AMC Networks Inc. - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 1-35106

AMC Networks Inc.

(Exact name of registrant as specified in its charter)


Delaware		27-5403694
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11 Penn Plaza,
New York,	NY	10001
(Address of principal executive offices)		(Zip Code)

(212) 324-8500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

AMCX

The

NASDAQ

Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company (as defined in Exchange Act Rule 12b-2).


Large accelerated filer	þ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares of common stock outstanding as of October 27, 2023:


Class A Common Stock par value $0.01 per share			32,073,020
Class B Common Stock par value $0.01 per share			11,484,408

AMC NETWORKS INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statements of Stockholders' Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			44
Item 2. Unregistered Sales of Equity Securities , Use of Proceeds, and Issuer Purchases of Equity Securities			44

Item 6. Exhibits			44
SIGNATURES			45

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	955,187	$	930,002
Accounts receivable, trade (less allowance for doubtful accounts of $9,581 and $8,725)	657,656		722,185
Current portion of program rights, net	11,978		10,807
Prepaid expenses and other current assets	276,284		286,875
Total current assets	1,901,105		1,949,869
Property and equipment, net of accumulated depreciation of $390,887 and $344,906	172,897		202,034
Program rights, net	1,807,549		1,762,939
Intangible assets, net	300,763		354,676
Goodwill	640,143		643,419
Deferred tax assets, net	15,542		13,618
Operating lease right-of-use assets	81,783		108,229
Other assets	471,003		599,052
Total assets	$	5,390,785	$	5,633,836
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	103,575	$	172,009
Accrued liabilities	373,403		419,065
Current portion of program rights obligations	257,508		374,115
Deferred revenue	69,796		134,883
Current portion of long-term debt	459,063		33,750
Current portion of lease obligations	36,822		36,411
Total current liabilities	1,300,167		1,170,233
Program rights obligations	146,924		200,869
Long-term debt, net	2,334,216		2,778,703
Lease obligations	99,116		124,799
Deferred tax liabilities, net	117,687		112,642
Other liabilities	84,988		139,108
Total liabilities	4,083,098		4,526,354
Commitments and contingencies
Redeemable noncontrolling interests	225,400		253,669
Stockholders' equity:
Class A Common Stock, $0.01 par value, 360,000 shares authorized, 66,666 and 66,118 shares issued and 32,073 and 31,525 shares outstanding, respectively	666		661
Class B Common Stock, $0.01 par value, 90,000 shares authorized, 11,484 shares issued and outstanding	115		115
Preferred stock, $0.01 par value, 45,000 shares authorized; none issued	—		—
Paid-in capital	372,925		360,251
Accumulated earnings	2,342,914		2,105,641
Treasury stock, at cost (34,593 and 34,593 shares Class A Common Stock, respectively)	(1,419,882)		(1,419,882)
Accumulated other comprehensive loss	(246,052)		(239,798)
Total AMC Networks stockholders' equity	1,050,686		806,988
Non-redeemable noncontrolling interests	31,601		46,825
Total stockholders' equity	1,082,287		853,813
Total liabilities and stockholders' equity	$	5,390,785	$	5,633,836

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues, net	$	636,954	$	681,843	$	2,033,029	$	2,132,025
Operating expenses:
Technical and operating (excluding depreciation and amortization)	284,900		293,459		933,590		903,468
Selling, general and administrative	187,232		207,972		567,136		670,444
Depreciation and amortization	28,009		29,735		79,629		79,556
Impairment and other charges	5,400		—		30,282		—
Restructuring and other related charges	10,563		—		22,537		—
Total operating expenses	516,104		531,166		1,633,174		1,653,468
Operating income	120,850		150,677		399,855		478,557
Other income (expense):
Interest expense	(38,757)		(34,308)		(115,304)		(97,085)
Interest income	11,686		3,625		26,944		8,552

Miscellaneous, net	(2,211)		(1,546)		12,518		3,540
Total other expense	(29,282)		(32,229)		(75,842)		(84,993)
Income from operations before income taxes	91,568		118,448		324,013		393,564
Income tax expense	(23,671)		(28,456)		(82,725)		(103,118)
Net income including noncontrolling interests	67,897		89,992		241,288		290,446
Net income attributable to noncontrolling interests	(4,473)		(5,326)		(4,015)		(18,163)
Net income attributable to AMC Networks' stockholders	$	63,424	$	84,666	$	237,273	$	272,283

Net income per share attributable to AMC Networks' stockholders:
Basic	$	1.44	$	1.96	$	5.42	$	6.32
Diluted	$	1.44	$	1.94	$	5.40	$	6.23

Weighted average common shares:
Basic	43,951		43,238		43,786		43,070
Diluted	44,041		43,732		43,905		43,707

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income including noncontrolling interests	$	67,897	$	89,992	$	241,288	$	290,446
Other comprehensive income (loss):
Foreign currency translation adjustment	(27,860)		(54,896)		(6,216)		(125,229)




Comprehensive income	40,037		35,096		235,072		165,217
Comprehensive income attributable to noncontrolling interests	(3,389)		(3,136)		(4,053)		(13,114)
Comprehensive income attributable to AMC Networks' stockholders	$	36,648	$	31,960	$	231,019	$	152,103

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2023	$	666	$	115	$	366,553	$	2,279,490	$	(1,419,882)	$	(219,276)	$	1,007,666	$	32,585	$	1,040,251
Net income attributable to AMC Networks’ stockholders	—		—		—		63,424		—		—		63,424		—		63,424
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		417		417


Distribution to noncontrolling member	—		—		—		—		—		—		—		(317)		(317)

Other comprehensive income (loss)	—		—		—		—		—		(26,776)		(26,776)		(1,084)		(27,860)
Share-based compensation expenses	—		—		6,378		—		—		—		6,378		—		6,378



Net share issuances under employee stock plans	—		—		(6)		—		—		—		(6)		—		(6)
Balance, September 30, 2023	$	666	$	115	$	372,925	$	2,342,914	$	(1,419,882)	$	(246,052)	$	1,050,686	$	31,601	$	1,082,287


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, June 30, 2022	$	660	$	115	$	341,403	$	2,285,664	$	(1,419,882)	$	(243,292)	$	964,668	$	48,778	$	1,013,446
Net income attributable to AMC Networks’ stockholders	—		—		—		84,666		—		—		84,666		—		84,666
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		883		883


Distributions to noncontrolling member	—		—		—		—		—		—		—		(407)		(407)




Other comprehensive income (loss)	—		—		—		—		—		(52,706)		(52,706)		(2,190)		(54,896)

Share-based compensation expenses	—		—		7,050		—		—		—		7,050		—		7,050

Net share issuances under employee stock plans	1		—		(1,249)		—		—		—		(1,248)		—		(1,248)
Balance, September 30, 2022	$	661	$	115	$	347,204	$	2,370,330	$	(1,419,882)	$	(295,998)	$	1,002,430	$	47,064	$	1,049,494

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
















Balance, December 31, 2022	$	661	$	115	$	360,251	$	2,105,641	$	(1,419,882)	$	(239,798)	$	806,988	$	46,825	$	853,813
Net income attributable to AMC Networks’ stockholders	—		—		—		237,273		—		—		237,273		—		237,273
Net income (loss) attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		(13,111)		(13,111)


Distributions to noncontrolling member	—		—		—		—		—		—		—		(2,151)		(2,151)

Other comprehensive income (loss)	—		—		—		—		—		(6,254)		(6,254)		38		(6,216)
Share-based compensation expenses	—		—		19,908		—		—		—		19,908		—		19,908



Net share issuances under employee stock plans	5		—		(7,234)		—		—		—		(7,229)		—		(7,229)
Balance, September 30, 2023	$	666	$	115	$	372,925	$	2,342,914	$	(1,419,882)	$	(246,052)	$	1,050,686	$	31,601	$	1,082,287


	Class A Common Stock		Class B Common Stock		Paid-in Capital		Accumulated Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		AMC Networks Stockholders’ Equity		Noncontrolling Interests		Total Stockholders' Equity
Balance, December 31, 2021	$	655	$	115	$	347,971	$	2,098,047	$	(1,419,882)	$	(175,818)	$	851,088	$	51,584	$	902,672
Net income attributable to AMC Networks’ stockholders	—		—		—		272,283		—		—		272,283		—		272,283
Net income attributable to non-redeemable noncontrolling interests	—		—		—		—		—		—		—		5,192		5,192
Distributions to noncontrolling member	—		—		—		—		—		—		—		(3,366)		(3,366)
Purchase of noncontrolling interest, net of tax	—		—		(3,066)		—		—		—		(3,066)		(1,297)		(4,363)


Other comprehensive income (loss)	—		—		—		—		—		(120,180)		(120,180)		(5,049)		(125,229)
Share-based compensation expenses	—		—		23,862		—		—		—		23,862		—		23,862


Net share issuances under employee stock plans	6		—		(21,563)		—		—		—		(21,557)		—		(21,557)
Balance, September 30, 2022	$	661	$	115	$	347,204	$	2,370,330	$	(1,419,882)	$	(295,998)	$	1,002,430	$	47,064	$	1,049,494

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) / (unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income including noncontrolling interests	$	241,288	$	290,446
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	79,629		79,556
Impairment and other charges	24,882		—
Share-based compensation expenses related to equity classified awards	19,671		23,862
Non-cash restructuring and other related charges	11,916		—
Amortization of program rights	626,685		610,099
Amortization of deferred carriage fees	15,662		24,747
Unrealized foreign currency transaction loss (gain)	7,778		(1,098)
Amortization of deferred financing costs and discounts on indebtedness	5,876		5,778

Bad debt expense	2,106		2,035
Deferred income taxes	2,973		46,292
Gain on investments	—		(4,084)

Other, net	(4,881)		(7,854)
Changes in assets and liabilities:
Accounts receivable, trade	48,570		99,711
Prepaid expenses and other assets	146,321		(18,174)
Program rights and obligations, net	(844,332)		(1,065,937)
Income taxes payable	16,198		13,181
Deferred revenue	(65,548)		66,822
Deferred carriage fees, net	(4,725)		(22,285)
Accounts payable, accrued liabilities and other liabilities	(198,930)		(106,506)
Net cash provided by operating activities	131,139		36,591
Cash flows from investing activities:
Capital expenditures	(28,392)		(33,510)
Return of capital from investees	696		1,771

Acquisition of investments	(283)		(5,002)

Loans to investees	—		(2,456)
Principal payment received on loan to investee	180		720
Proceeds from sale of investments	8,565		9,854
Net cash used in investing activities	(19,234)		(28,623)
Cash flows from financing activities:
Payments for financing costs	(342)		—
Principal payments on long-term debt	(25,313)		(25,313)
Deemed repurchases of restricted stock units	(7,229)		(21,557)

Principal payments on finance lease obligations	(3,134)		(2,606)

Distributions to noncontrolling interests	(47,546)		(28,232)
Purchase of noncontrolling interests	(1,343)		(2,500)
Net cash used in financing activities	(84,907)		(80,208)
Net increase (decrease) in cash and cash equivalents from operations	26,998		(72,240)
Effect of exchange rate changes on cash and cash equivalents	(1,813)		(29,051)
Cash and cash equivalents at beginning of period	930,002		892,221
Cash and cash equivalents at end of period	$	955,187	$	790,930

See accompanying notes to condensed consolidated financial statements.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Description of Business and Basis of Presentation

Description of Business

AMC Networks Inc. ("AMC Networks") and its subsidiaries (collectively referred to as the "Company," "we," "us," or "our") own and operate entertainment businesses and assets. The Company is comprised of two operating segments:

•Domestic Operations: Includes our programming services, which consist of our five national programming networks, our global streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our global streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, ALLBLK, and HIDIVE) and AMC+. Our AMC Studios operation produces original programming for our programming networks and third parties and also licenses programming worldwide, and IFC Films is our film distribution business. The operating segment also includes AMC Networks Broadcasting & Technology, our technical services business, which primarily services most of the national programming networks.

•International and Other: Includes AMC Networks International ("AMCNI"), our international programming businesses consisting of a portfolio of channels around the world, and 25/7 Media, our production services business.

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of AMC Networks and its subsidiaries in which a controlling financial interest is maintained or variable interest entities ("VIEs") in which the Company has determined it is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

Investments in business entities in which the Company lacks control but does have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method of accounting.

Unaudited Interim Financial Statements

These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2022 contained in the Company's Annual Report on Form 10-K (our "2022 Form 10-K") filed with the SEC. The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, such financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented.

The results of operations for interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates and judgments inherent in the preparation of the consolidated financial statements include the useful lives and methodologies used to amortize and assess recoverability of program rights, the estimated useful lives of intangible assets and the valuation and recoverability of goodwill and intangible assets.

