AMC Networks Inc. (AMCX) Q1 2026 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the AMC Global Media First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker host, Nick Seibert, SVP, Corporate Development and Investor Relations. Nick, you may begin.

Thank you. Good morning, and welcome to the AMC Global Media First Quarter 2026 Earnings Conference Call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Kim Kelleher, President and Chief Commercial Officer; Dan McDermott, Chief Content Officer and President of AMC Studios; and Mike Sherin, Chief Accounting Officer. 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 our filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made today. We'll discuss certain non-GAAP financial measures on this call. The required definitions and reconciliations can be found in the press release we issued this morning, which is available on our website at amcglobalmedia.com. And with that, I'd like to turn the call over to Kristin.

Thanks, Nick, and Good morning, everyone. We've had a busy start to the year with the first quarter representing yet another successful quarter of double-digit streaming revenue growth and robust free cash flow generation. We saw a notable improvement in first quarter advertising revenue trends and remain encouraged by the progress we continue to see on that front. We also entered into a new long-term affiliation agreement with our partners, DISH and Sling TV. We're tracking to plan across all key metrics and are pleased to reiterate our financial outlook for the year. As a reminder, our 2026 outlook contemplates consolidated revenue of approximately $2.25 billion, AOI of approximately $350 million and free cash flow of at least $200 million. You may have noticed we recently changed our company name to better reflect the business we operate today. AMC Global Media is a studio-driven owner of world-class IP. We deliver programming in more than 100 countries and territories around the world on our own platforms and reach millions more through strategic licensing agreements. Our streaming business is the world's largest collection of targeted services, bringing superfans of specific genres, a level of depth and curation they can't find anywhere else. In the U.S., we're reaching streaming customers through direct subscriptions and hard bundle arrangements with partners like Charter and Philo. To date, we've seen 1.8 million hard bundle activations. Later this year, DIRECTV will hard bundle the ad-supported version of AMC+ into its video service. We expect this universe to continue to grow as streaming and linear distribution converges and consumer awareness of this additional value rises. These activations are in addition to our reported streaming subscribers of 10.1 million, which reflects our substantial retail customer base. We manage our business with a long-range perspective and focus on creating high-quality enduring content, generating free cash flow and driving shareholder value. Streaming revenue is growing and now represents our #1 source of domestic revenue. We expect stable domestic subscription revenue this year. While the quality and size of our streaming subscriber base remains important to us, over the past few years, we have focused on free cash flow in lieu of subscriber targets. Because of this, we will no longer report streaming subscribers quarterly, although we will provide meaningful updates from time to time. We continue to grow our strong presence on CTVs. FAST is a key component of our digital strategy and also provides promotional and marketing opportunities for our pay platforms. We have more than 40 FAST channels today, and we'll launch a dozen more in the coming months. We're also growing internationally as we expand our FAST presence in the U.K., LATAM and Spain. As we said last quarter, the streaming rights for one of the most watched shows in history, -- The Walking Dead return to us early next year. We've aligned our rights to January 2027 and envision licensing the Walking Dead Universe, which spans 7 series and 352 episodes and counting co-exclusively. We're seeing significant interest for this enduring franchise and are actively engaged in discussions with several major platforms. Last week, we had our annual upfront content showcase attended by our most important commercial and creative partners. It was great to come together to discuss new commercial opportunities and the content that will drive these relationships over the next year and beyond. We made a number of announcements, including that we've Greenlit our next big original series for AMC and AMC+, a multigenerational racing drama produced in partnership with NASCAR called Thunder Road. Dennis Quaid will play the lead character, and we are already seeing notable inbound interest from advertising partners on this series. We also renewed our sports docuseries Rise in partnership with the NFL and Skydance Sports. Building on the success of the first season, which featured the San Francisco 49ers, Rise of the Saints will focus on the New Orleans Saints and the team's historic run in the years following Hurricane Katrina. Eli Manning and his father, Legendary Saints quarterback Archie Manning, are both partners and will appear on the show, which will premiere early next year. And we announced a new partnership with Meta to make a number of our streaming apps available on the Meta Quest headset starting with AMC+ later this year. We're excited to meet fans on this immersive new platform. This month marks Acorn TV's second annual Murder Mystery May. Last year, this programming event drove Acorn to its biggest month ever. This year's major title is the new Brooke Shields series, You're Killing Me, premiering May 18. We're also in production on a second season of Irish Blood, starring Alicia Silverstone, which last year became the strongest show in terms of acquisition in Acorn history. All Reality, our newest targeted streaming service, is seeing strong initial growth driven by the Love after Lockup, Mama June and Bridezillas franchises. The service launched on Amazon late last year and is now also available through Roku and Apple. All Reality is a great example of how we continue to manage and adjust our streaming business to find and serve fans. A few recent content highlights to note. We launched the Audacity, AMC's newest prestige drama, and we go into production on the second season next month. We debuted a new season of our popular anthology series, -- The Terror, with The Terror: Devil in Silver. We've had a number of notable film releases over the last few weeks, including Forbidden Fruits, Faces of Death, and Over Your Dead Body, 3 very different titles that demonstrate strength and breadth of our film business. We'll see the return of important franchises with Anne Rice's The Vampire Lestat, premiering on June 7 on AMC and AMC+ and the third season of -- The Walking Dead: Dead City, slated for later this summer. Lastly, the search for a new CFO is progressing. And while we aren't announcing anything today, we will update you when we have news to share. Our Chief Accounting Officer, Mike Sherin, is joining us on the call today. Mike's skill and leadership reflect the depth of our finance team and the executive strength across our entire company. Mike will now review our financial performance for the quarter, our outlook and our continued focus on our capital structure, including the further debt reduction and planned additional share repurchases that we announced today. And with that, I'm pleased to turn the call over to Mike.

