Good day, and thank for standing by. Welcome to AMC Networks' First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-answer session [Operator Instructions]. Please be advised that, today's conference is being recorded. I would now like to turn the call over to your first speaker today, Nick Seibert, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning. And welcome to the AMC Networks first quarter 2025 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 Web site 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. And with that, I'd like to turn the call over to Kristin.

Thanks, Nick. Good morning, everyone. It was 18 months ago on this call that we first talked about programming, partnerships and profitability as our three major areas of focus in running this business. Since then, I've been proud of our performance overall and particularly in these three categories, especially in a time of uncertainty and change. Every media company today is trying to find its own path forward in a world that is increasingly complex. Our path is focused on the clear advantages we have in this moment and in the future. We make great shows, we're nimble and independent with the freedom to experiment and evolve and our strong, distinct brands are home to some of the most passionate fandoms in entertainment. Our continued focus on profitability is driven by the strategic and disciplined steps we've taken to reimagine this company while prioritizing the generation of free cash flow. As a reminder, last quarter, we revised our two year cumulative free cash flow guidance upward to $550 million over the '24-'25 period. I'm pleased to report that we're off to a strong start this year generating $94 million in free cash flow in the quarter. In terms of distribution, we believe our strategic advantages in this or any environment are that we are fast moving, opportunistic and able to deliver products that create value for our company as well as for our partners. For example, we developed an ad supported version of AMC+ in part to give our partners additional flexibility in how their customers connect to our high quality programming. That product is now part of our long term affiliation agreement with Charter, serving both their desire to bundle streaming value into their existing video service and our own goal of expanding access to our shows and films.…

Thank you, Kristin. As a nimble and innovative premium programmer, we continue to focus on what is in our control amidst continuing linear headwinds and recent macroeconomic uncertainty. This includes the reorientation of our business around free cash flow generation, investing in our valuable and sought after IP and franchise expansion and maintaining flexibility across the operating business and the capital structure. We are pleased with our first quarter results, particularly regarding free cash flow, which was $94 million in the quarter. We remain solidly on track to achieve our outlook of approximately $220 million of free cash flow for the full year. Consolidated net revenue declined 7% year-over-year to $555 million. Consolidated AOI declined 30% to $104 million with a 19% margin. Adjusted EPS was $0.52. I'll now discuss our segment results. Domestic operations revenue decreased 7% to $486 million. Subscription revenue decreased 3% due to a 12% decline in affiliate revenue and was partly offset by streaming revenue growth of 8%. With the launch of ad supported AMC+ on Charter at the March, we felt it was important to refine certain aspects of our streaming subscriber and subscription revenue definitions. Therefore, customers who receive our services as part of a video package that also includes our linear networks are no longer included in our streaming subscriber count. This includes Charter Spectrum TV Select and Philo customers who would have been counted as subscribers under our prior definition. While these customers will no longer be included in our streaming subscriber count, they are important to us as we employ our partner focused distribution strategy. We expect to provide further updates over time regarding the trending of these customers to ensure a holistic picture of AMC's programming distribution. Recast historical streaming subscribers can be found in the earnings release we…

[Operator Instructions] And our first question will be coming from Thomas Yeh of Morgan Stanley.

Can you tell us a bit more about the streaming subscribers coming in through the bundled video packages? What's the uptake so far on Spectrum TV? And are you seeing any risk of cannibalization on the a la carte side? And maybe just a clarification on the affiliate revenues. Is it a variable source of revenues based on sign up? Any color there that would be helpful.

I'll take the first one, Thomas. So on the streaming front, actually we're very happy with the way things are going with Charter and as we've spoken about in the past our integration with Philo last year. And so, Charter has a good sense of what they anticipate the take rates and importantly the authentication for anybody that has access to the embedded streaming services within their platform. And so we're tracking exactly where we wanted to be. So we're really happy with that as are they. To your second question, Patrick?

Specifically on cannibalization, Thomas, I would say, listen, we are taking -- we are small and obviously, we are taking a partner centric approach to our distribution. That means through existing partners and new partners. Obviously, we've got long standing relationships with Charter, Comcast, DISH, DIRECTV, et cetera, all of our traditional MVPD distributors. And we see incredible value in us expanding the distribution of our content. We think this is going to create a much healthier video ecosystem. You could go so far as to say we're sort of kind of Charter members of Charter's vision for improved video ecosystem. We think this will, one, improve the video experience for customers broadly. We think it will help distribution partners as well in terms of packaging, broadband or wireless with value enhanced video offerings. And we think it creates just a healthier programming distribution ecosystem kind of more broadly. We actually think that over time, this is going to present additional revenue opportunities for the company in the form of upselling customers from an ad supported product to a premium product. We think it will generate additional viewership and engagement of which we can drive additional advertising revenue. And we think it will also, again, in sort of success and healthier ecosystem and slightly reduced cord cutting, will create a more solid foundation of sort of affiliate revenue going forward as well. So we're taking a long term view here but we think there's a ton of upside in this strategy. On the third part of your question there in terms of like the nature of the economics. I would say, this is a really fluid environment we're operating in, right? We've signed a couple of these deals. Each one is a bit different. Each one is a bit bespoke. So I don't think it's worth getting into sort of the microeconomics of each specific deal. Suffice to say that we wanted to make sure that we were very clear in terms of streaming revenue being driven by our new streaming subscriber definition. And so that should make comparisons, I think, more valuable in terms of ARPU, churn, et cetera. So you'll have sort of clean numbers going forward.

