Good day! And thank you for standing by. Welcome to the AMC Networks, First Quarter 2023 Earnings 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.

Thank you. Good morning, and welcome to the AMC Networks First Quarter 2023 Earnings Conference Call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O’Connell, Executive 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 in today's press release. With that, I'd like to turn the call over to Kristin.

Good morning, everyone. Thank you for joining us. While I'm new to my role as CEO of AMC Networks, this is a company I know very well. I started my career here and spent the last decade serving on the Board of Directors. But more than that, my background in programming, cable operations and more recently, data and analytics around viewership and advertising gives me a clear and actionable perspective on the opportunity we have here. AMC Networks has always been known for great content and the ability to make shows that breakthrough in popular culture, receive critical acclaim and engage fans. That is the consistent theme that has defined our presence in the content landscape for years. The question today is how do we take that core competency and evolve the business for a new world of multi-platform consumption that is increasingly being driven by the consumers we serve? When I look at AMC Networks today, and I think this is key for our future, I don't just see a content company. I see a technology-focused company that delivers its content across an expanding number of platforms here and around the world. I see a nimble and fast-moving organization that relies heavily on data to grow audiences, serve fans and build value for our advertising and distribution partners. On our last call we talked about the idea of transitioning from a wholesale to a retail mindset. For us, that means reorienting our company and making sure everything we do is in service of viewers and subscribers, our customers in this new world of content consumption. We also shared our strong focus on reevaluating the pathways to content monetization as we reduce costs, streamline the organization, maintain a strong balance sheet, and drive free cash flow. Our efforts in these…

Thank you, Kristin. As Kristin highlighted, with the strength of our programming, our nimble approach to a dynamic marketplace, and our continued focus on operating efficiency, AMC Networks is well-positioned to succeed as consumer behaviors continue to evolve. We took several steps over the past couple of quarters to recalibrate the business for increased monetization and we feel good about the progress we've made to-date. We right-sized our investments and content and streamlined costs to drive increased free cash flow in 2023 and beyond. We continue to strengthen our longstanding relationships with key distributors. As Kristin mentioned, we recently completed a multi-year renewal with Dish Networks and Sling TV for our linear networks, streaming services, and fast channels. Moving on to our first quarter 2023 financial performance, consolidated revenue increased 1% from the prior year to $717 million. Consolidated adjusted operating income increased 2% to $216 million, representing a margin of 30%, which reflects our strong focus on operating efficiency. Adjusted earnings per share was $2.62. In our domestic operations segment, first quarter revenue grew 1% to $612 million. Subscription revenue of $348 million grew 1% for the quarter. First quarters streaming revenue was $141 million representing 29% growth year-over-year. We ended the quarter with 11.5 million streaming subscribers, representing year-over-year growth of 22%. While this represents a sequential decline in subscribers from the 11.8 million we reported at the end of 2022, the decline in subscribers was largely due to our focus on higher values subscribers and a roll off of holiday promotional subscribers. The rationalization of our subscriber base along with pricing actions taken last year increased the average revenue we generate per subscriber. As we remain focused on the overall profitability of the company, we continue to program our services efficiently. If you look at the top…

Thank you. [Operator Instructions]. Our first question comes from Michael Morris with Guggenheim Securities. Michael, please go ahead with your question.

Hi, good morning. This is Charlie [inaudible] on for Michael Morris. Just a quick question from me. On the AMC+ ad support tier, can you share any more details on the anticipated price point and expected ARPU there, and just kind of your expectations about the ad ARPUs and whether those would offset a lower price point, and kind of how you're thinking about consumer choice between the multiple peers? And then, as you're making that determination, are you considering any ad-supported tiers for your other niche streaming services? Thank you.

Thanks Charlie. It's Kristin. As you mentioned, we did announce at our recent upfront ad supported tier for AMC+. We're looking at an October launch for that tier. We see it as a great opportunity to continue to superserve and expand our audiences, give more choice to consumers, and obviously provide a more holistic and robust advertising solution for our current and future advertisers. But I think it'll be probably the next call that Kim will give you more details on pricing and expectations on the ARPU front.

Great. Thank you.

All right, standby for our next question. Our next question comes from Tim Nollen with Macquarie. Tim, please go ahead with your question.

Hi guys. This is Ross Compton on for Tim. Thanks for taking the question. I'm interested in your background in media measurement with 605, and if you guys could discuss how you're using alternative measurements to sell ads now in your linear business or to come in the streaming business. And do you use 605 in addition to other measurement services? Are those in place? And does 605 or any other measurement services give you kind of an advantage and an increase in CPM [ph]? Thanks.