Thank you, Kristin. We are off to a solid start in 2026, and our first quarter results are consistent with the expectations we laid out when we issued our full year outlook earlier this year. First quarter consolidated net revenue declined 2% year-over-year to $542 million. Consolidated AOI declined 34% to $69 million with a 13% margin. We are pleased to report another quarter of healthy free cash flow generation with first quarter free cash flow totaling $65 million. We are on track to achieve our 2026 free cash flow outlook of at least $200 million for the full year. I'll now discuss our segment results. Domestic operations revenue decreased 3% to $471 million. Subscription revenue decreased 3% year-over-year with streaming revenue growth of 11%, offset by a 16% decline in affiliate revenue. The decrease in affiliate revenue was primarily the result of continued subscriber declines. We anticipate that our affiliate revenue rate of decline will improve in the second half of the year as new agreements and contractual changes take effect. First quarter streaming revenue benefited from rate initiatives implemented across our services. We ended the quarter with 10.1 million reported streaming subscribers as compared to 10.2 million subscribers in the prior year period. Retention in the first quarter was consistent with both the fourth quarter and first quarter of last year. Across our portfolio, subscribers remain active and engaged. In the first quarter, we saw a 5-year high in engagement, showing growth from both the prior quarter and prior year. Moving to advertising. Domestic operations advertising revenue declined 5%, primarily due to lower marketplace pricing. In the first quarter, we saw increased ratings in our scripted series within key demos and continued healthy growth in digital and advanced advertising. First quarter content licensing revenue of $53 million reflected the timing and availability of deliveries in the period and was consistent with the $54 million of licensing revenue reported in the first quarter of 2025. Regarding adjusted operating income for the quarter. Domestic operations AOI decreased 26% to $92 million, reflecting revenue flow-through and increased technical and operating expenses, including programming amortization. Moving to international. International revenues increased 3% to $72 million for the first quarter. Excluding the favorable impact of foreign currency translation, international revenues decreased approximately 5%. International subscription revenue, excluding FX, decreased 5%, reflecting the wind down of a joint venture that operated primarily in Poland and Africa. International advertising revenue, excluding FX, decreased 5% due to lower ratings and digital advertising in the U.K. International AOI for the first quarter was $5 million with an 8% margin. Turning to the balance sheet. We successfully retired our senior secured notes due 2029. During the quarter, we exchanged the majority of these notes for our existing 2032 notes, extending their maturity to 2032. Subsequent to quarter end, we redeemed the remaining unexchanged portion of the 2029 notes with cash. As announced in our earnings release, we continue to focus on reducing our gross debt, which will include the pay down of our remaining Term Loan A and termination of our credit facility next week. These transactions significantly extend our debt maturity profile with approximately three quarters of our total debt not due until July of 2032. Additionally, today, we announced plans to repurchase approximately $30 million of our Class A common stock through an accelerated share repurchase, reflecting the redemption of our 2029 notes subsequent to the quarter end and the planned transactions announced today, including the Term Loan A pay down and additional share repurchase, -- our cash position remains healthy with approximately $428 million of balance sheet cash and pro forma net debt and finance leases of approximately $1.3 billion, representing pro forma net leverage of 3.5x. Moving on to the reiteration of our 2026 financial outlook. Regarding our most important financial metric, free cash flow, we continue to expect to generate at least $200 million of free cash flow this year. Regarding full year revenue and AOI, we continue to expect consolidated revenue of approximately $2.25 billion and anticipate consolidated AOI of approximately $350 million. In terms of the cadence of AOI for the remainder of the year, we anticipate that AOI will continue to be back half weighted due to the timing of licensing revenue and streaming rate events. It is also worth mentioning that second quarter AOI will represent the low point for the year due to the above-mentioned revenue dynamics and the timing of expenses, including increased marketing in the quarter related to new series premieres. With that, I'll hand the call back to Nick.

