Ladies and gentlemen, thank you for standing by and welcome to the AMC Networks’ Full Year and Fourth Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the call over to your host, Nick Seibert. You may begin.

Thank you. Good morning and welcome to the AMC Networks’ full year and fourth quarter 2021 earnings conference call. Joining us this morning are Matt Blank, Interim Chief Executive Officer; Chris Spade, Chief Operating Officer and Chief Financial Officer; and Miquel Penella, President of Streaming Services. 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 website at amcnetworks.com. Before we begin, I would like to remind everyone that today’s 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 Networks’ SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call. Today, we will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found at the end of today’s earnings press release. With that, I would like to turn the call over to Matt. Matt?

Thank you, Nick and good morning everyone. 2021 was a strong and pivotal year for AMC Networks. We met or exceeded all of our guidance metrics and delivered a full year of outstanding results. So, let’s start with a few headlines. We had revenue of $3.1 billion, representing a 9% increase and the highest revenue year in our company’s history and a significant milestone, ending the year with more than 9 million paid subscribers across our portfolio of streaming services, delivering on the 2021 full year subscriber goal we promised and representing nearly 50% year-over-year growth, reinforcing our position as the global leader in targeted streaming. We expect that by the end of 2022 we will be halfway towards our previously disclosed target of reaching 20 million to 25 million paid subscribers across our streaming platforms by the end of 2025. We delivered full year growth in domestic ad sales and subscription revenue, including 100% growth in our streaming revenue, demonstrating the power of our model. And it was a big year for growth for our international division, led by robust advertising revenue across our global portfolio. We capped the year with a strong fourth quarter and several notable achievements. We completed a multiyear distribution agreement with Comcast, including expanded availability of our streaming services. And we entered the fast growing fan-driven anime space through our acquisition of a company called Sentai, a global distributor of anime content. The foundation of our success remains our portfolio of strong, distinct brands and consistently great content, supported by our broad library of owned and controlled IP, including franchises with established global fan bases, like The Walking Dead, the Anne Rice Catalog and the Agatha Christie library. As we have said before, our streaming strategy is just different from others. The growth and…

Thank you, Matt and good morning everyone. Our differentiated and targeted streaming strategy is clearly working. For 2021, we are pleased to have met or exceeded all the goals we previously outlined, including ending the year with more than 9 million aggregate paid streaming subscribers, representing subscriber growth of 49%. With this momentum, we are well-positioned to deliver our 2025 streaming goals. For the full year 2021, consolidated revenue increased 9% to $3.1 billion, the highest revenue year in the history of the company. Consolidated adjusted operating income was $816 million, representing a 6.5% increase year-over-year. The company generated record adjusted earnings per share of $9.64 and representing 24% growth. For the fourth quarter 2021, consolidated revenue increased 3% to $804 million, adjusted operating income was $103 million, and adjusted earnings per share, was $0.54. Full year and fourth quarter domestic operations revenues grew 8% to $2.6 billion and 4% to $685 million respectively. This growth was underpinned by strong growth in streaming subscriptions and robust full year advertising performance. Subscription revenue, which includes streaming and affiliate revenue, grew 15% for the full year and 11% for the fourth quarter. For the full year 2021, streaming revenue was $371 million, representing 100% growth as compared to the full year 2020. We exited 2021 with streaming run-rate revenue of $424 million based on the company’s share of the month of December’s gross paid subscription fees annualized. Affiliate revenue declines were in the low single-digits for the full year of 2021. For the fourth quarter, excluding the impact of a one-time payment associated with a distributor in the prior year quarter, affiliate revenue decreased in the low single-digits. Robust subscription revenue growth was partly offset by a decrease in content licensing revenue of 4% for both the full year and fourth quarter…

Thank you, Chris. And as Matt said at the start of the call, we’re building a successful streaming business with a unique playbook, which is structurally different than the one being followed by other major players in the space. This gives us some clear advantages today and as we continue to make progress towards our very reasonable and attainable subscriber goals. All of our streaming services saw significant and steady growth in the last year. Our unique strategy allows us to grow these businesses quickly and responsibly, building a more stable base of subscribers at a much lower comparative content spend. In that regard, I want to give a little more context and data around the advantages of our targeted approach to streaming. Every streaming business revolves around a few key elements. The cost to acquire subscribers, the lifetime value of those subscribers, the fixed costs associated with retaining them, mainly in the form of paying for content and how many of those subscribers or customers churn out of your service. Across our portfolio of targeted streaming services, excluding AMC+, which is still a relatively new service, our CPA or cost per customer acquisition is significantly less than the projected lifetime revenue associated with that customer. That is a good business. And once we are in our relationship with them, the annual revenue from each customer far exceeds what we spend on content to serve them. These are very favorable economics that we believe result in a stable and ultimately, very profitable business with customers who are very happy with their experience and the value of the services they subscribe to. If you look at the top 20 most popular shows in December across our four most established and targeted streaming services, Acorn TV, Shudder, Sundance Now and ALLBLK, 19…

[Operator Instructions] Our first question comes from Michael Morris with Guggenheim.

