AMC Networks Inc. Class A Stock

Thank you. Thank you for standing by and welcome to AMC Global Media's second quarter 2026 earnings conference call. [Operator Instructions] I would now like to hand the call over to Nicholas Siebert, SVP, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the AMC Global Media Second Quarter 2026 Earnings Conference Call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Kim Kelleher, President and Chief Commercial Officer; Dan McDermott, Chief Content Officer and President of AMC Studios; and [ Josefa Loquenduala ], Chief Financial Officer. We will begin with prepared remarks and then we'll open the call for questions. Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to our filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made today.

We will discuss certain non-GAAP financial measures on this call. The required definitions and reconciliations can be found in the press release we issued this morning, which is available on our website at amcglobalmedia.com. And with that, I'd like to turn the call over to Kristin.

Thanks, Nick, and good morning, everyone. I'd like to start with some news that underscores the value of our owned IP and the importance of our studio business. This morning, we announced a global co-exclusive licensing agreement with Netflix for the streaming rights to the entire The Walking Dead universe, all seven series and 371 episodes. This agreement expands our relationship with one of our most important partners and creates a global streaming home for this landmark franchise. It also allows us to bring the original The Walking Dead series to AMC+ for the first time. This new agreement highlights the strength of our studio model and ability of our owned IP to create long-term value for both AMC Global Media and our partners.

Dark Winds is another example of how our content continues to find new audiences and generate value across platforms. Season 4 launched on Netflix earlier this month as part of our branded AMC collection and, as we've seen with prior seasons, immediately reached their U.S. Top 10 list. In the U.S. and around the world, our content is the foundation of partnerships with a broad range of industry leaders, including Sky, Deutsche Telekom, BBC, Canal+, HBO Max, ITV, Netflix, Amazon, and so many others. As we noted on our last call, we expected the second quarter to be the low point for AOI with stronger performance in the back half of the year. Results were in line with these expectations. At the same time, we're pleased to share today that we are raising our guidance for the full year, which [ Josefa ] will discuss in more detail.

Our updated outlook layers in the The Walking Dead licensing agreement, as well as subscriber acquisition that came in slightly below our expectations in the first half of the year, as geopolitical events and high-profile sports programming captured outsized consumer attention. Our streaming business is built around bringing passionate fans the content they love. This strategy creates an engaged and loyal base of subscribers with deep connections to our brands. We take a long-range view of this business and the critical role our distribution partners play across all of our platforms, streaming, linear, and FAST. Streaming and linear continue to converge, and increasing number of viewers experience our services through hard bundled arrangements. This combined distribution delivers additional value to the customer, strengthens our affiliate relationships, and builds revenue partnerships focused on the future.

Across Charter and Philo, AMC+ and ALLBLK have already generated 2.3 million activations, and DirecTV recently launched AMC+ as a hard bundle offering in their Entertainment genre package, which will further contribute to the growth of this category. We recently renewed with major distributors Comcast and YouTube. Our new long-term agreement with YouTube includes the distribution of our seven streaming services, five linear networks and many of our FAST channels, as well as the future launch of our networks in YouTube TV genre packages. Our recent affiliate activity demonstrates the value distributors see in our portfolio and the impact of our long-range view. Over the last 12 months, we have renewed with four of the five major domestic MVPDs, including Comcast, DirecTV, DISH, and YouTube. Our upfront discussions are progressing well with strong client engagement and constructive conversations across categories.

Excluding the impact of an isolated technical issue in the second quarter, domestic advertising revenue decreased in the mid-single digits. We remain encouraged by the notable improvements in advertising revenue trends and strong growth in digital in the first half of the year. Our linear brands continue to resonate with viewers. Franchise reality hits like Love After Lockup and the new series [ This is Polly ] are delivering strong viewership and reinforcing the power of our original programming. The majority of our linear networks have seen ratings growth in prime time from the previous quarter. 21% at WE tv. On AMC, TNA Wrestling's Thursday Night Impact just hit an all-time ratings high earlier this month and is bringing new and live viewers to the network.

Acorn TV was one of the earliest streamers built around a specific genre, in this case, international crime dramas and mysteries. Last year, we launched an effort to re-energize Acorn with a slate of new shows and iconic talent, and the results have exceeded our expectations. We just renewed the breakout hit, [ Art Detectives ], for a second season. Inspector Ellis starring Sharon D. Clarke has returned with big viewership gains over Season 1. In addition to the strong performance at Acorn, our other services continue to super serve their distinct audiences. In the second quarter, we saw a sequential improvement in retention and a double-digit increase in engagement across our portfolio of streaming services, even as we implemented price increases.

Now for a few additional programming highlights. We're coming off another successful San Diego Comic-Con where the strength of our franchises was on full display. We announced the fourth season renewal of Anne Rice's Interview with the Vampire after the [ vampire list that ] delivered higher AMC+ viewership versus the prior season and strong fan and critical response. We also celebrated the Season 3 launch of The Walking Dead: Dead City with a standing-room-only Hall H panel and screening that demonstrated the strong ongoing fan engagement and cultural impact of the series. Next month, we start production on [ Thunder Road ], the multi-generational racing drama starring Dennis Quaid that we are making in partnership with NASCAR. This series, which has already generated strong advertiser interest, will be produced at our studio facility in Cincinnati, in Senoia, Georgia, the long-time home of the The Walking Dead franchise.

In addition to creating programs for our own platforms, our studio team is actively developing projects with a range of leading distributors. Producing for others is a natural offshoot of our internal development process. You may recall that we developed and produced the breakout Apple TV+ hit, Silo. The strength of our studio operation is rooted in production expertise, enduring creative relationships and a long track record of creating stories that resonate with audiences. We look forward to sharing more details on these projects as they progress. Since joining the company in June, our new CFO [ Josefa Lackin-Valla ] has hit the ground running. He's a great addition to our leadership team and brings deep experience across media, strategy, and finance. Before I hand the call over to [ Josefa ], I want to take a brief moment to thank all of our partners for recognizing the value and impact of our world-class content. I'd also like to thank our team for their continued execution as we expand the audiences for our content and create additional value for our company. [ Josefa ], over to you.

Thank you, Kristin. As the media landscape continues to evolve, AMC Global Media stands out as a differentiated player with the assets and capabilities to succeed in this dynamic time. Having spent the past month and a half digging in, I'm particularly impressed by the company's world-class studio, impactful portfolio of owned IP and franchises, the distinct valuable brands that drive monetization across multiple channels, including streaming, linear, FAST, AVOD, as well as our strong licensing business, which partners with third-party distributors that value our content. It is an exciting time to have joined the team, and I'm happy to be on the call today.

As Kristin mentioned, we recently entered into a new content licensing agreement with Netflix for the co-exclusive global streaming rights to The Walking Dead universe, a powerful indication of the lasting global demand for this IP and a testament to our ability to build out valuable franchises. At the conclusion of the license period, the rights to this highly sought-after franchise revert back to us. With a license period of five years and total contracted license fees of $500 million, this agreement provides us visibility over a multi-year time horizon. License fees are payable by Netflix over the license period in quarterly cash installments on a title-by-title basis, with payments beginning at the start date for each individual title. In 2026, we expect to receive cash payments of approximately $25 million. Looking further out, we anticipate annual cash payments of approximately $100 million in '27, '28, '29, and '30, with the remainder due in 2031.

As a result of the five-year payment schedule, we will recognize revenue based on the present value of the future payments and expect to recognize total revenue of approximately $445 million over the life of the agreement. We expect that approximately $200 million to $225 million of that revenue will be recognized in 2026 and in 2027. I'll have more to share regarding the financial implications of this agreement and how it benefits our full year outlook later in my remarks. Moving on to our second quarter consolidated results. Net revenue declined 9% year over year to $547 million. Consolidated AOI of $46 million represents the low point for this year, and as Kristin mentioned, was consistent with the expectations we laid out on our first quarter call. Reflected the timing of licensing revenue and increased marketing and investments related to the series premieres. These timing dynamics are now in the rearview mirror and we anticipate AOI growth for the second half of the year. Free cash flow was $43 million for the quarter with $108 million of free cash generated in the first six months of the year. We are on track to achieve our increased free cash flow guidance of approximately $220 million this year.

Moving to our segment results. Domestic operations revenue decreased 11% to $470 million in the second quarter. Overall subscription revenue decreased by 5%, which reflects streaming revenue growth of 6% that partly offset declines in affiliate of 17%, which were in line with our expectations for the quarter. We anticipate that our affiliate revenue rate of decline will improve in the second half of the year as new agreements and contractual changes take effect. Streaming revenue growth in the second quarter was primarily driven by price increases across our services. Domestic operations advertising revenue included the one-time impact of a now-resolved system integration issue in the second quarter. Excluding this one-time impact, advertising revenue declined by mid-single-digit percents due to lower ratings and marketplace pricing partially offset by continued digital advertising growth.

Second quarter content licensing revenue was $56 million and reflected the timing and availability of deliveries in the period. We see continued strong demand for our content as evidenced by the recent activity we've already covered in great detail. Regarding adjusted operating income for the quarter, domestic operations AOI was $61 million and reflected revenue performance and the timing of marketing investments primarily related to the timing of series premieres. Moving to international, international revenue increased by 4% to $79 million for the second quarter. Excluding the favorable impact of foreign currency translation, international revenue increased approximately 2%. International subscription revenue, excluding FX, decreased 3%, reflecting the impact of the previously disclosed wind down of a joint venture that operated primarily in Poland and Africa. Second quarter international advertising revenue, excluding FX, increased 11% primarily related to revenue from the outperformance of advertising in the fourth quarter of 2025. International AOI for the second quarter was $14 million with an 18% margin.

Turning to the balance sheet, in the second quarter, we paid down our remaining term loan A and terminated our credit facility. We ended the quarter with approximately $464 million of cash. We've meaningfully improved our debt maturity profile now with three-quarters of our total debt not due until July of 2032. At quarter end, we had net debt of approximately $1.3 billion and a consolidated net leverage ratio of 4.1x. As a result of the timing and cadence of AOI and cash throughout the year, our second quarter net leverage ratio represents the high point for the year. Regarding capital allocation, our philosophy has not changed. First, we look to fuel the business by creating and acquiring compelling programming that resonates with our audiences while maintaining healthy levels of free cash flow generation. Second, we remain focused on reducing gross debt and managing our maturity profile. Lastly, M&A and share purchases will be opportunistic and measured.