Great. Thanks Ross. It's Kristin. I'll start, and then I'll hand it over to Kim. 605 provides two services to AMC Networks. One is a measurement capability that we use internally, and the other is for attribution. I would say for the bulk of the tenure, Kim's ad sales team has used the attribution service to really validate and show the level of sophistication that our advertising team has in targeting and segmentation and then delivering results that are probably most of the time provable to be more successful than just a general ad placement. So 605 is really providing the back-end capabilities to measure and to show the attribution capabilities. But we're not currently participating in alternative measurement currencies other than to use them internally to look at our own media spend and how we can maximize that through our agency known. But I'll let Kim talk a little bit more about the integration of that and our Audience+ announcement.

Sure. Building off what Kristin was just sharing, Ross, I'd say we're very open and willing to partner with clients on alternative currency and measurement in this coming up front and year. And we're in ongoing dialogues with all the various alternative measurement companies, including iSpot, VideoAmp, Comscore, and of course 605 who we work closely with. Our standing is we've been with Nielsen a long time, and we're actively evaluating their new Nielsen ONE ad products prior to their launch. But I think that we are also following along with interest. I'm an active member on the VAB board, and we're a member of the newly formed JIC, the Joint Industry Committee. And we're taking our front row stance on witnessing the innovation that comes out in this ad marketplace for certification of unified streaming measurement.

Thanks. That's really helpful. Thank you.

Our next question comes from Brett Feldman with Goldman Sachs. Brett, please go ahead with your question.

Great. Just two questions about the evolution in your streaming strategy, if you don't mind. So the first one is kind of high level. Well Kristin, you've talked about being a much more customer or retail-centric oriented business. And I was hoping you can maybe elaborate a bit in terms of where you think you are on that journey to being more focused that way. So I'm thinking about it operationally. Do you think you actually have the operational structure in place to do that, as well as you think the company needs to? And is any additional investment needed? Do you potentially need any partners to do it? And maybe even at a higher level, if you just comment on culturally where you think you are in terms of this evolution of the business. And then sticking with streaming, we've seen a lot of your peers in the media space begin to consolidate their streaming services into flagship platforms. You came to market with a portfolio of niche streaming services that have done very well in their demos, but you've really started to have a lot of traction with your own flagship, which is AMC+, and I'm wondering if you can elaborate a bit around your thoughts on continuing to maintain this diverse portfolio of streaming products versus maybe potentially consolidating all of it into AMC+. Thanks.

I'm not going to ask you to repeat the question, Brett. So operationally, all right, I'll start there. So I'm an operator, that's why I was brought into this role, at a time when the industry is shifting and the company was in the midst of a lot of moving pieces, right, between the transition from linear to digital, the new different ways that we are looking at advertising, and then just having a 40-year-old company. And so for me coming in, we took a lot of pain in the fourth quarter last year. We said goodbye to a lot of colleagues that had been with us for many years, and we really needed to reorient the business. So we've moved past that. We're looking forward to new opportunities. And a lot of them do involve streamlining the operation, not from a headcount perspective, because we've done the bulk of that work, but more from looking at how we service our customers, both our distribution partners, as well as our direct-to-consumer customers. So reimagining our call center and our customer service functions in general, which is something I have a lot of experience with. Reimagining the backend. As most people know, there's not really a straight-out, off-the-shelf solution for streaming, and because we acquired certain streamers and others we built ourselves, we need to unify that backend and figure out what the most efficient and effective sort of future-proof technology we can put in place to facilitate as our streaming businesses grow. So those are two big areas really, the customer service function and the backend infrastructure. As far as additional investment, we don't see anything dramatic in either of those areas, but I would leave that to Patrick to speak to. And then the other thing I think that's…

The only thing I would add is, I think we're well-positioned for the emergence of the bundling that we're going to be seeing, which actually really meets a consumer need for choice. And you can see bundling as being part of our strategy going forward.

If you wouldn't mind, if I could squeeze in a question on a different topic. We're starting to get asked about the rider’s strike, and I'm curious your take on at what point this could end up affecting the business, particularly in terms of a series of orders and deliveries. Thank you.

Thank you. I would say we're very well-positioned for all of this year and into next year, so we have no real concerns about the rider’s strike at this point.

Thank you for taking the question.

Thank you.

Our next question comes from Douglas Creutz with TD Cowen. Doug, go ahead with your question.

