Good day and thank you for standing by. Welcome to the AMC Networks First Quarter 2021 Earnings Call. At this time, all participant lines are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference maybe recorded. [Operator Instructions] I'd now like to hand the conference over to your host today, Mr. Nick Seibert, Head of Investor Relations.

Thank you. Good morning, and welcome to the AMC Networks first quarter 2021 earnings conference call. Joining us this morning are Josh Sapan, President and Chief Executive Officer; Ed Carroll, Chief Operating Officer; and Chris Spade, Chief Financial Officer. Today we will begin with prepared remarks, and then we will open the call for questions. If you do not have a copy of today's release, it is available on our Web site at amcnetworks.com. Before we begin, I would like to remind everyone that this call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Network's SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call. On today's call, we'll discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found at the end of the earnings press release issued today. With that, I would now like to turn the call over to Josh.

Good morning and thank you for joining us. Today, you'll hear prepared remarks from me, from our COO, Ed Carroll, and our CFO, Chris Spade, before we open up the call to questions. I'll spend a few minutes talking about the pivot we continue to make in our fundamental business. Ed will discuss several of our operational highlights, and Chris will review our financial performance, including discussion of our new operating segments, which we noted in the earnings press release we issued earlier this morning. With regard to our new operating segments, I'll briefly say that we've made this change in order to best reflect our ongoing business transformation. This includes taking a multiplatform distribution approach to maximizing the value with our compelling content, particularly as we retain more ownership rights to that content. This multiplatform approach today includes monetizing our content across our vibrant and growing streaming platforms, our linear and international channels, as well as through selective content licensing. And we think this new segmentation best represents our operational approach. Our earnings release noted revenue impacts for the first quarter related to content licensing primarily due to timing of Fear the Walking Dead, and one less episode The Walking Dead. Excluding this impact, total revenue grew low to mid-single digits for the first quarter largely driven by streaming revenue growth. Chris will discuss this in greater detail in her remarks. In the first quarter, overall, AMC Networks had solid performance, driven by continued momentum from our streaming services supported by our strong content. We continue to maintain a strong financial profile, with a solid balance sheet with $1 billion in cash and net leverage of 2.4 times. We have returned to shareholders almost $1.4 billion over the past several years. Our buyback program has retired almost 46% of…

Thanks, Josh. As Josh mentioned, we are continuing to see success with our targeted streaming strategy which is focused on specific areas of interest and programming genres as opposed to broader something for everyone approach that is becoming the norm. More than just acquiring subscribers, we are building communities around our unique services, an important distinction and one that we are finding potent as we acquire and retain customers. This targeted approach allows to us to apply performance marketing tactics targeting specific audiences based on their areas of interest and consumption. Also valuable to us has been the use of our linear networks to reach potential subscribers which remains one of the most powerful and efficient marketing channels available. Josh walked through individual services. Let me just offer a few operational and content highlights. AMC+, our newest and broadest offering, had a very successful quarter. AMC+ just launched on the Apple, Amazon, and Roku platforms late last year. So, we are in early days. But, we are finding a strong appetite for the high quality dramas from AMC, BBC America, and our other entertainment networks. Our ability to find and develop original content has differentiated our linear networks for years. We are applying the same skills to streaming with an audience-targeted focus that gives a dedicated lane to succeed in a competitive environment. In the first quarter, AMC+ featured six new episodes of The Walking Dead, which were constructed in a way that allowed them to be produced during the COVID lockdown to lessen the time gap between seasons 10 and 11. We also premiered the widely anticipated second season of A Discovery of Witches. Other series that saw a strong viewing on AMC+ in the quarter included Gangs of London, The Walking Dead World Beyond, and Riviera as well…

Thank you, Ed and Josh, and good morning everyone. Before I review and discuss our financial performance for Q1 2021. I will review new changes to the presentation of our operating segments. Beginning with the first quarter of 2021, career reporting under new operating segments structure, this new structure best reflects AMC Networks focused multi-platform distribution approach to content monetization and our business operations. It also provides the best alignment of revenue and expenses in relation to how we will monetize content investments across linear, streaming and selective licensing platforms. Today's discussion of our financial results will refer to our new operating segment structure, which includes our two operating segments, domestic operations, and international and other. Domestic operation includes what was formerly known as the national network segment, AMC Networks streaming services and our film distribution businesses. International and other includes AMC Networks' international businesses and the production services business formerly known as Levity and now named 25/7 Media. Prior to this new segmenting, the streaming services including AMC+ resided in the international and other segments. Additionally, we are now separately reporting corporate expenses as a distinct reporting component, including corporate management, accounting, tax, treasury, HR facilities, legal and technology. This will improve operating segments margin disclosures by excluding corporate expense allocations from the operating segments. Going forward in 2021, as we did for year-end and full-year 2020, we plan to provide supplemental revenue and operational performance information at the end of the year, which will include streaming subscribers and streaming revenue for year end and the full-year of 2021. Now let's turn to the first quarter performance for 2021. I would like to first summarize a few singular items reflected in our quarterly results. These include first in March 2021, we divested the live business of Levity from prize…