Note 2. Revenue Recognition

Transaction Price Allocated to Future Performance Obligations

As of September 30, 2023, other than contracts for which the Company has applied the practical expedients, the aggregate amount of transaction price allocated to future performance obligations was not material to our consolidated revenues.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Contract Balances from Contracts with Customers

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.


(In thousands)	September 30, 2023		December 31, 2022
Balances from contracts with customers:
Accounts receivable (including long-term receivables within Other assets)	$	765,333	$	1,003,505
Contract assets, short-term (included in Prepaid expenses and other current assets)	2,364		48,594

Contract liabilities, short-term (Deferred revenue)	69,796		134,883
Contract liabilities, long-term (Deferred revenue included in Other liabilities)	181		683

Revenue recognized for the nine months ended September 30, 2023 and 2022 relating to the contract liabilities at December 31, 2022 and 2021 was $102.6 million and $63.1 million, respectively.

In October 2023, the Company entered into an agreement enabling it to sell certain customer receivables to a financial institution on a recurring basis for cash. The transferred receivables will be fully guaranteed by a bankruptcy-remote entity and the financial institution that purchases the receivables will have no recourse to the Company's other assets in the event of non-payment by the customers. The Company can sell an indefinite amount of customer receivables under the agreement on a revolving basis, but the outstanding balance of unpaid customer receivables to the financial institution cannot exceed the initial program limit of $125.0 million at any given time. As of the date of this report, the Company has not yet sold any customer receivables under this agreement.

Note 3. Net Income per Share

The following is a reconciliation between basic and diluted weighted average common shares outstanding:


(In thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Basic weighted average common shares outstanding	43,951	43,238	43,786	43,070
Effect of dilution:

Restricted stock units	90	494	119	637
Diluted weighted average common shares outstanding	44,041	43,732	43,905	43,707

As of September 30, 2023 and September 30, 2022, 1.9 million and 0.9 million, respectively, of restricted stock units have been excluded from diluted weighted average common shares outstanding, as their impact would have been anti-dilutive.

Stock Repurchase Program

The Company's Board of Directors previously authorized a program to repurchase up to $1.5 billion of its outstanding shares of common stock (the "Stock Repurchase Program"). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the three and nine months ended September 30, 2023 and 2022, the Company did not repurchase any shares of its Class A Common Stock. As of September 30, 2023, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Note 4. Restructuring and Other Related Charges

On November 28, 2022, the Company commenced a restructuring plan (the “Plan”) designed to achieve significant cost reductions in light of “cord cutting” and the related impacts being felt across the media industry as well as the broader economic outlook. The Plan encompasses initiatives that include, among other things, strategic programming assessments and organizational restructuring costs. The Plan is intended to improve the organizational design of the Company through the elimination of certain roles and centralization of certain functional areas of the Company. The programming assessments pertain to a broad mix of owned and licensed content, including legacy television series and films that will no longer be in active rotation on the Company’s linear or streaming platforms.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

During the third quarter of 2023, the Company substantially completed the Plan and exited a portion of its office space in its corporate headquarters in New York and office space in Silver Spring, Maryland and Woodland Hills, California. In connection with exiting a portion of the New York office, the Company recorded impairment charges of $11.6 million, consisting of $9.1 million for operating lease right-of use assets and $2.5 million for leasehold improvements. Fair values used to determine the impairment charge were determined using an income approach, specifically a discounted cash flow ("DCF") model. The DCF model includes significant assumptions about sublease income and enterprise specific discount rates. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

As a result of the Plan, the Company recorded restructuring and other related charges of $10.6 million and $22.5 million for the three and nine months ended September 30, 2023, consisting primarily of charges relating to exiting a portion of office space in New York and severance and other personnel costs.

There were no restructuring and other related charges for the three and nine months ended September 30, 2022.

The following table summarizes the restructuring and other related charges (credits) recognized by operating segment:


(In thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
	2023			2023
Domestic Operations	$	(783)		$	3,940
International and Other	(4)			1,642
Corporate / Inter-segment eliminations	11,350			16,955
Total restructuring and other related charges	$	10,563		$	22,537

The following table summarizes the accrued restructuring and other related costs:


(In thousands)	Severance and Employee-Related Costs		Content Impairments and Other Exit Costs		Total
Balance at December 31, 2022	$	37,150	$	74,724	$	111,874
Charges (credits), net	13,444		9,093		22,537
Cash payments	(40,285)		(61,305)		(101,590)
Non-cash adjustments	—		(11,916)		(11,916)
Other	(56)		1,481		1,425
Balance at September 30, 2023	$	10,253	$	12,077	$	22,330

Accrued restructuring and other related costs of $20.1 million and $2.2 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at September 30, 2023. Accrued restructuring and other related costs of $108.0 million and $3.9 million are included in Accrued liabilities and Other liabilities, respectively, in the consolidated balance sheet at December 31, 2022.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 5. Program Rights

Total capitalized produced and licensed content by predominant monetization strategy is as follows:


	September 30, 2023
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	198,647	$	537,260	$	735,907
In-production and in-development	—		284,783		284,783
Total owned original program rights, net	$	198,647	$	822,043	$	1,020,690

Licensed program rights, net:
Licensed film and acquired series	$	1,276	$	570,027	$	571,303
Licensed originals	2,084		134,300		136,384
Advances and content versioning costs	—		91,150		91,150
Total licensed program rights, net	3,360		795,477		798,837
Program rights, net	$	202,007	$	1,617,520	$	1,819,527

Current portion of program rights, net					$	11,978
Program rights, net (long-term)					1,807,549
					$	1,819,527


	December 31, 2022
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Owned original program rights, net:
Completed	$	215,496	$	322,248	$	537,744
In-production and in-development	45,098		294,086		339,184
Total owned original program rights, net	$	260,594	$	616,334	$	876,928

Licensed program rights, net:
Licensed film and acquired series	$	3,092	$	642,768	$	645,860
Licensed originals	5,373		171,418		176,791
Advances and content versioning costs	—		74,167		74,167
Total licensed program rights, net	8,465		888,353		896,818
Program rights, net	$	269,059	$	1,504,687	$	1,773,746

Current portion of program rights, net					$	10,807
Program rights, net (long-term)					1,762,939
					$	1,773,746

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Amortization of owned and licensed program rights, included in Technical and operating expenses in the condensed consolidated statements of income, is as follows:


	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	21,116	$	63,800	$	84,916	$	101,947	$	165,547	$	267,494
Licensed program rights	485		110,898		111,383		2,620		356,571		359,191
Program rights amortization	$	21,601	$	174,698	$	196,299	$	104,567	$	522,118	$	626,685


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
(In thousands)	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total

Owned original program rights	$	33,728	$	35,534	$	69,262	$	128,072	$	82,850	$	210,922
Licensed program rights	12,597		131,350		143,947		29,838		369,339		399,177
Program rights amortization	$	46,325	$	166,884	$	213,209	$	157,910	$	452,189	$	610,099

For programming rights predominantly monetized individually or as a group, the Company periodically reviews the programming usefulness of licensed and owned original program rights based on several factors, including expected future revenue generation from airings on the Company's networks and streaming services and other exploitation opportunities, ratings, type and quality of program material, standards and practices, and fitness for exhibition through various forms of distribution. If events or changes in circumstances indicate that the fair value of a film predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost. There were no significant program rights write-offs included in technical and operating expenses for the three and nine months ended September 30, 2023 or 2022.

In the normal course of business, the Company may qualify for tax incentives through eligible investments in productions. Receivables related to tax incentives earned on production spend were $191.7 million and $143.1 million as of September 30, 2023 and December 31, 2022, respectively, recorded in Prepaid expenses and other current assets, and $84.6 million and $104.5 million as of September 30, 2023 and December 31, 2022, respectively, recorded in Other assets.

Note 6. Investments

The Company holds several investments in and loans to non-consolidated entities which are included in Other assets in the condensed consolidated balance sheet.

Equity Method Investments

Equity method investments were $82.7 million and $79.6 million at September 30, 2023 and December 31, 2022, respectively.

Marketable Equity Securities

There were no investments in marketable equity securities at September 30, 2023 or December 31, 2022.

There were no realized or unrealized gains or losses on marketable equity securities for the three and nine months ended September 30, 2023. No gains or losses were recorded on marketable equity securities for the three months ended September 30, 2022, and $4.1 million of gains were recorded for the nine months ended September 30, 2022, included in miscellaneous, net in the condensed consolidated statements of income. In April 2022, the Company sold its interest in a marketable equity security for $9.9 million.

Non-marketable Equity Securities

Investments in non-marketable equity securities were $41.3 million and $42.7 million at September 30, 2023 and December 31, 2022, respectively. No gains or losses were recorded on non-marketable equity securities for the three months ended September 30, 2023, or the three and nine months ended September 30, 2022. During the nine months ended

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

September 30, 2023, the Company recognized impairment charges of $1.7 million on certain investments, which were included in miscellaneous, net in the consolidated statements of income.

Note 7. Goodwill and Other Intangible Assets

The carrying amount of goodwill, by operating segment is as follows:


(In thousands)	Domestic Operations		International and Other		Total
December 31, 2022	$	349,292	$	294,127	$	643,419


Impairment charge	—		(1,877)		(1,877)
Amortization of "second component" goodwill	(560)		—		(560)
Foreign currency translation	—		(839)		(839)
September 30, 2023	$	348,732	$	291,411	$	640,143

As of September 30, 2023 and December 31, 2022, accumulated impairment charges in the International and Other segment totaled $165.7 million and $163.8 million, respectively.

The $1.9 million impairment charge for International and Other relates to the 25/7 Media reporting unit. See "Impairment Test of Long-Lived Assets and Goodwill" below for more details.

The reduction of $0.6 million in the carrying amount of goodwill for Domestic Operations is due to the realization of a tax benefit for the amortization of "second component" goodwill at SundanceTV. Second component goodwill is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with the authoritative guidance at the time of the SundanceTV acquisition, the tax benefits associated with this excess are applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes, if and when such tax benefits are realized in the Company's tax returns. All remaining tax benefits were realized during the second quarter of 2023.

The following tables summarize information relating to the Company's identifiable intangible assets:


(In thousands)	September 30, 2023
	Gross		Accumulated Amortization		Net		Estimated Useful Lives
Amortizable intangible assets:
Affiliate and customer relationships	$	633,525	$	(410,571)	$	222,954	6 to 25 years
Advertiser relationships	46,282		(37,598)		8,684		11 years
Trade names and other amortizable intangible assets	105,441		(56,216)		49,225		3 to 20 years

Total amortizable intangible assets	785,248		(504,385)		280,863
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	805,148	$	(504,385)	$	300,763

(In thousands)	December 31, 2022
	Gross		Accumulated Amortization		Net
Amortizable intangible assets:
Affiliate and customer relationships	$	634,000	$	(373,240)	$	260,760
Advertiser relationships	46,282		(34,443)		11,839
Trade names and other amortizable intangible assets	105,338		(43,161)		62,177

Total amortizable intangible assets	785,620		(450,844)		334,776
Indefinite-lived intangible assets:
Trademarks	19,900		—		19,900
Total intangible assets	$	805,520	$	(450,844)	$	354,676

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Aggregate amortization expense for amortizable intangible assets for the three months ended September 30, 2023 and 2022 was $9.8 million and $10.2 million, respectively, and for the nine months ended September 30, 2023 and 2022 was $30.7 million and $31.2 million, respectively. Estimated aggregate amortization expense for intangible assets subject to amortization for each of the following five years is:


(In thousands)
Years Ending December 31,
2023	$	40,454
2024	39,128
2025	37,420
2026	33,076
2027	28,272

Impairment Test of Long-Lived Assets and Goodwill

25/7 Media is our production services business and is part of our International and Other operating segment. See "Item 1. Business - International and Other" in our 2022 Form 10-K for further details. During the second quarter of 2023, given the impact of market challenges at 25/7 Media, specifically as it relates to reduced demand for new content and series cancellations from third parties, the Company revised its outlook for the 25/7 Media business, resulting in lower expected future cash flows. As a result, the Company determined that sufficient indicators of potential impairment of long-lived assets existed at 25/7 Media. The Company performed a recoverability test and determined that the carrying amount of the 25/7 Media asset group was not recoverable. The carrying value of the asset group exceeded its fair value, therefore an impairment charge of $23.0 million was recorded for identifiable intangible assets, which is included in impairment and other charges in the consolidated statement of income within the International and Other operating segment. Fair values used to determine the impairment charge were determined using an income approach, specifically a DCF model, and a market comparables approach. The DCF model includes significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

During the second quarter of 2023, the Company also determined that a triggering event had occurred with respect to the 25/7 Media reporting unit, which required an interim goodwill impairment test to be performed. Accordingly, the Company performed a quantitative assessment using an income approach, specifically a DCF model, and a market comparables approach. Based on the valuations performed, a $1.9 million goodwill impairment charge was recorded, which is included in impairment and other charges in the consolidated statement of income, within the International and Other operating segment.

