Good day and thank you for standing by. Welcome to the AMC Networks Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Nick Seibert, Vice President, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the AMC Networks third quarter 2022 earnings conference call. Joining us this morning are Christina Spade, Chief Executive Officer; Patrick O’Connell, Chief Financial Officer; and Kim Kelleher, Chief Commercial Officer. Today’s press release is available on our website at amcnetworks.com. We will begin with prepared remarks, and then we’ll open the call for questions. 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 press release. With that, I’d like to turn the call over to Chris.

Good morning, everyone and thank you for joining us. As I begin my new role as CEO of AMC Networks, I am proud to lead the company at one of the most exciting moments in our history on many fronts. Today, I will discuss our third quarter 2022 operating performance and our goals and strategies for future value creation based on what we are seeing in today’s landscape. Patrick O’Connell, our new CFO, who joined the company in August, will then review our financial performance in more detail. In the third quarter, we added 300,000 streaming subscribers and we now have 11.1 million total paid subscribers, representing a 44% year-over-year increase in subscribers and a 41% increase in streaming revenue. We continue to expect we will end the year with approximately 12 million total streaming subscribers. Our meaningful and consistent streaming growth has been driven by our strong content slate, coupled with our strategic marketing efforts which have been significantly evolving this year. Our third quarter results were impacted by several factors, including strong streaming growth, the timing and availability of content licensing deliveries, a softer scatter and direct response advertising market and unfavorable foreign exchange impacts. As a result of these market indicators, we expect full year 2022 revenue growth to be flat-to-low single-digits. Due to better visibility of the timing of certain production items, we also anticipate full year free cash flow to be between breakeven and $50 million for 2022. Our year-to-date adjusted operating income margin is 28%, which reflects our consistent ability to strategically manage our investments for strong profitability. Patrick will review our guidance in greater detail shortly. AMC Networks is in the midst of an important transformation with streaming growth momentum and new opportunities that are enabling us to transition to a consumer-focused multi-platform…

And thank you. [Operator Instructions] And our first question comes from Tim Nollen from Macquarie. Your line is now open.

Good morning. Thanks for taking the question. I’ll just ask one, but I may have a couple of parts to it. It’s about your new deal with Roku. Interesting to see 11 FAST channels, I think, launching there. Could you just maybe remind us what you have with other FAST services? And then how incremental this Roku deal might be for you? And then another part to the question is, Roku has had some issues lately with its ad revenues dropping. I think some of that is due to its reliance on insertion orders. You, by contrast, I think has some pretty interesting developed advanced advertising you know programmatic efforts underway. And I wonder if you could speak a little bit to what you might be doing in this Roku deal with those? Thanks.

Hi, Tim, this is Kim Kelleher. Thanks for your question. We’re excited about this partnership and that we announced with Roku yesterday. You’re absolutely right, it’s 11 channels, we will start to go live on the 15th of November. This does round out the 7 platforms that we’re currently on, as Chris mentioned, Pluto TV, Sling TV, Samsung TV Plus, Vizio SmartCast, Plex and Comcast Xumo. Sales rates are an important part of our strategy. We work in partnership with the platforms that distribute our channels. And one thing that AMC Networks does very differently, I think, overall than others is really optimizing our channel performance in a very concerted partnership way. We do all the programming and scheduling with our partners of these channels constantly tweaking, constantly – like regularly going back and making sure that we’re creating a viewer experience that is optimal and representative of our brands. As Chris also mentioned, these channels are drawing a very fast-growing younger new audience or viewers to our content. You know one thing that I would say to answer the second part of your question is, as we continue to roll this out, our programming strategies continue to drive the different verticals that we see, and we see a lot of opportunity for growth. You know we have other genres and segments that we have yet to launch in, and we see this continuing to be a big opportunity.

Thanks.

And thank you. [Operator Instructions] And our next question comes from Thomas Yeh from Morgan Stanley. Your line is now open.

