are, watch The Walking Dead. That's one big number. That's a big, big number if you take the sort of total population opportunity as a subset of total U.S. population of 350 million, let's call it 200 million, one in 10 Americans is watching The Walking Dead and not too long after it premieres. That's a big deal. I say that because the notion of ad-free has intrigue and suggests that people want this content. To your first question, if I may, on the subs. The sub counts were what they were. You probably have them with more clarity than I do. It doesn't influence our approach. It really affirms our approach. As I mentioned just when I was yammering a couple minutes ago, we have diversified our activities to increase our TV production and ownership and exploitation around the world. When Sean gave you the financials, it's a significantly growing part of our top line, and so we think that being a studio and TV producer will make us important for this ecosystem domestically, both satellite, cable, telco and emerging MVPDs, and you see that reflected in our affiliate number. And it will give us an opportunity to sell those shows in multiple platforms and ways, both sequentially as we're doing in the U.S. and then to our own channels and elsewhere. So the numbers don't influence our approach. The numbers are what they are. We think that our diversification with a focus on key content that people really will chase and go after is ultimately the way for us to grow and grow sustainably.

Great. Thanks, Josh.

Our next question comes from Ben Swinburne from Morgan Stanley. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you. Good morning. Two questions. Josh, you always give a very passionate defense of the value of AMC's Networks to its distributors in talking about the content relative to the affiliate fees. Is there an argument to be made that Hulu is getting the best deal possible now? As they highlighted yesterday at their upfront, they have The Walking Dead, they have a lot of your originals, but they're not paying to carry the network. So just wondering if Hulu's launch changes how you view that platform which went from a tremendous driver of licensing fees and awareness of their shows to a business that may be getting more than they should be getting relative to their position in the marketplace? And then for you or Ed, I'm just curious, the ratings are what the ratings are when we look at them across TV on C3. Is there any way you can help us think about the incremental leakage out of the three-day window? In other words, if you look at your shows, the C3 to C7 or C30, whatever you want to look at, if you look at that year-on-year, how is that trending? Is that a meaningful move still or have things stabilized? Thanks.

So Ben, just on your first question, it is worth glancing at – the available data is the third-party data published by various resources, Kagan and others, because it is at least is – it's relatively consistent. They publish what they think the rates are, whether they're absolutely accurate or not. And so AMC Networks for the combined channels rate is half of, often 25% of, 20% of what some other groups' channel offerings are. The reason I respond with passion is what we hear from our distributors, actually directly, is they say, Jesus, you have the most valuable stuff I'm carrying. They don't even say it in the context of a rate comparison. And then our rate is 50% or 20% of what the others are offering. I don't mean to knock anybody. So I end up thinking, Jesus, I work here, and they're saying it's better (37:14) and it's half the cost or 25% of the cost. That's really good value. And so we need to climb into a position where our content investment, now $1 billion, of performance on the screen for the top 10 shows on TV, and we sort of break records with this stuff, we should be rewarded for it. So it's end up a little passionate about it. As to Hulu, again, new entities moving into different positions, so it's a piece of curiosity. We enjoy a nice relationship with Hulu as our SVOD partner. By the way, they don't have The Walking Dead. They have Fear the Walking Dead. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Yeah. (37:52).

It's just worth noting. And by the way, we didn't reach a deal with Hulu. Deals have a few key components. They have term, they have positioning and they have rate. So we did not come to terms with Hulu, as of yesterday. But I think that my own point of view, hopefully not too enthusiastic, is that everybody has to compete. Everyone has to get subscribers, if you're an MVPD or virtual MVPD. Everyone will have a price. Theirs will be $35, $40. And that you want to have the best stuff, and you want to have the best stuff as subscribers connect and disconnect, and as you compete. And so we think, no, I think no, they don't have the good stuff cheap at all. I think they have wonderful back library of a select number of our shows, and they don't have the new shows and the current shows, and the shows that will premiere. So that's my point of view. I think it's not a complete portfolio. YouTube, Google does. They made a different decision in terms of rate, positioning and term, and so we enjoy a great relationship with Hulu, we think extraordinarily highly with them. We marvel and admire their growth, and we have great respect for their management team, so the next days will come.

Ben, this is Ed. On your other question about viewing patterns. We do attempt to design our shows for maximum urgency and make it so people are afraid that they will encounter spoilers. And the fact that we have four of the top 10 dramas right now in the marketplace, probably suggest some success there. But certainly the viewing patterns do shift, and to your question, yes. We do see significant growth in so-called catch-up viewing, our online viewing that includes mobile and desktop and on demand. That's a significant area of revenue growth for our ad sales group. I would just add just generally about the environment and the conversations around Peak TV, and the availability of dramas. Josh mentioned in his remarks that the network alone now accounts for more than a third of the demo impressions against drama, in all of ad supported cable. So when you think about all the increased dramas available on Peak TV, so much of that is not made available in an environment where advertisers, where marketers can participate in that. So as we go into this upfront, and as we continue to be in the scatter market, we like our position as providing so many of the passionate and engaged viewers. It sort of gives us momentum into the upfront. Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC: Thank you, both.