Moving to our updated outlook for 2026. First, regarding revenue, we now anticipate full-year consolidated revenue in the range of $2.4 billion to $2.45 billion. Our updated revenue outlook reflects the inclusion of approximately $200 million to $225 million of content licensing revenue related to the The Walking Dead license agreement. This implies that the full year domestic operations content licensing revenue will be in the range of $460 million to $485 million. Additionally, our updated revenue expectations reflect the effect of slower than anticipated subscriber acquisition that we experienced in the first half. As such, we now anticipate that domestic operations subscription revenue will decrease modestly by approximately 3% for the full year as compared to our 2025 results. Moving to adjusted operating income, we are increasing our full year AOI outlook to reflect our increased revenue expectations, partly offset by additional programming expenses related to the The Walking Dead license agreement and now anticipate AOI in the range of $410 million to $420 million for the full year.

Regarding free cash flow, it is important to note that the content licensing revenue is recognized upon the delivery of a series and the timing of cash payments is based upon a negotiated payment schedule. This causes a timing mismatch between when revenue is recognized and when cash is received. From an outside perspective, these dynamics can make licensing revenue appear volatile from quarter to quarter or year to year. Generally, IP licensing delivers a contracted stream of defined cash payments with high cash margins, clarity and confidence into the longer-term cash generation potential of the business. We are increasing our free cash flow guidance to reflect anticipated in-year cash payments associated with the licensing agreement we announced today. As such, we now expect free cash flow of approximately $220 million for the full year.

In closing, our content remains at the center of everything we do and remain committed to engaging audiences across our multifaceted distribution ecosystem with comparable volumes of high-quality content every year, and we'll continue building out our library of powerful franchises while maintaining our focus on cash flow generation and the balance sheet. With that, I'll now hand the call back to Nick.

Thanks, [ Josefa ]. Operator, please open the lines for the Q&A session.

We will now begin the question and answer session. [Operator Instructions] Please stand by while we compile the Q&A roster. Our first question comes from the line of [ Sean Dethley ] of Morgan Stanley. Your line is open, [ Sean ].

Great. Thanks so much, Kim, and congrats on the Netflix deal for The Walking Dead. I was hoping you could take us behind the scenes on the competitive bidding process. How many bidders were there? What drove your decision to go with Netflix? And then if you could, obviously, they're the incumbent and they know the property well, but just how many other parties were interested and why you chose to stay with them. And then just on the core adjustment to the full year, I think you mentioned geopolitical uncertainty, sports. I'd imagine some World Cup impact, but just to mention some of the other drivers that are headwinds for the full year guide. Thanks very much.

Great. Hi, [ Sean ]. It's Kristin. On the bidding process, as we said last quarter, we had a lot of the major players involved, and there was a variety of things to consider. We always knew we wanted to do a co-exclusive deal, but the opportunity to license everything to one group globally versus piecemeal, there were a lot of different factors that impacted the decision. But, you know, I agree with you that Netflix has been an incredible partner for us and for this franchise. And at the end of the day, it was just the right choice for us to make. And then on the core adjustment, you know, I think there's a variety of things going on. Your World Cup statement is something we've talked about a lot over this quarter, the impact across the world of the World Cup on a variety of businesses, including ours. But we're seeing some green shoots, and we're excited about the increase in the streaming over the course of the year.

And we were actually really, really positively impacted in a bunch of ways by our linear performance. And so I'll let some of the others weigh in on that question, but we're more focused now on the back half of the year. And as we said, we anticipate much better performance coming out of what we knew was going to be a lumpy quarter. Next question, please, operator.

Our next question comes from the line of David Karnovsky of JPMorgan. Your line is open, David.

Hi, [ Doug Wardlaw,ographer ] David. I guess further kind of hammering into the The Walking Dead deal, like, can you just give a little bit more perspective on, you know, why this was the right structure, you know, how long you've been thinking about co-exclusive rights, and then given that it is co-exclusive, what impact do you expect to AMC+ engagement from having the full content universe there.

Yes, I will say on the AMC+ side, and then Kim really led the negotiations, so I'll let her speak a little bit too. Prior question. You know, the overall engagement that we're seeing on our streaming services is really giving us, you know, a lot of optimism here for, you know, the value of streaming and the way that we present it. And so for AMC+ in particular, that is a destination for our core fan base. And so the co-exclusivity regarding Netflix, I think we feel really positive that it is going to increase and build on the increasing engagement that we're already seeing for AMC+ and our other services. But, you know, people do associate this IP very specifically with AMC. So I think it can cohabitate quite nicely on AMC+ and on Netflix and do really good work for both streaming services, which is why we're so enthusiastic about this deal. Anything you want to add, Kim?

Yes, sure, Doug. As we've mentioned on past quarterly calls, we've worked for years to align the rights around this valuable franchise ahead of this deal with the goal of generating the best economic outcome possible partner, which we think we've accomplished with Netflix. I think that took a lot of work over the years to align all of our international rights, et cetera, so we're excited at the outcome of that. And to what Kristin said, I think that this co-exclusive arrangement allows us to bring the original The Walking Dead series back to AMC+ for the first time. And we're really excited about that. Our fans are really excited about that. And I think we will see the results as it reverts to the platform in January.

Thanks. Let's go to the next question operator. Oh, sorry. You got a follow up. Go ahead, Doug. Yes.

Sorry, no problem. Then just, I guess, a little bit separately, you recently leaned into live sports and sports-adjacent content between wrestling and some sports docuseries. I'm curious on how engagement has looked for those properties as sports rights and shoulder programming associated with them continue to drive engagement industry-wide, like how much further do you anticipate the company pushing into this space?

That's a great question. The live sports program, we've been really pleasantly surprised. I keep saying that on this call, but there's been a lot of good things coming out of the quarter with the performance of TNA. We talked a lot before we launched that content, does it fit into our strategy for AMC? Wrestling, it really is story-driven, character-driven content, which is why we thought it would align nicely with what AMC, the linear channel, represents. And then what the other benefit of having wrestling on is it does tie quite nicely to the audiences for some of our other content. So, skewing younger, male, but a lot of women also watch wrestling, has been great for us. And then, you know, I'll let Dan speak to the further ideas that he has, but I will say, as we commented last year, [ Rise of the 49ers ] was another big bright spot for us in the programming category, and we have another sort of episode in that docu-series called [ Rise of the Saints ], which speaks to, you know, what happened in New Orleans post-Katrina with the New Orleans Saints. So Dan, anything else on sports?

Just the same thing. I mean, as we see sports, live sports, continue to engage the audience, we can be a real provider of sports-adjacent content that can service that audience, which has demonstrated a real affinity for all this kind of content. So we're very much in this business, not only with our Rise Up franchise, but our [ Cursed ] franchise that we announced about six weeks ago and other sports.

In our Central Northern Europe group where we have about 250 employees in Budapest, we actually operate the number one and number two sports channels in Romania, Slovakia, Hungary and the former Czech Republic. So we do a significant amount of live sports programming internationally. But in the U.S., I think our focus continues to be scripted dramas and intriguing unscripted with supplemental, as you said, shoulder programming that still sticks to our regular genre. You won't see us going out and trying to license games or anything like that. That's not where we're going. But as great storytellers in the U.S. and in some of our other territories, it's been beneficial for us to tell stories about some of these characters and teams as well.

Thanks, Doug. Let's go to the next question, operator. Thank you. Our next question comes from the line of Steven Cahall of Wells Fargo. Your line is open, Steven.

Thank you. Good morning. And I joined the call late, so I apologize if some of this has already been answered. But I was just wondering if you could talk through the sort of ratable recognition I think you're going to have for The Walking Dead. So if I understand it correctly, you'll have a couple hundred million in '26 and '27 as revenue. How should we think about the AOI contribution in those years and also the AOI contribution after those years, given the cash profile that you laid out? And with the guidance that you're changing for '26, I'm just wondering what the underlying ex-Walking Dead changes to guidance versus how much of it is from the new transaction. Thank you.

Sure, thank you. Thanks, Steven. So on the revenue recognition, it's not out of the ordinary. It's standard procedure. We're going to recognize $200 million to $225 million of the revenue in year '26 and also in '27. That is driven by ASC 606 revenue recognition rules, which require revenue to be recorded at the present value of the future payments. So it's going to be approximately $445 million for the life of the agreement. AOI will be high margin as you would suspect in a content licensing deal, just like all of our content licensing deals. And so we won't speak to the specific margins with the result with regards to the specific contract, but it's a content licensing construct. And then free cash flow will come in at $25 million in year '26, $100 million in years '27 through '30, with the remainder in 2031. And that follows contracts, the contractual provisions.

And just on the guidance? On the guidance, look, we're keeping to the guidance on advertising revenue. I think we talked about $200 million to $225 million of new licensing revenue coming in, which implies domestic licensing of $460 million to $485 million per year. Domestic subscription revenue for the year-round will come in at about a 3% decline year over year. So that reflects the offset.

Got it. Thank you. Thank you, Steve. Operator, we'll go to the next question. Yes, sir. Once again, to ask a question, please press star 1-1 on your telephone. Again, that's star 1-1 to ask a question. Our next question comes from a line of Michael Morris of Guggenheim Securities. Please go ahead, Michael.

Thank you. Good morning. Wanted to ask first about your comment that the rate of affiliate declines can improve in the back half of the year with the new agreements. Would love to hear some more detail on those new agreements. I know they've been sort of evolving in shape and components, as you've pointed out, but would love to hear a little bit more about how that can lead to an improved rate of decline, that would be helpful. And then bigger picture, there are several very large transactions in the media market that have been announced or contemplated, whether it's Fox acquiring Roku, whether it's what Comcast has announced with their split. I'd love to hear your view of the broader landscape and how these changes may or may not impact your business. Thank you.

