AMC Networks Inc. Draws Strength From "Miscellaneous" Income Sources
TV content producer and distributor AMC Networks (NASDAQ: AMCX) reported second-quarter earnings early on Thursday morning. Strong domestic results outweighed weaker figures in the international segment, and the company made a few unusual moves during the quarter.
AMC Networks' second-quarter results: The raw numbers
| Metric |
Q2 2017 |
Q2 2016 |
Year-Over-Year Change |
|---|---|---|---|
| Net revenues |
$711 million |
$684 million |
3.8% |
| Operating income |
$176 million |
$178 million |
(1.1%) |
| Net income attributable to shareholders |
$103 million |
$77 million |
33% |
| GAAP earnings per share (diluted) |
$1.54 |
$1.05 |
47% |
What happened with AMC Networks this quarter?
The company's top line and operating results were largely in line with the year-ago quarter, but an obscure line item further down the income statement added a serious boost to AMC's earnings.
The year-ago period's $25 million in miscellaneous expenses, mostly related to currency exchange effects on international results, turned into a $19 million income generator this time. Currency effects played a part again, and a deeper partnership with fellow content producer RLJ Entertainment added $10 million to AMC's miscellaneous income.
The RLJ deal alone added $0.15 to AMC Networks' earnings per share, and the swing from loss to income on the miscellaneous line added up to a $0.66 boost over the year-ago result.
Otherwise, AMC's results stuck close to the script from the second quarter of 2016. The national networks segment delivered 6% higher sales and a 12% boost to operating profits, while the international division saw sales falling by 6%. Foreign operating losses quadrupled to $31.2 million, but the dollar value of that shift was roughly equal to the larger domestic segment's smaller move in percentage terms.
What management had to say
The slow overseas business sprung from the Digital Media Center operation AMC Networks used to run from its Amsterdam offices. As previously announced, that technical operations asset was sold to British media services company TVT for an undisclosed cash sum, and AMC Networks immediately recorded a $17 million non-cash goodwill impairment charge related to that deal. Another $12 million pre-tax charge will follow in the third quarter.
"The DMC business was a drag, and therefore that's now a divested asset," said AMC Networks CFO Sean Sullivan, according to a conference call transcript provided by Seeking Alpha.
Looking ahead
Ad sales and distribution revenues are expected to rise in the third quarter, at least for the domestic business segment. Overseas, the DMC sales will lead to modestly lower sales as well as that $12 million impairment charge you saw earlier, putting a damper on the quarter's international results overall.
The 2017 Emmy Awards ceremony is coming up in September, and AMC Networks scored 27 nominations for hit shows like Better Call Saul, Portlandia, and BBC America's Planet Earth II series.
"This has been a quarter of momentum and activity and validation, we think, across the industry in our approach and commitment to strong meaningful brands and outstanding story-telling," said CEO Josh Saban. "And that is why we're confident in our ability to continue to deliver solid financial performance and value creation for our shareholders."
10 stocks we like better than AMC NetworksWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and AMC Networks wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 1, 2017
Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends AMC Networks. The Motley Fool has a disclosure policy.