Note 8. Accrued Liabilities

Accrued liabilities consist of the following:


(In thousands)	September 30, 2023		December 31, 2022
Employee related costs	$	81,235	$	97,362
Participations and residuals	152,030		138,384
Interest	22,006		37,105
Restructuring and other related charges	20,055		107,998
Other accrued expenses	98,077		38,216
Total accrued liabilities	$	373,403	$	419,065

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 9. Long-term Debt

The Company's long-term debt consists of the following:


(In thousands)	September 30, 2023		December 31, 2022
Senior Secured Credit Facility: (a)
Term Loan A Facility	$	615,938	$	641,250
Senior Notes:

5.00% Notes due April 2024	400,000		400,000
4.75% Notes due August 2025	800,000		800,000
4.25% Notes due February 2029	1,000,000		1,000,000

Total long-term debt	2,815,938		2,841,250
Unamortized discount	(15,246)		(18,718)
Unamortized deferred financing costs	(7,413)		(10,079)
Long-term debt, net	2,793,279		2,812,453
Current portion of long-term debt	459,063		33,750
Noncurrent portion of long-term debt	$	2,334,216	$	2,778,703

(a)The Company's revolving credit facility remains undrawn at September 30, 2023. Total undrawn revolver commitments are available to be drawn for general corporate purposes of the Company.

During the nine months ended September 30, 2023, the Company repaid a total of $25.3 million of the principal amount of the Term Loan A Facility in accordance with the terms of the agreement.

In April 2023, the Company entered into Amendment No. 2 ("Amendment No. 2") to the Second Amended and Restated Credit Agreement (the "Credit Agreement"). Amendment No. 2 (i) reduced the aggregate principal amount of the revolving loan commitments under the Credit Agreement from $500 million to $400 million, (ii) replaced the interest rate based on London Interbank Offered Rate with an interest rate based on the Secured Overnight Financing Rate, (iii) increased the Company's ability to incur additional debt in the future to provide additional flexibility for future financings, including increasing the amount of the incremental debt basket to the greater of $1.2 billion and the amount that would not cause the senior secured leverage ratio to exceed 3.00 to 1.00 on a pro forma basis and (iv) made certain other modifications to the Credit Agreement. The maturity date of the Term Loan A Facility and revolving credit facility under the Credit Agreement is February 8, 2026. In connection with the modification of the revolving loan commitments, the Company recorded $0.6 million to write-off a portion of the unamortized deferred financing costs, which is included in interest expense within the consolidated statements of income for the nine months ended September 30, 2023.

On November 3, 2023, the Company gave notice of its intention to redeem the remaining $400 million outstanding principal amount of its 5.00% senior notes due 2024 (the “2024 Notes”) on December 12, 2023 (the “Redemption Date”). The 2024 Notes will be redeemed at a redemption price of 100.000% of the principal amount of the 2024 Notes plus accrued and unpaid interest to, but excluding, the Redemption Date.

Other Debt

During the second quarter of 2023, a majority owned subsidiary of the Company extended its credit facility totaling $4.5 million to July 21, 2024. The facility bears interest at the greater of 3.5% or the prime rate plus 1%. There were no outstanding borrowings under the credit facility as of September 30, 2023.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 10. Leases

The following table summarizes the leases included in the condensed consolidated balance sheets as follows:


(In thousands)	Balance Sheet Location	September 30, 2023		December 31, 2022
Assets
Operating	Operating lease right-of-use assets	$	81,783	$	108,229
Finance	Property and equipment, net	10,159		10,982
Total lease assets		$	91,942	$	119,211
Liabilities
Current:
Operating	Current portion of lease obligations	$	32,313	$	32,207
Finance	Current portion of lease obligations	4,509		4,204
		$	36,822	$	36,411
Noncurrent:
Operating	Lease obligations	$	83,551	$	105,768
Finance	Lease obligations	15,565		19,031
		$	99,116	$	124,799

Total lease liabilities		$	135,938	$	161,210

In connection with exiting a portion of its office space in New York in the third quarter of 2023, the Company recorded an impairment charge of $9.1 million for operating lease right-of use assets. Refer to Note 4, Restructuring and Other Related Charges for additional details.

Note 11. Fair Value Measurement

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

•Level I - Quoted prices for identical instruments in active markets.

•Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level III - Instruments whose significant value drivers are unobservable.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The following table presents for each of these hierarchy levels, the Company's financial assets and liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022:


(In thousands)	Level I		Level II		Level III		Total
At September 30, 2023:
Assets
Cash equivalents	$	89,539	$	—	$	—	$	89,539



Foreign currency derivatives	—		6,070		—		6,070

Liabilities

Foreign currency derivatives	—		3,613		—		3,613


At December 31, 2022:
Assets
Cash equivalents	$	80,000	$	—	$	—	$	80,000



Foreign currency derivatives	—		536		—		536

Liabilities

Foreign currency derivatives	—		8,965		—		8,965

The Company's cash equivalents (comprised of money market mutual funds) are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.

The Company's foreign currency derivatives are classified within Level II of the fair value hierarchy as their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.

At September 30, 2023 and December 31, 2022, the Company did not have any material assets or liabilities measured at fair value on a recurring basis that would be considered Level III.

Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting and impairment testing. These nonrecurring valuations primarily include the valuation of program rights, goodwill, intangible assets and property and equipment. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level III of the fair value hierarchy.

Credit Facility Debt and Senior Notes

The fair values of each of the Company's debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities.

The carrying values and estimated fair values of the Company's financial instruments, excluding those that are carried at fair value in the condensed consolidated balance sheets, are summarized as follows:


(In thousands)	September 30, 2023
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	610,362	$	585,141
5.00% Notes due April 2024	399,463		393,000
4.75% Notes due August 2025	795,796		738,000
4.25% Notes due February 2029	987,658		616,250

	$	2,793,279	$	2,332,391

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	December 31, 2022
	Carrying Amount		Estimated Fair Value
Debt instruments:
Term loan A facility	$	633,486	$	615,600
5.00% Notes due April 2024	398,687		375,348
4.75% Notes due August 2025	794,171		607,000
4.25% Notes due February 2029	986,109		620,818

	$	2,812,453	$	2,218,766

Fair value estimates related to the Company's debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Note 12. Derivative Financial Instruments

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than one of our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain accounts payable and trade receivables (including intercompany amounts) that are denominated in a currency other than the applicable functional currency.

The fair values of the Company's derivative financial instruments included in the condensed consolidated balance sheets are as follows:


(In thousands)	Balance Sheet Location	September 30, 2023		December 31, 2022





Derivatives not designated as hedging instruments:
Assets:
Foreign currency derivatives	Prepaid expenses and other current assets	$	357	$	141
Foreign currency derivatives	Other assets	5,713		395


Liabilities:


Foreign currency derivatives	Accrued liabilities	$	1,694	$	3,663
Foreign currency derivatives	Current portion of program rights obligations	176		82
Foreign currency derivatives	Other liabilities	1,743		5,220

The amounts of gains and losses related to the Company's derivative financial instruments not designated as hedging instruments are as follows:


(In thousands)	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

Foreign currency derivatives	Miscellaneous, net	$	(736)	$	(2,947)	$	9,077	$	(6,708)

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 13. Income Taxes

For the three and nine months ended September 30, 2023, income tax expense was $23.7 million and $82.7 million, respectively, representing an effective tax rate of 26% for both periods. The items resulting in variances from the federal statutory rate of 21% for the three and nine months ended September 30, 2023, primarily consisted of state and local income tax expense and tax expense related to non-deductible compensation.

For the three and nine months ended September 30, 2022, income tax expense was $28.5 million and $103.1 million, respectively, representing an effective tax rate of 24% and 26%, respectively. The items resulting in variances from the federal statutory rate of 21% for the three and nine months ended September 30, 2022, primarily consisted of state and local income tax expense, tax expense for an increase in the valuation allowance for foreign taxes and tax expense related to non-deductible compensation.

At September 30, 2023, the Company had foreign tax credit carry forwards of approximately $53.9 million, expiring on various dates from 2024 through 2033. These carryforwards have been reduced by a valuation allowance of $53.9 million as it is more likely than not that these carry forwards will not be realized. For the nine months ended September 30, 2023, $0.4 million relating to amortization of tax deductible second component goodwill was realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

As of September 30, 2023, approximately $198.0 million of cash and cash equivalents, previously held by foreign subsidiaries, was repatriated to the United States. Our consolidated cash and cash equivalents balance of $955.2 million, as of September 30, 2023, includes approximately $170.9 million held by foreign subsidiaries. Of this amount, approximately $60.0 million is expected to be repatriated to the United States with the remaining amount continuing to be reinvested in foreign operations. Tax expense related to the repatriated amount, as well as the expected remaining repatriation amount, has been accrued in the current period and the Company does not expect to incur any significant, additional taxes related to the remaining balance.

Note 14. Commitments and Contingencies

Commitments

As of September 30, 2023, the Company's contractual obligations not reflected on the Company's condensed consolidated balance sheet increased $20.6 million, as compared to December 31, 2022, to $932.8 million. The increase was primarily driven by additional program rights commitments and the renewal of a third-party service contract, partially offset by payments for program rights.

Legal Matters

On August 14, 2017, Robert Kirkman, Robert Kirkman, LLC, Glen Mazzara, 44 Strong Productions, Inc., David Alpert, Circle of Confusion Productions, LLC, New Circle of Confusion Productions, Inc., Gale Anne Hurd, and Valhalla Entertainment, Inc. f/k/a Valhalla Motion Pictures, Inc. (together, the "Plaintiffs") filed a complaint in California Superior Court in connection with Plaintiffs’ rendering of services as writers and producers of the television series entitled The Walking Dead, as well as Fear the Walking Dead and/or Talking Dead, and the agreements between the parties related thereto (the "Walking Dead Litigation"). The Plaintiffs asserted that the Company had been improperly underpaying the Plaintiffs under their contracts with the Company and they asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, inducing breach of contract, and liability for violation of Cal. Bus. & Prof. Code § 17200. The Plaintiffs sought compensatory and punitive damages and restitution. On August 8, 2019, the judge in the Walking Dead Litigation ordered a trial to resolve certain issues of contract interpretation only. Following eight days of trial in February and March 2020, on July 22, 2020, the judge issued a Statement of Decision finding in the Company's favor on all seven matters of contract interpretation before the court in this first phase trial. On January 20, 2021, the Plaintiffs filed a second amended complaint, eliminating eight named defendants and their claims under Cal. Bus. & Prof. Code § 17200. On May 5, 2021, the Plaintiffs filed a third amended complaint, repleading in part their claims for alleged breach of the implied covenant of good faith and fair dealing, inducing breach of contract, and certain breach of contract claims. On June 2, 2021, the Company filed a demurrer and motion to strike seeking to dismiss the claim for breach of the implied covenant of good faith and fair dealing and certain tort and breach of contract claims asserted in the third amended complaint. On July 27, 2021, the court granted in part and denied in part the Company's motion. On January 12, 2022, the Company filed a motion for summary adjudication of many of the remaining claims. On April 6, 2022, the court granted the Company’s summary adjudication motion in part, dismissing the Plaintiffs’ claims for breach of the implied covenant of good faith and fair dealing and inducing breach of contract. On January 26, 2023, the Plaintiffs filed a notice of appeal of the court’s post-trial, demurrer, and summary adjudication decisions. The parties entered into an agreement to resolve through confidential binding arbitration the remaining claims in the litigation

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

(consisting mainly of ordinary course profit participation audit claims), and as a result, the court formally dismissed the case. The arbitration to resolve the two remaining claims for breach of contract was held between October 16 through October 20, 2023 and a final decision is not expected until 2024. While the ultimate outcome of this litigation is uncertain, we expect that the ultimate outcome is unlikely to have a material impact on the Company’s financial condition or results of operations.

On November 14, 2022, the Plaintiffs filed a separate complaint in California Superior Court (the “MFN Litigation”) in connection with the Company’s July 16, 2021 settlement agreement with Frank Darabont (“Darabont”), Ferenc, Inc., Darkwoods Productions, Inc., and Creative Artists Agency, LLC (the “Darabont Parties”), which resolved litigations the Darabont Parties had brought in connection with Darabont's rendering services as a writer, director and producer of the television series entitled The Walking Dead and the agreement between the parties related thereto (the “Darabont Settlement”). Plaintiffs assert claims for breach of contract, alleging that the Company breached the most favored nations (“MFN”) provisions of Plaintiffs’ contracts with the Company by failing to pay them additional contingent compensation as a result of the Darabont Settlement (the “MFN Litigation”). Plaintiffs claim in the MFN Litigation that they are entitled to actual and compensatory damages in excess of $200 million. The Plaintiffs also brought a cause of action to enjoin an arbitration the Company commenced in May 2022 concerning the same dispute. On December 15, 2022, the Company removed the MFN Litigation to the United States District Court for the Central District of California. On January 13, 2023, the Company filed a motion to dismiss the MFN Litigation and informed the court that the Company had withdrawn the arbitration Plaintiffs sought to enjoin. The motion is fully briefed and awaiting decision. The court has scheduled a trial date of September 17, 2024. The Company believes that the asserted claims are without merit and will vigorously defend against them if they are not dismissed. At this time, no determination can be made as to the ultimate outcome of this litigation or the potential liability, if any, on the part of the Company.

