Good day everyone and thank you for standing by. Welcome to the AMC Networks Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. Now I will pass the call over to Nick Seibert, Vice President, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the AMC Networks second quarter 2024 earnings conference call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O’Connell, Chief Financial Officer; Kim Kelleher, Chief Commercial Officer; and Dan McDermott, President of Entertainment and AMC Studios. 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.

Thank you, Nick and thanks everyone for joining this morning. As we navigate a dynamic and complex media environment, we continue to find opportunities in a strategic plan built around programming, partnerships and profitability. Key to this plan is the creation and curation of celebrated films and series, and making them available to viewers wherever they might choose to watch. I’d like to note the significant progress we’ve made against one of our major strategic priorities, generating strong free cash flow. I’m pleased to report that just halfway through the year, we have already delivered $239 million of free cash flow, and we’re well on our way to achieving our full year guidance for this important metric. This is the result of our prudent and disciplined financial management of the business. Our overall strategic approach is evident in our new branded distribution partnership with Netflix, featuring prior seasons of 15 AMC shows on the number one streaming platform in the world. This non-exclusive licensing agreement will give the vast US audience of Netflix subscribers access to our high quality, critically acclaimed content, with the AMC brand clearly represented. We believe that finding a bigger stage for our shows will be a big win for our own platforms and existing distribution partners. Years ago, Breaking Bad demonstrated the power of Netflix to help build awareness and interest in a series that was still launching new seasons on AMC. We’re looking forward to seeing our core franchises and most important current shows tap into this same powerful engine for audience expansion. Unique partnerships like this demonstrate that AMC Networks is an innovative and nimble company unencumbered by the constraints and limited options facing others in our industry. We have the freedom to work with anyone, and we have a continued commitment to…

[Operator Instructions] Please stand by for our first question. And it’s from Thomas Yeh with Morgan Stanley. Please proceed.

Thanks so much. Good morning. Kristin, I wanted to dig in a little bit on this Netflix feel. How does it look in terms of the outline of what you’re expecting it to do relative to the experiments that you had run in the past with, say, for example, HBO with the AMC Plus pics [ph]? And has the experimentation evolved in any way in terms of what you’re hoping to get out of it and what you’re hoping to see?

Sure. Good morning, Thomas. We’re super excited about this deal. A lot of people do talk about the Breaking Bad effect and how a decade or so ago, the exposure that Breaking Bad got on Netflix really helped break that series out into something that’s now kind of part of our culture. And so with the Netflix deal, we’re putting our content non-exclusively prior seasons on a very big stage in the US. And these shows not only will get a lot of exposure to the 125 million Netflix subscribers in the US, but for our distribution partners who all have Netflix partnerships themselves, it’s beneficial to them as well, right. So if you think about, Roku [ph] has a Netflix button on their remote control, right. Comcast and others have Netflix partnerships and bundles within their distribution ecosystem. So, for us having this exposure we think will really drive as it did with Max, people back to AMC and AMC Plus for the new seasons that are premiering in 2025 and 2026 of these franchises. So, it’s exciting for us. I think Netflix is also equally excited about it. So August 19, it all shows up onscreen; so we encourage everybody to check it out and to -- if there’s anything you haven’t consumed yet of our newer franchises, watch seasons one and in some cases, seasons two, and then roll on back to us when we get into the fall and into early next year for the premiers of the new seasons.