Yes, thank you. I noticed your SG&A costs in the quarter were the lowest they had been, I think since Q3 or so of 2020. Is this a good level to use if I'm thinking about SG&A costs going forward? Anything sort of noteworthy in the quarter you caught that might make it abnormal?

Hey Doug, it's Patrick. Thanks for the question. Over the last quarter or so, we've taken significant steps to take costs out of the business. That starts with both programming and marketing. Those are the two kind of biggest cost levers that we've had. So we've sort of done what we said we're going to do in that regard. A part of that to Kristin's point earlier was having to say goodbye to a number of our colleagues in Q4 and so you see the results of that kind of flowing through into the Q1 numbers here. So I would say, yes, that's a reasonable number to use going forward here. And I think more broadly, what you should understand from us is that we are very much driving this business for our margin, and so as a result of some of the cost actions we've taken, both on the programming side and on the marketing side, we're seeing those reductions yield margin and AOI in this quarter and we expect that to continue on through the balance of the year. So while we recognize it's a balancing act between investing in the business and having kind of growth levers to continue to attract the audiences and the partners that we have, that there's also an imperative here to drive the business for free cash flow today. So that's kind of in summary where we stand from an overall kind of cost kind of apparatus.

Okay, thank you.

Our next question comes from Robert Fishman of MoffettNathanson. Robert, go ahead with your question.

Good morning, everyone. Can you provide some more detail behind the strategic non-renewal at the end of ‘22 that impacted the affiliate fees and whether we should expect more of these decisions going forward? And then on the international strategy, just given the focus on cash flow, does it make sense to pull back on investing outside the U.S. and even sell some of these international linear networks? Thank you.

Yeah, hey Robert. It's Patrick. On the strategic non-renewal, we have identified that as Fubo. I consider that – we consider that to be a one-off. I think Fubo had a strategic imperative to drive their business more towards live sports programming. We were one of the last remaining entertainment bundles that they carried. Obviously, we have an imperative to maintain kind of price discipline in the market as well. So as sorry as we were to see them go, it didn't make sense to continue the relationship kind of given the economics that were on offer.

And I would just add to that. This is Kim, Robert. I'd just add, obviously in Kristen and Patrick's remarks around Dish, we are well into conversations with all our key partners and anticipate long and successful partnerships.

Great. And on the international plan, I would just say international is really interesting. We serve a variety of different regions and they have very different constructs than the U.S. right now. So for example, Northern Europe is very – Hungary and Romania and those areas, basic cable is $20 to $22 a month. There continues to be healthy margins coming from the international businesses that we have. Spain, we just had a major renewal in Spain that – sorry, I just wanted to confirm I'm allowed to speak about that. So we're widely distributed throughout Spain, and we will grow some streaming there. The U.K. is a little bit different, so we're working through that. But overall, even though it's a small percentage of our business, international is very healthy. It throws off very reasonable margins and we continue to plan on spending time and energy there as appropriate.

Thank you.

And our next question comes from David Karnovsky with JPMorgan. David, go ahead with your question.

Just on domestic advertising, I wanted to see if there was any color you can give on how demand trended through the quarter or into April. And then Kristen, I wanted to get your view on the content direction of the company. You're arguably at a time of transition with Walking Dead ending and some spinoff series beginning. So I guess first, what gives you kind of confidence in the health of that franchise? And then secondly, are there areas from a programming perspective where kind of you see room for improvement? Thanks.

Yeah. Hey David, it's Patrick. I'll start on the ad side and throw it to Kim for some additional color. Obviously, the decline in this quarter was expected on our part. It was due to lower linear ratings, softness of the ad market, which we've spoken to, and few episodes of some of our tentpole franchises, including the Walking Dead. In particular, we were lapping a tough comp in Q1, in ‘22 I would say, with both Walking Dead and Better Call Saul. So these were anticipated. And frankly, we did a little bit better than we expected. So we feel actually pretty good about it. As I said earlier, there's an immediate return on these reductions in programming that is significantly in excess of the foregone ad revenues. So clearly driving the business for near-term ROI, balanced against continued prudent investment. I'll let Kim talk to the color.

Yeah. Frankly David, I mean just building off what Patrick just shared. I'd say, yes, we're seeing a similar environment to competitors in our space, the soft scatter and marketers really being conservative with their spending right now because of the economic uncertainty. That being said, we are seeing real category strength in both health and pharmaceutical spending, as well as telecom, personal care, and to your point about early April, we're seeing signs of life and spending from automotive coming back. So a trend we very much hope to see continue. The only other thing I’d just mention is, we're also seeing very strong growth from our automated programmatic partnerships, which is enabling us to capture many more advertisers, which is giving our business more predictability and a solid foundation on the digital side.

