Third Quarter 2026 Earnings Call - AMC GLOBAL MEDIA INC

Financial Performance:

• Consolidated revenue grew 1% in Q3 2026; Domestic operations revenue increased 2%, while International revenue decreased 5% (4% excluding FX).
• Adjusted Operating Income (AOI) for the quarter was $70 million; Domestic AOI was $89 million (18% margin), and International AOI was $11 million (14% margin).
• Free cash flow was negative $52 million due to an $85 million one-time litigation settlement payment made in Q3; excluding this payment, free cash flow would have been $33 million.
• Streaming revenue grew 4% sequentially, reaching a 7% growth on a comparable basis excluding the divested All Black service.
• Content licensing revenue was $84 million; full-year 2026 domestic content licensing is anticipated to range from $460 million to $485 million.
• The balance sheet ended with $440 million in cash and approximately $1.3 billion in net debt; the company completed a $30 million accelerated share repurchase plan in October.

Guidance and Future Outlook:

• Full-year 2026 consolidated revenue guidance remains unchanged at $2.4 billion to $2.45 billion, and AOI guidance is $410 million to $420 million, despite the All Black divestiture.
• Full-year 2026 free cash flow is anticipated to be approximately $150 million, inclusive of the one-time $85 million settlement impact.
• Management expects the rate of decline in affiliate subscriber counts to remain consistent with 2025 levels, driven by new agreements and contractual changes that improved Q3 trends.
• Strategic focus remains on gross debt reduction rather than M&A or share repurchases, prioritizing long-term balance sheet strength.

Business Segments and Product Lines:

• Divested the All Black streaming service to Macro for an undisclosed sum; All Black had approximately 600,000 subscribers and was profitable prior to the sale.
• Secured a global co-exclusive licensing deal with Netflix for the entire The Walking Dead universe, bringing the original series to AMC+ for the first time starting January 7, 2027.
• Announced a new co-production partnership with Netflix to jointly fund, own, and produce series like the spy drama Bannerman, with revenue shared after recouping costs.
• Domestic advertising revenue decreased 7% but showed improvement due to digital growth and political category strength; upcoming titles include Thunder Road and Point Break.
• International operations saw a 5% revenue decline due to the wind-down of a joint venture in Poland/Africa and currency translation, though ad revenue grew 6% on a reported basis.
• Upcoming content highlights include Silo (Apple TV+ hit), Headlands (Netflix), Fearfest, The 30th Anniversary of Fear, Anne Rice's Mayfair Witches, and Rise of the Saints.

Market and Competitive Landscape:

• The media industry is shifting from traditional upfronts to a "year-round buying environment," with increasing digital budget allocation; AMC leveraged early investments in programmatic and data capabilities to capture this demand.
• In Iberia (Spain/Portugal), linear TV remains dominant due to high broadband penetration and government subsidies, differing significantly from the U.S. streaming shift.
• Central and Northern Europe markets are characterized by strong linear sports channels and government-subsidized cable bundles, delaying the transition to standalone streaming models.
• LATAM remains a "wild card" with high growth potential but significant challenges due to content theft and collection risks.
• AMC differentiates itself through targeted, niche streaming services (six services total post-divestiture) rather than broad general entertainment, focusing on "time well spent" for engaged fan communities.

Risks and Challenges:

• A one-time $120 million settlement related to a decade of litigation regarding The Walking Dead impacted Q3 free cash flow, with $85 million paid in Q3 and $35 million in January.
• The affiliate revenue base continues to face secular decline, though the rate of decline has improved recently due to rate actions and contract renewals.
• International markets present specific risks: piracy in LATAM and saturation/subsidization in Europe may limit streaming growth opportunities compared to the U.S.
• The advertising market remains evolving, with variability in digital demand outside the traditional upfront window.

Management Commentary and Tone:

• Management tone was confident and positive, emphasizing operational discipline, strong IP value, and strategic flexibility.
• CEO Kristen Dolan highlighted the success of the targeted streaming strategy and the synergistic value of the Netflix partnership in expanding The Walking Dead audience.
• CFO Josefa Locanduala confirmed that the All Black divestiture was profitable and that the core business's underlying performance remains unchanged despite the sale.
• The company expressed strong belief in the "studio asset" model, producing content for third parties (Apple, Netflix) alongside owned IP to maximize monetization.

Analyst Questions and Answers:

• Advertising Drivers: Analysts asked about the source of ad improvements; management attributed gains to programmatic/digital investments, political ad spikes, and the ability to monetize linear inventory digitally.
• All Black Profitability: Clarified that All Black was profitable prior to the sale, dispelling concerns about a drag on AOI guidance.
• Distribution Strategy: Management discussed expanding distribution via bundles (Charter, Philo) and direct-to-consumer relaunches, leveraging a unified tech platform to serve targeted audiences.
• Affiliate Trends: Confirmed that the rate of affiliate decline improved in Q3 due to contractual changes and that the weighted agreement term remains stable at roughly four years.
• Co-production Economics: Explained that co-productions reduce cash investment risk while allowing for shared long-term upside and perpetuity ownership of assets in respective territories.
• International Strategy: Management detailed that linear networks remain superior in Iberia and Northern Europe, while the U.S. market lessons inform strategies in other regions.

Other Key Points:

• The company operates on a unified technology platform for its six targeted streaming services, ensuring predictable costs and flexible packaging.
• Retention rates were consistent year-over-year despite rate increases across services.
• The Walking Dead franchise is treated as an evergreen asset with plans for new series well into the future.
• The company maintains a "prudent" approach to capital allocation, balancing programming investment with healthy free cash flow generation.