Got it. Understood. Makes sense. Patrick, I wanted to ask about your comment also on the year-over-year increase expected in programming amortization next year. You’ve been running at about $1 billion of cash spends on programming for this year, and I think last year as well. What’s driving that bump in cadence? Are you expected to kind of hold the $1 billion zone in terms of what’s the right investment level for the future of the business? Patrick O’Connell: So the answer to your first question is, and just to clarify, the $1 billion is a cash number, right. So that $1 billion of cash programming investment is what we’re currently, kind of, investing this year. But let me flip back to the amortization question, which I think is what you’re really asking here. So obviously, programming is our largest and most strategic investment that we make in this business, and so we’re always continuously calibrating it against the available monetization opportunities, as I said in my remarks. In years passed, cash programming has floated upto $1.3 billion, almost upto $1.4 billion; certainly much higher than the $1 billion that we’re spending this year. And in 2022, you’re aware we took some decisive steps to right-size our programming levels. AMC has always been about quality, not quantity. I think that’s kind of resonated in the market. I think we’re taking very much back to basics approach there. We also reduced the level of programming on some of our services in 2023 as well. And so obviously that has a flow through effect in terms of the amortization that gets realized in the income statement. So taken together, those two steps, the write-downs at the end of 2022 and the reduction in sort of programming volume across some of our services in 2023 had the effect of reducing programming amortization in 2023 and 2024. But the reality is, we have yet to fully amortize the pre-2023 kind of higher levels of investment, what we call kind of carryover AMORT that kind of flows through the system over 3 to 4 years. So this is going to have the effect of increasing year-over-year amortization from 2024 into 2025, just given the amount of puts and takes, so we don’t think this was sort of fully kind of recognized in the markets; we wanted to call it out. But obviously, the most important aspect here is that our cash programming investment for 2024 remains roughly $1 billion; that’s our current rate. And you know, we also have clear line of sight towards the roughly $0.5 billion of free cash flow that we’ll generate between this year and the next. So this was just an effort to, sort of like, help people understand some of the moving pieces because there is sometimes some confusion between amortization and cash program investment.

Can I just add to that? Because Dan’s sitting right here, and I just -- I need to congratulate him and his folks for -- you know, even with the reduction in expense since I’ve joined the company. The quality of what we’re putting on the street continues to be stellar. And we talked about a little bit in the script but anybody that’s watched season -- the current season of Interview With The Vampire, Episode Five, or if you’ve watched Daryl Dixon, which was shot in France, like the quality of what we’re producing ourselves. And then on the film side, the value of the acquisitions that our film team is doing continue to really build for us; the franchises, the content and the asset value because we’re doing great stuff, but we’re doing it in a very cost conscious way. So, just -- you know the reduction in expense is important but we’ve really, I think, sustained, if not, enhanced the quality of what we’re putting out in our products across all brands,

Understood. It’s the lifetime value of the asset in terms of -- the useful lifetime you’re using to amortize over multiple years. Has that changed? Are you kind of continuing to assess that multi-year amortization life? Patrick O’Connell: Two pieces of that. So one from an accounting perspective; no. There’s been no changes in the amortization policy or the accounting sort of around it. But to Kristin’s point in terms of building asset value in the studio, and the visibility we have into content licensing revenue, this year and next, and the $225 million [ph] that’s sort of out there in terms of guidance for this year, which I think we feel really good about; that certainly has a much longer tail. And so we continue to build asset value in the studio as a result of -- us, one at the current sort of volumes of programming, at the levels of quality that Kristin mentioned as well. There’s been sort of -- I would say, almost a return to quality in the licensing market, and we’re seeing a lot of strength there. So we feel good about that long tail value.

Thank you. Our next question comes from the line of David Joyce with Seaport Research Partners.

A couple things. First, on the streaming services, move over the backend to Comcast Technology Solutions. Is that going to provide any lift to AOI or were those already self-funding before you did that and this just makes it even more efficient? It is the first question. Patrick O’Connell: Hey David, it’s Patrick. I’ll take that first one. Listen, from a financial perspective, as is our reputation, we are continuously looking for efficiencies across the business, and so it just made a ton of sense for us as this arrangement allows us to avail ourselves of Comcast Technology Services -- sorry, Solutions; scale, infrastructure and architecture. From a timing point of view, we just signed this. This is going to be a long-term deal; there will be no impact in 2024. There will be a modest amount of onboarding and maybe some duplicative costs into 2025 but with clear paybacks over kind of 12 to 24 months. Lastly, I think it’s worth noting in terms of the economics of this deal, that it’s both, cost and capital efficient. So when we look at the NPV of this which is clearly positive, we think about it on an operating free cash flow basis; so AOI less CapEx, and we’ll get savings across both buckets. And so we feel really good about this. Net-net, it’s not just about cost savings but also cost certainty, which I think Kristin outlined here. So more to come here in the future, but again, think about it in terms of both cost and capital efficiency going forward.

