Television broadcasting and production company AMC Networks (NASDAQ: AMCX) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 11.7% year on year to $599.3 million. Its non-GAAP profit of $0.64 per share was 38.8% below analysts’ consensus estimates.

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AMC Networks Chief Executive Officer Kristin Dolan said: "We are pleased and encouraged by our results in the fourth quarter and across all of 2024. We achieved our full-year guidance across all key financial metrics, including generating healthy free cash flow of $331 million. Our free cash flow performance to date has been strong and we are increasing our expectations to approximately $550 million of cumulative free cash flow over the '24/'25 two-year period. We forged and expanded innovative partnerships that are helping to drive our company forward amidst a period of change that is challenging all media companies. In addition, we continued to delight fans by delivering high-quality and distinctive shows and films across our own targeted offerings as well as an array of partner platforms, and to expand our targeting capabilities to differentiate our advertising business."

Company Overview

Originally the joint-venture of four cable television companies, AMC Networks (NASDAQ: AMCX) is a broadcaster producing a diverse range of television shows and movies.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, AMC Networks’s demand was weak and its revenue declined by 4.6% per year. This fell short of our benchmarks and signals it’s a low quality business.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. AMC Networks’s recent history shows its demand has stayed suppressed as its revenue has declined by 11.6% annually over the last two years.

AMC Networks also breaks out the revenue for its most important segments, Affiliate and Advertising, which are 26% and 26.4% of revenue. Over the last two years, AMC Networks’s Affiliate revenue (retransmission and licensing fees) averaged 13.3% year-on-year declines while its Advertising revenue (marketing services) averaged 14% declines.

This quarter, AMC Networks missed Wall Street’s estimates and reported a rather uninspiring 11.7% year-on-year revenue decline, generating $599.3 million of revenue.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

AMC Networks has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.7%, subpar for a consumer discretionary business.

AMC Networks’s free cash flow clocked in at $37.59 million in Q4, equivalent to a 6.3% margin. The company’s cash profitability regressed as it was 3.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts predict AMC Networks’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 13.7% for the last 12 months will decrease to 9.6%.

Key Takeaways from AMC Networks’s Q4 Results

We struggled to find many positives in these results. Its revenue and EPS both missed. Overall, this was a softer quarter, but it seems expectations were low. The stock traded up 1.5% to $10 immediately after reporting.

Is AMC Networks an attractive investment opportunity at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.