[Operator Instructions] Our first question comes from Kutgun Maral with RBC Capital Markets.

Good morning, and thanks for taking the questions. Two topics, if I could. First, on SVOD, I apologize if I missed it, but can you provide any more color on SVOD subscribers existing the first quarter or maybe trends into Q2. And now that it's been about six months or so since you've rolled out AMC+, are you seeing its growth outpace the growth from your other streaming services? I'm just trying to understand how much of nine million subscribers you expect for year-end might represent AMC+ since I assume that continued mix shift would be accretive to ARPU given it's a higher retail price point. And then I have a follow-up, please.

So, and this is Ed, on SVOD, I would say most directly to your question, we're seeing a strong and steady growth throughout, both on AMC+ and on the targeted SVODs. The other color I would give you is that, in terms of engagement, we're seeing number of streams at an all-time high, very healthy completion rate for our original series. And I would say, particularly the targeted SVODs are exceeding our initial expectations. The model is proving to be even more efficient as we scale. The services are representing not only a destination, but they're forming a community around the content. And that's helping us with both churn and SAC. And so as those communities build, we believe the pricing power in front of us only increases. So, I would sum up by saying we're proceeding along the model. We're feeling good about the results. And we feel we're gaining momentum, both on AMC+ and the targeted SVODs.

Got it, and thanks, Ed. And then maybe just to advertising. Digital is becoming a more meaningful contributor especially across AVOD and the vast channel space. Some of your peers include digital ad sales in their BTC or streaming revenue disclosure. So, I'm just trying to make sure we compare your growth appropriately with them, and in that vein is there any chance you could help us think about the magnitude of the digital advertising you're generating or maybe its growth outlook?

Yes, well, the digital advertising is the fastest growing segment of our advertising. It's included in the advertising numbers. Our strategy, just to back up, is to be on really all of the major AVOD platforms. So we feel, in doing that, we have visibility over a large part of the market by virtue on being all the platforms. And we program our own FAST channels with a library of content, so we're able to adjust relatively quickly based upon the number of impressions. So, that continues to grow for us. It's growing at the fastest rate. The impressions continue to grow at a steady pace, and it is included in the total ad sales number.

Got it, thank you.

Our next question comes from Tim Nollen with Macquarie.

Great, thanks. Couple of questions on streaming, please, obviously topic of great interest, firstly, is it possible to breakout the subscriber numbers between a direct-to-consumer subscriber, some of the times that's just for Shudder, Acorn, or whatever, versus the broadband apps, like AMC+, if you care to provide that kind of detail. And then secondly, I'm just curious, you mentioned, Ed, about the growth of your streaming services internationally. I'm not that familiar with how well known or popular your content is internationally. If you could just help us understand what is the growth profile for your international streaming services, i.e., is it even better than the U.S. growth potentially because there is demand, and it's not very well penetrated, or is it maybe a tougher hill to climb internationally? Thanks.

Right. So, Tim, starting with the first question on the DTC, I remind you that AMC+ is only offered through partners right now through DISH, through Comcast, through the Roku, Amazon, Apple, et cetera. So, at this point, we don't have a DTC in the market for AMC+ that does not mean that will always be the case. For the targeted SVODs, we do have a DTC in the marketplace, and they make up a very significant part of the total subscriber distribution. On international, we're just starting to expand internationally. Acorn and Sundance now have been available outside the U.S. for about a year. Shudder a bit longer, and mainly in the U.K., Canada, and Australia. So, that represents roughly 10% of the subscribers. And we do see a lot of upside as you would imagine the content that we're making for the targeted SVODs and certainly AMC's track record has broad appeal across the world. And another advantage we think we have is our strong relationships with the platform due to our linear nets across the world. We think that gives us a leg up strategically, and we'll be able to enjoy synergies with our MVPD platforms, similar to what we've done in the U.S.