Thanks so much. Chris, you mentioned the success of Anne Rice on both new growth starts and existing subscribers. Can you talk a bit about how you see the overlap or the incrementality of your franchise TAMs you know between the Walking Dead and now Vampire? Is the subscriber opportunity that you see for AMC+ retention-based? Or are we thinking about trying to build a bigger TAM and target more audiences across different spheres? And then a follow-up. Can you talk about how unit economics for the international distribution for AMC+, I mean, in light of some of the news from Stars last night about exiting some of the international markets? It seems like it’s a tough space to scale in. So, any color on profitability abroad would be really helpful. Thank you so much.

Thank you, Thomas. I appreciate your questions. Your first part question about the Anne Rice IP and how it overlaps with the Walking Dead. So relative to our AMC+ and AMC brands, our new tagline is specifically designed with the testing that we did to really show that we are offering above and beyond content that everyone out there who’s consuming streaming content, you’re taking up important and precious time to watch streaming and you want an escape. You want something that’s going to take you to a different world. And so we’re really trying to you know play into that consumer’s interest in being entertained in that way. And so the Walking Dead franchise and the Anne Rice Immortal Universe franchise really play into that. So there is some overlap across the franchises, but what we’re seeing is, where we have the iconic Walking Dead franchise that there’s a lot of vested fans already in that space. Some of what I’ve honestly heard is that, you know we’re up to season 11 in the flagship series, and people are saying you know I’ve never watched Season 1, so no I’m not going to really spend the time to get into it. And the other thing we’re seeing is a lot of people are watching Season 1 and they’re getting addicted to it. And the interesting thing with the Walking Dead Universe is because it has been around for so long, and it is so iconic, even with this 11th season, we designed the 11th season in a way that you could just pick up watching episode 1 of season 11. And you may not know everything going on in episode 1, but you will pretty quickly understand who’s who. And then you will still be able to truly enjoy…

And thank you. [Operator Instructions] And our next question comes from Michael Morris from Guggenheim Securities. Your line is now open.

Hi, thank you very much. Good morning guys. I have two questions. My first one, I guess, maybe is for Chris, and it’s about your – you know your distribution decisions of this content, right that’s you know maximizing the multi-platform sort of monetization, if I can. It feels like the industry is as complex as ever and the decisions you need to make are as complex as ever. So maybe can you update us on how you are deciding? You know how you’re prioritizing where things go? And whether that you know prioritization has shifted, if you expect it to shift? I’m really just interested in terms of how you think about making the most of this content that you decide the order in which or the destinations you want to monetize it through? And then my second question is perhaps for Patrick on free cash flow. You know the guidance for the full year is a relatively low free cash flow conversion compared to your historical trend. So I’m curious if you could just talk about why free cash flows you know kind of lower this year? And how you think about longer-term conversion, whether you think historical levels are achievable or whether there’s a new normal with respect to that metric? Thank you.

Thanks, Mike. I appreciate the questions. Relative to our distribution decisions for content, you know our segments are deliberately set up in the way they are with our domestic operations, including the power of all of our distribution revenue streams. You know I’ll use Interview with the Vampire as an example that we make a significant investment in the original series where we own global rights. And then we look to carefully window it out that we can go across each of the windows of the platforms to optimize the return that we’re going to get on investment over the life cycle of the show, which the Anne Rice IP, as it’s coming together, especially with that show, and as we have more seasons of it, it will become important evergreen content for the future as well. So as you think about the windowing, we make an investment in original series or even original films for the IFC films where we have long-term rights, for example, and then we look at each window. You know we will – right now, our approach is that we, for AMC and AMC+ series, we put it first on AMC and AMC+ and use that megaphone and that’s in the US. And then we’re also doing it on a linear basis in international markets that we’re in. And then where we have selectively launched AMC+ elsewhere. But then as it moves through the windowing chain, we will look to monetize it in any way we can. So also for Interview with the Vampire as an example, any place that we don’t have AMC+, we will look to optimize and license those rights if we’re not going to be in that market anytime soon. And so we’re constantly looking at all of that. But we’re looking at our windowing and our optimization more for the long-term and the short-term. We’re not kind of really looking at like, hey, we can quickly sell this and get some more money for the quarter. We’re really looking at how do we make the most of this for the long-term and then make sure that it will be there for us in our library that we can also benefit from it for the future. And it is shifting. You know I think your point is right on. It continues to shift, and it will continue to shift. And that’s where I think our nimbleness is very important in the sense that we’re constantly looking at what is happening in the marketplace, and how can we possibly make the most of it with what’s going on in a way that stays true to our long-term strategy.