I'll give you a high level on the affiliate. We're starting to see improving video sub trends in cable, although it's still earlier. Obviously, a healthier distribution ecosystem will benefit everybody. We were happy for Charter to see that they were only down 21K on the video subs in their earnings call. And the TV Select Plus, the hard bundle that we're part of, is now over, I think, over $125 in streaming value for subscribers. And as we mentioned, we're seeing significant engagement and authentication for people who have the opportunity to engage with AMC+ in some of these hard bundles. But overall, like I said, we saw a 21% improvement on WE tv audiences for the quarter. And we think things are starting to settle in. And then obviously we announced our YouTube TV renewal, which Kim can add a little color to on the distribution side. And then we'll come back to your second question. Sure.

As Kristin mentioned, we renewed our carriage agreement with YouTube during the quarter. It was a smooth and very constructive renewal, completed without any disruption for our viewers. And I think this is notable at a time where recent renewals across the industry have involved a lot of public dispute and blackouts. So we think it says something about the value of our programming strength and of our affiliate relationships, and the impact of really our partner-focused approach to distribution. So, you know, I'm excited that we've renewed distribution agreements with four of the top five major domestic MVPDs in the last 12 months, including Comcast, DirecTV, DISH, and YouTube, and feel very strongly about the lengths and economics we achieved in those results.

And then as far as consolidation, you know, it can be a tailwind for us because there's fewer larger platforms and they all need high-quality content to differentiate, right? And so we're one of the few independent suppliers of premium programming and owned IP and, you know, the The Walking Dead deal is evidence of this. We also, I think, continue, we've said for the last three and a half years, like, our goal is to continue to make great IP, to meet audiences wherever they are in our distribution strategies, whether it's, you know, streaming, AVOD, SVOD, FAST. And, you know, I think we're well positioned. We're watching closely with what goes on throughout the marketplace. And as a public company, we'll always answer the phone when it rings, and we're just sort of in a watch and see moment, but we're not changing our strategy that we have been talking about for the last three and a half years, we're just going to keep going, and I think we have a small but mighty mixing metaphor, the little engine that could here, and we're just going to keep going, and we're optimistic about our opportunities going forward.

Thank you both. Thanks, Mike. Operator, we can go to the next question. Thank you.

Next question comes from the line of Doug Creutz of TD Cowen. Your line is open, Douglas.

Hey, thank you. Just wondering how the $100 million in annual cash licensing payments you'll be getting for The Walking Dead rights over the next five years compares to, let's say, the average annual licensing payment you got for the franchise over the last five years. Thanks.

You can't really compare them, Doug, because as Kim said, things were licensed in different countries to different people in all different tenures. And so it was really hard even going into this process for us to think through what would be a good deal, a really good deal, and a great deal, right? So it's not really a one-to-one, but again, we're thrilled that we were able to take the time to bring all the rights back to be able to position them in the marketplace as a global offering across every single piece of the library, so the 371 episodes that we have. But it's nearly impossible to kind of answer the question the way you framed it. Sorry.

Okay, thank you. I would now like to turn the conference back to Nicholas Siebert for closing remarks. Sir?

Thank you all for joining us today. We appreciate your interest in AMC Global Media. Have a nice day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the AMC Global Media First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker host, Nick Seibert, SVP, Corporate Development and Investor Relations. Nick, you may begin.

Thank you. Good morning, and welcome to the AMC Global Media First Quarter 2026 Earnings Conference Call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Kim Kelleher, President and Chief Commercial Officer; Dan McDermott, Chief Content Officer and President of AMC Studios; and Mike Sherin, Chief Accounting Officer. We will begin with prepared remarks, and then we'll open the call for questions. Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ.

Please refer to our filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made today. We'll discuss certain non-GAAP financial measures on this call. The required definitions and reconciliations can be found in the press release we issued this morning, which is available on our website at amcglobalmedia.com. And with that, I'd like to turn the call over to Kristin.

Thanks, Nick, and Good morning, everyone. We've had a busy start to the year with the first quarter representing yet another successful quarter of double-digit streaming revenue growth and robust free cash flow generation.

We saw a notable improvement in first quarter advertising revenue trends and remain encouraged by the progress we continue to see on that front. We also entered into a new long-term affiliation agreement with our partners, DISH and Sling TV. We're tracking to plan across all key metrics and are pleased to reiterate our financial outlook for the year.

As a reminder, our 2026 outlook contemplates consolidated revenue of approximately $2.25 billion, AOI of approximately $350 million and free cash flow of at least $200 million. You may have noticed we recently changed our company name to better reflect the business we operate today.

AMC Global Media is a studio-driven owner of world-class IP. We deliver programming in more than 100 countries and territories around the world on our own platforms and reach millions more through strategic licensing agreements. Our streaming business is the world's largest collection of targeted services, bringing superfans of specific genres, a level of depth and curation they can't find anywhere else. In the U.S., we're reaching streaming customers through direct subscriptions and hard bundle arrangements with partners like Charter and Philo.

To date, we've seen 1.8 million hard bundle activations. Later this year, DIRECTV will hard bundle the ad-supported version of AMC+ into its video service. We expect this universe to continue to grow as streaming and linear distribution converges and consumer awareness of this additional value rises.

These activations are in addition to our reported streaming subscribers of 10.1 million, which reflects our substantial retail customer base. We manage our business with a long-range perspective and focus on creating high-quality enduring content, generating free cash flow and driving shareholder value. Streaming revenue is growing and now represents our #1 source of domestic revenue. We expect stable domestic subscription revenue this year. While the quality and size of our streaming subscriber base remains important to us, over the past few years, we have focused on free cash flow in lieu of subscriber targets. Because of this, we will no longer report streaming subscribers quarterly, although we will provide meaningful updates from time to time. We continue to grow our strong presence on CTVs. FAST is a key component of our digital strategy and also provides promotional and marketing opportunities for our pay platforms.

We have more than 40 FAST channels today, and we'll launch a dozen more in the coming months. We're also growing internationally as we expand our FAST presence in the U.K., LATAM and Spain. As we said last quarter, the streaming rights for one of the most watched shows in history, -- The Walking Dead return to us early next year. We've aligned our rights to January 2027 and envision licensing the Walking Dead Universe, which spans 7 series and 352 episodes and counting co-exclusively.

We're seeing significant interest for this enduring franchise and are actively engaged in discussions with several major platforms. Last week, we had our annual upfront content showcase attended by our most important commercial and creative partners. It was great to come together to discuss new commercial opportunities and the content that will drive these relationships over the next year and beyond.

We made a number of announcements, including that we've Greenlit our next big original series for AMC and AMC+, a multigenerational racing drama produced in partnership with NASCAR called Thunder Road.

Dennis Quaid will play the lead character, and we are already seeing notable inbound interest from advertising partners on this series. We also renewed our sports docuseries Rise in partnership with the NFL and Skydance Sports. Building on the success of the first season, which featured the San Francisco 49ers, Rise of the Saints will focus on the New Orleans Saints and the team's historic run in the years following Hurricane Katrina.

Eli Manning and his father, Legendary Saints quarterback Archie Manning, are both partners and will appear on the show, which will premiere early next year. And we announced a new partnership with Meta to make a number of our streaming apps available on the Meta Quest headset starting with AMC+ later this year. We're excited to meet fans on this immersive new platform. This month marks Acorn TV's second annual Murder Mystery May. Last year, this programming event drove Acorn to its biggest month ever. This year's major title is the new Brooke Shields series, You're Killing Me, premiering May 18. We're also in production on a second season of Irish Blood, starring Alicia Silverstone, which last year became the strongest show in terms of acquisition in Acorn history.

All Reality, our newest targeted streaming service, is seeing strong initial growth driven by the Love after Lockup, Mama June and Bridezillas franchises. The service launched on Amazon late last year and is now also available through Roku and Apple. All Reality is a great example of how we continue to manage and adjust our streaming business to find and serve fans. A few recent content highlights to note. We launched the Audacity, AMC's newest prestige drama, and we go into production on the second season next month. We debuted a new season of our popular anthology series, -- The Terror, with The Terror: Devil in Silver. We've had a number of notable film releases over the last few weeks, including Forbidden Fruits, Faces of Death, and Over Your Dead Body, 3 very different titles that demonstrate strength and breadth of our film business.

We'll see the return of important franchises with Anne Rice's The Vampire Lestat, premiering on June 7 on AMC and AMC+ and the third season of -- The Walking Dead: Dead City, slated for later this summer. Lastly, the search for a new CFO is progressing. And while we aren't announcing anything today, we will update you when we have news to share. Our Chief Accounting Officer, Mike Sherin, is joining us on the call today.

Mike's skill and leadership reflect the depth of our finance team and the executive strength across our entire company. Mike will now review our financial performance for the quarter, our outlook and our continued focus on our capital structure, including the further debt reduction and planned additional share repurchases that we announced today. And with that, I'm pleased to turn the call over to Mike.

Thank you, Kristin. We are off to a solid start in 2026, and our first quarter results are consistent with the expectations we laid out when we issued our full year outlook earlier this year. First quarter consolidated net revenue declined 2% year-over-year to $542 million. Consolidated AOI declined 34% to $69 million with a 13% margin. We are pleased to report another quarter of healthy free cash flow generation with first quarter free cash flow totaling $65 million. We are on track to achieve our 2026 free cash flow outlook of at least $200 million for the full year. I'll now discuss our segment results. Domestic operations revenue decreased 3% to $471 million.

Subscription revenue decreased 3% year-over-year with streaming revenue growth of 11%, offset by a 16% decline in affiliate revenue. The decrease in affiliate revenue was primarily the result of continued subscriber declines. We anticipate that our affiliate revenue rate of decline will improve in the second half of the year as new agreements and contractual changes take effect. First quarter streaming revenue benefited from rate initiatives implemented across our services. We ended the quarter with 10.1 million reported streaming subscribers as compared to 10.2 million subscribers in the prior year period.

Retention in the first quarter was consistent with both the fourth quarter and first quarter of last year. Across our portfolio, subscribers remain active and engaged. In the first quarter, we saw a 5-year high in engagement, showing growth from both the prior quarter and prior year.

