May 9, 2013 / 12:45 PM / in 4 years

"Walking Dead" breathes life into AMC results

(Reuters) - AMC Networks Inc reported quarterly results above analysts' estimates as more people watched the cable operator's shows, particularly "The Walking Dead".

Viewership of The Walking Dead's third season jumped 55 percent from that of the previous season. The season finale in March was watched by 12.4 million viewers, including 8.1 million from the 18-49 demographic coveted by advertisers.

" ... Audience size on the Walking Dead is probably the most significant piece of what drove revenue, because the audience is so charged and I think it was effectively monetized," a company executive said on a conference call with analysts.

The show, about a police officer who finds himself in a world of zombies after waking up from a coma, is based on a comic book series by the same name, written by Robert Kirkman.

It was ranked No. 1 on U.S. TV — broadcast or cable — in the 18-49 age group, averaging 5.6 million viewers for the latest season, according to The Hollywood Reporter.

AMC's first-quarter net income rose to $61.5 million, or 85 cents per share, from $43.2 million, or 60 cents per share, a year earlier.

Revenue rose 17 percent to $382.0 million.

Analysts expected earnings of 80 cents per share on revenue of $366.7 million, according to Thomson Reuters I/B/E/S.

"It ain't the mountains of Tibet but that's a robust beat," Albert Fried & Co analyst Richard Tullo told Reuters.

AMC's profit has missed estimates three times in the last eight quarters, including in the final quarter of 2012.

During the first quarter, advertising revenue rose about 27 percent to $164 million and distribution revenue rose about 12 percent to $196 million.

Slower Growth Ahead

However, the company said advertising revenue growth will slow down in the second quarter due to fewer episodes of original programs on AMC.

"We will continue to increase our investment in programming and marketing across all of our channels and as a consequence of this, there'll be continued variability in AOCF (adjusted operating cash flow) growth and margins," Chief Financial Officer Sean Sullivan said on the call.

AMC, which was blacked out from the network of the third largest pay-TV provider Dish Network Corp in July, said it expects to add a litigation settlement gain of about $133 million to its operating income in the second quarter.

Dish paid AMC and former parent Cablevision Systems Corp $700 million as part of a settlement.

AMC said in a filing last month that it would pay Cablevision $175 million from its share, leaving Cablevision with $525 million. (r.reuters.com/gaj87t)

Dish, whose customers account for about 13 percent of AMC's subscriber base, resumed broadcasting the AMC channel on October 21, but the blackout affected AMC's results until the fourth quarter.

" ... With 'Breaking Bad' and the Dish TV deal I think they will continue to post (more than) 12 percent year-on-year (revenue) growth," analyst Tullo said, adding that higher affiliate fees would drive AMC's second quarter revenue.

"Breaking Bad" is about a chemistry teacher who starts dealing in drugs to support his family. He is aided by one of his former students.

Dish could be paying AMC Networks 14 percent more in affiliate fees, than it was before the dispute, an analyst said on condition of anonymity.

AMC's earnings quality score was 96 out of 100 as of December, according to Thomson Reuters StarMine, compared with the industry's median score of 61.

The StarMine model measures the sustainability of future earnings based on past results and focuses on financial components such as accruals, cash flow, operating efficiency and one-time exclusions.

Dish reported a 40 percent fall in first-quarter profit on Thursday, hurt by higher programming and subscriber-acquisition costs. The company added fewer subscribers than expected during the quarter.

AMC's shares, which have risen about 11 percent in the last three months, were up about 3 percent at $66.41 on the Nasdaq on Thursday afternoon. They rose as much as 9 percent to a two-year high earlier in the day.

Editing by Don Sebastian and Sreejiraj Eluvangal

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