The Company is party to actions and claims arising from alleged violation of the federal Video Privacy Protection Act (the “VPPA”) and analogous state laws. In addition to certain putative class actions currently pending, the Company is facing a series of arbitration claims managed by multiple plaintiffs’ law firms. The class action complaints and the arbitration claims all allege that the Company’s use of a Meta Platforms, Inc. pixel on the websites for certain of its subscription video services, including AMC+ and Shudder, violated the privacy protection provisions of the VPPA and its state law analogues. On October 27, 2023, the Company reached a settlement in principle (which settlement is subject to court approval) with multiple plaintiffs’ law firms relating to their pending class actions alleging violations of the VPPA and analogous state laws. Although the outcome of the arbitration cannot be predicted with certainty, management does not believe that the resolution of these arbitrations will have a material adverse effect on the Company’s business or financial position or the Company’s ability to meet its financial obligations as they become due. Any potential liability is expected to be reimbursed by the Company’s insurance carriers.

The Company is party to various lawsuits and claims in the ordinary course of business, including the matters described above, as well as other lawsuits and claims relating to employment, intellectual property, and privacy and data protection matters. Although the outcome of these matters cannot be predicted with certainty and while the impact of these matters on the Company's results of operations in any particular subsequent reporting period could be material, management does not believe that the resolution of these matters will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due.

Note 15. Equity Plans

During the second quarter of 2023, AMC Networks granted 1,792,097 restricted stock units ("RSUs") to certain executive officers and employees under the AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan, which vest ratably over a three-year period, and 131,640 RSUs under the 2011 Stock Plan for Non-Employee Directors to non-employee directors that vested on the date of grant.

In February 2023, AMC Networks granted 297,325 RSUs under the AMC Networks Inc. Amended and Restated 2016 Employee Stock Plan to its chief executive officer. The RSUs vest ratably over a three-year period.

During the nine months ended September 30, 2023, 883,424 RSUs of AMC Networks Class A Common Stock previously issued to employees of the Company vested, all of which occurred during the first two quarters of 2023. On the vesting date, 387,675 RSUs were surrendered to the Company to cover the required statutory tax withholding obligations and 495,749 shares of AMC Networks Class A Common Stock were issued. Units are surrendered to satisfy the employees' statutory minimum tax withholding obligations for the applicable income and other employment tax. The units surrendered during the nine months ended September 30, 2023 had an aggregate value of $7.2 million, which has been reflected as a financing activity in the condensed consolidated statement of cash flows for the nine months ended September 30, 2023.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

The Company recorded share-based compensation expenses of $6.4 million and $19.9 million (including $0.2 million recorded as part of Restructuring and other related charges) for the three and nine months ended September 30, 2023, respectively, and $7.1 million and $23.9 million for the three and nine months ended September 30, 2022, respectively. Share-based compensation expenses are recognized in the consolidated statements of income as part of selling, general and administrative expenses.

As of September 30, 2023, there was $35.2 million of total unrecognized share-based compensation cost related to outstanding unvested share-based awards. The unrecognized compensation cost is expected to be recognized over a weighted average remaining period of approximately 2.3 years.

Note 16. Noncontrolling Interests

Redeemable Noncontrolling Interests

In connection with the Company's previous acquisitions of New Video Channel America L.L.C (owner of the cable channel BBC America) and RLJ Entertainment, the terms of the acquisition agreements provide the noncontrolling members with a right to put all of their noncontrolling interest to subsidiaries of the Company at a future time. Since the exercise of these put rights is outside the Company's control, the noncontrolling interest in each entity is presented as a redeemable noncontrolling interest outside of stockholders' equity on the Company's consolidated balance sheet.

The following tables summarize activity related to redeemable noncontrolling interest for the three and nine months ended September 30, 2023 and 2022:


(In thousands)	Three Months Ended September 30, 2023
June 30, 2023	$	241,486
Net earnings	4,056
Distributions	(20,142)


September 30, 2023	$	225,400


(In thousands)	Three Months Ended September 30, 2022
June 30, 2022	$	270,726
Net earnings	4,443
Distributions	(2,686)


September 30, 2022	$	272,483


(In thousands)	Nine Months Ended September 30, 2023
December 31, 2022	$	253,669
Net earnings	17,126
Distributions	(45,395)


September 30, 2023	$	225,400


(In thousands)	Nine Months Ended September 30, 2022
December 31, 2021	$	283,849
Net earnings	12,971
Distributions	(24,866)
Other	529

September 30, 2022	$	272,483

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Note 17. Related Party Transactions

The Company and its related parties enter into transactions with each other in the ordinary course of business. Revenues, net from related parties amounted to $1.3 million and $1.3 million for the three months ended September 30, 2023 and 2022, respectively, and $3.9 million and $3.8 million for the nine months ended September 30, 2023 and 2022, respectively. Amounts charged to the Company, included in selling, general and administrative expenses, pursuant to transactions with its related parties amounted to $0.9 million and $3.3 million for the three months ended September 30, 2023 and 2022, respectively, and $7.5 million and $4.6 million for the nine months ended September 30, 2023 and 2022, respectively.

As disclosed in Note 20 of our 2022 Form 10-K, from time to time the Company enters into arrangements with 605, LLC. James L. Dolan, the Non-Executive Chairman and a director of the Company, and his spouse, Kristin A. Dolan, the Chief Executive Officer of the Company and founder of 605, LLC, previously owned 100% of 605, LLC. Kristin A. Dolan also served as the Non-Executive Chairman of 605, LLC from February 2023 until September 13, 2023, and served as its Chief Executive Officer from its inception in 2016 until February 2023. 605, LLC provides audience measurement and data analytics services to the Company and its subsidiaries pursuant to a Master Services Agreement dated February 8, 2019 (the “Master Services Agreement"). On September 13, 2023, 605, LLC was sold to iSpot.tv, and James L. Dolan and Kristin A. Dolan now hold a minority interest in iSpot.tv. As a result, from and after September 13, 2023, 605, LLC is no longer considered to be a related party.

On August 1, 2022, the Audit Committee authorized the Company to enter into a Statement of Work for Strategic Analytic Services (the “Statement of Work”) with 605, LLC under the Master Services Agreement. The fees payable to 605, LLC by the Company for these services were $10.5 million payable in five installments. The initial term of the Statement of Work ran from August 1, 2022 to December 31, 2022. The term was automatically extended to June 30, 2023 per the terms of the agreement. The Statement of Work expired by its terms on June 30, 2023.

Under the Statement of Work, 605, LLC was engaged in a strategic, research, market, business and financial assessment of the Company and its business, partnering with the Company’s management team. 605, LLC utilized their expertise, including assessment of extensive real-time business intelligence and consumer research, to enable potential further acceleration of the Company’s long-term growth and value creation. Among the analytic services provided by 605, LLC were situation analysis, customer experience, data utilization, addressing the market, content strategy and overview, sales strategy, pricing analysis, customer profiles, content (by offering), marketing strategy and financial analysis.

Note 18. Cash Flows

The Company's non-cash investing and financing activities and other supplemental data are as follows:


(In thousands)	Nine Months Ended September 30,
	2023		2022
Non-Cash Investing and Financing Activities:


Operating lease additions	$	3,171	$	7,527
Capital expenditures incurred but not yet paid	2,243		5,481
Contingent consideration for purchase of noncontrolling interests	—		2,806
Supplemental Data:
Cash interest paid	123,715		105,827
Income taxes paid, net	28,829		39,322

Note 19. Segment Information

The Company classifies its operations into two operating segments: Domestic Operations and International and Other. These operating segments represent strategic business units that are managed separately.

The Company evaluates segment performance based on several factors, of which the primary financial measure is operating segment adjusted operating income ("AOI"). The Company defines AOI as operating income (loss) before depreciation and amortization, cloud computing amortization, share-based compensation expenses or benefit, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges and including the Company’s proportionate share of adjusted operating income (loss) from majority-owned equity method

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

investees. The Company has presented the components that reconcile adjusted operating income to operating income, and other information as to the continuing operations of the Company's operating segments below.


(In thousands)	Three Months Ended September 30, 2023
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	332,135	$	56,173	$	—	$	388,308
Content licensing and other	61,916		22,150		(1,842)		82,224
Distribution and other	394,051		78,323		(1,842)		470,532
Advertising	147,147		19,275		—		166,422
Consolidated revenues, net	$	541,198	$	97,598	$	(1,842)	$	636,954
Operating income (loss)	$	161,627	$	7,985	$	(48,762)	$	120,850
Share-based compensation expenses	3,494		815		2,069		6,378
Depreciation and amortization	11,536		4,271		12,202		28,009
Impairment and other charges	5,400		—		—		5,400
Restructuring and other related charges (credits)	(783)		(4)		11,350		10,563
Cloud computing amortization	5		—		2,331		2,336
Majority-owned equity investees AOI	3,732		—		—		3,732
Adjusted operating income (loss)	$	185,011	$	13,067	$	(20,810)	$	177,268


(In thousands)	Three Months Ended September 30, 2022
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	349,338	$	52,765	$	—	$	402,103
Content licensing and other	57,793		29,124		(4,816)		82,101
Distribution and other	407,131		81,889		(4,816)		484,204
Advertising	180,258		17,381		—		197,639
Consolidated revenues, net	$	587,389	$	99,270	$	(4,816)	$	681,843
Operating income (loss)	$	186,609	$	8,291	$	(44,223)	$	150,677
Share-based compensation expenses	3,155		537		3,358		7,050
Depreciation and amortization	12,141		4,482		13,112		29,735


Cloud computing amortization	5		—		2,047		2,052
Majority-owned equity investees AOI	4,791		—		—		4,791
Adjusted operating income (loss)	$	206,701	$	13,310	$	(25,706)	$	194,305

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)


(In thousands)	Nine Months Ended September 30, 2023
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	1,013,419	$	170,143	$	—	$	1,183,562
Content licensing and other	246,093		76,668		(6,816)		315,945
Distribution and other	1,259,512		246,811		(6,816)		1,499,507
Advertising	475,359		58,163		—		533,522
Consolidated revenues, net	$	1,734,871	$	304,974	$	(6,816)	$	2,033,029
Operating income (loss)	$	523,645	$	10,422	$	(134,212)	$	399,855
Share-based compensation expenses	10,133		2,500		7,038		19,671
Depreciation and amortization	35,053		13,944		30,632		79,629
Impairment and other charges	5,400		24,882		—		30,282
Restructuring and other related charges	3,940		1,642		16,955		22,537
Cloud computing amortization	15		—		6,800		6,815
Majority-owned equity investees AOI	11,019		—		—		11,019
Adjusted operating income (loss)	$	589,205	$	53,390	$	(72,787)	$	569,808


(In thousands)	Nine Months Ended September 30, 2022
	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Revenues, net
Subscription	$	1,040,110	$	169,879	$	—	$	1,209,989
Content licensing and other	191,473		103,513		(16,901)		278,085
Distribution and other	1,231,583		273,392		(16,901)		1,488,074
Advertising	582,451		61,500		—		643,951
Consolidated revenues, net	$	1,814,034	$	334,892	$	(16,901)	$	2,132,025
Operating income (loss)	$	573,943	$	39,733	$	(135,119)	$	478,557
Share-based compensation expenses	10,000		1,758		12,104		23,862
Depreciation and amortization	37,716		14,018		27,822		79,556


Cloud computing amortization	17		—		5,306		5,323
Majority-owned equity investees AOI	13,733		—		—		13,733
Adjusted operating income (loss)	$	635,409	$	55,509	$	(89,887)	$	601,031

Subscription revenues in the Domestic Operations segment include revenues related to the Company's streaming services of $142.5 million and $131.2 million for the three months ended September 30, 2023 and 2022, respectively, and $420.8 million and $362.9 million for the nine months ended September 30, 2023 and 2022, respectively.

Corporate overhead costs not allocated to the segments include costs such as executive salaries and benefits and costs of maintaining corporate headquarters, facilities and common support functions.

AMC NETWORKS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(unaudited)

Inter-segment eliminations are primarily licensing revenues recognized between the Domestic Operations and International and Other segments.