Okay, that’s good to hear. Secondly, on the Netflix deal revenues would be recognized when you deliver episodes of your content. Are you making everything available at once or is it going to be kind of spread out for a while?

Yes. So 13 of the 15 shows will be available on August 19, 13 of the 15 series, and then we have two more premiering in the first quarter of 2025. And as far as revenue recognition… Patrick O’Connell: Yes, as far as revenue recognition, actually, the full amounts going to be recognized at 2024 because the availability date will be just ahead of Q1 at the end of Q4; so this revenue will be realized this year. And I would say -- just David, kind of more broadly on content licensing; we’re seeing strength in this market, both domestically with the Netflix deal, but also internationally with the new deal we cut with The Walking Dead titles with Sky. And so I know I mentioned in my commentary, some revenue uplift there. And this is -- you know, to Kristin’s point earlier about just the quality of content that we continue to produce, and there being a little bit of -- sorry quality, and they’re being sort of flight to that quality. And given how much we produce for our schedule, we’re seeing demand across not just AMC content, but also the program we produce for Acorn, HIDIVE, etcetera. And as the linear universe continues to shrink, the value of that license content in our broader ecosystem outside AMC or AMC Plus continues to increase. And so as we’ve said before, we’re exploring ways to capture additional value, both in terms of the hard dollars we get in licensing revenue, but also in terms of what I call sort of soft dollars; this is Kristin’s point about people coming back into the AMC ecosystem to watch, kind of, current season episodes, etcetera. So we think with this new model, with the non-exclusive constructs, with meaningful brand support in some cases, it’s sort of a win-win, both hard dollar licensing revenue upfront and hopefully some soft dollar economics on the backend. So net-net, this is just another way we’re exercising some of our creative kind of financial models to really sweat these programming assets as best we can.

Thank you. [Operator Instructions] Our next question comes from the line of Steven Cahall with Wells Fargo.

Thank you, Patrick. First, I just wanted to ask you about your comment on revenue shifting around a little bit within the guidance for the year. My best guess is this means that your licensing revenue is a little stronger, maybe after the Netflix deal announcement and the Sky deal announcement. I’m wondering if that implies with some other revenue is a little weaker. So I’d love to just understand the mix and how we might think about that carrying forward to revenue in 2025? And then to follow-up on the content amortization; that’s very helpful. Thank you for taking us through that. I don’t think that you report amortization, I think it’s mixed in with some other expenses. So I was just wondering if you could give us a ballpark for what amortization is running at in 2024 or at least how big the step-up is from a dollar perspective in 2025 as we kind of think about pencilling out the impact of your strong free cash flow generation, vis-à-vis some of these AOI dynamics to get to net leverage? Thank you. Patrick O’Connell: Okay. So I’ll take those in order. First, on just kind of revenue composition and the changing nature of the business here. I mean, listen, just to take a step back, we are operating in a very challenging and dynamic environment. We’re currently in the state of what I would characterize as sort of disequilibrium between the linear and streaming economic regimes, right. It’s making kind of forecasting a bit more challenging. The benefit we have at AMC is that we’re small, nimble, creative, and we’ve got a really good kind of value equation in the marketplace, whether it’s kind of on the wholesale or on the retail side. So that gives us a lot…

And maybe just a quick follow-up. I know you had a tough licensing comp in 2023, it sounds like it will be really strong with this stuff in 2024. Should we expect then, because the revenue isn’t amortized for licensing and it’s booked in the period. Is that probably going to be a tough comp in 2025 given the nature of kind of these landmark deals? Patrick O’Connell: It’s tough to say, honestly. I mean, like, given our current level of production and the strength of seeing in the market, it feels good right now. We feel really good about 2025, it’s probably going to be north of that. We’ll see how it goes from there.

Thank you. As I see no further questions in queue, I will turn the call back to management for closing remarks.

Thanks for joining us today. Have a good weekend.

And thank you all for participating in today’s conference. You may now disconnect.