And then maybe just the last one, Patrick, you mentioned no meaningful indicators yet on the macro related concerns for the ad market. Can you maybe just help us think through the year-over-year comparisons on ad declines through the balance of the year, if there are potential incremental tailwinds from some of the factors that you just mentioned as an offset to some of the linear declines?

I mean, listen, Thomas, maybe what I'll do is, I'll start with kind of our initial expectations for the year and sort of juxtapose Q1 performance versus that breakout sort of linear and digital. I think that will be sort of the way to tact this. I think, listen, the linear market remains challenged, right, that's sort of well understood. Our performance on linear is almost entirely a function of the ratings environment. That is very similar dynamic to last year in terms of the split between ratings and what we call kind of marketplace or pricing, that's pretty -- that's been consistent on the linear side year-over-year. And in fact, in Q1, linear was frankly a little bit stronger than we had expected. Obviously, overall domestic advertising revenue was down 15%. I would say, the underperformance there was just due to softness on the digital side. We're seeing the exact same trends as everyone else in terms of a lot more additional supply in the market, kind of putting pressure on price, putting pressure on fill rates as well. So that was sort of the underperformance that we noted in the quarter. As far as the balance of the year goes, listen, it's a fluid market. These dollars, especially on the digital side, they move fast, they can come in, they can come out. We're really pleased with the reception that our programming has received in the market. Most recently at our upfront that continues to resonate we hear from partners on a daily basis. And so we feel that with the tools that we've given our partners in terms of attribution and whatnot, we will be well positioned to kind of attack this market going forward.

And our next question will be from David Joyce of Seaport Research Partners.

I guess, just a couple more add-ons there. I was just wondering how much of your advertising is coming from streaming at this point, given that that's where some of the pressures are? Is it still in the low single digits portion of your advertising? And I was wondering on the international side, when you would be lapping the subscription revenue issues from the Spanish drop?

I'll take your first question on the streaming advertising. It delivers incremental overall revenue to our pool. However, it does give us, because of our genre based services, it gives us a great opportunity on the sponsorship side for integrated partnerships and an opportunity for marketers to really actually heavy hit the tip of the spear of the horror fans and the -- with the Shudder launch and with our AMC franchises. So it's part of an overall mix that drives actually significant dollars for the company overall.

I'll take the International question. So with Movistar, not dissimilar to BT in the UK a couple of years ago, they've completely changed their strategy and as of last fall said they no longer wanted to carry any linear services. So similar to BT, we were probably one of the last ones that they had maintained. There's been some significant shifts in their senior leadership over the past month or so and we continue to speak with them. But at the same time, our growth in the Spanish market with other partners has been significant, and so we anticipated this change. We have plans in place to offset the revenue changes there and we're optimistic that we may have a different relationship with Movistar going forward.

And then just to add on that -- on your financial question there, that happened at the end of the year 2024. So it's sort of a clean comp in terms of you're looking kind of year-over-year, number one. Number two, this was built into our guidance. So it's not a change in terms of how we're kind of attacking the year.

And if I could just ask about the seasonality this year. Are there any comparison challenges or benefits based on new originals coming on that impact revenue or the cost side of things?

I'd call out one. I wouldn't call it seasonality, I'd call it more just kind of cash flow dynamics in terms of the production schedule. You will have noted the very healthy free cash flow generation in Q1. I think the free cash flow generation is going to be kind of front loaded this year towards the first half, partly because we've got more production lined up in the back half. And in terms of the specific working capital dynamics, obviously, there's some additional headwinds kind of below the line from increased interest expense. So we don't have the tax benefits that we recognized in the first half of last year. Those have been mostly offset by working capital kind of grab backs, we're good guys, we've been able to define this year. So that's the only, I think, kind of noteworthy seasonality aspect to the kind of the income statement that I think is worth calling out at this point.

[Operator Instructions] Our next question will come from Stephen Cahall of Wells Fargo.

First, Patrick, maybe to just follow-up on some of the seasonality questions. So I think revenue in Q1 was down a little weaker than what you guided to for the year. Where do you expect that revenue acceleration to come from as we get through the balance of the year? Is that from streaming as you start to put through some of those price actions that you talked about? Is it some of the lumpiness to the content schedule for advertising? So just helping us maybe shape the year on revenue a little bit. And then I'd love to revisit the ad market. I think what we've heard kind of to sum up from the peer group this week is that, there's definitely some of that digital weakness, tough to tell what's going to happen in linear, some caution, but as you say, kinda not downright challenges quite yet. I guess, following up, how much of the business do you think is exposed to some of these digital trends? And as you start to get into the upfront, do you think you can firm up some of the linear stuff to offset that? We'd just love to kind of get a sense of how you broadly think about your advertising revenue growth expectations for the year versus maybe where you started last quarter?

