Income down at national networks

AMC reported higher profits in the second quarter as lower losses in its international operation offset declines at its U.S. networks.

Net income rose 3% to $106 million, or $1.82 a share, from $103 million, or $1.54, a year ago.

Revenue rose 7.2% to $761 million.

AMC stock fell 4% because earnings per share fell short of Wall Street estimates. Revenues were above Wall Street estimates, but only because they included a $30 gain from the recently acquired Levity Entertainment Group.

On the company's earnings call with analysts, CFO Sean Sullivan said that because of the Levity acquisition, the company was raising its guidance for  revenue to a mid-single digit increase from a low-single digit increase.

Sullivan also said the the company continues to expect that adjusted operating income would show low single-digit growth, with Levity contributing about 1 percentage point of that growth.

At the company’s national networks in the U.S., including AMC, We TV, Sundance TV, IFC and BBC America, operating income was down 0.8% to $210 million. Programming expenses rose including a $4 million write-off of programming assets.

Revenue rose 3.7% to $627 million. Distribution revenue increased 5.8% to $380 million. Advertising revenue was 0.6% to $247 million despite lower ratings following a 9% decline in the first quarter.

Sullivan said that ad revenue in the third quarter will show a "modest sequential decline due to the timing and mix of the airing of our originals."

The company cut the operating losses at its international and other segment by 673.7% to $11.3 million. International revenue rose 32.4% to $146.7 million.

Other revenue was up by $30 million because of the acquisition of Levity Entertainment Group.

“We continued to deliver solid financial and operating results in the second quarter, growing revenue and adjusted operating income; generating strong free cash flow; and using our capital to position the business for the long-term,” said CEO Josh Sapan. “Our recent transactions related to RLJ Entertainment and Levity are strategically consistent with several of our larger goals, including furthering our interests in ad-free direct-to-consumer businesses that we own and control, through RLJ Entertainment’s growing Acorn TV and UMC SVOD services, and content ownership.

Sapan noted that as an independent programmer, the company’s content and networks were carried by the most virtual MVPDs including AT&T’s Watch. AMC Networks total number of subscribers is up 2% from a year ago at a time when cord-cutting is reducing pay-TV customers.

“In an environment that is rapidly changing, our strong track record, along with our size and our attractive price to distributors, will enable us to continue operating from a strong competitive position, take advantage of growth opportunities, and create value for shareholders," Sapan said.