Our next question comes from Bryan Kraft with Deutsche Bank.

Hi. Good morning. I was wondering if you could talk about what you're seeing in the ad market right now as far as pricing and inventory sellout. And also if you could comment maybe on the pipeline for new shows over the next 12 months as you aim to expand production? Thank you.

So, the scatter market continues to be steady for us, Bryan. Scatter pricing continues to be strong. There's some moderation in certain categories regarding demand. We are now as you would imagine in pre-upfront conversations with all the ad agencies, our content is sought after, and not just on AMC. We're actually with Planet Earth on BBC, and Mama June on WE and Brockmire on IFC. We're in the position of having hit high watermarks for all those networks. So, that's how we're feeling about it. I mean, in one word I would say, we would categorize scatter as steady, and as far as the upfront, those conversations now are just beginning.

And you think the moderation is more a function of posturing ahead of the upfront? Some of the other companies have alluded to that.

That would not be unusual.

Okay. Thank you.

Our next question comes from Tim Nollen from Macquarie. Tim Nollen - Macquarie Capital (USA), Inc.: Hi, thanks. I wanted to ask about the incremental viewership that you've talked about here in terms of a lot of your programs get much higher viewership figures after the same day, or day three or day seven. And my question is, how do you monetize that if most of your upfront deals I assume are still going to be done on C3 or perhaps C7. It seems like there's still a lot of money perhaps out there to be chased, and I'm just wondering how you're doing that? Thanks.

Well, by and large we're aggregating the impressions. So in those upfront deals and most of those scatter deals, if the viewer is watching within three days either on demand or on some of our online platforms that would be included in the impressions generated by that show. Then when you get to day four, we have discrete sales, we generate discrete impressions and we monetize those accordingly. Tim Nollen - Macquarie Capital (USA), Inc.: Maybe another way to ask would be do you think there's more upside to be gained from some (43:29) viewership beyond day three. Up to day 35 or whatever? Is there a lot more that you could gather on your advertising if the system were set up differently? Or are you conversely able to capture that viewership now?

Well, it's an interesting question, and there's probably more than one answer. As I alluded to before, we attempt to design our shows to create urgency to capture as many eyeballs as we can as quickly as we can. However, as viewing patterns are shifting, I do think that we will be capturing a higher percentage in meaningful revenue over the longer tail, between days four and day seven. And eventually, it's an industry question, but I think everyone in this room would probably think that you will get to a longer period of time in which to be rewarded for those eyeballs because those viewers are watching. They're not coming to that program casually. And they're certainly – they're seeking it out, and they're engaged by it. Tim Nollen - Macquarie Capital (USA), Inc.: Got it. Thanks.

Operator, we'd like to take one last question, please.

Okay. Our final question will come from Michael Nathanson with MoffettNathanson.

Thanks. I have a question for Josh, and it's a philosophical one. Given the emphasis that you and Sean have talked a lot about moving to be more of a studio and clearly doing it with your investments, I wonder if you rethought at all the international strategy? Because when you talk to TV executives, they always talk about how strong international is for syndicators. So I wonder, how do you balance the need to basically maybe feed your own networks abroad versus the ability to maybe sell these shows at much higher rates to SVOD and endemic companies? So how do you balance those two? And is owning Chello a bit of a net drag on possibly the monetization of those shows?

Great, Michael. So we think that's sort of a good problem to have because we are moving increasingly toward being a studio, but we're not only a studio. So the ownership of channels, which by the way we continue to launch and develop and convert and improve, those both that we purchase from Liberty and those that now we're starting ourselves all over, including Europe and Africa, is good business. And we actually think it's good studio business because obviously we get to make the decisions ourselves about where to put the show. So when AMC Studio makes a show, we're not under obligation to put it on the AMC or Sundance channel overseas. It's our decision, and we deliberate that carefully. We deliberate it economically, and we look where we think we can maximize value. Can we maximize value by injecting strength into a channel that's widely distributed in 150 countries? Or can we make more money by putting it somewhere else? Or can we window it and put it on our channels first, and then syndicate it sequentially to outlets afterwards? The nice news in it, Michael, from our point of view is the decision is ours, and it's ours in terms of influencing the content we make, evaluating the content that we've made and being able to move with degrees of flexibility to create maximum value. So you're right that it's an issue. I think it's more a good issue than a challenging issue because we get the benefits of having stability in our top line recurring revenue and being able to course correct as we go forward.

Okay. Thank you, Josh.

Sure thing.

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