AMC Global Media Inc.

Good day, and thank you for standing by. Welcome to the AMC Network's third quarter 2022 earnings conference 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. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nick Siebert, Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the AMC Network's third quarter 2022 earnings conference call. Joining us this morning are Christina Spade, Chief Executive Officer, Patrick O'Connell, Chief 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 Network's 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 at the end of today's press release. With that, I'd like to turn the call over to Chris.

Good morning, everyone, and thank you for joining us. As I begin my new role as CEO of AMC Networks, I am proud to lead the company at one of the most exciting moments in our history on many fronts. Today I will discuss our third quarter 2022 operating performance and our goals and strategies for future value creation based on what we are seeing in today's landscape. Patrick O'Connell, our new CFO who joined the company in August, will then review our financial performance in more detail. In the third quarter, we added 300,000 streaming subscribers and we now have 11.1 million total paid subscribers, representing a 44% year-over-year increase in subscribers and a 41% increase in streaming revenue. We continue to expect we will end the year with approximately 12 million total streaming subscribers. Our meaningful and consistent streaming growth has been driven by our strong content slate, coupled with our strategic marketing efforts, which have been significantly evolving this year. Our third quarter results were impacted by several factors, including strong streaming growth, the timing and availability of content licensing deliveries, a softer scatter and direct response advertising market, and unfavorable foreign exchange impacts. As a result of these market indicators, we expect full year 2022 revenue growth to be flat to low single digits. Due to better visibility of the timing of certain production items, we also anticipate full-year free cash flow to be between break-even and $50 million for 2022. Our year-to-date adjusted operating income margin is 28%, which reflects our consistent ability to strategically manage our investments for strong profitability. Patrick will review our guidance in greater detail shortly. AMC Networks is in the midst of an important transformation with streaming growth momentum and new opportunities that are enabling us to transition to a consumer-focused, multi-platform premium content company with a strategic mix of proven and new digital distribution revenue streams. In the two years since the October 2020 launch of our premium subscription AMC Plus streaming offering, we have significantly grown global distribution. With AMC+, we are offering a compelling content mix to create a very specific value proposition for viewers, centered on premium content offerings for discerning adults, which is the cornerstone of our AMC brand. With the success of AMC+, and our targeted services Acorn, Shudder, All Black, and High Dive, we are effectively executing a differentiated streaming strategy, super serving passionate audiences with highly curated content offerings. We are utilizing a broad array of our platforms to showcase and window our content as we fully monetize our content investment across our linear streaming and expanding digital platforms. We are leading in advanced advertising as we take advantage of new revenue opportunities, particularly in the deployment of addressable advertising and programmatic buying to forge a clear path of growth in digital advertising revenue. Underlying all of this is the strength of our content curation, driven by a diverse slate of excellent storytelling that viewers fall in love with and they can't live without. This is our North Star that will drive our ongoing success. Against this backdrop, we are nimbly navigating secular trends, a fast-changing and competitive marketplace, and ever-evolving consumer behaviors. I have witnessed firsthand, particularly over the past six to 12 months, our ability to successfully iterate and learn from what we are seeing in the marketplace as consumers engage with our brand offerings. At this juncture, we are keenly focused on strategically operating within the digital marketplace that is taking shape for the future, while also optimizing our linear HEST. Ongoing success will be driven by strong execution of three key goals. First, develop, create, and curate world-class premium content tailored for our target audiences and communities to drive high engagement. Second, prioritize IP ownership to fuel our multi-platform distribution opportunities and digital growth. And third, manage winning economics and profitability for the long term as we continue to reconstitute our revenue mix. The best and most recent example of our content strength is our successful October 2nd debut of Anne Rice's Interview with the Vampire. We developed and launched a carefully orchestrated marketing campaign that significantly broke through to new and existing fans, utilizing our multiple distribution platforms and our awareness and performance marketing capabilities as a powerful megaphone to launch the series and our new Anne Rice Immortal Universe franchise Our campaign kicked off earlier this year at San Diego Comic-Con, and in September, our new AMC Plus brand campaign, with our new Above and Beyond tagline, fueled strong awareness leading into the series launch, which was in tandem with the premiere of the final eight episodes of the Walking Dead flagship series, providing us with a huge built-in audience. It has been a winning formula for us, with Interview with a Vampire ranking as the most successful launch in the history of AMC Plus in terms of viewership and acquisition. Parrot Analytics recently reported that since its release, Interview has had nearly 25 times the demand for the average show in the U.S. with week-over-week increases, underscoring AMC Network's ability to punch well above our weight and create sought-after content that garners outsized attention and engagement. The Critically Acclaimed series is also the number one new drama on ad-supported cable for 2022 to date, demonstrating the continued strength of our linear platform with AMC being home to four of the top 15 cable dramas this year in both key demos. Overall, these results are a strong validation of the coordinated efforts that supported this launch and an indication of how we are strategizing around these big content moments in the future. The