Our next question comes from Michael Nathanson with MoffettNathanson.

Thanks. Good morning. I have a couple. This has been my recent set of questions, which is just the volatility in U.S. affiliate revenues, they bounce around. So, could somebody help me get like level set, how do we think of the right way to think long-term about just the affiliate feed number that you guys posted been bouncing pretty severely? So, Josh and Chris, help me think about the next couple of years on the right way to think about the inputs to the [indiscernible] number? Then I have another one.

Sure, Michael. It's Josh. No, I think we renewed -- I think we mentioned renewed eight affiliate agreements over the past two years. Now there is actually a ninth that occurred since the last quarter. The rates that we are getting rate increases on those linear affiliate agreements. And of course, we're working against a universe that is in decline by call it 6% to 7% a year in the U.S. So, the position we're in is strong, stable, and our services are attractive. In any given 90-day period, you get some different contractual things moving around. But I guess I'd remind you, I think it's important to note that we really do have a high value collection of a limited number of channels. That's very different than 10, 15 channels, broadcast networks that are carrying sports fees. And I think that MVPDs as we go forward are seeing that the price value relationships of the AMC Networks put us pretty closely to the first place in value for what they're putting on linear. What's occurring now is that we're selling them streaming services. They're retailing that. And so, they're getting margin on that. So, we find ourselves actually in a nicer new position of harmony with our MVPDs. So, I would say from a horizon point of view, Michael, I think this situation for us gets better and better, as MVPDs are price sensitive, number one; value sensitive, and we have the harmony opportunity of margin for them on the premium services with an attractive price for linear.

Josh, cash you want to maybe, and Ed wants to jump in. I remember when you guys bought those international channels, and there was a lot of hope at that time that you'd be able to make a really big business out of international. I wonder stepping back, how does AMC+ fit into the international roll out? And do you see that as potentially the next opportunity and maybe the channel business taking a backseat going forward? So I know as talked about the other SI products, but where's AMC fit into your overtop strategy? And what markets would you think are next for you guys to move into?

Sure, sure. So, a few things if I might, if I can expand the answer, we did several acquisitions over the past four years. The International channels 49.9% controlling interest in BBC America. We did the deal for our RLJE, which brought us Acorn and what's now called all black. The thought if you will and I'll get to this specific of your question about AMC plus internationally, was to be a global company, was to be a global content company that produced material that was an appeal around the world. And that was delivered in the most opportune manner. At the time that was linear, and it's now becoming streaming. So just to emphasize what Ed said, we are just beginning to deploy our streaming services overseas. The happy news there is that your partners, the distribution partners Michael that we have in Spain and Latin America and Eastern Europe are going to become if they're not already the retailers for the streaming services. And we've begun with the targeted services, as I mentioned, and we definitely see AMC plus as next. In terms of market opportunity, I don't want to get ahead of myself, but I would say that the shows on AMC the linear channel have proven worldwide appeal. Just for instance, The Walking Dead, Fear the Walking Dead, that a whole franchise are among the biggest shows frankly on the planet. When we begin to deploy our streaming services around the planet, we're going to have what we've already seen in streaming, which is market appetite. And then we're going to have an accelerator of interest in the content that's historically been on our linear channels that will come to our streaming channels. And we'll do it in harmony and in part on the infrastructure of what we've done with our linear channel partners. So I think and I would say, the most exciting time for this company is going to be coming in the next 6, 12, 18, 24 months and beyond.

Okay. Thanks, Josh.

Our next question comes from Thomas Yeh with Morgan Stanley.

Hi, thanks for taking my questions. Given the new segment reporting, which I think also reduces elimination accounting, I was hoping you could give us an update on the path of content licensing monetization, in particular with the world beyond landing on AMC plus Ed mentioned some strong engagement there. Can you comment on how you assess the returns relative to the tradeoffs? And do these early findings increase your appetite to push content more exclusively into your services? And then I have a follow up.