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Inter-segment revenues
Domestic Operations	$	(1,825)	$	(3,864)	$	(6,451)	$	(14,308)
International and Other	(17)		(952)		(365)		(2,593)
	$	(1,842)	$	(4,816)	$	(6,816)	$	(16,901)

The table below summarizes revenues based on customer location:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues
United States	$	524,044	$	569,996	$	1,681,909	$	1,761,430
Europe	76,332		70,041		233,817		250,112
Other	36,578		41,806		117,303		120,483
	$	636,954	$	681,843	$	2,033,029	$	2,132,025

One customer within the Domestic Operations segment accounted for approximately 12% and 13% of consolidated revenues, net for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, one customer within the Domestic Operations segment accounted for approximately 12% and 10%, respectively, of consolidated revenues, net.

The table below summarizes property and equipment based on asset location:


(In thousands)	September 30, 2023		December 31, 2022
Property and equipment, net
United States	$	160,796	$	187,833
Europe	10,795		12,520
Other	1,306		1,681
	$	172,897	$	202,034

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. In this Management's Discussion and Analysis of Financial Condition and Results of Operations there are statements concerning our future operating results and future financial performance. Words such as "expects," "anticipates," "believes," "estimates," "may," "will," "should," "could," "potential," "continue," "intends," "plans" and similar words and terms used in the discussion of future operating results and future financial performance identify forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:

•the level of our revenues;

•market demand, including changes in viewer consumption patterns, for our programming networks, our subscription streaming services, our programming, and our production services;

•demand for advertising inventory and our ability to deliver guaranteed viewer ratings;

•the highly competitive nature of the cable, telecommunications, streaming and programming industries;

•the cost of, and our ability to obtain or produce, desirable content for our programming services, other forms of distribution, including digital and licensing in international markets, as well as our film distribution businesses;

•market demand for our owned original programming and our film content;

•the loss of any of our key personnel and artistic talent;

•the impact of strikes, including those related to the Writers, Directors, and Screen Actors guilds;

•the security of our program rights and other electronic data;

•our ability to maintain and renew distribution or affiliation agreements with distributors;

•our ability to successfully launch our streaming services in countries outside of the United States;

•economic and business conditions and industry trends in the countries in which we operate, including increases in inflation rates and recession risk;

•fluctuations in currency exchange rates and interest rates;

•changes in domestic and foreign laws or regulations under which we operate;

•changes in laws or treaties relating to taxation, or the interpretation thereof, in the United States or in the countries in which we operate;

•the impact of existing and proposed federal, state and international laws and regulations relating to data protection, privacy and security, including the European Union's General Data Protection Regulation ("GDPR");

•our substantial debt and high leverage;

•reduced access to, or inability to access, capital or credit markets, or significant increases in costs to borrow;

•the level of our expenses;

•future acquisitions and dispositions of assets;

•our ability to successfully acquire new businesses and, if acquired, to integrate, and implement our plan with respect to businesses we acquire;

•problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;

•uncertainties regarding the financial results of equity method investees, issuers of our investments in marketable equity securities and non-marketable equity securities and changes in the nature of key strategic relationships with partners and joint ventures;

•the outcome of litigation and other proceedings;

•whether pending uncompleted transactions, if any, are completed on the terms and at the times set forth (if at all);

•other risks and uncertainties inherent in our programming and streaming businesses;

•financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;

•the impact of pandemics or other health emergencies on the economy and our business;

•events that are outside our control, such as political unrest in international markets, terrorist attacks, natural disasters and other similar events; and

•the factors described under Item 1A, "Risk Factors" in our 2022 Annual Report on Form 10-K (the "2022 Form 10-K"), as filed with the Securities and Exchange Commission ("SEC").

We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

Introduction

Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is a supplement to and should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere herein and our 2022 Form 10-K to enhance the understanding of our financial condition, changes in financial condition and results of our operations. Unless the context otherwise requires, all references to "we," "us," "our," "AMC Networks" or the "Company" refer to AMC Networks Inc., together with its subsidiaries. The MD&A is organized as follows:

Business Overview. This section provides a general description of our business and our operating segments, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

Consolidated Results of Operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022. Our discussion is presented on both a consolidated and segment basis. Our two segments are: (i) Domestic Operations and (ii) International and Other.

Liquidity and Capital Resources. This section provides a discussion of our financial condition as of September 30, 2023, as well as an analysis of our cash flows for the nine months ended September 30, 2023 and 2022. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations that existed at September 30, 2023 as compared to December 31, 2022.

Critical Accounting Policies and Estimates. This section provides an update, if any, to our significant accounting policies or critical accounting estimates since December 31, 2022.

Business Overview

Financial Highlights

The tables presented below set forth our consolidated revenues, net, operating income (loss) and adjusted operating income (loss) ("AOI")1, for the periods indicated.


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues, net
Domestic Operations	$	541,198	$	587,389	$	1,734,871	$	1,814,034
International and Other	97,598		99,270		304,974		334,892
Inter-segment Eliminations	(1,842)		(4,816)		(6,816)		(16,901)
	$	636,954	$	681,843	$	2,033,029	$	2,132,025
Operating Income (Loss)
Domestic Operations	$	161,627	$	186,609	$	523,645	$	573,943
International and Other	7,985		8,291		10,422		39,733
Corporate / Inter-segment Eliminations	(48,762)		(44,223)		(134,212)		(135,119)
	$	120,850	$	150,677	$	399,855	$	478,557
Adjusted Operating Income (Loss)
Domestic Operations	$	185,011	$	206,701	$	589,205	$	635,409
International and Other	13,067		13,310		53,390		55,509
Corporate / Inter-segment Eliminations	(20,810)		(25,706)		(72,787)		(89,887)
	$	177,268	$	194,305	$	569,808	$	601,031

1 Adjusted Operating Income (Loss), is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section on page 37 for additional information, including our definition and our use of this non-GAAP financial measure, and for a reconciliation to its most comparable GAAP financial measure.

Segment Reporting

We manage our business through the following two operating segments:

•Domestic Operations: Includes our programming services, which consist of our five national programming networks, our global streaming services, our AMC Studios operation and IFC Films. Our national programming networks are AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. Our global streaming services consist of our targeted subscription streaming services (Acorn TV, Shudder, Sundance Now, ALLBLK, and HIDIVE) and AMC+. Our AMC Studios operation produces original programming for our programming services and third parties and also licenses programming worldwide, and IFC Films is our film distribution business. The operating segment also includes AMC Networks Broadcasting & Technology, our technical services business, which primarily services most of the national programming networks.

Domestic Operations

In our Domestic Operations segment, we earn revenue principally from: (i) the distribution of our programming through our programming networks and streaming services, (ii) the sale of advertising, and (iii) the licensing of our original programming to distributors, including the distribution of programming of IFC Films. Subscription revenue includes fees paid by distributors and consumers for our programming networks and streaming services. Subscription fees paid by distributors represent the largest component of distribution revenue. Our subscription fee revenues for our programming networks are based on a per subscriber fee, and, to a lesser extent, fixed fees under multi-year contracts, commonly referred to as "affiliation agreements." The subscription fee revenues we earn vary from period to period, distributor to distributor and also vary among our programming services, but are generally based upon the number of each distributor's subscribers who receive our programming, referred to as viewing subscribers. Subscription fees for our streaming services are typically based on a per subscriber fee and are generally paid by distributors and consumers on a monthly basis.

Content licensing revenue is earned from the licensing of original programming for digital, foreign and home video distribution and is recognized upon availability or distribution by the licensee, and to a lesser extent, is earned through the distribution of AMC Studios produced series to third parties.

Under affiliation agreements with our distributors, we have the right to sell a specified amount of national advertising time on our programming networks. Our advertising revenues are more variable than subscription fee revenues because the majority of our advertising is sold on a short-term basis, not under long-term contracts. Our arrangements with advertisers provide for a set number of advertising units to air over a specific period of time at a negotiated price per unit. Additionally, in these advertising sales arrangements, our programming networks generally guarantee specified viewer ratings for their programming.

Programming expenses, included in technical and operating expenses, represent the largest expenses of the Domestic Operations segment and primarily consists of amortization of program rights, such as those for original programming, feature films and licensed series, as well as participation and residual costs. The other components of technical and operating expenses primarily include distribution and production related costs and program operating costs including cost of delivery, such as origination, transmission, uplinking and encryption.

The success of our business depends on original programming, both scripted and unscripted, across all of our programming services. These original series generally result in higher ratings for our networks and higher viewership on our streaming services. Among other things, higher audience ratings drive increased revenues through higher advertising revenues. The timing of exhibition and distribution of original programming varies from period to period, which results in greater variability in our revenues, earnings and cash flows from operating activities. There may be significant changes in the level of our technical and operating expenses due to the level of our content investment spend and the related amortization of content acquisition and/or original programming costs. Program rights that are predominantly monetized as a group are amortized based on projected usage, typically resulting in an accelerated amortization pattern and, to a lesser extent, program rights that are predominantly monetized individually are amortized based on the individual-film-forecast-computation method.

Most original series require us to make significant up-front investments. Our programming efforts are not always commercially successful, which could result in a write-off of program rights. If events or changes in circumstances indicate that the fair value of program rights predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost.

International and Other

Our International and Other segment primarily includes the operations of AMCNI and 25/7 Media.

In our International and Other segment, we earn revenue principally from the international distribution of programming and, to a lesser extent, the sale of advertising from our AMCNI programming networks. We also earn revenue through production services from 25/7 Media. For the nine months ended September 30, 2023, distribution revenues represented 81% of the revenues of the International and Other segment. Distribution revenue primarily includes subscription fees paid by distributors to carry our programming networks and production services revenue generated from 25/7 Media. Our subscription revenues are generally based on either a per-subscriber fee or a fixed contractual annual fee, under multi-year affiliation agreements. Subscription revenues are derived from the distribution of our programming networks primarily in Europe, and to a lesser extent, Latin America. Our production services revenues are based on master production agreements whereby a third-party engages us to produce content on its behalf. Production services revenues are recognized based on the percentage of cost incurred to total estimated cost of the contract.

Programming expenses, program operating costs and production costs incurred to produce content for third parties are included in technical and operating expenses, and represent the largest expense of the International and Other segment. Programming expenses primarily consist of amortization of acquired content, costs of dubbing and sub-titling of programs, and production costs. Program operating costs include costs such as origination, transmission, uplinking and encryption of our linear AMCNI channels as well as content hosting and delivery costs at our various on-line content distribution initiatives. Our programming efforts are not all commercially successful, which could result in a write-off of program rights. If events or changes in circumstances indicate that the fair value of program rights predominantly monetized individually or a film group is less than its unamortized cost, the Company will write off the excess to technical and operating expenses in the consolidated statements of income. Program rights with no future programming usefulness are substantively abandoned resulting in the write-off of remaining unamortized cost.

Corporate / Inter-segment Eliminations

Corporate operations primarily consist of executive management and administrative support services, such as executive salaries and benefits costs, costs of maintaining corporate headquarters, facilities and common support functions. The segment financial information set forth below, including the discussion related to individual line items, does not reflect inter-segment eliminations unless specifically indicated.

Impact of Economic Conditions

Our future performance is dependent, to a large extent, on general economic conditions including the impact of direct competition, our ability to manage our businesses effectively, and our relative strength and leverage in the marketplace, both with suppliers and customers. Additionally, changes in macroeconomic facts and circumstances, particularly high inflation and the rise in interest rates, may adversely impact our results of operations, cash flows and financial position or our ability to refinance our indebtedness on terms favorable to us, or at all.

Capital and credit market disruptions, as well as other events such as pandemics or other health emergencies, inflation, international conflict and recession, could cause economic downturns, which may lead to lower demand for our products, such as lower demand for television advertising and a decrease in the number of subscribers receiving our programming services. Events such as these may adversely impact our results of operations, cash flows and financial position.

Consolidated Results of Operations

The amounts presented and discussed below represent 100% of each operating segment's revenues, net and expenses. Where we have management control of an entity, we consolidate 100% of such entity in our consolidated statements of income notwithstanding that a third-party owns an interest, which may be significant, in such entity. The noncontrolling owner's interest in the operating results of consolidated subsidiaries are reflected in net income attributable to noncontrolling interests in our consolidated statements of income.

