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AMC Networks stock sinks 15% as investments drag down Q2 income

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AMC Networks (NASDAQ:AMCX) shares dropped ~15% on Friday after the media company reported weaker than expected second quarter results.

Although streaming subscribers grew 46% to 10.8M, adj. operating income slipped 22% Y/Y to $196M, mainly due to the timing of increased investments in content and marketing to drive subscriber and streaming revenue growth. AMC (AMCX) added that it is on track to achieve long-term goal of 20M-25M streaming subscribers by 2025.

The New York-based entertainment firm generated net revenues of $738M that fell 4%, with normalized streaming revenues up 36%. Domestic operations net revenue slipped 2.8% Y/Y to $621.1M, while International & Other net revenue came at $125.8M, -9% Y/Y.

It reiterated full year 2022 financial outlook of low-single-digit revenue growth. Adj. operating income is guided be ~10% lower than 2021 due to increased strategic content, marketing and technology investments. FCF is seen at ~$100M.

Speaking on the results, Wells Fargo Securities said: “AMCX is in a tough spot because while content is driving nice growth in DTC subs, investors are most keen to see when the pivot returns AOI growth back to positive. There are concerns about free cash flow”