next series in our Anne Rice Immortal Universe, Anne Rice's Mayfair Witches, starring Alexandra Daddario, will premiere on January 8, 2023 on AMC Plus and AMC. Our talented team has already begun early promotion to launch this series strongly, including promotion at New York Comic Con last month and targeted awareness marketing in Q3 and Q4. As we look forward to the last weeks of the Walking Dead flagship series, the most successful show in the history of cable television. We are excited about the growth prospects of our planned expansion of this franchise, with several new series, including The Walking Dead, Dead City, which recently wrapped production, a spin-off featuring fan favorite Daryl Dixon, set in Paris, and also in 2023, we'll have the return of Fear the Walking Dead for its eighth season, with more to come, including a new series starring Rick and Michonne, These new series in the Walking Dead universe will propel this vibrant and vital global franchise in exciting new ways, engaging loyal fans who continue to display affinity and enthusiasm for this universe while appealing to a whole new generation of viewers as well. I would like to spend a moment on how we have approached franchise management around both of these important properties. Within less than two years of buying the Anne Rice IP rights, we have begun to premiere two strong series in this franchise, with more to come. The excellent creative team supporting this universe are already writing a second season of Interview with the Vampire, and we have Mayfair Witches produced and ready to kick off in 2023. As for The Walking Dead, yes, the flagship series is ending after 11 seasons and more than 175 episodes. But even as we mark this epic television moment, we have new stories featuring the most enthralling characters, providing a compelling entry point for new fans. So we have two things happening at the same time in our company as it relates to effective franchise management and our long-term IP ownership strategy. The successful launch of a powerful new universe and the effective management of an iconic one, enabling us to serve existing fans while opening the door to new fans fueling the continued growth of our franchise communities. For our targeted streaming platforms, Acorn, Shudder, All Black, and HiDive, we are highly focused on acquiring, retaining, and engaging subscribers with a profitable lifetime value and optimizing our content refresh rate to give us the greatest potential to have an impact with new and existing subscribers. With our targeted strategy, We offer an array of content that is diverse and enables us to build affinity-based, loyal communities in a cost-efficient manner, putting us firmly on a path for profitability and strong lifetime value of subscriber performance. Our second goal is to prioritize content ownership to fuel maximum multi-platform revenue monetization. Content ownership, including maintaining global rights, provides us with key benefits to fully maximize all of the revenue streams from our content investments across all windowed distribution platforms. Strategically prioritizing content ownership, especially for our franchises, provides optionality in terms of windowing content across their efficient and dynamic ecosystem of own platforms. And as we continue to expand internationally, N creates the opportunity to license our content to third parties when and if it makes sense to do so. As the distribution and streaming landscape continue to evolve, our digital platforms are evolving and expanding, creating new avenues for monetizing our high-quality content and tying to our third goal, maximizing the value of new digital opportunities and taking full advantage of the strength of our linear television business as we manage winning economics and profitability. We are utilizing our deep content libraries as we lean into the FAST and AVOD space, and we now have 14 FAST channels on seven leading platforms, including Roku, Pluto, Samsung, Vizio, Plex, Sling, and Comcast Zumo. Our linear networks are outpacing other cable networks by a wide margin, demonstrating the strength of our channel's portfolio. For the first nine months of the year, the prime time average delivery across our five linear networks matches our performance across the first nine months of 2021, outperforming the wider landscape in which cable networks on average are down 13% year to date. Our linear networks and our digital platforms are a complete strategic distribution ecosystem that we use in a dynamic way to elevate our popular and acclaimed content and use it to reach our fans, particularly younger and digitally savvy viewers. This ecosystem allows us to effectively and efficiently window our content, one of the foundations and core strengths of the television business, and also to apply new tech-enabled areas of monetization. In particular, we are seeing strong growth year over year in digital advertising, an increasingly meaningful revenue category for us. Relative to affiliate distribution, we have an expanding array of long-standing and mutually beneficial partnership relationships that bring heft and strength to everything we do. Yesterday, we expanded our partnership with Roku to feature AMC Network's high-quality original programming, fast channels, and targeted streaming services across Roku's broad and growing ecosystem. This agreement highlights the value we bring to our distribution partners with our premium content and platforms. Internationally, we are proceeding with an opportunistic approach, leveraging the strength and reach of our strong global partner relationships. We are launching AMC Plus in international markets, including new launches in the third quarter in Australia and New Zealand through strategic partnerships. Overall, we are mindful that the most effective way to successfully navigate the dynamic and evolving consumer landscape is to focus on the needs and interests of consumers and on our ability to super serve fans of our content with the entertainment they love and value. We will continue to innovate strategically and opportunistically and balance the importance of driving winning economics with profitability for the long term. I would like to take a moment to acknowledge and thank our talented global AMC Networks team for all they are doing to drive our success. And I would like to officially introduce Patrick as our new CFO. It is an honor to be working with Patrick again. I have no doubt that his proven track record for strong and strategic financial leadership will serve us well and will be a driving force for further value creation for AMC Networks.