Sure. In general, our world as we described is changing as our streaming platforms grow. The nice news is that we have our hands on the dial. So as we produce new material that we own, it's up to us whether to keep it for our streaming platforms domestically and internationally, or well - or whether to sell it or license it. It's perhaps worth mentioning that one can license for a short period of time, one can license for a long period of time, if you choose to do it, one can license domestically or internationally or in subsets of the international market. I think it's the case that we will have a bias to keep material for ourselves in order to accelerate the growth of our streaming services. But it's not to say that we won't make a decision depending upon the development of our international streaming deployment, to create a license for a limited period of time in certain geographies, if we think that there's a smart return on that. So, we'll make an economic assessment that involves the strategic and momentum benefit of putting in our own services against selective licensing on third parties taking into account and judging how long we want to do it for and what geographies we might want to do it.

It makes sense. And then Josh, you talked about a less event driven path of growth acquisitions for the OTT services. And I think Ed talked about performance marketing tactics as well. Does that mean we should expect top of funnel growth is less tied to the timing of some of the high-profile original content releases? Or should we be thinking about brand versus performance marketing differently than general entertainment services? Thank you.

I think the answer is yes. I think what we are seeing and we've seen it in Sundance Now, which we've operated for years and we've seen it in Acorn, which we've operated now for years and proceeded before as we came through acquisition. It is that as against whole house services, people identify with and liked to have a steady deep stream of British content or suspense and horror or all black or immersive dramas and documentaries on Sundance Now. They are somewhat less sensitive to what's on this week, what's on this month, where is the show of the moment. So what we find is that for instance on Shudder, which is experiencing very nice growth, shows the hits on Shudder or Creepshow, a movie that we did called Nest, a movie that's up for a Peabody Award in entertainment called [Love Raleigh] [Ph]. And it's up against Euphoria and all this other stuff that's somewhat better known. And so, we have the nature of our subscribers is they come for a depth of content, a steady stream of content, and they are less absolutely sensitive to this week or this month where is the show that is in the headlines.

Okay. Thank you so much.

Our next question comes from Michael Morris with Guggenheim.

Thank you. Good morning, guys. I have two questions, one on advertising and one on streaming profitability. My first question is on the national linear addressable campaigns that that you referenced. And the question there is around what the ultimate opportunity is and sort of the incremental contribution of that approach. So as you look at the success that you had there on those two, how big can that be if this continues to work and how much sort of incremental value is there in that linear inventory? My second question on streaming profitability, Josh, you mentioned strong margin potential for the streaming businesses over time. Most of your peers site margin contraction as a result of their streaming services, whether it's content spend or marketing. So, can you put a little more context around what constitutes strong? Is it as strong as what you've been able to enjoy on the linear side historically? Or what's the frame of reference for the strength there? Thank you.

Great. So, Michael, this is Ed, on your advertising question. I think there is great potential for increased ramp-up. And this has certainly been the addressability conversations have certainly been a centerpiece of the upfront. We have fun conversations that we're having now. Just to put it in plain speak, what it allows us to do with the help of the consortium that includes Comcast, Charter and Cox, and Vizio, for example, is when we're serving one spot we're able to target that at a specific demographic work and we can do that down to the household or device level. So, another household might see another spot and another household might see another spot again. So, it is a way for us to increase our inventory in effect and enjoy higher pricing from each of these advertisers in the process. Now, it does take more work for reasons that are obvious. It does take active cooperation with our MVPD partners, which we see as a strength of ours, but the biggest part of the answer to your question is really the speed at which advertisers want to prioritize this and work with us to deploy this. And I think you will see this scale up in a significant manner in this upfront, based on the conversations we're now having.

Michael, on the subject of, I think, you're talking about margin and investment, if I'm not mistaken on streaming, and here's what I think what's true of our services and it's just a fundamental structural almost genetic difference. We are not looking for moon shots on these streaming services. As we mentioned, we reaffirmed our $9 million year end. We're looking to be between $20 million and $25 million in a few years. And we have the targeted services and AMC+. We've seen growth as Ed mentioned during the last period on both AMC+, and the targeted services. So, the playbook we're running is pretty different than home health services, who, frankly, God bless them have ambition for a quarter of a billion subscribers and more in global share. And they all operate in different systems, some are owned by the sell companies, some have shopping infrastructure, some have many other different characteristics. We have our characteristics, and what we need to do to achieve our objectives is to provide content that the fans, constituents, subscribers, members of our services like. That's frankly cost less. Ed will tell you that of 20 shows that we've had on the air recently, the vast number, it's something like 18 or so. We're under a million under seven figures. So that means we're in a different stratosphere, then what other people are doing as we service those very different subscriber basis. And there was an earlier question about performance marketing. We're of course engaged in deeply metric based performance marketing, it's the nature of the bps. So when you combine that which Acorn frankly, has been doing very well for a period of seven years with the inherently lowered necessity or a sort of monster hit on our services to end up with a different set of economics. And there's a very healthy margin opportunity in that.