Thanks guys. Good morning. I want to ask you first a little more detail on the Sentai acquisition. Love to hear like what kind of contribution this makes in the near-term, but maybe more importantly, can you talk about the timing or path to taking some of your IP and combining it with the opportunities that this studio and this format present for you, what – how quickly can you kind of get that combined performance? And then also maybe just a pretty unique one. But when you talked about the international rollout, I was kind of surprised to hear India at the top of the list, given what a challenging market that’s been for some others. So, I am curious what you are seeing there that makes it kind of top of your list of additional markets from here? Thanks.

Thanks, Mike. Sentai was interesting. I – literally in my first week on the job back in September, I was presented with this opportunity and the folks here were well into their discussions and putting that transactions together. And about two weeks later, a couple of weeks later, there was a Wall Street Journal story, I think, about Barnes & Noble’s earnings and surprises in their store traffic. And the article pointed out that it was driven by two things, graphic novels and Sentai books. And I said, “Wow, this is a category I don’t know much about.” Full disclosure, I have never been a fan, but there is a tremendous following for it. And I view that acquisition as sort of a microcosm of our targeted strategy. There are audiences out there that we can reach. We can reach efficiently. They have a streaming service in place called HIDIVE, I think we can enhance tremendously in terms of the marketing of that service. And we own a lot of that content. And we think it will be valuable content and more valuable content in the future. In terms of what we can add to it in terms of our IP, I think that’s probably down the road a little bit, but we are ramping up there very quickly, and we intend to make that an important part of our offerings. And again, it’s exactly on message for us in terms of how we are trying to reach the super fan audiences. Reach them efficiently, low churn rates, great subscriber, long-term value and programming costs that we can control and will enhance all of our offerings going forward. So, that’s a good one for us. In terms of India, I will let Chris elaborate on that a little bit, but you are right, it’s coming up soon.

Good morning Mike. Thanks for the questions. Relative to our international rollout, we are excited to expand our international footprint. And as you may know, a lot of our distribution expansion is mainly with our partners, with Amazon and Apple and others. And from the standpoint of our direct-to-consumer offering, we will have a direct-to-consumer offering also. But from the standpoint of our rollout plan, it’s largely in partnership with bigger distributors. And of course, our products will differ in terms of our offerings country-by-country. So, with India, we will take a close look at what’s there. On a broader scale for our international expansion, as you also know, we have international businesses largely driven by the linear side of the businesses. But because we have boots on the ground, so to speak, we have a lot of sort of organic ability there locally in a lot of the regions to not just roll out from corporate, we are going to roll out our international expansion, but we can perfectly triangulate what we are trying to do on a global level and then use these local regions to our benefit with dubbing, local content, partnership relationships. So, we feel very good about our international expansion opportunities.

Great. Thank you.

Our next question comes from Robert Fishman with MoffettNathanson.

Good morning. Thank you. Following up on your prepared streaming remarks, can you expand upon the balance of marketing and promotional investment that’s needed to drive AMC+ subscriber growth. We just saw you pay for the most expensive ad spot during the Super Bowl. So just curious, was this a special one-off compared to the more tailored subscriber acquisition approach that you discussed?

Let me start on that – I am sorry, let me just start on that and say that I think one of the things you are going to see in addition to the aggressive pursuit of subscribers for our streaming services is as we begin the year with our best content in history, you are going to see us doing a lot of marketing to support that content and support the brands that we offer as a backdrop to all of the directed specialized marketing we do in the streaming world. So, the Super Bowl spot was one part of it. I think that with the type of content we have this year, that was an important opportunity to kind of take advantage of that content and get our message out more broadly to consumers. I will let Miquel talk a little bit more on your other point.

Yes. Thank you, Matt. And specifically for the Super Bowl ad, we felt it was important for AMC+ as an extension of our linear business, to let consumers know, to let audiences know that the final episodes, the final seasons of franchises like The Walking Dead, Better Call Saul, Killing Eve are now going to be premiered on AMC+. But that is not typically what we do to acquire customers. What we do to acquire customers follows a very disciplined approach that includes creating audience profiles and really targeting our marketing campaigns based on our understanding of the consumers lifetime value and with a very specific target for the cost per acquired customer. And that’s something that we do systematically in a disciplined manner, and we manage it on a daily basis.