I'll take the first and Kim will take the second. In terms of the cadence of the revenue over the balance of the year, you've effectively answered your own question, which is, with the price increases we put through on the streaming side in Q1 and we've got a couple more price actions to take in Q2 and Q3, as I mentioned in my prepared remarks, that's going to compound over time. And so, you'll see an acceleration of streaming revenue growth throughout the year. The streaming revenue growth that we articulated as far -- as part of the guidance was largely predicated on pricing as opposed to volume. Obviously, looking to grow both but it was more pricing heavy. And to date, the pricing actions you put through have taken extraordinarily well, so in line with expectations. And so we feel really good about that. And then the second piece of the equation is obviously content licensing. It was a little bit lighter this quarter. We had frankly a large deal move from Q1 to Q2. So you'll see that kind of rebound over the balance of the year. I wouldn't call it seasonality as much as I would just call it just the nature of the content licensing beast. But I think those are the two factors I'd call out in terms of the revenue acceleration over the balance of the year.

I would definitely agree with our peer group in expressing that uncertainty in the marketplace, it is here but it is not new. We've all been navigating these uncertain times since the pandemic. I feel like specific to your questions, we've a highly trained sales organization at AMC that's in place to navigate these changes and fluctuations in an ongoing way. As Patrick mentioned, we're seeing real strength in our direct sales and our programmatic sold business Q1 specifically but that influx of supply is putting pressure on price for the marketplace overall. We're feeling very confident about our premium content, the shows that are coming, our advanced advertising capabilities that we've worked on for the last four years in earnest and that continues to separate us from the crowded market and is delivering very unique value to our advertising customers. I think our goal is to focus on our viewers first strategy, which is to make sure our viewers can watch our content wherever and whenever they want on any device at any time. So from this vantage point, I would say, the increase in the inventory is actually a good thing, showing viewership shifts into areas like FAST and AVOD, areas that we fully embraced as a company from a distribution standpoint. I think the only other thing I'd just say is, we're -- the impact of what we're seeing is something we're really trying to insulate ourselves against. And we're working very, very closely with our television distribution partners on making more and more of our linear inventory, DAI enabled, which means digitally enabled, which actually -- this growth allows us to continue to let our content scale and digitally monetize against what has traditionally been a linear monetization environment. So we are sticking to the plan and anticipate being able to navigate this bumpiness.

And maybe just to take it up for a macro second, here are two macro levels, Stephen, for a second is like just to reiterate. This is -- our streaming products are profitable, and to Kim's point about digital, we go through it a lot but people don't always remember. We have 19 FAST channels, 136 feeds on 12 different platforms. So if you integrate that with the existing ad-supported streaming services in AMC+ and soon Shudder and the others following behind that, we just keep expanding our capacity for digital advertising. And then we couple that with the technological advances that we have to do both digital insertion on linear and then integrated selling of segments across all of these 136 instances of our products in a digital format. So it's all coming together, which helps us I think sustain our momentum when the marketplace gets a little chunky like it is right now.

And maybe just a quick follow-up in case I missed this. Did you talk about what you expect content spend and content amortizations to be this year? That'd be helpful to understand too.

I'm pleased to report there's no change from kind of what we've been articulating in the past, which is amortization is going to be probably slightly lower year-over-year. Cash content spend is also going to be down kind of slightly, I would say. But important to note there that the volume of productions are staying reasonably flat year-over-year in terms of the number of episodes that we're producing across our platforms. We shifted the mix a little bit and we're trying to program them as efficiently as possible, obviously. But there's been no change in the volume of production or the expectations around our cash content costs this year.

Or the quality, I just want to reiterate, a show like Dark Winds, which is extremely efficient in the amount of money that we spend per episode continues. We're so proud of the Rotten Tomatoes 100%, all three seasons, the lift that we got on AMC+ this year for the season three premiere and just the overall awareness and interest in that series and then the continued interest in The Walking Dead, and we're excited for next quarter to give you some updates on how Dead City season two went and then we're looking forward to the next season of Daryl Dixon with The Walking Dead. But the unscripted -- also, as we mentioned in the comments, the unscripted continues to perform really well in addition and everybody knows that's less expensive programming too. But the edict from above, which has been in place for forever is we can never sacrifice the quality of what we create for any business situation. And thankfully, Dan and the team continue to produce amazing content that is well received at a very reasonable price. So it's a big piece of our success.

Thank you. And I'm showing no further questions at this time. I would like to turn the call back to Nick for closing remarks.

Thank you for joining us today. Have a good day.

And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.