Moving to advertising. Domestic operations advertising revenue declined 5%, primarily due to lower marketplace pricing. In the first quarter, we saw increased ratings in our scripted series within key demos and continued healthy growth in digital and advanced advertising. First quarter content licensing revenue of $53 million reflected the timing and availability of deliveries in the period and was consistent with the $54 million of licensing revenue reported in the first quarter of 2025.

Regarding adjusted operating income for the quarter. Domestic operations AOI decreased 26% to $92 million, reflecting revenue flow-through and increased technical and operating expenses, including programming amortization.

Moving to international. International revenues increased 3% to $72 million for the first quarter. Excluding the favorable impact of foreign currency translation, international revenues decreased approximately 5%.

International subscription revenue, excluding FX, decreased 5%, reflecting the wind down of a joint venture that operated primarily in Poland and Africa.

International advertising revenue, excluding FX, decreased 5% due to lower ratings and digital advertising in the U.K. International AOI for the first quarter was $5 million with an 8% margin.

Turning to the balance sheet. We successfully retired our senior secured notes due 2029. During the quarter, we exchanged the majority of these notes for our existing 2032 notes, extending their maturity to 2032. Subsequent to quarter end, we redeemed the remaining unexchanged portion of the 2029 notes with cash. As announced in our earnings release, we continue to focus on reducing our gross debt, which will include the pay down of our remaining Term Loan A and termination of our credit facility next week. These transactions significantly extend our debt maturity profile with approximately three quarters of our total debt not due until July of 2032.

Additionally, today, we announced plans to repurchase approximately $30 million of our Class A common stock through an accelerated share repurchase, reflecting the redemption of our 2029 notes subsequent to the quarter end and the planned transactions announced today, including the Term Loan A pay down and additional share repurchase, -- our cash position remains healthy with approximately $428 million of balance sheet cash and pro forma net debt and finance leases of approximately $1.3 billion, representing pro forma net leverage of 3.5x.

Moving on to the reiteration of our 2026 financial outlook. Regarding our most important financial metric, free cash flow, we continue to expect to generate at least $200 million of free cash flow this year. Regarding full year revenue and AOI, we continue to expect consolidated revenue of approximately $2.25 billion and anticipate consolidated AOI of approximately $350 million. In terms of the cadence of AOI for the remainder of the year, we anticipate that AOI will continue to be back half weighted due to the timing of licensing revenue and streaming rate events.

It is also worth mentioning that second quarter AOI will represent the low point for the year due to the above-mentioned revenue dynamics and the timing of expenses, including increased marketing in the quarter related to new series premieres. With that, I'll hand the call back to Nick.

Thanks, Mike. Operator, please open the line for the Q&A session.

[Operator Instructions] And our first question coming from the line of Steven Cahall with Wells Fargo.

Kristin, can you update us on how you're thinking about re-licensing The Walking Dead? Does it make sense to do kind of one big beautiful deal? Or are the economics better to chop it up into small pieces like linear versus streaming partners or different territories or geos? And if we do start to see some headlines on a deal like this, any way to think about what the residual component of that and how much drops down to AOI and free cash flow?

And then, Mike, I just wanted to confirm, since I know that is a big piece of content that's potentially up to re-license, is that included in this year's AOI and free cash flow guidance? Or would it be in addition to? Since I know the timing is kind of unpredictable, I think it's not in the guidance, but just wanted to confirm.

Steven, thanks for the question. It's a multimillion- dollar question. It's a good one to be asking to kick off the call. We've been really excited about the inbound for discussion on the licensing rights for -- The Walking Dead. And we're really looking at every scenario, which there's a variety of ways to look at it. We definitely feel it's important to keep some of the content for ourselves co-exclusively. So we're emphasizing the fact that we're looking predominantly at co-exclusive deals.

But there are some very large and enthusiastic partners in the bidding process right now. And so we're really looking at any variety of construct, but the key thing for us is co-exclusivity and then we may chunk it up with may all go to one person, domestic versus international, like there's many, many ways to skin this cat. So there's been a lot of activity at the company in working with potential partners and really looking at different scenarios. So stay tuned. But as far as the residuals and the other stuff, I'll flip that to the finance guys.

Steve, this is Mike. I can tell you that for 2026, The Walking Dead rights would not be included in the estimated AOI of $350 million.

Great. And then just a quick follow-up on streaming. If I caught that right, Mike, I think you said that there could be a rate event coming. I guess big picture is, would you expect streaming revenue growth to accelerate in the back half of the year? I think it's decelerated a little bit the last couple of quarters.

Yes. Steve, it's Nick. Kind of as we look forward, the way I think about it is kind of looking at double digits kind of for the year, kind of building throughout the year, gets you to the kind of flat subscription revenue growth.

Our next question coming from the line of Sean Diffley with Morgan Stanley.

So another one on The Walking Dead rights. Just obviously, Netflix knows the value of this IP really well. Are there other considerations beyond just monetary that would factor into your analysis of where they go and how you chop them up? And then second question, obviously, it looks like advertising was a good amount better. What's going on there? Is there anything to call out that's driving the better results? And then on the flip side, affiliate was a bit worse than us in the quarter.

Obviously, sub declines in the ecosystem matter, but it looks like you're calling for an improvement in the back half. Maybe just some of the drivers there. I think you called out new agreements, but anything to assume on underlying cord-cutting trends in there as well?

Great. I think I'm going to kick all 3 of those questions over to Kim. Thanks, Sean.

Sure. Thanks for the questions. On your first question regarding The Walking Dead licensing, I would just say, of course, we consider the customer experience and discoverability when we're looking for what our co-exclusive partnerships are going to be going forward. We have several partners around the world for -- The Walking Dead right now, and we're engaged with all of them about the future.

On advertising, I have to say we're pleased with the ad revenue trend in Q1, and we're seeing this continue into Q2. So we've really embraced the viewership changes that have come with streaming and FAST in AVOD and have seen growth across all areas. The commercial revenue team continues to optimize their digital delivery and performance across all the platforms real time, really focusing on yield. And like I said, we're excited to see the momentum that started in really second half of '25 continue into '26.

In the first quarter, we saw strong digital growth, in particular, up 44% versus Q1 2025. And as Mike mentioned earlier in the script, on linear, we're seeing increased viewership, which reflects the strength of our programming, in particular, around increased ratings around our originals, specifically in key demos.

So in general, we're seeing a healthier ad market compared to this time last year, which is good to see as we go into the upfront marketplace. And lastly, on affiliate, I really -- what you're seeing is timing. Obviously, we've had some domestic subscription declines in Q1 reflected, but we see domestic subscription revenue to be overall stable for the year.

Yes. And Sean, there's a lot of kind of timing of different deals. Every deal is different with each partner and the renewal calendar and things like that. So what we're kind of looking at for the full year is kind of the rate of decline being similar to kind of what it was last year in affiliate revenue. So I wouldn't read too much into 1Q.

And our next question coming from the line of David Karnovsky from JPMorgan.

Maybe, as a follow-up to The Walking Dead commentary, it would be great to hear just about the health of the content licensing market generally at the moment. And then on the ASR, can you just speak to the backdrop of that decision, expected shares that will come back and kind of any read-throughs to long-term capital allocation?

Yes. David, this is Kristin. I'll start with the content licensing and let Kim add more color. I mean it's a key part of our revenue makeup. And we've been really opportunistic around the deep library that we have. And this year, we've actually advanced on the back end, our capability to really look through the content that we have the rights to and dig deeper into the library through just better management of the inventory through software that Stephanie has helped us create.

So when our teams are going out domestically and globally, they have a really good sort of suitcase of every single thing that we have available to license. And we've been able to make, I think, a bigger dent in the opportunity over the last 18 months because we know everything that we have and because Dan continues to make content that has strong IP and that's very attractive across the world. So content licensing is and will continue to be a really key important part of our future. But as to the specifics, I'll flip it over to Kim again.

All great points. And I would just say we're trying to be very thoughtful about how we window in our licensing agreements, not only domestically but around the world. And to your question very specifically, it's a very robust and competitive market right now. So it's a good time to be in market with this particular IP.

David, this is Mike. On the ASR question, I would say, first and foremost, our capital allocation priorities are to continue to invest in great content for the business. So we remain focused on free cash flow generation and manage the balance sheet with a focus towards debt reduction and maturity extensions. And then occasionally and opportunistically, we would return capital to shareholders.

Yes. And I'll just add to that, specifically in terms of the additional share repurchase and how we're affecting that. We've been in the market a couple of times over the past year or so in our equity. And given the lower float and volume limitations and things like that, it just becomes kind of a grind trying to get not a lot of dollars to work, but a lot of shares back. And this ASR structure just kind of gives us more certainty and ability to affect roughly $30 million of share repurchases.

Our next question is coming from the line of David Joyce with Seaport Research Partners.

Two questions, please. First, on distribution. There are still some linear services in the U.S. where you don't have a carriage right now like Hulu or Fubo. What is your desire to get on more linear domestically and internationally? What sort of gating factors are there? Or are you really just more focused on building the streaming side?

And then secondly, on advertising, I think you mentioned earlier that ad rates were down, but the revenue was pretty solid. What's driving that? Are you making more inventory available? Or is it a mix of the avails? Kind of what are those sort of puts and takes?

I'll take the distribution question, David. Yes, we are happy to have all of our products carried wherever we can have them carried, and they're equally important to us. Hulu is going to be interesting as they move down their evolutionary path. And then with Fubo, that was a strategic nonrenewal on our part last year. But I just want to emphasize that the linear channels are still very important to us as our streaming. And I think our secret sauce is our ability to work with all of the content that we have and make sure we can deliver it to our partners who can then deliver it to customers everywhere they want to watch the shows that we create.

And then on the ad front, I'd just reiterate, yes, a little bit of softness in rates, and that's really coming from the increased ratings and available inventory that we've seen come through in Q1. We've been able to capture those increases, in particular, across the original inventory and key demos with pricing opportunity. But because of the largeness of the ratings increases, we've seen a little bit of softness tied to the overall increase in inventory. But we're in very good shape, and we're very pleased with how the advertising performance went this Q1.

Our next question in queue coming from the line of Charles Wilber with Guggenheim Securities.