Thanks, Chris. Patrick O’Connell: Michael, on your free cash flow point, you know obviously we took the guidance down for this year. There’s a couple of factors in there. If I unpack it a little bit. Some of it is just a flow through, obviously you know from the weaker revenue we see on the advertising side. There’s a bit of noise on the production side. We don’t time productions over quarters or years. And so there’s a bit of that. And frankly, there’s a little bit of kind of working capital where we don’t always control the timing of certain tax credit receipts, et cetera. So that’s the reason we’re taking the free cash flow guidance down a little bit this year. In terms of going forward, obviously we’ve made the decision to be very disciplined in our content and programming investment. We think we will – that will certainly continue to be the case. We are also taking a focused and disciplined approach to programming individual channels across our channel efficiency. And I think as these products sort of evolve and we continue to see the programming efficiency that’s sort of – and that is attached to these sort of super-served platforms, we think we’ll see the benefits of that. You know going forward as you’ve heard us say, we’re very much focused on a multi-platform monetization model. And so we’re very much focused on driving margins going forward and driving as much margin and free cash flow out of the business as possible.

And thank you. [Operator Instructions] And our next question comes from Michael Nathanson from MN Research.

Great, thanks. Good morning everyone. I have three for you on streaming. The first is, you noted you took a price increase in the spring. I’m wondering, any update on churn post the price increase? What have you seen? Secondly, an update internationally on what markets you’re going to launch in Q4? And any outlook on ‘23 what markets that you still have to come for international launches for streaming? And lastly, one of the pictures we’ve heard on FAST is that, it helps to be a linchpin or launching pad for new streaming subscribers. So can you talk a bit about what you’ve seen in your other platforms as you’ve launched FAST and what has been the conversion rate from FAST to paid subscribers?

Good morning, Michael. Thanks for your questions. Relative to the price increases that we took for Acorn and ALLBLK, we really didn’t see any significant churn. It was fairly stable. I stick to what I said on the last call that I was really thinking that maybe we should have increased it by $2, because it has been stable. And so I think that was a good move for us. And we continue to look at pricing and how the pricing relates to our subscribers. We obviously want to have the best value proposition we can for our subscribers, but we also want to maximize our top line performance. And so churn as you indicate, is a key part of that. And it is the key factor to think about when we’re looking at what our price point should be. On the international front, we don’t really have any additional news to put out for what’s coming down the pike. But as we look to what our partners are doing and as we explore different markets, you know there will be more to announce there for the future. And then I’ll turn it over to Kim for the FAST question.

Thanks, Chris. It’s a great question. You know on certain closed-loop distribution platforms like Samsung TV Plus and the other OEMs where you can watch supported AVOD channels or FAST channels and subscribe to our services, we’re seeing real benefits to those closed-loop systems. And we’re seeing – actually, it’s really the funnel of younger, more digitally savvy viewership coming in through the top of the funnel and then being able to, within the same ecosystem, push them through promotion in partnership with the platform directly into our services targeted and AMC+. So we are starting to see the FAST channels are driving subscriptions within the platform environment.