Thanks, Mike. Operator, please open the line for the Q&A session.

[Operator Instructions] And our first question coming from the line of Steven Cahall with Wells Fargo.

Kristin, can you update us on how you're thinking about re-licensing The Walking Dead? Does it make sense to do kind of one big beautiful deal? Or are the economics better to chop it up into small pieces like linear versus streaming partners or different territories or geos? And if we do start to see some headlines on a deal like this, any way to think about what the residual component of that and how much drops down to AOI and free cash flow? And then, Mike, I just wanted to confirm, since I know that is a big piece of content that's potentially up to re-license, is that included in this year's AOI and free cash flow guidance? Or would it be in addition to? Since I know the timing is kind of unpredictable, I think it's not in the guidance, but just wanted to confirm.

Steven, thanks for the question. It's a multimillion- dollar question. It's a good one to be asking to kick off the call. We've been really excited about the inbound for discussion on the licensing rights for -- The Walking Dead. And we're really looking at every scenario, which there's a variety of ways to look at it. We definitely feel it's important to keep some of the content for ourselves co-exclusively. So we're emphasizing the fact that we're looking predominantly at co-exclusive deals. But there are some very large and enthusiastic partners in the bidding process right now. And so we're really looking at any variety of construct, but the key thing for us is co-exclusivity and then we may chunk it up with may all go to one person, domestic versus international, like there's many, many ways to skin this cat. So there's been a lot of activity at the company in working with potential partners and really looking at different scenarios. So stay tuned. But as far as the residuals and the other stuff, I'll flip that to the finance guys.

Steve, this is Mike. I can tell you that for 2026, The Walking Dead rights would not be included in the estimated AOI of $350 million.

Great. And then just a quick follow-up on streaming. If I caught that right, Mike, I think you said that there could be a rate event coming. I guess big picture is, would you expect streaming revenue growth to accelerate in the back half of the year? I think it's decelerated a little bit the last couple of quarters.

Yes. Steve, it's Nick. Kind of as we look forward, the way I think about it is kind of looking at double digits kind of for the year, kind of building throughout the year, gets you to the kind of flat subscription revenue growth.

Our next question coming from the line of Sean Diffley with Morgan Stanley.

So another one on The Walking Dead rights. Just obviously, Netflix knows the value of this IP really well. Are there other considerations beyond just monetary that would factor into your analysis of where they go and how you chop them up? And then second question, obviously, it looks like advertising was a good amount better. What's going on there? Is there anything to call out that's driving the better results? And then on the flip side, affiliate was a bit worse than us in the quarter. Obviously, sub declines in the ecosystem matter, but it looks like you're calling for an improvement in the back half. Maybe just some of the drivers there. I think you called out new agreements, but anything to assume on underlying cord-cutting trends in there as well?

Great. I think I'm going to kick all 3 of those questions over to Kim. Thanks, Sean.