One on streaming subscribers and just the approach there. You called out the number of ad-supported AMC+ subscribers under the hard bundles agreement this quarter. I just wanted to see if you could talk a little bit about your strategy or your approach to subscriber acquisition and maybe the difference in monetization between the approaches between the direct subscribers in these hard bundle agreements.

Yes. Charles, it's Kristin. On streaming, because we're a smaller company, our goal is really to make the product available everywhere we can.

And with the hard bundles, we think it really does add value because we have broader relationships with these distribution partners. So longer-term deals where, over time, their audiences are moving from linear to streaming. And so we'd like being in both places. We don't necessarily articulate specific revenue with each different category of content.

We do overarching deals with our partners, and then we collaborate with them pretty extensively in Charter's case and in Philo's case to make sure that the products are represented well with the customers and they're available in whatever format. And the goal there is as these long-term relationships continue when the opportunities come up to reimagine the approach to revenue, then we may assign the revenue differently for streaming versus linear as the industry evolves.

But our overall strategy, as you know, as we've talked about for the last 4 years, is to optimize the availability of the content to keep creating great content and to work on the business so that we're very opportunistic with both how we license, where we license, who we distribute to, how we distribute and then -- and keep ourselves out in the marketplace as a small but mighty player. So it's really part of the overall evolution of the industry as well as our evolution as a company. And did you have the second half of that or that was the bulk of it?

No. I mean, I think you answered it well. I just wanted to see if you can provide any color in terms of the monetization flow-through of the 2, but it sounds like it's a bit of a holistic approach with your distribution partners. Is that fair to say?

You said it better than me. Thank you. Yes, it was predominantly blended, and we're going to keep looking again for. We love the hard bundle scenario because for us, embedded in that is all the ancillary marketing that we get from partners and then the opportunity for our content to really be seen and experienced by people all over the world.

Our next question coming from the line of Doug Creutz with TD Cowen.

Can you just give an update on what your plans for cash content spending are this year and if that's evolved at all since the last call?

Sure. We'll flip that one to Dan.

Thanks, Doug. Investing in our programming is clearly the most important and meaningful thing we do. We have an incredibly strong production team.

We're committed to engaging audiences with comparable volumes of high-quality content every year. We expect the same volume and quality of content in 2026 as in 2025. Generally, there's some variability between years due to the timing of programming commitments. But for this year, from the view we have today, we expect that from both a P&L perspective and a cash perspective, programming cash and amortization should be consistent, give or take, a little bit compared to last year.

Just to add to that, the team is really efficient and able to make a lot of great content with not a huge amount of spend. And what we're also focused on, which Dan's team has done a great job on is curating the right stuff, but then also moving efficiently towards greenlighting second season.

So for example, with the Audacity or with Irish Blood, like if we know something is good and generally, we've been -- it's -- sometimes it is lightning in a bottle, but a lot of times, it's just really skilled people making great choices and working with great partners, and we've continued to bolster the library over the past couple of years under Dan's leadership. So it gives us the opportunity because the shows are good to move quickly on additional seasons and keep the fan base engaged and happy, which I believe we're going to see a pretty strong fan base in June for the The Vampire Lestat, our third season of the Interview With The Vampire because it's getting pretty crazy out there. So if that's the last question, I think we'll tell everybody, make sure you tune in on June 7 to The Vampire Lestat, the next series in our Anne Rice group.

Thank you. And I'm showing no further questions at this time. I will now turn the call back over to Nick for any closing comments.

Thank you all for joining us today. We appreciate your interest in AMC Global Media. Have a nice day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the AMC Networks Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand it over to your first speaker, Nick Seibert, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to the AMC Networks Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today are Kristin Dolan, Chief Executive Officer; Patrick O'Connell, Chief Financial Officer; Kim Kelleher, Chief Commercial Officer; and Dan McDermott, Chief Content Officer and President of AMC Studios. We'll begin with prepared remarks, and then we'll open the call for questions.

Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Networks' SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements. On this call, we will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found in today's press release available on our website at amcnetworks.com.

And with that, I'd like to turn the call over to Kristin.

Thanks, Nick, and thanks, everyone, for joining us. AMC Networks had a successful 2025. We used our unique strengths and advantages to drive the company forward in a time of change. This year, we strengthened our balance sheet and achieved a meaningful inflection point in our business. Streaming is now our largest single source of domestic revenue. This is a validation of our strategy and an important milestone in our business transformation. We generated $272 million in free cash flow, a key priority for us, well ahead of our previously increased forecast.

We expect that 2026 will represent another solid year on this front and anticipate free cash flow of at least $200 million for the full year. Our streaming strategy is simple and distinct. We offer fans of specific genres, unmatched curation and depth through our targeted services. We window content efficiently, keep prices low and deliver clear value to our subscribers and wholesale partners through which we reach the vast majority of our viewers. We also operate all our services through unified technology that delivers an excellent viewing experience efficiently and with predictable costs.

In November, we launched our newest targeted streaming service called All Reality, bringing viewers the best in unscripted content, including our most popular reality franchises. It's currently available through Amazon Prime Video and Roku with more platforms coming soon. At last month's Sundance Film Festival, we relaunched Sundance Now as the definitive streaming home for independent film. The service features more than 1,000 hours of distinguished programming sourced from our independent film company, RLJE Films and Shudder. Building on decades of expertise and credibility, Sundance now gives fans the window into the world's most important film festivals and access to the most acclaimed titles.

Our anime service, HIDIVE, has achieved strong growth since we acquired it 4 years ago, the result of the increasing popularity of the genre and our team's expert curation. Acorn TV had a very active and successful 2025. We will continue the momentum with returning favorites and new originals, including your You're Killing Me, starring and executive produced by Brooke Shields. We will also bring fans second installments of two popular programming events, An Autumn to Die For and Murder Mystery May, which drove record viewership last year.

We have significantly reoriented our advertising business, embracing viewership changes and opportunities that have come with streaming, FAST and AVOD. In 2025, we saw growth in each of these areas. This is so important as the market shifts away from traditional reporting metrics and age-based demos to driving business outcomes. We'll be showcasing our advanced advertising capabilities and the unique value we deliver at a series of partner events in the coming months.

In the fourth quarter, we completed a transaction that gives us full ownership of RLJ Entertainment. This includes Acorn TV, ALLBLK, RLJE Films and a substantial investment in Agatha Christie Limited, which manages and monetizes Agatha Christie's valuable IP worldwide.

Content remains at the center of everything we do, and we're excited to bring a dynamic slate of strong programming to AMC and AMC+ this year. Our critically acclaimed sports docu-series, Rise of the 49ers was the most watched new AMC original since The Walking Dead: The Ones Who Live. It also drove the biggest day of sign-ups to AMC+ direct-to-consumer platform since the season 2 premiere of The Walking Dead: Dead City last spring. Dark Winds returns for its fourth season next week and was just renewed for Season 5. This remarkable series has established itself as one of the best neo-noir crime dramas in the history of television. It is also one of the most watched shows on AMC+.

We're very excited about a new prestige drama set in the world of Silicon Valley called The Audacity. It has all the elements of a classic AMC series, great story, unforgettable characters, a talented cast and something to say. We can't wait to preview it at South by Southwest next month and bring it to viewers on AMC and AMC+ on April 12. And we just kicked off a new partnership with TNA Wrestling, bringing a 2-hour block of live TV to our schedule every week. We have significantly expanded TNA's television audience. The Thursday Night show is also attracting younger viewers to AMC, who have a clear affinity for Walking Dead, Anne Rice and Shudder content, a connection we will leverage in the months ahead.

Industry consolidation is highlighting the value of studio assets and powerful IP. Our dynamic mix of content across a wide range of platforms underscores our strength as a studio-based programmer able to build franchises and engage fans. It's worth noting that the streaming rights to all 177 episodes of The Walking Dead, the biggest franchise in the history of cable television, returned to AMC Networks in less than a year. Still beloved, the original series generated nearly 0.5 billion hours of viewership on Netflix over the last 6 months of 2025.

Over the course of 2025, we successfully renewed more than 1/3 of our affiliate footprint in the U.S. and Canada on favorable terms, including long-term agreements with DIRECTV, NCTC, Philo and EastLink, among others. Many of these larger agreements include bringing video customers access to the ad-supported version of AMC+ at no additional cost. More than 1.1 million Spectrum TV customers have activated the ad-supported version of AMC+ that is now bundled into their video service. Charter's recent results included video subscriber growth for the first time in almost 6 years, which management directly connected to their strategy of bundling streaming value into their video product. We see this as a hopeful sign for the industry and the entire pay-TV ecosystem.

Three years into this role leading AMC Networks, I can say without reservation that I believe in our strategy, our people and the opportunities we see for this company. Our independence is a source of strength in a changing time. Our studio engages viewers by populating our platforms with high-quality and efficiently produced IP that we own. We have the strongest and most mutually beneficial partner relationships in the industry and advanced technology powers everything that we do. It's clear to me that we're only scratching the surface of what this company can achieve.

I'd like to take a moment to thank our CFO, Patrick O'Connell, who has been a great partner and colleague and will be stepping down next month to take on a new role outside our industry. We appreciate his contributions and we'll be cheering him on in his new endeavor.

And now I'd like to turn the call over to Patrick.

Thank you for the kind words, Kristin. It's been a pleasure to work with you and the entire team at AMC Networks. We've accomplished a lot over the past few years, and I'd like to thank the Dolan family and the Board of Directors for the opportunity. 2025 was a productive year for AMC Networks. We're proud of the progress we've made, including reconstituting our revenue mix towards streaming, investing in valuable IP, reorienting the business around free cash flow and the actions we've taken to strengthen our balance sheet. We generated healthy free cash flow, exceeding our increased outlook, and we once again delivered on our financial guidance. We believe our strong free cash flow outperformance in 2025 sets the stage for another year of robust cash generation. And for 2026, we expect to generate free cash flow of at least $200 million.

Moving on to our full year results. Consolidated revenue was $2.3 billion. Consolidated adjusted operating income was $412 million with a margin of 18%. We converted approximately 2/3 of our AOI to cash and delivered full year free cash flow of $272 million. On to our segment results. Domestic operations revenues decreased 5% to $2 billion for the full year and decreased 1% to $515 million for the fourth quarter. Subscription revenue meaningfully stabilized in 2025 with a decrease of less than 1% for the full year and flat in the fourth quarter.

