Third Quarter 2026 Earnings Call - AMC GLOBAL MEDIA INC

Financial Performance:

• Consolidated revenue grew 1% year-over-year to approximately $2.4 billion for the full year 2026.
• Adjusted Operating Income (AOI) was $70 million for Q3 2026; full-year 2026 AOI is guided at $410M–$420M.
• Free cash flow for Q3 was negative $52 million due to an $85 million litigation settlement payment; excluding this one-time item, FCF was positive $33 million.
• Full-year 2026 free cash flow is anticipated to be approximately $150 million, inclusive of the after-tax impact of the settlement.
• Domestic operations revenue grew 2%, driven by a 4% increase in streaming revenue and a sequential improvement in affiliate revenue decline (down 11% in affiliates, offset by streaming gains).
• International revenue declined 5% to $73 million, primarily due to foreign currency translation and the wind-down of a joint venture in Poland/Africa.
• Content licensing revenue was $84 million in Q3; full-year domestic content licensing revenue is guided at $460M–$485 million, with the majority recognized in Q4.
• Balance sheet showed $440 million in cash on hand and approximately $1.3 billion in net debt.
• Completed a $30 million accelerated share repurchase plan in October, buying back 2.8 million shares.

Guidance and Future Outlook:

• Full-year 2026 consolidated revenue guidance remains $2.4 billion–$2.45 billion, and AOI guidance remains $410 million–$420 million, adjusted to exclude the divested All Black service.
• Management anticipates maintaining the current revenue and AOI guidance despite the loss of All Black's contribution, attributing success to core business strength.
• Free cash flow variability may occur quarter-to-quarter due to the timing of cash payments and receipts.
• Long-term capital allocation priorities prioritize gross debt reduction over M&A and share repurchases.
• Future content strategy emphasizes "time well spent" via targeted, curated streaming services (now six total) rather than broad general entertainment.

Business Segments and Product Lines:

• Streaming: Sold the All Black streaming service to Macro; six targeted services remain. Excluding All Black, streaming revenue grew 7% on a comparable basis, driven by price increases.
• AMC Plus: Launching the complete "Walking Dead Universe" on January 7, including all episodes, specials, and behind-the-scenes content, alongside the final season of The Walking Dead: Daryl Dixon.
• AMC Studios: Producing Bannerman (spy drama with Jeff Daniels) under a new co-production deal with Netflix; Silo (Apple TV+) and The House on the Hill (Netflix) cited as successful third-party outputs.
• Upcoming Slate: Rise of the Saints (NFL/Skydance collaboration) launching in February; Anne Rice's Mayfair Witches Season 3 premieres Dec 30; Point Break and Thunder Road (NASCAR co-pro) in production.
• Advertising: Wrapped a successful upfront with firm investments; leveraging programmatic and data capabilities to capture digital budget shifting from traditional upfronts.

Market and Competitive Landscape:

• The industry is shifting toward "time well spent" with targeted content for specific fan communities rather than broad mass appeal.
• Netflix Partnership: Established a global co-exclusive licensing deal for the Walking Dead universe and a new co-production model to jointly fund and own future titles (e.g., Bannerman), sharing long-term upside.
• International Markets: Strong performance in Spain/Portugal with linear channels remaining top-tier; Central/Northern Europe dominated by subsidized sports bundles; UK remains a hybrid market; Latin America presents high growth potential but significant piracy risks.
• Distribution: Expanding into non-traditional channels (e.g., Peloton) and leveraging a unified technology platform to optimize D2C and wholesale bundling.

Risks and Challenges:

• Litigation: A $120 million settlement regarding The Walking Dead (paid $85M in Q3, $35M in January) impacted Q3 FCF but had no impact on adjusted operating income.
• Market Volatility: Advertising market trends and digital budget shifts create a year-round buying environment requiring agile programmatic strategies.
• Piracy: Significant risk in Latin American markets (e.g., Brazil) affecting guaranteed payments for content.
• Affiliate Declines: Continued subscriber loss in the pay-TV ecosystem, though the rate of decline is improving due to new contractual agreements.
• FX and JV Wind-down: International revenue impacted by foreign currency translation and the closure of the Poland/Africa joint venture.

Management Commentary and Tone:

• Tone: Confident and focused on strategic pivots; management emphasizes the "studio owner" competitive edge and responsible programming investment.
• Strategy: Explicitly moving away from the "broad" streaming model toward niche, fan-centric services with a unified tech platform and predictable costs.
• Content: Reiterated that high-quality IP and creative relationships are the core value drivers, with a focus on monetizing IP across linear, streaming, and third-party channels.
• All Black Exit: Framed as a strategic optimization; the service was profitable, and the sale to Macro allows Macro to focus on the Black audience with a machine to drive real attention.

Analyst Questions and Answers:

• Advertising Trends: Analysts asked about the shift from upfronts to scatter markets. Management confirmed strong programmatic and data capabilities are capturing digital demand, with Q3 political ads driving Q4 momentum. Ratings on BBC America, IFC, and WeTV remain positive.
• All Black Economics: An analyst questioned if All Black was losing money; Management clarified the service was profitable and its divestiture does not change the underlying core business performance or AOI guidance.
• Streaming Distribution: Discussion focused on bundling and D2C opportunities. Management highlighted a relaunch of AMC Plus with improved features and expansion into retail/equipment manufacturer partnerships.
• Walking Dead Go-to-Market: Asked about launching The Walking Dead on AMC+ while it is on Netflix. Management plans to market the comprehensive "Universe" experience (exclusive content, behind-the-scenes) to drive AMC+ subscriptions, leveraging the franchise's evergreen nature.
• Affiliate Trends: Questions regarding subscriber decline rates. Management noted the rate of decline improved in Q3 due to new agreements, with weighted agreement terms averaging four years.
• Co-production Economics: Clarified that co-productions (Netflix, Alcon) reduce cash investment risk while providing shared long-term licensing upside and perpetual ownership of IP.
• International Strategy: Discussed the pros/cons of linear vs. licensing; management noted that in markets like Iberia and Central/Northern Europe, linear models remain superior due to high penetration and subsidies, unlike the mature US market.

Other Key Points:

• The settlement of the Walking Dead litigation was a major Q3 event, resolved through a $120M payment structure that does not affect adjusted operating income.
• The company now operates six targeted streaming services on a unified technology platform, enabling flexible pricing and bundling.
• A specific focus on "political" advertising categories and high-interest series like Point Break and Thunder Road has driven strong advertiser engagement.
• The "FearFest" and "Best Christmas Ever" programming events continue to anchor Q4 content and advertising sales.
• Management remains prudent on capital allocation, balancing cash flow generation with strategic programming investments to support long-term balance sheet health.