And so, Josh, if I could. If we think about that business, and the streaming part of your business becoming the largest source of revenue over time, as we referenced. Is it your view that you will kind of go through that changed and this evolution with the consistent margin performance, or I don't mean quarter-to-quarter like, I understand that, but I'm just saying, from a big picture perspective, the profitability on the next generation business compared to the sort of legacy business?

I wouldn't want to promise a number as we go forward. I think it's, we're new or to it, as you know, and it's evolving with some speed. We are very mindful of costs. And I mentioned the nature of the services. So I think I'm going to ask Chris Spade to just comment for a moment, she may be able to elaborate a little bit.

Thanks, Josh. Thanks, Mike. Thanks for the question. It's actually a great question, given the landscape we're in and all the evolution of streaming. From where I sit, I would point back to the guidance where we were very laser focused on not just quarter-by-quarter, but what we're seeing for the full-year, given the strength of our pivot. So, relative to what we're projecting for the P&L. We are going to have growth on the top-line, which is going to be driven by stream growth. So from that standpoint, we said we're going to be up low single-digits. On the AOI growth, we're going to be down mid single-digits on a percentage basis. And it's not really because if we just look at this year, that's the best we could do. We're making conscious deliberate choice to reinvest in marketing, and increase or programming content spent. On the cash flow, we're seeing that. So what I can tell you is that our goal is not to just spend away. Our goal is to really look at all the expenses we have in total, and then optimize the performance of what's going to drive from a marketing tactic standpoint, from what type of content. Our research tells us, we need to continue to put up for the streaming services. And we're very happy with what we're seeing so far. So we are confident to reiterate our guidance. And I think that honestly, it's going to be the ongoing question not just for us, but for the industry. So thank you for the question.

Thank you. I Appreciate it.

[Operator Instructions] Our next question comes from Steven Cahill with Wells Fargo.

Thanks. So I think now all of your peers are giving quarterly streaming subscriber numbers. Just wondering with the new reporting segmentation if that's something that we might expect going forward and just kind of thinking about the net ads or the streaming sub - sorry, commentary, I think you were just said over $6 million at year end. It sounds like you're pretty confident being above $9 million by the end of this year. But the slate is pretty kind of weighted to the second-half of the year. So is that how we should kind of think about the case of the streaming subscriber growth? And then just the last one, it sounds like you're leaning into subscriber acquisition this year? So any just updates on profitability of the streaming business for the medium term? Thank you.

Yes, so we are -- I think what we've done is we thought that the most important thing for us to do was to provide a full-year look. I don't know exactly what our peers did, but we several months ago, identified where we'd be at the end of the year. I don't know if they've done that. So we thought that we would give you as much transparency. And Chris just reiterated the key financial metrics associated with that 9 million subscribers. And we thought that was frankly, the best way to keep you appraised of where our minds are on the performance of the business and what the key critical points of achievement are. So we think that that's frankly most sensible, as opposed to frankly opportunistically popping up with a number here and there, that that would be less helpful to you, and absolutely understanding where we were headed. So, I'm actually -- I'll turn it over to Chris, because I think she has a little bit of application on that subject.

Yes, thanks for the question. I do think when we look at our performance for the year you hit on a few key things, which is how the content plays out over the year. And as we know we're turning the corner from COVID. So our production strength is only going to improve, it's not going to weaken. But relative to as we look at the timing of our slate, Q1, Q2, Q3 Q4, we do all in have a strong slate for this year, and we're going to invest in marketing to really drive the growth. But we are laser focused on whole year and to get to at least the 9 million subs. We're definitely on track for that. We feel good about where we are. And you know, I think, as we looked at what we did in 2020, streaming was growing fairly significantly. So it had been an international and other. We moved it over to segment to be inclusive in the flywheel of AMC and AMC+ in terms of monetizing all different ways in terms of linear, streaming and selective licensing. And then as we look to the future, As Josh said, our streaming revenue is going to become even more significant. So our reporting will evolve. But in terms of where we are in 2021, I think it sets the table very nicely, which is why we made the segment changes.

I'm sure there are no further questions in the queue at this time.

Ladies the gentleman, this concludes today's conference call. Thank you for participating. You may now disconnect.