In a first for AMC Networks, full year streaming revenue represented the largest single source of revenue in the segment. While affiliate revenue declined 13% for both the year and the fourth quarter, we are encouraged by the improvement in video results that we've seen so far from the major cable operators in this earnings cycle. For the full year, linear affiliate revenue headwinds were almost entirely offset by streaming growth of 12%. And in the fourth quarter, streaming growth of 14% more than fully offset linear declines.

We ended the year with 10.4 million streaming subs. Subscribers were flat as compared to the prior quarter and prior year period. In 2025, we repriced the entire subscriber base, and we are pleased with what we are seeing in terms of engagement and retention. 2025 represented the most watched year ever across our portfolio of streaming services in terms of total viewing hours. And in the fourth quarter, we also saw sequential improvement in retention. Content licensing revenue was $272 million for the full year and $75 million for the fourth quarter. Licensing revenue reflected the availability of deliveries.

Looking ahead, we see continued demand for our high-quality content. Domestic operations advertising revenue decreased 15% for the year and 10% for the fourth quarter, primarily due to linear ratings declines and lower marketplace pricing. Domestic Operations AOI of $490 million for the full year and $128 million for the quarter reflected continued linear revenue headwinds.

Moving to our International segment. Recall that in 2024, international revenue included advertising revenue related to retroactive adjustments reported by a third party of $21 million for the full year and $7 million for the fourth quarter. Excluding retroactive adjustments in the prior period and favorable FX in the current period, international revenue decreased 4% for both the year and the quarter.

On an apples-to-apples basis, advertising revenues grew 6% for the full year and 4% for the fourth quarter, primarily driven by strong advertising performance in the U.K. and Ireland. Subscription revenues, excluding FX, declined 8% for the full year and 6% for the quarter. The decrease in subscription revenue was related to a nonrenewal that occurred in the fourth quarter of last year. International AOI for the full year was $43 million and fourth quarter AOI was $7 million.

We remain focused on our balance sheet, and we're pleased with the results of our efforts over the last year. To recap, in 2025, we executed a series of transactions that reduced gross debt by almost $600 million, captured approximately $140 million of discount, extended the majority of our revolving credit facility in 2030 and opened a 2032 maturity window through the issuance of new longer-dated senior secured notes.

Overall, we've meaningfully extended our maturity profile now with only $83 million of remaining term loan due by April 2028 and no bond maturities until 2029. We ended 2025 with net debt of approximately $1.3 billion and a consolidated net leverage ratio of 3.1x. Despite lower AOI in 2025, our net leverage ratio remained relatively stable, increasing by less than 1/3 of a turn from the 2.8x we reported at the end of 2024.

As we look forward, our focus remains on further reducing gross debt and extending maturities. We've maintained a healthy cash position and ended the year with approximately $675 million of total liquidity. This includes approximately $500 million of cash on the balance sheet as well as our undrawn $175 million revolver. As a reminder, we believe it's prudent to capitalize the business with a minimum cash balance of approximately $200 million to $250 million.

In the fourth quarter, we repurchased approximately 850,000 shares of our Class A common stock for approximately $7.5 million. As of December 31, we had $117 million remaining on our share repurchase authorization. Additionally, as Kristin mentioned, in the fourth quarter, we acquired Bob Johnson's 17% stake in RLJ Entertainment for $75 million in cash. This transaction provides us with increased operating clarity and simplifies our business structure.

Moving on to capital allocation. Our philosophy remains consistent. First, we look to support the business by creating and acquiring compelling programming that resonates with our audiences while maintaining healthy levels of free cash flow generation. Second, we remain focused on reducing gross debt and extending debt maturities. And lastly, acquisitions and share repurchases will be opportunistic and measured. Moving on to our outlook. We expect consolidated revenue for 2026 to be approximately $2.25 billion. As it is still early in the year, the geography of certain items may shift as the year unfolds. Notwithstanding that, I'll now unpack the current assumptions that underpin our revenue outlook.

We anticipate that streaming revenue growth and linear subscription revenue headwinds will result in stable domestic operations subscription revenue as compared to 2025. We continue to be innovative, aggressive and strategic with regard to content licensing and anticipate approximately $260 million of domestic operations content licensing revenue for 2026, reflecting our current rate of production and market dynamics. We continue to make great strides in the evolution of our advertising business. That said, we anticipate that linear revenue declines will outpace digital growth in 2026 and expect that domestic advertising revenue would decrease in the low double-digit percent area as compared to 2025.

We anticipate that the underlying dynamics in the many international markets that we operate in will remain relatively consistent year-over-year and expect total international segment revenue for 2026 to be between $290 million and $300 million. Linear revenue headwinds continue to impact AOI. Therefore, for the full year 2026, we anticipate that consolidated AOI will be approximately $350 million. AOI will also be weighted towards the back half of the year due to the cadence of series deliveries, streaming rate events and the timing of expenses, including programming amortization.

Moving on to our most important financial metric, free cash flow. We continue to convert the majority of our AOI to free cash flow. And for 2026, we expect to generate free cash flow of at least $200 million. In closing, as an independent, nimble and innovative premium programmer, our commitment to creating high-quality content remains at the center of everything we do. We approach the marketplace a bit differently than others, including building out our library of powerful franchises and monetizing our content across an evolving distribution ecosystem. We'll continue to preserve capital with a focus on cash flow generation and the health of our balance sheet, and we'll balance appropriate levels of programming investment against the available monetization opportunities.

With that, I'll hand the call back to Nick.

Thanks, Patrick. Operator, let's open the session for Q&A, please. Thank you.

[Operator Instructions] Our first question will come from the line of Steven Cahall from Wells Fargo.

Patrick, we'll certainly miss having you on these calls. I wanted to kick off with an advertising question. It was a little worse in 2025 than it was in 2024. I think it came in a little below your expectations. So can you just help us think a little more about what's within the low double-digit guidance for 2026, the puts and takes? I know you've done a lot of work on the dynamic side of things. So I would love to frame your confidence in that outlook. And then The Walking Dead rights coming back is pretty exciting for the company. Just wondering when you start to think about having conversations in the market about what that could be worth and kind of what those bids look like. When we look at this, it could be $150 million opportunity. It could be 2x that or even bigger. So just trying to sort of frame expectations for what can happen to those rights as we get towards the end of the year.

Steven, it's Kristin. We'll miss Patrick, too. We've had -- I'm going to answer The Walking Dead question, then I'll let Kim speak to advertising. We've had a great relationship with Netflix for well over a decade since 2011 in carriage of The Walking Dead. The rights come back to us. As we said, it's a consistent top performer on streaming. And as you noted, the rights are very valuable. I can't say a lot right now, but we are in conversations now preparing for the rights coming back and for finding a home for them in the future. So there's more to report. We're just not ready to speak about it now, but we are in conversations, and we're very optimistic about the value of the content and our opportunity to monetize it going forward.

Steve, it's Kim. On your advertising question, I think the whole industry saw what we -- at the top half of '25, we saw a huge influx of digital inventory hit the marketplace driven by the shifting viewership. And I think that it drove down pricing, and we saw a lot of impact across the board for that. We reacted as quickly as we could and went into the upfront with a very streaming-first approach that I think we started seeing the impact from with the tides turning for us in Q3 and then continued momentum into Q4 with improvements. It really reflected the team's successful upfront strategy that we look to take into '26. We're growing in all the most important areas, streaming, FAST, AVOD and really looking to mitigate losses on the linear side.

Thanks for the question, Steve. Operator, we will go to the next question.

Our next question will come from the line of David Joyce from Seaport Research Partners.

Another kind of advertising question. Granted you still have the linear challenges there, but how should we think about the ad contribution from the streaming side and from FAST channels? Just wondering, are advertisers buying across all those platforms? Or are they kind of picking and choosing?

David, it's Patrick. I'll take a first crack at it, and Kim can add some color commentary. Listen, digital advertising is a meaningful portion of our business. It was a big part of the strength in the fourth quarter. Obviously, we're subject to some of the vicissitudes in the marketplace, which we saw at the top half of 2025. But as Kim mentioned, tactically, we're able to move quickly. Scatter was pretty strong in Q4. We demonstrated that we could sort of build brand sponsorships around certain events, including Best Christmas Ever, et cetera. So we're really nimble, we're really fast. The digital business was -- frankly, the industry broadly was challenged in the first half of 2025. That's now reversed field. That's a nice kind of growth area for us. It's not a majority of the revenue, but it's a substantial portion of our revenue. And so we feel good about continuing to grow that to offset the obvious linear headwinds.

The only thing I would add, David, is I would say we are seeing the industry embrace cross-platform buying more and more, and we are well set up to meet that need. We continue to grow our viewership across our digital distribution and have activated DAI across all of that. So it's a very seamless transaction for the advertiser, and that's been well met in the marketplace.

[Operator Instructions] Our next question will come from the line of Thomas Yeh from Morgan Stanley.

Patrick, you mentioned subscriber universe decline seeing an encouraging trend. I think there's also a slew of new skinny bundles that are getting launched that might possibly cause some fragmentation as well in terms of which networks get carried or not. Can you maybe just talk about your positioning there and how you see that shaking out relative to your view about the broader affiliate revenue outlook that you laid out? And then on cash spend on content, I noticed it declined a decent amount this year, possibly due to timing. Within the framework of your guide for EBITDA and free cash flow for next year, can you maybe just help us think through what you're thinking there from a cash spend perspective?

Thomas, so on the first, in terms of affiliate revenue, obviously, we're encouraged by some of the green shoots that we see across the broader landscape. It plays very well into AMC's partner-centric model, whereby we're cutting deals with Charter and frankly, others on innovative ways to avail a broader universe of broadband subscribers to either pay-TV in the traditional format or via apps of our ad-supported AMC+. So -- and it's nice to see sort of other large MSOs, PTV providers seemingly following in Charter's footstep. So we think that's an encouraging sign.