Sure. Thanks for the questions. On your first question regarding The Walking Dead licensing, I would just say, of course, we consider the customer experience and discoverability when we're looking for what our co-exclusive partnerships are going to be going forward. We have several partners around the world for -- The Walking Dead right now, and we're engaged with all of them about the future. On advertising, I have to say we're pleased with the ad revenue trend in Q1, and we're seeing this continue into Q2. So we've really embraced the viewership changes that have come with streaming and FAST in AVOD and have seen growth across all areas. The commercial revenue team continues to optimize their digital delivery and performance across all the platforms real time, really focusing on yield. And like I said, we're excited to see the momentum that started in really second half of '25 continue into '26. In the first quarter, we saw strong digital growth, in particular, up 44% versus Q1 2025. And as Mike mentioned earlier in the script, on linear, we're seeing increased viewership, which reflects the strength of our programming, in particular, around increased ratings around our originals, specifically in key demos. So in general, we're seeing a healthier ad market compared to this time last year, which is good to see as we go into the upfront marketplace. And lastly, on affiliate, I really -- what you're seeing is timing. Obviously, we've had some domestic subscription declines in Q1 reflected, but we see domestic subscription revenue to be overall stable for the year.

Yes. And Sean, there's a lot of kind of timing of different deals. Every deal is different with each partner and the renewal calendar and things like that. So what we're kind of looking at for the full year is kind of the rate of decline being similar to kind of what it was last year in affiliate revenue. So I wouldn't read too much into 1Q.

And our next question coming from the line of David Karnovsky from JPMorgan.

Maybe, as a follow-up to The Walking Dead commentary, it would be great to hear just about the health of the content licensing market generally at the moment. And then on the ASR, can you just speak to the backdrop of that decision, expected shares that will come back and kind of any read-throughs to long-term capital allocation?

Yes. David, this is Kristin. I'll start with the content licensing and let Kim add more color. I mean it's a key part of our revenue makeup. And we've been really opportunistic around the deep library that we have. And this year, we've actually advanced on the back end, our capability to really look through the content that we have the rights to and dig deeper into the library through just better management of the inventory through software that Stephanie has helped us create. So when our teams are going out domestically and globally, they have a really good sort of suitcase of every single thing that we have available to license. And we've been able to make, I think, a bigger dent in the opportunity over the last 18 months because we know everything that we have and because Dan continues to make content that has strong IP and that's very attractive across the world. So content licensing is and will continue to be a really key important part of our future. But as to the specifics, I'll flip it over to Kim again.

All great points. And I would just say we're trying to be very thoughtful about how we window in our licensing agreements, not only domestically but around the world. And to your question very specifically, it's a very robust and competitive market right now. So it's a good time to be in market with this particular IP.

David, this is Mike. On the ASR question, I would say, first and foremost, our capital allocation priorities are to continue to invest in great content for the business. So we remain focused on free cash flow generation and manage the balance sheet with a focus towards debt reduction and maturity extensions. And then occasionally and opportunistically, we would return capital to shareholders.

Yes. And I'll just add to that, specifically in terms of the additional share repurchase and how we're affecting that. We've been in the market a couple of times over the past year or so in our equity. And given the lower float and volume limitations and things like that, it just becomes kind of a grind trying to get not a lot of dollars to work, but a lot of shares back. And this ASR structure just kind of gives us more certainty and ability to affect roughly $30 million of share repurchases.

Our next question is coming from the line of David Joyce with Seaport Research Partners.

Two questions, please. First, on distribution. There are still some linear services in the U.S. where you don't have a carriage right now like Hulu or Fubo. What is your desire to get on more linear domestically and internationally? What sort of gating factors are there? Or are you really just more focused on building the streaming side? And then secondly, on advertising, I think you mentioned earlier that ad rates were down, but the revenue was pretty solid. What's driving that? Are you making more inventory available? Or is it a mix of the avails? Kind of what are those sort of puts and takes?

I'll take the distribution question, David. Yes, we are happy to have all of our products carried wherever we can have them carried, and they're equally important to us. Hulu is going to be interesting as they move down their evolutionary path. And then with Fubo, that was a strategic nonrenewal on our part last year. But I just want to emphasize that the linear channels are still very important to us as our streaming. And I think our secret sauce is our ability to work with all of the content that we have and make sure we can deliver it to our partners who can then deliver it to customers everywhere they want to watch the shows that we create.