Three and Nine Months Ended September 30, 2023 and 2022

The following table sets forth our consolidated results of operations for the periods indicated.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023		2022		Change		2023		2022		Change
Revenues, net:
Subscription	$	388,308	$	402,103	(3.4)	%	$	1,183,562	$	1,209,989	(2.2)	%
Content licensing and other	82,224		82,101		0.1	%	315,945		278,085		13.6	%
Distribution and other	470,532		484,204		(2.8)	%	1,499,507		1,488,074		0.8	%
Advertising	166,422		197,639		(15.8)	%	533,522		643,951		(17.1)	%
Total revenues, net	636,954		681,843		(6.6)	%	2,033,029		2,132,025		(4.6)	%
Operating expenses:
Technical and operating (excluding depreciation and amortization)	284,900		293,459		(2.9)	%	933,590		903,468		3.3	%
Selling, general and administrative	187,232		207,972		(10.0)	%	567,136		670,444		(15.4)	%
Depreciation and amortization	28,009		29,735		(5.8)	%	79,629		79,556		0.1	%
Impairment and other charges	5,400		—		n/m		30,282		—		n/m
Restructuring and other related charges	10,563		—		n/m		22,537		—		n/m
Total operating expenses	516,104		531,166		(2.8)	%	1,633,174		1,653,468		(1.2)	%
Operating income	120,850		150,677		(19.8)	%	399,855		478,557		(16.4)	%
Other income (expense):
Interest expense, net	(27,071)		(30,683)		(11.8)	%	(88,360)		(88,533)		(0.2)	%

Miscellaneous, net	(2,211)		(1,546)		43.0	%	12,518		3,540		253.6	%
Total other expense	(29,282)		(32,229)		(9.1)	%	(75,842)		(84,993)		(10.8)	%
Income from operations before income taxes	91,568		118,448		(22.7)	%	324,013		393,564		(17.7)	%
Income tax expense	(23,671)		(28,456)		(16.8)	%	(82,725)		(103,118)		(19.8)	%
Net income including noncontrolling interests	67,897		89,992		(24.6)	%	241,288		290,446		(16.9)	%
Net income attributable to noncontrolling interests	(4,473)		(5,326)		(16.0)	%	(4,015)		(18,163)		(77.9)	%
Net income attributable to AMC Networks' stockholders	$	63,424	$	84,666	(25.1)	%	$	237,273	$	272,283	(12.9)	%

Revenues

Three months ended September 30, 2023 vs. 2022

Subscription revenues decreased 4.9% in our Domestic Operations segment primarily due to a decline in affiliate revenues, partially offset by an increase in streaming revenues. The decrease in our Domestic Operations segment was partially offset by a 6.5% increase in our International and Other segment primarily due to the favorable impact of foreign currency translation at AMCNI.

Subscription revenues vary based on the impact of renewals of affiliation agreements and the number of subscribers to our services. We expect linear subscriber decline to continue, consistent with the declines across the cable ecosystem.

Content licensing and other revenues increased 7.1% in our Domestic Operations segment primarily due to the timing and availability of deliveries. The increase in our Domestic Operations segment was partially offset by a 23.9% decrease in our International and Other segment primarily due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Content licensing revenues vary based on the timing of availability of our programming to distributors, including AMC Studios produced series for third parties, and the timing and volume of productions at 25/7 Media. In addition, we expect content licensing revenues in our Domestic Operations segment to face pressure in 2024 due to reduced availability of original programming.

Advertising revenues decreased 18.4% in our Domestic Operations segment primarily due to linear ratings declines, a challenging advertising market and fewer original programming episodes within the quarter, partially offset by digital and advanced advertising revenue growth. The decrease in our Domestic Operations segment was partially offset by a 10.9% increase in our International and Other segment primarily due to favorable impact of foreign currency translation at AMCNI and digital and advanced advertising growth in the U.K.

Advertising revenues vary based on the timing of our original programming series and the popularity of our programming as measured by Nielsen. Advertising revenue has declined in 2023 compared to 2022 and we expect advertising revenue to continue to decline as the advertising market gravitates toward other distribution platforms.

Nine months ended September 30, 2023 vs. 2022

Subscription revenues decreased primarily due to a 2.6% decrease in our Domestic Operations segment due to a decline in affiliate revenues, partially offset by an increase in streaming revenues.

Content licensing and other revenues increased 28.5% in our Domestic Operations segment primarily due to the timing and availability of deliveries in the period, including $56.1 million for the delivery of the remaining episodes of an AMC Studios produced series to a third party and the $20.3 million impact associated with the termination of an output agreement that resulted in the acceleration of revenue previously anticipated to be recognized in 2024. The increase in our Domestic Operations segment was partially offset by a 25.9% decrease in our International and Other segment due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Advertising revenues decreased 18.4% in our Domestic Operations segment primarily due to linear ratings declines, softness in the advertising market and fewer original programming episodes within the period, partially offset by digital and advanced advertising revenue growth. Advertising revenues also decreased 5.4% in our International and Other segment, primarily due to the impact of the wind-down of two channels in 2022 and marketplace declines in the U.K.

Technical and operating expenses (excluding depreciation and amortization)

The components of technical and operating expenses primarily include the amortization of program rights, such as those for original programming, feature films and licensed series, and other direct programming costs, such as participation and residual costs, distribution and production related costs and program delivery costs, such as transmission, encryption, hosting, and formatting.

There may be significant changes in the level of our technical and operating expenses due to original programming costs and/or content acquisition costs. As competition for programming increases, costs for content acquisition and original programming may increase.

Three months ended September 30, 2023 vs. 2022

Technical and operating expenses (excluding depreciation and amortization) decreased 0.9% in our Domestic Operations segment primarily due to a decrease in program rights amortization. Technical and operating expenses (excluding depreciation and amortization) also decreased 11.0% in our International and Other segment primarily due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Nine months ended September 30, 2023 vs. 2022

Technical and operating expenses (excluding depreciation and amortization) increased 8.2% in our Domestic Operations segment primarily due to costs associated with the delivery of the remaining episodes of an AMC Studios produced series to a third party and an increase in program rights amortization primarily driven by the impact associated with the termination of an output agreement that resulted in the acceleration of program rights amortization previously anticipated to be recognized in 2024. The increase in our Domestic Operations segment was partially offset by a 16.1% decrease in our International and Other segment primarily due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Selling, general and administrative expenses

The components of selling, general and administrative expenses primarily include sales, marketing and advertising expenses, administrative costs and costs of non-production facilities.

There may be significant changes in the level of our selling, general and administrative expenses due to the timing of promotions and marketing of original programming series.

Three months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses (including share-based compensation expenses) decreased 15.4% in our Domestic Operations segment primarily due to lower marketing and subscriber acquisition expenses related to our streaming services. The decrease in our Domestic Operations segment was partially offset by an increase of 18.9% in our International and Other segment primarily due to an increase in corporate overhead costs allocated to AMCNI.

Nine months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses (including share-based compensation expenses) decreased 19.7% in our Domestic Operations segment primarily due to lower marketing and subscriber acquisition expenses related to our streaming services and decreased 12.5% in Corporate primarily due to lower employee related costs. The decrease in our Domestic Operations segment and in Corporate was partially offset by an increase of 4.9% in our International and Other segment primarily due to an increase in corporate overhead costs allocated to AMCNI.

Depreciation and amortization

Depreciation and amortization expenses include depreciation of fixed assets and amortization of finite-lived intangible assets.

Three months ended September 30, 2023 vs. 2022

Depreciation and amortization expense decreased primarily due to lower depreciation of equipment at Corporate and the impact of no longer amortizing intangible assets at 25/7 Media as a result of the impairment charge recognized in the second quarter of 2023.

Nine months ended September 30, 2023 vs. 2022

Depreciation and amortization expense increased due to higher depreciation of equipment at Corporate, partially offset by the impact of fully depreciated equipment in our Domestic Operations segment and the impact of no longer amortizing intangible assets at 25/7 Media as a result of the impairment charge recognized in the second quarter of 2023.

Impairment and other charges

During the third quarter of 2023, the Company recorded a $5.4 million other charge.

During the second quarter of 2023, given the impact of market challenges at 25/7 Media, specifically as it relates to reduced demand for new content and series cancellations from third parties, the Company revised its outlook for the 25/7 Media business, resulting in lower expected future cash flows. As a result, the Company determined that sufficient indicators of potential impairment of long-lived assets and goodwill existed at 25/7 Media and an impairment charge of $24.9 million was recorded. Refer to Note 7, Goodwill and Other Intangible Assets for additional details.

There were no impairment and other charges for the three and nine months ended September 30, 2022.

Restructuring and other related charges

For the nine months ended September 30, 2023, additional restructuring and other related charges consisted primarily of severance and other employee-related costs, with $3.9 million related to our Domestic Operations segment, $1.6 million related to AMCNI and $5.4 million related to Corporate.

There were no restructuring and other related charges for the three and nine months ended September 30, 2022.

Operating income

Three months ended September 30, 2023 vs. 2022

The decrease in operating income was primarily attributable to a decrease in revenues, net of $44.9 million, restructuring and other related charges of $10.6 million, and an other charge of $5.4 million, partially offset by decreases in selling, general and administrative expenses of $20.7 million and technical and operating expenses of $8.6 million.

Nine months ended September 30, 2023 vs. 2022

The decrease in operating income was primarily attributable to a decrease in revenues, net of $99.0 million, an increase in technical and operating expenses of $30.1 million, impairment and other charges of $30.3 million, and restructuring and other related charges of $22.5 million, partially offset by a decrease in selling, general and administrative expenses of $103.3 million.

Interest expense, net

Three months ended September 30, 2023 vs. 2022

The decrease in interest expense, net was primarily due to higher interest income from our money market mutual fund accounts and bank deposits, partially offset by higher interest rates on our Term Loan A Facility.

Nine months ended September 30, 2023 vs. 2022

Miscellaneous, net

Three months ended September 30, 2023 vs. 2022

The decrease in miscellaneous, net was primarily related to a $2.3 million unfavorable variance in the foreign currency remeasurement of monetary assets and liabilities (principally intercompany loans) that are denominated in currencies other than the underlying functional currency of the applicable entity and $0.6 million of lower net earnings of equity method investees, partially offset by $2.2 million of lower net losses on derivative financial instruments as compared to the three months ended September 30, 2022.

Nine months ended September 30, 2023 vs. 2022

The increase in miscellaneous, net was primarily related to $15.8 million of higher net gains on derivative financial instruments as compared to the nine months ended September 30, 2022. This increase was partially offset by $3.8 million of lower net gains on marketable securities and impairment charges of $1.7 million related to certain investments in 2023.

Income tax expense

Three months ended September 30, 2023 vs. 2022

For the three months ended September 30, 2023, income tax expense was $23.7 million representing an effective tax rate of 26%. The items resulting in variances from the federal statutory rate of 21% primarily consisted of state and local income tax expense and tax expense related to non-deductible compensation. For the three months ended September 30, 2022, income tax expense was $28.5 million representing an effective tax rate of 24%. The items resulting in variances from the federal statutory rate of 21% primarily consisted of state and local income tax expense, tax expense for an increase in the valuation allowance for foreign taxes and tax expense related to non-deducible compensation.

Nine months ended September 30, 2023 vs. 2022

For the nine months ended September 30, 2023, income tax expense was $82.7 million representing an effective tax rate of 26%. The items resulting in variances from the federal statutory rate of 21% primarily consisted of state and local income tax expense and tax expense related to non-deductible compensation. For the nine months ended September 30, 2022, income tax expense was $103.1 million representing an effective tax rate of 26%. The items resulting in variances from the federal statutory rate of 21% primarily consisted of state and local income tax expense, tax expense for an increase in the valuation allowance for foreign taxes and tax expense related to non-deductible compensation.

Segment Results of Operations

Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use segment adjusted operating income as the measure of profit or loss for our operating segments. See Non-GAAP Financial Measures section below for our definition of Adjusted Operating Income and a reconciliation from Operating Income to Adjusted Operating Income on a segment and consolidated basis.

Domestic Operations

The following table sets forth our Domestic Operations segment results for the periods indicated.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023		2022		Change			2023		2022		Change
Revenues, net:
Subscription	$	332,135	$	349,338	(4.9)	%		$	1,013,419	$	1,040,110	(2.6)	%
Content licensing and other	61,916		57,793		7.1			246,093		191,473		28.5
Distribution and other	394,051		407,131		(3.2)			1,259,512		1,231,583		2.3
Advertising	147,147		180,258		(18.4)			475,359		582,451		(18.4)
Total revenues, net	541,198		587,389		(7.9)			1,734,871		1,814,034		(4.4)
Technical and operating expenses (excluding depreciation and amortization)(a)	236,595		238,752		(0.9)			779,838		720,558		8.2
Selling, general and administrative expenses(b)	123,324		146,727		(16.0)			376,847		471,800		(20.1)
Majority-owned equity investees AOI	3,732		4,791		(22.1)			11,019		13,733		(19.8)
Segment adjusted operating income	$	185,011	$	206,701	(10.5)	%		$	589,205	$	635,409	(7.3)	%
(a) Technical and operating expenses exclude cloud computing amortization
(b) Selling, general and administrative expenses exclude share-based compensation expenses

Revenues

Three months ended September 30, 2023 vs. 2022

Subscription revenues decreased primarily due to a 13.1% decline in affiliate revenues, partially offset by an 8.6% increase in streaming revenues. Affiliate revenues decreased due to basic subscriber declines and a 3% impact of a strategic non-renewal that occurred at the end of 2022. Streaming revenues increased due to year-over-year subscriber growth and price increases. Subscription revenues include revenues related to the Company's streaming services of $142.5 million and $131.2 million for the three months ended September 30, 2023 and 2022, respectively. Aggregate paid subscribers2 to our streaming services increased 3.8% to 11.1 million at September 30, 2023 compared to 10.7 million at September 30, 2022.