Okay. And can you just go back to a question for Patrick. On – Patrick a question on free cash flow. You know on my last question, the question I have is, are you looking to actually optimize free cash flow? Or is this psychology of, look, we have an opportunity to keep growing you know managing the cash the way we used to do in the business may not be the most strategic decision given the opportunity you have to grow. So how do you balance kind of the need to deliver cash flow for us versus the opportunity you see in reinvesting that cash flow for growth, which you’re sharing today? Patrick O’Connell: Yeah, sure. Thanks, Michael. Listen, from a capital allocation standpoint, we’re – you know we clearly continue to invest in the business. I would say we are titrating that investment, however. You know, obviously we’ve got a linear ecosystem that is shrinking. And we’ve got a digital ecosystem that is [technical difficulty] side that programming works largely across [technical difficulty].

And we still have a good runway for streaming growth to come. And so we’re going to be very diligent and thoughtful about how we prioritize you know what we lean into. But as the digital and streaming revenue becomes stronger and even more meaningful, it’s already at a very healthy level. And so we’re very proud to see where it’s at. But as it continues to strengthen and grow in the long-term you know we are going to look to have that cash come back and drop down and you know it is about optimizing the cash flow.

Thanks.

And thank you. [Operator Instructions] And our next question comes from Steven Cahall from Wells Fargo. Your line is now open.

Thank you. Maybe first just a little bit of context on the advertising market. Could you remind us how your linear ad revenue splits in terms of how much you’re able to sell in the upfront and then how much you sell in the scatter market? And it would be great to hear some of your latest thoughts on the scatter market. We’ve heard from some peers that there is some softness there, whether that’s due to macro or AVOD launches like Netflix. So I would love to get your update there and how you see that trending as we get into next year? And then, Patrick, I know you’re not guiding to 2023 free cash flow. It seems like there’s a big emotional line for investors that when free cash flow is trending down or going negative. Stocks tend to follow. And then when it reverts, they can go up again. So I’m just curious if you think this is the trough free cash flow year for AMC? Or as you continue to invest and make the pivot to direct-to-consumer that could still be to come? Thank you.

Thanks, Steven. This is Kim. It’s like you said, broadly, our ad-supported networks are experiencing the same environment as others in the space. The scatter markets have been soft. The climate of economic uncertainty has really resulted in our marketing partners and everyone’s marketing partners being more conservative with their spend. I think that while the prevailing conditions are subject to outside factors, we’ve really been leading the industry in a lot of critical ways that we’re going to stay myopically focused on. We’re trying to maximize the strength and potential of our existing linear television business through our advanced advertising efforts, initiatives and build-outs. We’re building the tools and technologies we need to build our digital business now and into the future. And we’re also seeing real positive impact from what we talked about earlier this year on our automatic – our automated programmatic partnerships, which really enables us to capture larger amounts of advertisers with a lower barrier of entry. So that is truly growing the pool of marketers that we work with from the traditional linear sense in the past. I would say from – in regards to the upfront, we saw strong CPM increases, and we are going to see that actually continue from the ‘22-’23 upfront through the first three quarters of next year. We were at the high end of the cable market for several of our networks. That being said, our revenue outlook going forward reflects what we’re seeing in the current ad market. And we’re going to remain kind of cautious and very attentive around the broader macroeconomic environment. Patrick O’Connell: And on your – it’s Patrick speaking. On your cash flow question, I would say, listen, as it relates to you know free cash flow, we’re obviously, as I said before, being very cautious in titrating our investment into additional programming. And so you know going forward, we will monitor that investment very carefully. We’ve drawn a line in the sand that, that’s not going to increase materially. And we’re going to invest on a – when we see results, we continue to push in for growth, but not at the expense of driving significantly negative free cash flow. So we’re absolutely focused on it. We want to sort of invest where we see opportunity and we see sort of growth in near-term profits, and I’ll leave it there.

Thank you.

And thank you. And I am showing no further questions. I would now like to turn the call back over to Nick for closing remarks.

Thank you very much, everyone for joining us today and thank you for the interest in AMC Networks. This concludes the call. Have a good day.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.