Good day, and thank you for standing by. Welcome to the AMC Networks Inc. Second Quarter 2025 Earnings Call. [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, SVP, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the AMC Networks Second 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 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. And with that, I'd like to turn the call over to Kristin.

Thank you, Nick, and good morning, everyone. We continue to execute our clear strategic plan focused on programming, partnerships and profitability as we manage AMC Networks through this period of change in our industry. I'm pleased with the progress we've made in the first half of the year. In the second quarter, streaming revenue growth accelerated. We saw strong licensing performance and generated $96 million of free cash flow. In light of these positive results, we are raising our free cash flow outlook to approximately $250 million for the full year. In addition, we recently completed important financing transactions, which Patrick will discuss in more detail. We expect that the retirement of our debt at a significant discount will create meaningful shareholder value. I'd like to spend a moment discussing a core competency that differentiates AMC Networks, which is our ability to build and grow fan communities around our high-quality content. This is the goal of every company in media, and our success in this regard spans our linear networks, programming franchises, targeted streaming services and film business. Two weeks ago, we were at San Diego Comic-Con, the biggest fan event in the world and a major annual priority for our company. Our Walking Dead and Anne Rice universes and for the first time, our Shudder streaming service were well represented. Active fan relationships drive our company and also deliver meaningful value to our distribution and advertising partners. It was powerful and affirming to see people lined up for hours to be terrified at our Shudder activation to watch Norman Reedus and Melissa McBride preview a new season of The Walking Dead: Daryl Dixon in Hall H or experienced the cast of interview with the Vampire entering Ballroom 20 to deafening applause. We've also approached streaming in a unique and…

Thanks, Patrick. Operator, we'll now move to the Q&A portion of the call.

[Operator Instructions] One moment for our first question, which will come from Thomas Yeh of Morgan Stanley. Thomas, your line is open.

Can you dig into the source of the free cash flow upside a little bit more relative to the reiteration of revenue and EBITDA? It sounded like Patrick, you mentioned cash tax savings is a driver. Any changes to cash spending in the roughly $1 billion zone and working capital to help us bridge the gap? Patrick O’Connell: Thomas, thanks for the question. Yes, just unpacking the kind of increase in the free cash flow guide, a couple of factors. I would say the largest factor is the cash taxes. An offset to that was we did have some incremental cancellation of indebtedness income on which we pay tax on. But on a net basis, cash taxes is the largest component of guidance increase. I would say, second to that would be savings across some of our programming. Those were modest in relation to the cash tax savings, but still important. And sort of even more important than either of those two is the fact that the cash tax savings will sort of compound into '26 and '27 as we get sort of full interest deductibility going forward. Obviously, given our capital structure, that was an important component of that legislation for us. So not meaningful changes to the prior guidance in terms of cash programming spend. But in ranked order, it's the cash taxes first and the programming second.

Okay. That's super helpful. And if we benchmark relative to the original guidance across the revenue buckets at the beginning of the year, you reiterated content licensing and streaming. It seems like advertising is tracking a little worse and affiliate maybe a little bit better. As we think about the back half for those two, can you maybe just help us think about the trends on a year-over-year comparison basis and what we have been seeing recently continue? Patrick O’Connell: Yes. I mean we continue to feel good about the $2.3 billion total revenue guide. I think the story remains sort of much the same as it has been for the last couple of quarters, in that content licensing revenue continues to be strong. The market is strong. Obviously, our content performs well on our services. It performs extraordinarily well on other platforms, in addition. And so we continue to see strength in that sort of -- in those marketplaces, both domestically and internationally. So yes, on the margin, I would say, incremental strength on content licensing, a little bit of weakness on the advertising side. Affiliate, we continue to feel kind of really good about our relationships with our partners, and those deals continue to get signed as a matter of course. And so that I don't expect any sort of material change from our initial guidance for the year. I would caution, however, we don't sort of typically give kind of quarter-by-quarter kind of reframes on kind of a revenue line item basis. So there are multiple ways up the mountain. So we feel good about the 2.3, and there's obviously a number of ways to get there. But as -- in terms of broad brush strokes, I think the trends you've seen in the past are going to kind of carry through for the balance of the year.

Understood. And if I can squeeze one more in just on the Runway partnership and the puts and takes there, is it right to assume that you're allowing them to train off your content library and then in return, you can leverage these tools exclusively for yourself to empower you to do more efficient postproduction and preproduction? Maybe help us to frame through what the give and take is there.