Great. And then I'll take the content question. You know David, the Walking Dead continues to be a very popular universe. And I just watched, I just screened the two, Dead City, the first two that will be premiering next month and that's the one that features New York City in the background. And the show is as compelling and engaging and dramatic as it's ever been, so we're excited to continue that franchise. I will say, we were really, really pleased with the performance of Interview with the Vampire and particularly Mayfair Witches and we have very high hopes for continuing to activate the Anne Rice universe and grow a whole other franchise through that acquisition, of all of that IP. And then looking at the slate coming up that we spoke about in opening comments, Monsieur Spade with Clive Owen is killer. The show Parish with Giancarlo is amazing. It's another New Orleans set, kind of fast action, really interesting drama. And then Lucky Hank, which we had our final episode last Friday did incredibly well and actually grew audiences week-over-week as people became more enamored, particularly for those of you that watched it after episode five, which is like the pivotal point of the series. And then, on the other, on the streaming services, we have some great films that we've acquired. So Corsage, The Lost King, and I think a lot of people read and heard about Skinamarink, which was a sort of breakout horror film that we acquired this year that did really well. Between that and just as we mentioned, some of the anime content like Oshi No Ko and some of those shows, we're feeling really strong. The other great premiere that's coming up later this month is on Acorn, which is Happy Valley, which is season three of a really good British crime drama. That was like the top of the conversation when season three premiered in the U.K. a couple months ago. So I feel really good about our slate as Patrick mentioned, like really settling down at around $1 billion market investment is where we were successful throughout the teens and into the early 20’s. So like we feel very comfortable that that's an appropriate level that we can maintain and still present everything that really speaks to our success in the past as creating great franchising and really delivering excellent high quality breakout content, so feeling really good about the content.

Our next question comes from Ryan Gravett with UBS. Ryan, please go ahead with your question.

Great. Thank you. Maybe just on the licensing business. You mentioned that it would be down this year just given the deliveries that you had towards the end of 2022. But just curious how you're thinking about approaching licensing in ‘23 and beyond, especially with some of your big franchise IP coming back. And I guess you see more opportunities to leverage your production capabilities like you did for the Apple TV series. Thanks.

I think that's like a three-parter. So I'll start overall. We're definitely sort of walking the line between we don't want to be an arms dealer. We have very strong brands and very strong franchises. So what we're doing I think is looking at optimizing the distribution of our franchises and our films everywhere that we can in a way that still allows us to preserve the brand equity that's associated with each of those series. So you'll know it's coming from AMC. You'll know it's coming from any of our brands, because we will make the effort, and particularly with franchises that we already own that are visibly AMC content like The Walking Dead, we will continue to distribute those and monetize them as much as possible. But I think the main thing is to preserve the brand equity and to keep doing what we're doing on linear and also on our streaming services.

The only thing I'd add to Kristin's point is we're thinking it's with our portfolio of content, we think show by show and what is the best way to monetize that and making sure that it is in front of the fandom and the viewers that want to see it. So at the international level, that means going region-by-region more so than globally right now. But we're open to those conversations on certain shows. Domestically, it's very much the same approach. We consider each show and map a plan to how we're going to distribute and perhaps license that show. So while it's down year-over-year with the SILO comps, which Patrick will talk to in a second, I actually feel like we are optimizing and maximizing the yield in our content licensing strategy.

Yeah. Hey Ryan, it's Patrick. The only thing I'd add there in terms of our tactical approach to the market vis-a-vis being in a “arms dealer” is that we will take a – I will characterize it as highly tactical approach. There's no project that we have to do, right. We program our own networks, that gives us a fantastic sort of perch and a web of relationships that we can monetize. Our production of SILO which premiered a couple of days ago is evidence of that. If there's an economic equation that makes sense and we can earn a reasonable margin at a reasonable risk, we will take those swings. But we don't have to be in the market chasing deals to generate revenue, because we produce for ourselves. So again, highly tactical and the economics have to make sense.

Great. Thank you all.

This concludes our question-and-answer period. I would now like to turn it back over to Nick Seibert for closing remarks.

Thank you everyone for your time today. This concludes the call.

Thank you for your participation in today's conference. This does conclude our program. You may now disconnect.