As it relates to sort of skinny bundles and whatnot, we have been extraordinarily successful in continuing to renew our affiliate agreements with full carriage across all of our channels. We continue to represent an incredibly strong value proposition for those distributors. And by extension, their viewers as well. So I think in that regard, the proof is in the pudding. And obviously, we're hopeful that these trends will continue. And so we feel very good about those affiliate relationships.

Secondly, in terms of cash content spend, it was down kind of slightly from 2024 levels. But we continue to invest extraordinarily heavily in premium programming. That is our signature. That is our focus, and that is the mandate that we have kind of from the Board and our Chairman to continue to invest in that manner and at those levels and at the same time, produce healthy levels of free cash flow. So we think we're doing both of those things at the same time. As we roll forward into 2026, I would expect that from both a P&L perspective and a cash perspective, those levels are going to remain fairly constant, meaning we're going to continue to invest heavily in that programming. I don't know, Dan, do you want to comment any further?

No, I think that's right. I think it's the most important and meaningful thing that we do. The one thing I would say is we have an extremely strong production team that takes advantage of tax incentives around the world and shooting in locations that get us the real bang for our buck, if you will. I mean we're very savvy about how we deliver the tent-pole series that we deliver on the cash that we have. And so that's been a real great situation in 2025, and we expect to continue that in 2026.

And I'll just finish up by saying that the caliber of the slate in 2025 and what we have planned for 2026 continues to either meet or outperform our expectations. So series like the 49ers, The Audacity that we spoke about. We had a Dark Winds premiere here in L.A. last night. It was amazing. So we're putting a really good slate out on AMC, but also on our streaming services as well. So we're not just being efficient. We're still producing the content that built the reputation that we have to this day. So we're psyched about what we have.

And with that, this concludes the question-and-answer session. I will now turn it back over to Nick for closing remarks.

Thank you for joining us today. We look forward to having a dialogue, and thank you for your interest in AMC Networks.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to the AMC Networks Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Nick Seibert, SVP, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the AMC Networks third quarter 2025 earnings conference call.

Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O'Connell, Chief Financial Officer; Kim Kelleher, Chief Commercial Officer; and Dan McDermott, President of Entertainment and AMC Studios.

Today's press release is available on our website at amcnetworks.com. We will begin with prepared remarks, and then we'll open the call for questions. Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Networks' SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call today. We will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found in today's press release.

And with that, I'd like to turn the call over to Kristin.

Thanks, Nick, and thanks, everyone, for joining us this morning. We're pleased with our performance in the third quarter and our progress in several key areas. We delivered another quarter of healthy free cash flow and are on track to achieve our increased guidance of $250 million in free cash for the full year. The results we reported today mark a key milestone in our transition from a cable networks business to a global streaming and technology-focused content company. Streaming revenue growth accelerated in the quarter and offset affiliate revenue declines, resulting in stable domestic subscription revenues. As we have previously discussed, we expect streaming to be our single largest source of revenue in our domestic segment this year. This is a first for us and a meaningful inflection point as we continue to manage the business for the long term.

As much larger companies spin off assets or split up to find clarity in a complicated time, we've built the components of a modern media business that is nimble, independent and well suited to today's environment and whatever comes next. We have a successful studio that produces programming and franchises that attract passionate and engaged viewers. We're home to the world's largest collection of targeted services, bringing fans of specific genres and unmatched level of curation and depth. We window our owned content across a full distribution ecosystem of domestic and international networks, streaming services, theaters and FAST channels. And we service all of this with a unified technology platform that allows us to deliver our content to viewers wherever they want to watch in a scalable way with predictable costs.

A few highlights before I turn things over to Patrick. As previewed on our last call, we renewed and expanded our branded content licensing agreement with Netflix, which has been beneficial for both companies. We reserve new seasons of our most important franchises for our own platforms and get the promotional benefits of making prior seasons available to Netflix's large base of U.S. subscribers. This new agreement also expands to select international markets with a combination of first and second window rights focused on our biggest franchises like Anne Rice, Dark Winds and The Walking Dead.

Turning to other key partnerships. We renewed a long-term distribution agreement with DirecTV, which expands the availability of our networks and programming across linear, FAST and streaming. Next year, DirecTV will hard bundle the ad-supported version of AMC+ in video packages that include AMC's linear network and will also add Shudder to one of their genre packages. We continue to work with Charter to raise awareness among Spectrum TV customers that ad-supported AMC+ is now included in their video package. More than 850,000 Spectrum customers have opted into AMC+ since its inclusion in the package earlier this year. We've also expanded our relationship with Cox. All 5 of our linear networks are now included in their streaming-only TV plan, Cox TV Lite. Just this week, we launched our first triple bundle with Amazon Prime Video offering AMC+, MGM+ and Starz a significant savings over stand-alone pricing. During last quarter's call, as we were finalizing our upfront negotiations, we noted a more than 25% increase in digital advertising commitments.

I'm pleased to say the final figure was an increase of 40%. This is meaningful growth in an increasingly important category as our digital presence expands and advertisers see the impact of reaching viewers across all platforms that feature our popular and critically acclaimed programming. Our FAST and AVOD business continues to grow. We recently renewed our distribution with CTV leaders, Samsung and Roku and expect to launch 4 new FAST channels by the end of the year. As discussed last quarter, we are also implementing this successful strategy internationally. We currently have FAST channels in the U.K., Canada, Germany, Spain and Latin America. Globally, as of the end of September, we have 33 FAST channels distributed across 22 platforms totaling 215 active channel feeds. Combined, our portfolio of streaming services delivered an all-time high in viewership during the quarter, including the highest ever viewership of AMC+.

Acorn TV, our streaming service focused on international crime dramas and mysteries, is having its best year ever. We're thrilled with the new talent, energy and momentum we're bringing to this beloved service now in its second decade and one of the world's first and most successful targeted streaming services. Irish Blood, the new series starring and executive produced by Alicia Silverstone, premiered in August and is already Acorn's #1 series ever and has been renewed for a second season. We're currently in production in Nova Scotia on a new series called You're Killing Me, starring and executive produced by Brooke Shields. We just completed another successful FearFest, one of our biggest programming events of the year, now spanning thousands of hours of programming across AMC, AMC+ and Shudder. Brand partnerships included an integrated show sponsorship with Hyundai, a Universal Studios promotion on Shudder for Black Phone 2 and multi-platform partnerships with Bacardi and Kraft Heinz, anchored by full week placements on Sphere as well as on our linear streaming and social platforms.

On AMC and AMC+, we just brought fans a third series in our popular Anne Rice Immortal Universe, Anne Rice's Talamasca: The Secret Order. The first episode has already been seen by 2 million viewers across all platforms and is pacing as the most watched series premiere since The Walking Dead: The Ones Who Live. Interview with the Vampire will return next year with a new season called The Vampire Lestat focused on the popular character Lestat as the world's first truly immortal rock star. We've completed production of a new series that will premiere next spring on AMC and AMC+ called The Audacity, written and produced by Better Call Saul and Succession writer, Jonathan Glatzer. It's a provocative, timely and darkly comedic series featuring an amazing cast, including Billy Magnussen, Sarah Goldberg, Zach Galifianakis, Rob Corddry and Simon Helberg.

Next year, we're planning to go into production on a new franchise, Great American Stories, the first season of which will be focused on John Steinbeck's The Grapes of Wrath. Our film group is experiencing one of the most successful years in its history with recent theatrical release, Good Boy joining this summer's Clown in a Cornfield to deliver 2 of the 3 highest grossing opening weekends we've ever had. Dangerous animals also saw solid box office results this summer. Just as important as the theatrical success is the impact these films have when they move to streaming on AMC+ and Shudder, extending the reach of our high-quality IP with minimal audience duplication.

Earlier, I spoke about the strategic components of our business and our commitment to remaining fast-moving and adaptable as our industry evolves. Our achievements are only possible because of our people, and I'm extremely proud of the work we're doing and the culture we have built together. To support our employees during this dynamic period in media and to advance our company with dedication and focus, we recently offered a voluntary buyout program to most of our U.S. workforce. This program did not have specific financial targets, rather its purpose was to strengthen our talent base and ensure we have the right skills for the future. The result of this initiative is a less than 5% reduction in our total employee base. We are thankful for the contributions of those who have chosen to pursue new opportunities and of course, those who are driving this new era of the company.

AMC Networks continues to differentiate itself during this changing time in media. As I said at the top of the call, when I look across our business, I see a company that has the pieces and the people necessary to succeed in this environment and to move quickly to find new and better ways to bring engaged fans to the content they love.

And now I'll turn the call over to Patrick.

Thank you, Kristin. We are pleased with our third quarter performance. And today, we are reiterating our outlook for the full year. We delivered another quarter of healthy cash flow generation with free cash flow totaling $42 million in the third quarter. We remain well positioned to achieve our 2025 outlook of approximately $250 million of free cash flow. Third quarter consolidated net revenue declined 6% year-over-year to $562 million. Favorability in foreign exchange rates resulted in an approximately 65 basis point tailwind to our consolidated revenue growth rate. Consolidated AOI declined 28% to $94 million with a 17% margin, and adjusted EPS was $0.18 per share.

I'll now review our segment results. Domestic Operations revenue decreased 8% to $486 million. Subscription revenue was flat year-over-year with streaming revenue growth of 14%, partly offset by a 13% decline in affiliate revenue. Streaming revenue growth in the quarter benefited from the implementation of rate initiatives as well as year-over-year streaming subscriber growth of 2%. We ended the third quarter with 10.4 million streaming subs. We've implemented price increases across all of our streaming services this year. Retention and engagement remain healthy across our portfolio of services, and we continue to anticipate an acceleration in our streaming revenue growth rate for the fourth quarter. As Kristin highlighted earlier, streaming revenue is expected to be our largest single source of revenue this year in this segment.

Moving to Advertising. For the third quarter, Domestic Operations advertising revenue decreased 17% due to linear ratings declines and lower marketplace pricing. The ad market remains challenging for everyone, but we are encouraged by our strong upfront performance, the strength of our programming and our significant advanced and digital advertising capabilities. As Kristin mentioned, we are pleased to have renewed and expanded our licensing agreement with Netflix in the third quarter. Recall that licensing revenues often vary quarter-to-quarter due to the timing of agreements and delivery schedules.