Content licensing and other revenues increased primarily due to the timing and availability of deliveries.

Advertising revenues decreased due to linear ratings declines, a challenging advertising market and fewer original programming episodes within the quarter, partially offset by digital and advanced advertising revenue growth.

Nine months ended September 30, 2023 vs. 2022

Subscription revenues decreased primarily due to a 12.5% decline in affiliate revenues, partially offset by a 16.0% increase in streaming revenues. Affiliate revenues decreased due to basic subscriber declines and a 3% impact of a strategic non-renewal that occurred at the end of 2022. Streaming revenues increased due to year-over-year subscriber growth and price increases. Subscription revenues include revenues related to the Company's streaming services of $420.8 million and $362.9 million for the nine months ended September 30, 2023 and 2022, respectively.

Content licensing and other revenues increased primarily due to the timing and availability of deliveries, including $56.1 million for the delivery of the remaining episodes of an AMC Studios produced series to a third party and a $20.3 million impact associated with the termination of an output agreement that resulted in the acceleration of revenue previously anticipated to be recognized in 2024.

Advertising revenues decreased due to linear ratings declines, softness in the advertising market and fewer original programming episodes within the period, partially offset by digital and advanced advertising revenue growth.

2 A paid subscription is defined as a subscription to a direct-to-consumer service or a subscription received through distributor arrangements, in which we receive a fee for the distribution of our streaming services.

Technical and operating expenses (excluding depreciation and amortization)

Three months ended September 30, 2023 vs. 2022

Technical and operating expenses (excluding depreciation and amortization) decreased primarily due to a decrease in program rights amortization.

Nine months ended September 30, 2023 vs. 2022

Technical and operating expenses (excluding depreciation and amortization) increased primarily due to costs associated with the delivery of the remaining episodes of an AMC Studios produced series to a third party and an increase in program rights amortization, including the impact associated with the termination of an output agreement that resulted in the acceleration of program rights amortization previously anticipated to be recognized in 2024.

Selling, general and administrative expenses

Three months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses decreased primarily due to lower marketing and subscriber acquisition expenses related to our streaming services.

Nine months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses decreased primarily due to lower marketing and subscriber acquisition expenses related to our streaming services.

Segment adjusted operating income

Three months ended September 30, 2023 vs. 2022

The decrease in segment adjusted operating income was primarily attributable to a decrease in revenues, net of $46.2 million, partially offset by decreases in selling, general and administrative expenses of $23.4 million and technical and operating expenses of $2.2 million.

Nine months ended September 30, 2023 vs. 2022

The decrease in segment adjusted operating income was primarily attributable to a decrease in revenues, net of $79.2 million and an increase in technical and operating expenses of $59.3 million, partially offset by a decrease in selling, general and administrative expenses of $95.0 million.

International and Other

The following table sets forth our International and Other segment results for the periods indicated.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023		2022		Change			2023		2022		Change
Revenues, net:
Subscription	$	56,173	$	52,765	6.5	%		$	170,143	$	169,879	0.2	%
Content licensing and other	22,150		29,124		(23.9)			76,668		103,513		(25.9)
Distribution and other	78,323		81,889		(4.4)			246,811		273,392		(9.7)
Advertising	19,275		17,381		10.9			58,163		61,500		(5.4)
Total revenues, net	97,598		99,270		(1.7)			304,974		334,892		(8.9)
Technical and operating expenses (excluding depreciation and amortization)	52,089		58,528		(11.0)			162,630		193,924		(16.1)
Selling, general and administrative expenses(a)	32,442		27,432		18.3			88,954		85,459		4.1

Segment adjusted operating income	$	13,067	$	13,310	(1.8)	%		$	53,390	$	55,509	(3.8)	%
(a) Selling, general and administrative expenses exclude share-based compensation expenses

Revenues

Three months ended September 30, 2023 vs. 2022

Subscription revenues increased primarily due to the favorable impact of foreign currency translation at AMCNI.

Content licensing and other revenues decreased due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Advertising revenues increased primarily due to the favorable impact of foreign currency translation at AMCNI and digital and advanced advertising growth in the U.K.

Nine months ended September 30, 2023 vs. 2022

Subscription revenues increased primarily due to the favorable impact of foreign currency translation at AMCNI.

Content licensing and other revenues decreased due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties.

Advertising revenues decreased primarily due to the impact of the wind-down of two channels in 2022 and marketplace declines in the U.K.

Technical and operating expenses (excluding depreciation and amortization)

Three months ended September 30, 2023 vs. 2022

Nine months ended September 30, 2023 vs. 2022

Technical and operating expenses (excluding depreciation and amortization) decreased due to a reduction in the volume of productions at 25/7 Media driven by reduced demand for new content and series cancellations from third parties, as well as lower program rights amortization at AMCNI, primarily resulting from the impact of the wind-down of two channels in 2022 in the U.K.

Selling, general and administrative expenses

Three months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses increased primarily due to an increase in corporate overhead costs allocated to AMCNI.

Nine months ended September 30, 2023 vs. 2022

Selling, general and administrative expenses increased primarily due to an increase in corporate overhead costs allocated to AMCNI.

Segment adjusted operating income

Three months ended September 30, 2023 vs. 2022

The decrease in segment adjusted operating income was primarily attributable to an increase in selling, general and administrative expenses of $5.0 million and a decrease in revenues, net of $1.7 million, partially offset by a decrease in technical and operating expenses of $6.4 million.

Nine months ended September 30, 2023 vs. 2022

The decrease in segment adjusted operating income was primarily attributable to a decrease in revenues, net of $29.9 million and an increase in selling, general and administrative expenses of $3.5 million, partially offset by a decrease in technical and operating expenses of $31.3 million.

Corporate and Inter-segment Elimination

The following table sets forth our Corporate and Inter-segment Eliminations segment results for the periods indicated.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023		2022		Change		2023		2022		Change





Revenues, net:	$	(1,842)	$	(4,816)	(61.8)	%	$	(6,816)	$	(16,901)	(59.7)	%
Technical and operating expenses (excluding depreciation and amortization)(a)	(3,849)		(3,912)		(1.6)	%	(9,071)		(11,295)		(19.7)
Selling, general and administrative expenses(b)	22,817		24,802		(8.0)	%	75,042		84,281		(11.0)

Segment adjusted operating income	$	(20,810)	$	(25,706)	(19.0)	%	$	(72,787)	$	(89,887)	(19.0)	%
(a) Technical and operating expenses exclude cloud computing amortization
(b) Selling, general and administrative expenses exclude share-based compensation expenses and cloud computing amortization

Revenues, net

Revenue eliminations are primarily related to inter-segment licensing revenues recognized between the Domestic Operations and International and Other segments.

Technical and operating expenses (excluding depreciation and amortization)

Technical and operating expense eliminations are primarily related to inter-segment programming amortization recognized between the Domestic Operations and International and Other segments.

Selling, general and administrative expenses

Corporate overhead costs not allocated to the segments include such costs as executive salaries and benefits, costs of maintaining corporate headquarters, facilities and common support functions.

Selling, general and administrative expenses for the three and nine months ended September 30, 2023 compared to 2022 decreased primarily due to lower employee related costs.

Non-GAAP Financial Measures

We evaluate segment performance based on several factors, of which the primary financial measure is operating segment AOI. We define AOI, which is a financial measure that is not calculated in accordance with generally accepted accounting principles ("GAAP"), as operating income (loss) before share-based compensation expenses or benefit, depreciation and amortization, impairment and other charges (including gains or losses on sales or dispositions of businesses), restructuring and other related charges, cloud computing amortization and including the Company’s proportionate share of adjusted operating income (loss) from majority-owned equity method investees. From time to time, we may exclude the impact of certain events, gains, losses or other charges (such as significant legal settlements) from AOI that affect our operating performance.

We believe that AOI is an appropriate measure for evaluating the operating performance on both an operating segment and consolidated basis. AOI and similar measures with similar titles are common performance measures used by investors, analysts and peers to compare performance in the industry.

Internally, we use revenues, net and AOI as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. AOI should be viewed as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities and other measures of performance and/or liquidity presented in accordance with GAAP. Since AOI is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies.

The following is a reconciliation of operating income (loss) to AOI for the periods indicated:


	Three Months Ended September 30, 2023
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	161,627	$	7,985	$	(48,762)	$	120,850
Share-based compensation expenses	3,494		815		2,069		6,378
Depreciation and amortization	11,536		4,271		12,202		28,009
Restructuring and other related charges (credits)	(783)		(4)		11,350		10,563
Impairment and other charges	5,400		—		—		5,400
Cloud computing amortization	5		—		2,331		2,336
Majority owned equity investees AOI	3,732		—		—		3,732
Adjusted operating income (loss)	$	185,011	$	13,067	$	(20,810)	$	177,268


	Three Months Ended September 30, 2022
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	186,609	$	8,291	$	(44,223)	$	150,677
Share-based compensation expenses	3,155		537		3,358		7,050
Depreciation and amortization	12,141		4,482		13,112		29,735


Cloud computing amortization	5		—		2,047		2,052
Majority owned equity investees AOI	4,791		—		—		4,791
Adjusted operating income (loss)	$	206,701	$	13,310	$	(25,706)	$	194,305


	Nine Months Ended September 30, 2023
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	523,645	$	10,422	$	(134,212)	$	399,855
Share-based compensation expenses	10,133		2,500		7,038		19,671
Depreciation and amortization	35,053		13,944		30,632		79,629
Restructuring and other related charges	3,940		1,642		16,955		22,537
Impairment and other charges	5,400		24,882		—		30,282
Cloud computing amortization	15		—		6,800		6,815
Majority owned equity investees AOI	11,019		—		—		11,019
Adjusted operating income (loss)	$	589,205	$	53,390	$	(72,787)	$	569,808


	Nine Months Ended September 30, 2022
(In thousands)	Domestic Operations		International and Other		Corporate / Inter-segment Eliminations		Consolidated
Operating income (loss)	$	573,943	$	39,733	$	(135,119)	$	478,557
Share-based compensation expenses	10,000		1,758		12,104		23,862
Depreciation and amortization	37,716		14,018		27,822		79,556


Cloud computing amortization	17		—		5,306		5,323
Majority owned equity investees AOI	13,733		—		—		13,733
Adjusted operating income (loss)	$	635,409	$	55,509	$	(89,887)	$	601,031

Liquidity and Capital Resources

Our operations typically generate positive net cash flow from operating activities. However, each of our programming businesses has substantial programming acquisition and production expenditure requirements.

Our primary source of cash typically includes cash flow from operations. Sources of cash also include amounts available under our revolving credit facility and, subject to market conditions, access to capital and credit markets. Although we currently believe that amounts available under our revolving credit facility will be available when and if needed, we can provide no assurance that access to such funds will not be impacted by adverse conditions in the financial markets. The obligations of the financial institutions under our revolving credit facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others. As a public company, we may have access to capital and credit markets, although adverse conditions in the financial markets have in the past impacted, and are expected in the future to impact, access to those markets.

Our Board of Directors previously authorized a program to repurchase up to $1.5 billion of our outstanding shares of common stock (the "Stock Repurchase Program"). The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time. For the three and nine months ended September 30, 2023, we did not repurchase any of our Class A common stock. As of September 30, 2023, we had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

In October 2023, we entered into an agreement enabling us to sell certain customer receivables to a financial institution on a recurring basis for cash. The transferred receivables will be fully guaranteed by a bankruptcy-remote entity and the financial institution that purchases the receivables will have no recourse to our other assets in the event of non-payment by the customers. We can sell an indefinite amount of customer receivables under the agreement on a revolving basis, but the outstanding balance of unpaid customer receivables to the financial institution cannot exceed the initial program limit of $125.0 million at any given time. As of the date of this report, we have not yet sold any customer receivables under this agreement.

Our principal uses of cash include the production, acquisition and promotion of programming, technology investments, debt service and payments for income taxes. We continue to invest in original programming, the funding of which generally occurs a minimum of nine months in advance of a program's airing.

We believe that a combination of cash-on-hand, cash generated from operating activities, availability under our revolving credit facility and new accounts receivable monetization program, borrowings under additional financing facilities and, when we have access to capital and credit markets, proceeds from the sale of new debt, will provide sufficient liquidity to service the principal and interest payments on our indebtedness, along with our other funding and investment requirements over the next twelve months and over the longer term. However, we do not expect to generate sufficient cash from operations to repay the then outstanding balances of our debt at the applicable maturity dates. As a result, we will be dependent upon our ability to access the capital and credit markets in order to repay, refinance, repurchase through privately negotiated transactions, open market repurchases, tender offers or otherwise or redeem the outstanding balances of our indebtedness. On November 3, 2023, we gave notice of our intention to redeem the remaining $400 million outstanding principal amount of our 5.00% senior notes due 2024 (the “2024 Notes”) on December 12, 2023 (the “Redemption Date”). The 2024 Notes will be redeemed at a redemption price of 100.000% of the principal amount of the 2024 Notes plus accrued and unpaid interest to, but excluding, the Redemption Date. Given the maturity date of our $800 million of 4.75% senior notes due 2025, we may access the capital or credit markets in the near term to refinance those senior notes through privately negotiated transactions, open market repurchases, tender offers or redemptions.