Thomas, it's Kristin. So Runway is just a facilitation for us, it's a tool that allows us to ideate. But if the content is ours, then essentially, our goal is to put the best tools in the hands of our creative. So our teams are using Runway for visualization of ideas, whether it's set design or interestingly, shots that we wouldn't necessarily be able to afford on our budget, so things like shooting an oil rig or an aerial shot of a shipwreck. But the relationship there is really to help facilitate our opportunities to expand our scope, ensure creative alignment, visualize more quickly. And so we've had some wins. Actually, Dan could probably give you an example or two, but Runway is really just -- they're great partners, but we use them to facilitate our creative work. It's a technology play, it's not an integrated IP kind of play with any of our content or anything that we've created.

Yes, I'll just add to that, Thomas. I mean, I'd just say, look, the business has been integrating emerging technologies into the development and production of shows and film since the advent of the talkies. And as Kristin has mentioned and driven us over the last couple of years, we are an early adopter in the fast-moving space of deploying AI in the service of generative visualization. So we are using them to help us ideate, come up with concepts, ideas, help our showrunners visualize what they want to do, where they want to do it. And then in the realm of postproduction, we're able to save a considerable amount of money across our 30 to 50 episodes of television a year because generative AI is so good right now, it delivers 4K imagery, priced at anywhere from 20% to 40% of what traditional VFX is. And we're not displacing any of these people either. I wanted to be really clear that all of our efforts live clearly and cleanly within the parameters established by all the guilds. We're committed to the principle that everything we do is in support of the people that make these great shows possible, and we're literally just giving them tools that will enhance their ability to do the great work they do.

Our next question will be coming from John Hodulik of UBS.

A couple of more details on the top line. First, given the strength you've seen in streaming, do you think subscription revenue growth can grow sustainably from here? And then any more details you can tell us on the sort of ad trends or the ad market? Specifically, what are you seeing in terms of pricing from the linear side and the CTV side? We've heard about some pressure on general entertainment advertising in both sides. And just any color that you're seeing and what you expect for the second part of -- the second half of the year would be great. Patrick O’Connell: Great. John, it's Patrick. I'll take the streaming and Kim will take the advertising. Listen, we feel really good about the acceleration on the streaming side, both in terms of price and units, right? And so we've had some amazing success with some of the recent programming both on Acorn and on HIDIVE that really resonate with audiences. And so we're seeing kind of attractive upticks and kind of subscribers there. Could always do better, but we like what we see, particularly the last couple of quarters on those two platforms. In terms of the economics of the business, really important to note that we've done a handful of price increases across our platform with really attractive sort of net results, and we're seeing sort of a very, very modest impact to sort of gross adds, churn, et cetera. So the metrics continue to hold up really well. We've got some nice pricing power here. You're going to see that compound through the balance of the year into Q3 and Q4, obviously, beyond. So we feel really good about that, and we expect that, that streaming revenue will continue to accelerate into the back half of the year.

And John, just to note, I think it was in our remarks, but just to reiterate that streaming revenue will be our largest single revenue component this year. So it's going where we need it to go. And then, Kim, on advertising?

Sure. I think that it would be helpful to reiterate Kristin's comments about the strength of our upfront this year, which is probably the most leading indicator you've heard from others and us on where advertising is going to see nearly flat year-over-year volume while driving over a 25% increase in our digital revenue, it's all signs pointing in the right direction, as we look forward. Obviously, that upfront begins in October of this year and fourth quarter and flows through next year. So that's leading. I would also add that we continue to be -- our teams are leaders in the national linear addressable space. And what that really does, John, is that increases the value of our inventory by increasing the value it delivers to our advertisers through best-in-class targeting. And we continue to push as much of our inventory directionally, whether that's from the virtual MVPDs, the traditional MVPDs and obviously, the CTV space. We sell cross-platform to our partners, and that value increases with the layered targeting enhancements in the Audience+ programming -- the Audience+ tool we introduced actually almost 2 years ago.

And our next question will be coming from Charles Wilber of Guggenheim Securities.

I appreciate the detail on the upfront there. Just wanted to ask, could you share any kind of incremental color on particular areas of success, whether verticals or particular shows or content style or platforms or audience segments that are kind of working best for you? And then secondly, on the International FAST expansions, any cost or limitations on how quickly you can roll these out? And then, how you're thinking about the return profiles and the contribution timing from these?

I would just -- it's Kim again. I'd just throw in. We saw real health in our QSR and FAST casual category. Financial is up, food and retail is up. So those all bounced up in Q2 of this year, and we'll continue to watch the categories going forward. On the downside, automotive has been a tough one for consecutive quarters for many. So we continue to actually work hard in that space. In the areas of opportunity. We continue to expand that digital inventory, like I talked about in my last response. And we see that as the future because of the nature of the targeting abilities in that space, which do lend to higher CPMs. And so we're setting ourselves up for the future.