And then on the ad front, I'd just reiterate, yes, a little bit of softness in rates, and that's really coming from the increased ratings and available inventory that we've seen come through in Q1. We've been able to capture those increases, in particular, across the original inventory and key demos with pricing opportunity. But because of the largeness of the ratings increases, we've seen a little bit of softness tied to the overall increase in inventory. But we're in very good shape, and we're very pleased with how the advertising performance went this Q1.

Our next question in queue coming from the line of Charles Wilber with Guggenheim Securities.

One on streaming subscribers and just the approach there. You called out the number of ad-supported AMC+ subscribers under the hard bundles agreement this quarter. I just wanted to see if you could talk a little bit about your strategy or your approach to subscriber acquisition and maybe the difference in monetization between the approaches between the direct subscribers in these hard bundle agreements.

Yes. Charles, it's Kristin. On streaming, because we're a smaller company, our goal is really to make the product available everywhere we can. And with the hard bundles, we think it really does add value because we have broader relationships with these distribution partners. So longer-term deals where, over time, their audiences are moving from linear to streaming. And so we'd like being in both places. We don't necessarily articulate specific revenue with each different category of content. We do overarching deals with our partners, and then we collaborate with them pretty extensively in Charter's case and in Philo's case to make sure that the products are represented well with the customers and they're available in whatever format. And the goal there is as these long-term relationships continue when the opportunities come up to reimagine the approach to revenue, then we may assign the revenue differently for streaming versus linear as the industry evolves. But our overall strategy, as you know, as we've talked about for the last 4 years, is to optimize the availability of the content to keep creating great content and to work on the business so that we're very opportunistic with both how we license, where we license, who we distribute to, how we distribute and then -- and keep ourselves out in the marketplace as a small but mighty player. So it's really part of the overall evolution of the industry as well as our evolution as a company. And did you have the second half of that or that was the bulk of it?

No. I mean, I think you answered it well. I just wanted to see if you can provide any color in terms of the monetization flow-through of the 2, but it sounds like it's a bit of a holistic approach with your distribution partners. Is that fair to say?

You said it better than me. Thank you. Yes, it was predominantly blended, and we're going to keep looking again for. We love the hard bundle scenario because for us, embedded in that is all the ancillary marketing that we get from partners and then the opportunity for our content to really be seen and experienced by people all over the world.

Our next question coming from the line of Doug Creutz with TD Cowen.

Can you just give an update on what your plans for cash content spending are this year and if that's evolved at all since the last call?

Sure. We'll flip that one to Dan.

Thanks, Doug. Investing in our programming is clearly the most important and meaningful thing we do. We have an incredibly strong production team. We're committed to engaging audiences with comparable volumes of high-quality content every year. We expect the same volume and quality of content in 2026 as in 2025. Generally, there's some variability between years due to the timing of programming commitments. But for this year, from the view we have today, we expect that from both a P&L perspective and a cash perspective, programming cash and amortization should be consistent, give or take, a little bit compared to last year.

Just to add to that, the team is really efficient and able to make a lot of great content with not a huge amount of spend. And what we're also focused on, which Dan's team has done a great job on is curating the right stuff, but then also moving efficiently towards greenlighting second season. So for example, with the Audacity or with Irish Blood, like if we know something is good and generally, we've been -- it's -- sometimes it is lightning in a bottle, but a lot of times, it's just really skilled people making great choices and working with great partners, and we've continued to bolster the library over the past couple of years under Dan's leadership. So it gives us the opportunity because the shows are good to move quickly on additional seasons and keep the fan base engaged and happy, which I believe we're going to see a pretty strong fan base in June for the The Vampire Lestat, our third season of the Interview With The Vampire because it's getting pretty crazy out there. So if that's the last question, I think we'll tell everybody, make sure you tune in on June 7 to The Vampire Lestat, the next series in our Anne Rice group.

Thank you. And I'm showing no further questions at this time. I will now turn the call back over to Nick for any closing comments.

Thank you all for joining us today. We appreciate your interest in AMC Global Media. Have a nice day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.