It’s great that you saw the commercial. It’s all good man, right?

Thank you. Yes. No, it was a fun one. So, just bigger picture, I am just wondering how has your expected ROI changed for new programming that you have discussed coming with your streaming and more limited third-party licensing compared to what greenlighting a new series you still look like before the streaming pivot?

Sure. It’s a great question. I mean relative to our return on investment, as Miquel highlighted, we are focused on the streaming side of our lifetime value and our ARPU and what that can generate. But also when you think about it in our content investment, we still have the full flywheel of the ecosystem with linear and streaming. So, we are able to invest in our content in a way that we can fully monetize it across various different distribution areas and licensing revenue for us because of our size, it’s not billions and billions of dollars that we pull away from. So, with the way our licensing revenue will decline over time strategically, we feel that we have a balance that we will have some come in to fuel it. But over the long-term, streaming revenue will meaningfully grow to offset it. And we just feel that the exclusivity of these original content series is paramount and more important than licensing it to third-parties.

I also think that this is a moment in time when we have really a pretty exceptional lineup, probably the best lineup in our history in 2022. And we just delivered terrific performance in 2021 when we didn’t have that. So, if you look at kind of every piece of our business, from commercial revenue to the things we do with our traditional platform affiliates to our ability to drive streaming subscribers. This is an important time for us, an important time to take advantage of those content investments, and we plan to do that this year.

Right. And I think the key word in your question, or a set of words is return on investment in the sense that we are playing for the long-term, we want to have quality subscribers. We want to make sure that we are looking and measuring our content, marketing and tech investments in a way that really drives future value, which is the lifetime value of the streaming subscribers, while also optimizing linear business, add revenue from the standpoint of the strong performance we saw in ‘21. We will continue to have strength in 2022. And again, our content slate is key to driving future growth for 2022 and beyond and monetizing across all the platforms.

Thank you everyone.

Thank you.

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

Thanks. Maybe first, I was just wondering if you could talk about the trend of content spend. You have got the three big series this year. And then I am sure you are working hard to fill some of that content in and the free cash flow step down on an organic basis year-on-year is somewhat sizable. So, just wondering how we should think about cash content spend trending as you go through this big growth cycle? And what that kind of means for free cash flow in the next couple of years? And then on advertising, it seems like maybe on a year-on-year basis, you have just – you have got a huge year for the content slate this year. So, I was a little surprised that you are guiding to stable and not up. I just think you have a lot more shows hitting. So, maybe just help me unpack that a little bit. And any thoughts as you head into the upfront season, the spring? Thank you.

Sure. Thanks, Steven. Relative to the trend of the content spend, we have been waiting for 2022 patiently. So, we do have a strong volume of content offerings across all of our brands and services. So, we like the level of volume we have in 2022. We can offer new original content every, call it, three weeks to five weeks. And we feel that, that’s an important cadence to keep the streaming subscriber engaged and constantly being given new things to enjoy. So, relative to the trend there, I don’t really see on a full cash flow basis that will continue to rapidly increase content investment spend. Relative to free cash flow and the trends there, I think that goes hand-in-hand with what I just said, because we do have three series finales in 2022, more mature programming, higher cost per episode. That also affects our free cash flow in 2022 on a timing basis. So, from the standpoint going forward, I would expect that we would turn the corner and we would start to ramp back up net free cash flow over the long-term. And that also goes hand-in-hand with the margin outlook that we gave, where the next year, we feel it’s going to be an investment year from what we see now. But as that continues and streaming continues to meaningfully grow, we should be able to get to a mid to high-20% margin for the long-term. On the advertising front, the stable outlook is what we see today. We do have strong performance in terms of our series finales. Even just with the Super Bowl commercial, for example, that’s streaming focused, obviously, not advertising at this point, but we are seeing more traffic, more buzz there. So as we continue to focus on more awareness for all of our shows across all the platforms, I think that will have a halo effect on our viewership of linear, but it’s still early days. It’s still early days for the upcoming upfront. But we feel very strongly that we have innovation and leadership in our advertising talented team. And we expect that to continue, but we are just putting forth what we see on the horizon for us today with the macro viewership trends that are out there.

I think we should also just remember that pricing was extremely strong, coming out of the upfront last year for the past year. And that was through a year, again, that is not nearly as strong as ‘22 is in terms of the content that we are going to be offering across the board. So, there is a lot of reason to be excited and hopeful on that front.

Great. Thank you.

[Operator Instructions] And I am not showing any further questions at this time. I would like to turn the call back over to our host for any closing remarks.

Thank you for your interest in AMC Networks. You can now disconnect. Thanks.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day.