Great. And then on the FAST front, we've said it before, but now we're up to 28 FAST channels on 21 platforms around the world, so that's 190 global feeds at FAST. And we've been doing more and more partnership both with the OEMs, with the CTV folks, as well as with our other distribution partners. So like with TCL, there in -- we launched 11 FAST channels there in May. We domestically introduced 2 new channels in the marketplace. Acorn TV Mysteries and Love After Lockup with select partners and more to come. And then internationally, one of the big ones is we want launched The Walking Dead by AMC FAST channel in LatAm, including Brazil, which is the world's largest -- third largest FAST market. So we see a lot of opportunity here, particularly because as Kim always points out, we retain the sales rights and so our digital inventory stack gets bigger and broader as we launch more FAST channels. On the tech side, what I love about this is as we've continued the migration over to CTS. We now have all of our assets sitting on servers in one place with -- obviously, with a backup in another area, but 2 sets of cloud storage, one primary and one for disaster recovery, but everything can be fed from the same place. So as we ideate different channels, all of the files are there, and then our teams can put them together into a FAST channel that could either be a pop-up or persistent channel, if it's something super effective like The Walking Dead, seasonal opportunities, regional opportunities. And so FAST is just a great embodiment of sort of digital platform being so fast and then for us, the opportunity to continue to mine the library of everything that we have across all of our IP to create some really interesting and hopefully compelling content across the world.

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

A little bit more detail, please, on the contribution to the streaming subs and advertising from, I guess, the renewals that you inked with your distributors in the past year, where they're kind of making your streaming service more available. What's that then for the subscriber and advertising trends?

David, I'm sorry, did you mean advertising revenue? Or are you just asking about success so far with the [ FILOs ] and the spectrum constructs?

Yes, both. What those new relationships have done for the advertising trajectory? What they're doing for advertising for you? And how they supported your subscriber growth?

Okay. So just on the subscription side, we've always loved the Charter model, the Spectrum model. We've worked really closely with the team there on making sure that subscribers who are entitled to AMC+ as part of their TV select package, are activating. And we're seeing -- we're definitely in keeping, if not outperforming, some of the other folks that are available to Spectrum subscribers. So working very closely. And Charter has done an excellent job on subscriber. I get a lot of information reminding me what I have -- what my entitlements are. So we've been very, very pleased with the volume and take rate and engagement of those subscribers as well as with FILO, where we're also embedded AMC+ with our core linear channels. And then on the advertising front, these are ad-supported versions of AMC+, but it's still pretty early as far as like the total footprint for these bundled subscribers on the advertising front. But Kim, I don't know if you want to add anything to that?

I think that we will see it accrues over time, absolutely in an additive way, but it is a multi-revenue opportunity for growth.

Our last question will be coming from Steven Cahall of Wells Fargo.

Yes. So I'm sure you all have noticed that some of the media peers have been looking to split up their cable distribution assets from their content assets. And I imagine this is a question that you all have taken internally as well. You have a very successful studio, as we see from your licensing revenue. And then there's a lot of pressure on your revenue and AOI from the linear distribution part. So I guess, how are you thinking about that opportunity? You've been active in the debt market as well. So would just love any color there. And then maybe just back to capital allocation, so you bought back some stock in the quarter. Patrick, I think you said that your priorities haven't changed, which is still content over buybacks. So there's always scope to invest in more content to drive future value. How should we think about when buybacks come into the picture? Patrick O’Connell: Great. Steven, it's Patrick. I'll take them in reverse order. So first, on capital allocation, as you mentioned, the philosophy remains unchanged. I would look at the very modest $10 million buyback in the context of the other kind of capital markets activity we undertook over the course of the last couple of quarters, including reducing net leverage by 0.25 turn, given the discount that we captured in the recent activity. More importantly, obviously, still, we're extending duration of our balance sheet, including the new $400 million kind of secured issue due 2032. So we feel really good about the work we've done to set the company up for a long-term sort of financial success here via the balance sheet. So I would view the capital allocation in the context of those recent activities. But when you look up and you see…

And I'm showing no further questions. I would now like to turn the call back to Kristin for closing remarks.

Great. Thank you, operator. I'd like to close by saying it's a changing and sometimes challenging time in media. But as we discussed this morning, we're finding strength and opportunity in a clear strategic plan focused on programming, partnerships and profitability. I'm pleased with our results this quarter and our prospects for the remainder of the year, including a higher reforecast for free cash flow, which is, as everyone knows, one of our major ongoing priorities. So between that and the return of The Walking Dead: Daryl Dixon next month, the expansion of our Anne Rice universe later this year and our continued strong activity at Acorn, Shudder, HIDIVE across the portfolio of targeted streaming services, we think we're in pretty good shape. So we want to thank everybody again for joining us and for your continued interest in AMC Networks. And with that, we'll end the call.

And this concludes today's conference call. Thank you for participating. You may now disconnect.