Failure to raise significant amounts of funding to repay our outstanding debt obligations at their respective maturity dates would adversely affect our business. In such a circumstance, we would need to take other actions including selling assets, seeking strategic investments from third parties or reducing other discretionary uses of cash. For information relating to our outstanding debt obligations, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Debt Financing Agreements" of our 2022 Form 10-K.

In addition, economic or market disruptions could lead to lower demand for our services, such as loss of subscribers and lower levels of advertising. These events would adversely impact our results of operations, cash flows and financial position.

The revolving credit facility was not drawn upon at September 30, 2023. The total undrawn revolver commitment is available to be drawn for our general corporate purposes.

AMC Networks was in compliance with all of its debt covenants as of September 30, 2023.

Cash Flow Discussion

The following table is a summary of cash flows provided by (used in) operating, investing and financing activities for the periods indicated:


(In thousands)	Nine Months Ended September 30,
	2023		2022
Cash provided by operating activities	$	131,139	$	36,591
Cash used in investing activities	(19,234)		(28,623)
Cash used in financing activities	(84,907)		(80,208)
Net increase (decrease) in cash and cash equivalents from operations	$	26,998	$	(72,240)

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2023 and 2022 amounted to $131.1 million and $36.6 million, respectively.

For the nine months ended September 30, 2023, net cash provided by operating activities primarily resulted from $1,033.6 million of net income before amortization of program rights, depreciation and amortization, and other non-cash items, partially offset by payments for program rights of $844.3 million and restructuring initiatives of $101.6 million. Changes in all other assets and liabilities resulted in a net cash inflow of $43.4 million.

For the nine months ended September 30, 2022, net cash provided by operating activities primarily resulted from net income before amortization of program rights, depreciation and amortization, and other non-cash items of $1,069.8 million, partially offset by payments for program rights of $1,065.9 million. Changes in all other assets and liabilities resulted in a net cash inflow of $32.7 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 amounted to $19.2 million and $28.6 million, respectively.

For the nine months ended September 30, 2023, net cash used in investing activities consisted primarily of capital expenditures of $28.4 million, partially offset by proceeds from the sale of investments of $8.6 million.

For the nine months ended September 30, 2022, net cash used in investing activities consisted of capital expenditures of $33.5 million and an additional investment in an equity security of $5.0 million, partially offset by proceeds from the sale of a marketable equity security of $9.9 million.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 and 2022 amounted to $84.9 million and $80.2 million, respectively.

For the nine months ended September 30, 2023, net cash used in financing activities primarily consisted of distributions to noncontrolling interests of $47.5 million, principal payments on the Term Loan A Facility of $25.3 million, taxes paid in lieu of shares issued for equity-based compensation of $7.2 million, and principal payments on finance leases of $3.1 million.

For the nine months ended September 30, 2022, net cash used in financing activities consisted of distributions to noncontrolling interests of $28.2 million, principal payments on the Term Loan A Facility of $25.3 million, taxes paid in lieu of shares issued for equity-based compensation of $21.6 million, principal payments on finance leases of $2.6 million, and the purchase of noncontrolling interests of $2.5 million.

Contractual Obligations

As of September 30, 2023, our contractual obligations not reflected on the condensed consolidated balance sheet increased $20.6 million, as compared to December 31, 2022, to $932.8 million. The increase was primarily driven by additional program rights commitments and the renewal of a third-party service contract, partially offset by payments for program rights.

Supplemental Guarantor Financial Information

The following is a description of the terms and conditions of the guarantees with respect to the outstanding notes for which AMC Networks is the issuer.

Note Guarantees

Debt of AMC Networks as of September 30, 2023 included $400.0 million of the 2024 Notes, $800.0 million of 4.75% Notes due August 2025 and $1.0 billion of 4.25% Notes due February 2029 (collectively, the “notes”). The notes were issued by AMC Networks and are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of AMC Networks’ existing and future domestic restricted subsidiaries, subject to certain exceptions (each, a “Guarantor Subsidiary,” and collectively, the “Guarantor Subsidiaries”). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. A guarantee of the notes by a Guarantor Subsidiary is subject to release in the following circumstances: (i) any sale or other disposition of all of the capital stock of a Guarantor Subsidiary to a person that is not (either before or after giving effect to such transaction) a restricted subsidiary, in compliance with the terms of the applicable indenture; (ii) the designation of a restricted subsidiary as an “Unrestricted Subsidiary” under the applicable indenture; or (iii) the release or discharge of the guarantee (including the guarantee under the AMC Networks’ credit agreement) which resulted in the creation of the note guarantee (provided that such Guarantor Subsidiary does not have any preferred stock outstanding at such time that is not held by AMC Networks or another Guarantor Subsidiary).

Foreign subsidiaries of AMC Networks do not and will not guarantee the notes.

The following tables present the summarized financial information specified in Rule 1-02(bb)(1) of Regulation S-X for AMC Networks and each Guarantor Subsidiary. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X.

Summarized Financial Information


Income Statement
(In thousands)	Nine Months Ended September 30, 2023				Nine Months Ended September 30, 2022
	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Revenues	$	—	$	1,466,115	$	—	$	1,513,831
Operating expenses	—		1,107,533		—		1,104,348
Operating income	$	—	$	358,582	$	—	$	409,483
Income before income taxes	$	307,735	$	428,244	$	365,942	$	467,752
Net income	237,273		421,629		272,283		461,433


Balance Sheet	September 30, 2023				December 31, 2022
(In thousands)	Parent Company		Guarantor Subsidiaries		Parent Company		Guarantor Subsidiaries
Assets
Amounts due from subsidiaries	$	—	$	33,374	$	—	$	79,020
Current assets	7,980		1,437,697		44,045		1,258,759
Non-current assets	4,147,117		3,457,558		3,893,205		3,706,858

Liabilities and equity:
Amounts due to subsidiaries	$	71,910	$	1,836	$	68,682	$	6,783
Current liabilities	587,762		629,004		157,658		872,109
Non-current liabilities	2,516,659		232,256		2,972,602		330,467

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 2 to the Company's Consolidated Financial Statements included in our 2022 Form 10-K. There have been no significant changes in our significant accounting policies since December 31, 2022.

We discuss our critical accounting estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2022 Form 10-K. There have been no significant changes in our critical accounting estimates since December 31, 2022.

During the third quarter of 2023, the Company substantially completed its 2022 restructuring plan and exited a portion of its office space in its corporate headquarters in New York and office space in Silver Spring, Maryland and Woodland Hills, California. In connection with exiting a portion of the New York office, the Company recorded impairment charges of $11.6 million, consisting of $9.1 million for operating lease right-of use assets and $2.5 million for leasehold improvements. Fair values used to determine the impairment charge were determined using an income approach, specifically a discounted cash flow ("DCF") model. The DCF model includes significant assumptions about sublease income and enterprise specific discount rates. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

25/7 Media is our production services business and is part of our International and Other segment. See "Item 1. Business - International and Other" in our 2022 Form 10-K for further details. During the second quarter of 2023, given the impact of market challenges at 25/7 Media, specifically as it relates to reduced demand for new content and series cancellations from third parties, the Company revised its outlook for the 25/7 Media business, resulting in lower expected future cash flows. As a result, the Company determined that sufficient indicators of potential impairment of long-lived assets existed at 25/7 Media. The Company performed a recoverability test and determined that the carrying amount of the 25/7 Media asset group was not recoverable. The carrying value of the asset group exceeded its fair value, therefore an impairment charge of $23.0 million was recorded for identifiable intangible assets, which is included in impairment and other charges in the consolidated statement of income within the International and Other operating segment for the nine months ended September 30, 2023. Fair values used to determine the impairment charge were determined using an income approach, specifically a DCF model, and a market comparables approach. The DCF model includes significant assumptions about revenue growth rates, long-term growth rates and enterprise specific discount rates. Given the uncertainty in determining assumptions underlying the DCF approach, actual results may differ from those used in the valuations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Fair Value of Debt

Based on the level of interest rates prevailing at September 30, 2023, the carrying value of our fixed rate debt of $2.18 billion was more than its fair value of $1.75 billion by approximately $435.7 million. The fair value of these financial instruments is estimated based on reference to quoted market prices for these or comparable securities. A hypothetical 100 basis point decrease in interest rates prevailing at September 30, 2023 would increase the estimated fair value of our fixed rate debt by approximately $41.4 million to approximately $1.79 billion.

Managing our Interest Rate Risk

To manage interest rate risk, we enter into interest rate swap contracts from time to time to adjust the amount of total debt that is subject to variable interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to limit the exposure against the risk of rising rates. We do not enter into interest rate swap contracts for speculative or trading purposes and we only enter into interest rate swap contracts with financial institutions that we believe are credit worthy counterparties. We monitor the financial institutions that are counterparties to our interest rate swap contracts and to the extent possible diversify our swap contracts among various counterparties to mitigate exposure to any single financial institution. For the three and nine months ended September 30, 2023, we did not have any interest rate swap contracts outstanding.

As of September 30, 2023, we had $2.8 billion of debt outstanding (excluding finance leases), of which $615.9 million is outstanding under our loan facility and is subject to variable interest rates. A hypothetical 100 basis point increase in interest

rates prevailing at September 30, 2023 would increase our annual interest expense by approximately $6.2 million. The interest rate paid on approximately 78% of our debt (excluding finance leases) as of September 30, 2023 is fixed.

Managing our Foreign Currency Exchange Rate Risk

We are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our subsidiaries' respective functional currencies (non-functional currency risk), such as affiliation agreements, programming contracts, certain trade receivables and accounts payable (including intercompany amounts) that are denominated in a currency other than the applicable functional currency. Changes in exchange rates with respect to amounts recorded in our consolidated balance sheets related to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, to the extent that our revenue, costs and expenses are denominated in currencies other than our respective functional currencies, we will experience fluctuations in our revenue, costs and expenses solely as a result of changes in foreign currency exchange rates. The Company recognized losses of $3.3 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, and losses of $1.0 million and $0.1 million for the three and nine months ended September 30, 2022, respectively, related to foreign currency transactions. Such amounts are included in miscellaneous, net in the condensed consolidated statements of income.

To manage foreign currency exchange rate risk, we enter into foreign currency contracts from time to time with financial institutions to limit our exposure to fluctuations in foreign currency exchange rates. We do not enter into foreign currency contracts for speculative or trading purposes.

We also are exposed to fluctuations of the U.S. dollar (our reporting currency) against the currencies of our operating subsidiaries when their respective financial statements are translated into U.S. dollars for inclusion in our condensed consolidated financial statements. Cumulative translation adjustments are recorded in accumulated other comprehensive income (loss) as a separate component of equity. Any increase (decrease) in the value of the U.S. dollar against any foreign currency that is the functional currency of one of our operating subsidiaries will cause us to experience unrealized foreign currency translation losses (gains) with respect to amounts already invested in such foreign currencies. Accordingly, we may experience a negative impact on our comprehensive income (loss) and equity with respect to our holdings solely as a result of changes in foreign currency exchange rates.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation as of September 30, 2023, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

During the three months ended September 30, 2023, there were no changes in the Company's internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 14, Commitments and Contingencies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of our legal proceedings.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

The Company's Board of Directors has authorized a program to repurchase up to $1.5 billion of its outstanding shares of common stock (the "Stock Repurchase Program"). The authorization of up to $500 million was announced on March 7, 2016, an additional authorization of $500 million was announced on June 7, 2017, and an additional authorization of $500 million was announced on June 13, 2018. The Stock Repurchase Program has no pre-established closing date and may be suspended or discontinued at any time.

For the three and nine months ended September 30, 2023, the Company did not repurchase any of its Class A common stock. As of September 30, 2023, the Company had $135.3 million of authorization remaining for repurchase under the Stock Repurchase Program.

Item 6. Exhibits.

(a)Index to Exhibits.


10.1			Employment Agreement dated August 15, 2023, between AMC Networks Inc. and Michael J. Sherin III

22			Guarantor Subsidiaries of the Registrant

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document.

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			XBRL Taxonomy Extension Definition Linkbase.

101.LAB			XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMC Networks Inc.

Date:

November 3, 2023

By:

/s/ Patrick O'Connell

Patrick O'Connell

Executive Vice President and Chief Financial Officer

Date:

November 3, 2023

By:

/s/ Michael J. Sherin III

Michael J. Sherin III

Executive Vice President and Chief Accounting Officer