For the third quarter, content licensing revenue was $59 million, reflecting the timing and availability of deliveries in the period. Demand for our high-quality content remains healthy, and we now anticipate that Domestic Operations content licensing revenue will exceed $250 million for the full year. Domestic Operations AOI was $112 million for the quarter, representing a decrease of 25%. The decrease in AOI was largely driven by continued linear revenue headwinds.

Moving on to our International segment. Third quarter International revenues were $77 million. Excluding the favorable impact of foreign exchange in the current period, International revenues decreased approximately 50 basis points. Subscription revenue, excluding FX, decreased 6% due to the nonrenewal with Movistar in Spain, which occurred in the fourth quarter of 2024. Advertising revenue, excluding FX, increased 10% due to strong ad performance in the U.K. and Ireland. International AOI for the third quarter was $12 million with a 15% margin.

Turning to the balance sheet. We remain focused on continuing to reduce gross debt and extend maturities. We ended the quarter with net debt of approximately $1.2 billion, a consolidated net leverage ratio of 2.8x and approximately $900 million of total liquidity. We continue to believe that our securities will offer attractive opportunities to deploy cash across the capital structure to create meaningful equity value over time. In the third quarter, we repurchased $9 million of our unsecured senior notes due 2029 at an average price of $0.84 on the dollar. Subsequent to the end of the quarter, we also paid down approximately $166 million of our Term Loan A and amended our credit facility to push the maturity of the majority of our revolver availability to late 2030.

Regarding capital allocation, our philosophy remains consistent. First, we look to support the business by creating and acquiring compelling programming that resonates with our audiences while maintaining healthy levels of free cash flow generation. Second, we remain focused on reducing gross debt and extending debt maturities as evidenced by our third quarter open market repurchases and recent partial repayment and extension of our credit facility. Lastly, acquisitions and share repurchases will be opportunistic and measured.

Moving to our outlook. We are reiterating our 2025 outlook today. We remain confident in our ability to drive free cash flow and are on track to deliver approximately $250 million of free cash flow in 2025. With $232 million already generated in the first 9 months of the year, we are well on our way to achieving this goal. We continue to expect consolidated revenue of approximately $2.3 billion, reflecting continued linear headwinds, partially offset by streaming and content licensing strength. And we also expect consolidated AOI in the range of $400 million to $420 million for the full year. We are proud of the meaningful progress we've made in transitioning our business. We've built all the necessary components of a nimble and opportunistic modern media business.

All the while we've continued to create and curate the high-quality content that engages fans and builds valuable lasting franchises. We remain grounded in our consistent strategy of making great content, distributing that content broadly, generating meaningful free cash flow and being prudent in how we allocate our capital.

With that, I'll hand the call back to Nick.

Thank you, Patrick. Well, operator, we'll now open the line for questions, please.

[Operator Instructions] And our first question comes from the line of Charles Wilber of Guggenheim Securities.

Just wanted to ask, I was hoping you could talk about your partnership with the Sphere and promoting FearFest. How are you thinking about similar partnerships in the future for other promotions like Best Christmas Ever or content premieres? And then on AOI, margins decreased in the quarter to kind of mid-teens range. I believe in the past, you guys have talked about long-term margins in the mid- to high 20% range. Is that still how you're thinking about margin potential over the long term? And what steps do you need to take to drive margin expansion?

Great. Charles, it's Kristin. Thanks for the question on Sphere. As you know, we sell cross-platform all of our inventory, and we do it against specific audiences. And having the opportunity to integrate with the Exosphere capabilities in Vegas has been really attractive to a variety of advertisers, particularly those in packaged goods where we can work with Sphere Studios to create an interesting companion on the Sphere to their linear FAST and AVOD purchases with us. So Kim can you expand a little bit, I think, on who we work with and how that's come together.

Sure. I'd just add, it's an incredible way to mark the campaign in a marquee global way where the Exosphere goes global on social, and it really -- it marks that kind of signature moment for the advertisers. So most recently with FearFest, we did Bacardi and Kraft Heinz with -- and to a great deal of success. And we do have partnerships in discussion for Best Christmas Ever and into other signature time frames for '26.

Charles, on the margin question, I think what we've been -- what we've said in the past is that we're trying to do 2 things at once. We're trying to, on one hand, continue to invest heavily in premium programming and at the same time, drive significant free cash flow through the business. You have seen over the last couple of years that our free cash flow conversion has increased materially. It's quite high, over 60% in 2025. And that will continue to be the focus going forward. So I would pay particular attention to the free cash flow in the business. Obviously, in the last quarter, we actually increased the guide for the year, up from an implied $225 million to $250 million this year. And so that's really the watch where I focus on the free cash flow generation.

[Operator Instructions] Our next question comes from the line of Doug Creutz of TD Cowen.

Just as you become less of a linear business and more of a streaming business, how does that affect your overall cost structure? Are there ways that it's going to help you? Are there ways where it's going to hinder you? Can you talk how you -- about how you expect that to continue to evolve over the next couple of years?

Sure, Doug. I think we've got one of the most efficient models out there. When you think about how hard our programming dollars work against multiple distribution platforms, right? So when we program for AMC linear, it goes on AMC+ and the amount of incremental programming that's on AMC+ exclusively is relatively small from a dollar perspective. Certainly lots of episodes. There's a lot of Shudder content, et cetera, for subscribers there. So there's always something new with different and exclusive. But from a financial standpoint, the preponderance of our programming investment on AMC really does double duty across both linear and streaming.

And then secondly, I'd point out some of the other more targeted streaming businesses where like Acorn, for example, where the unit economics from a cost structure are quite advantageous. The cost of production on those series is much, much lower than on kind of other larger streaming services, the audiences are extremely kind of tuned in and we've got good engagement churn metrics, et cetera. So we feel really good about the efficiency from a cost perspective of the way we approach the streaming business. And I would say kind of broadly across the overall business, we continue to have levers to pull. But we are primarily focused on continuing to invest in premium programming across all of these businesses. And we think we do it well and that we get it to work hard for us.

I would just add, Doug, thanks for the question. On the operating side, we continue to remind people that our strategy is to be a wholesale streamer. And in doing that, a lot of the costs end up on the size of our distribution partners, whether it's for acquisition or for customer service or for promotion and bundling. And then the technology work that we've undertaken over the last 12 to 18 months is driving a very predictable approach, right? So digital, when you're doing streaming, we have all of our content is nicely tucked away with Comcast Technology Services and then that supported with their second location, cloud location. So we know that our content is safe, it's stored efficiently and successfully through CTS and then our distribution for streaming and for digital is on the back of that deal, which, as we always say, it's a deal that we know what it can -- what it will cost us to deliver and that is -- it is scalable for as large as we want to grow.

[Operator Instructions] Our next question comes from the line of David Joyce of Seaport Research Partners.

Thinking about advertising, with the components of the upfront commitments you mentioned and the 850,000 AMC+ sign-ons with Charter Spectrum, what would be the glide path do you think with this increased streaming presence to turning advertising into a growth business again, granted the advertising level because of linear is half of what it was like 8 or 9 years ago. But what can make this a growth revenue stream again?

Charles (sic) [ David], it's Kim. I would point to the number Kristin shared in our successful upfront tied to the 40% growth in our digital advertising, which really aligns actually -- aligns and includes that 850,000 ad-supported Charter subscribers. We continue to kind of expand the inventory we have through our partners of AMC+. So we really continue down the road of focusing on making our inventory digitally or dynamically ad inserted, which actually allows us an opportunity to cross-sell across all our platforms, including CTV, our streaming services that are ad-supported, which we continue to add to with Shudder ad-supported coming shortly. It's just -- it's growing that overall pool, and that will align over time.

[Operator Instructions] Our next question comes from the line of Steven Cahall of Wells Fargo.

I wanted to ask about advertising as well. So you talked about the growth in the FAST channels. I was wondering if you could give us the percentage of either domestic or total advertising revenue you're now recognizing from those FAST channels just so we get the relative size as it grows. And then just on the upfront, we've heard from some peers that at least entertainment linear pricing might have been down year-on-year. So I was wondering if you could give us any color there. And then finally, you talked about streaming revenue as your biggest revenue bucket. Can you just confirm if that's subscription and advertising? And if we compare streaming subscription and advertising to linear subscription and advertising, is streaming now bigger, which I think would be a big turning point.

Steven, it's Patrick. I'll do the third piece first, and I'll flip it over to Kim on the advertising side of the business. Our streaming revenue is streaming revenue only. There's not the digital advertising embedded in that. So that's -- you can call it kind of a clean or pure number. Obviously, we've got a number of products in the market from an ad-supported basis, but those dollars get captured in our advertising dollars, not the streaming dollars. So hopefully, that clears up.

And I would just mention, as Kristin pointed out in her comments, we do have -- we have 33 FAST channels now across 22 platforms with over 250 global feeds, and that's creating a great deal of streaming digital inventory for us. We don't break that out, Steven. That's included in the overall digital inventory that we sell cross-platform. But what I would add is this is not just an advertising venture for us. We look at the FAST and AVOD marketplaces as an opportunity for us to garner interest for our programming with early seasons that actually help drive awareness and promotion and marketing towards our streaming services. So the majority of the new FAST channels we've launched recently are channels that actually sample our targeted streaming services like Acorn Mysteries or Scares by Shudder or ALLBLK Gems. These services samples the -- sample content from our streaming services and give us an opportunity to drive that kind of noncord connected audience to our streaming services directly. So we're really seeing them beyond just an advertising generator, but more of a marketing and promotional opportunity for us in streaming.

And I would just add we have one partner right now who's trialing with us the opportunity to click through a FAST channel to purchase the corresponding TSVOD. So that's an interesting experiment for us. So it goes beyond just using FAST as a barker channel. It's actually an interactive mechanism to purchase the correlated streaming service. So we're excited about that and hoping for some positive results.

This concludes the question-and-answer session. I would like to turn it back to Nick Seibert for closing remarks.

Thank you, everyone, for joining us this morning. We appreciate you giving us the time and your continued interest in AMC Networks. Have a nice day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.