Seth Zaslow - AMC Networks, Inc. Joshua W. Sapan - AMC Networks, Inc. Sean S. Sullivan - AMC Networks, Inc. Edward A. Carroll - AMC Networks, Inc..

Michael Morris - Guggenheim Securities LLC Michael B. Nathanson - MoffettNathanson LLC Benjamin Daniel Swinburne - Morgan Stanley & Co. LLC Todd Michael Juenger - Sanford C. Bernstein & Co. LLC Bryan Kraft - Deutsche Bank Securities, Inc. Tim Nollen - Macquarie Capital (USA), Inc. David Joyce - Evercore Group LLC.

Ladies and gentlemen, thank you for standing by, and welcome to the AMC Networks Second Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Mr. Zaslow, please go ahead..

Thank you. Good morning, and welcome to the AMC Networks second quarter 2017 earnings conference call. Joining us this morning are members of our executive team, Josh Sapan, President and Chief Executive Officer; Ed Carroll, Chief Operating Officer; and Sean Sullivan, Chief Financial Officer.

Following a discussion of the company's second quarter 2017 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at amcnetworks.com. This call can also be accessed via our website. Please take note of the following.

Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that any such forward-looking statements are not guarantees of the future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties.

The company disclaims any obligation to update the forward-looking statements that may be discussed during this call. Further, we will discuss non-GAAP financial information.

We believe the presentation of non-GAAP results provides you with useful supplemental information concerning the company's ongoing operations and is appropriate in your evaluation of the company's performance.

For further details, please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information, which we'll refer to on this call. With that, I would now like to turn the call to Josh..

China Girl, the newest effort, I think it's fair to call it a masterwork from Oscar-winning director Jane Campion, stars Elisabeth Moss and Nicole Kidman and premieres in September. It is superb in every way.

Next week, Amazon Studios Golden Globe and Emmy Award-winning series Transparent, created by Jill Soloway and starting Jeffrey Tambor, will debut on SundanceTV. We're quite pleased that Amazon chose to partner with SundanceTV for the linear TV premiere of what we think is an important award-winning series.

And also premiering in September is Liar, a captivating psychological thriller starring Joanne Froggatt from Downton Abbey. At our global business, we continued to fulfill on our ambition to deliver AMC originals to our channels around the world.

In the second quarter, we debuted three of our hit series, Fear the Walking Dead, The Son with Pierce Brosnan and Into the Badlands, on our AMC global channels. These original series each have global appeal and have performed quite well for us around the world.

Their strength helps us cultivate our growing subscriber base and expand our footprint into new territories, including recent launches in South Africa and Eastern Europe. And we continue to carefully manage our IFC Films business, which performs with financial stability year-over-year in what is a fundamentally volatile business.

New releases include a film called Rebel in the Rye, starring Kevin Spacey, about the life of J.D. Salinger, and a documentary about famed surfer Laird Hamilton called Take Every Wave directed by acclaimed documentarian Rory Kennedy.

These two upcoming films are two among many that reinforce IFC Films reputation as a home to prestigious independent fare.

We feel quite good about the progress we've made in the streaming services that we own, which I mentioned earlier, Sundance Now, which focuses on award-winning high-quality TV series and independent film; and Shudder for fans of suspense and horror.

Both services are in the development stage and we're pleased with their trajectory both as direct-to-consumer offerings as well as through third-party retailers like Amazon.

This has been a quarter of momentum and activity and validation, we think, across the industry of our approach and commitment to strong meaningful brands and outstanding story-telling. And that is why we're confident in our ability to continue to deliver solid financial performance and value creation for our shareholders.

Now, I'd like to turn the call over to Sean Sullivan for an update on our financial performance..

Thanks and good morning. As Josh highlighted, we're quite pleased with the results in the second quarter and we remain on track to meet our targets for the full year. I'll touch on the outlook for the rest of the year in more detail later on in my remarks. In the second quarter, total company revenue grew 4% and AOI grew 8%. Adjusted EPS was $1.88.

with respect to the performance of our operating segments at the National Networks, revenues increased 6% to $605 million; AOI was $232 million, an increase of 13% as compared to the prior-year period. Distribution revenues at the National Networks increased 8% to a total of $359 million.

Non-affiliate revenue continued to be a significant contributor to top line growth with year-over-year growth in excess of 20%. The increase was due principally to the licensing of our scripted original programs in various ancillary windows, most notably, Fear the Walking Dead, Into the Badlands and Preacher.

Affiliate fee growth in the quarter was in the low-single digits, as a result of the contract resolution with one of our distribution partners. Overall, we're quite pleased with the outcome in terms of both rate and distribution.

In fact, we achieved a significant increase in our subscribers due to the positive repositioning of Sundance, IFC, BBC America and WE tv. We now cycle through any impact from the recently completed consolidation among our distribution partners.

And as a result, we expect affiliate fee revenue growth to accelerate into the mid-single digits in the back half of the year. And we continue to expect a modest acceleration in affiliate fee revenue for the full year as compared to 2016.

As Josh highlighted, we believe that we have unique strength in positioning with our distribution partners, and this will serve us well as the pay TV ecosystem continues to evolve. Moving to advertising. For the second quarter, advertising revenues increased 3% to a total of $245 million.

We saw a strong sequential improvement in advertising, due to the timing of our originals, most notably Better Call Saul and Into the Badlands at AMC. We also saw increased pricing, which help to offset lower delivery. Moving to expenses, total expenses increased 2% or $6 million versus the prior-year period.

Technical and operating expenses increased 11% to $266 million; the variance principally related to our continued investment in original programming across all of our networks. Programming write-offs did not meaningfully impact our results for the second quarter of 2017 or 2016.

SG&A expenses were $119 million in the second quarter, a decrease of 12% versus the prior-year period; the variance primarily related to an decrease in marketing costs due to the timing of originals. Moving to our International and Other segment, in the second quarter, International and Other revenues decreased $7 million to $111 million.

AOI was $1 million, a decrease of $7 million versus the prior year. Revenue on our international networks decreased slightly on a reported basis. Excluding the unfavorable impact of FX, revenue increased as distribution revenue growth more than offset some amortizing headwinds.

Revenue also declined modestly at IFC Films due primarily to timing as well as at DMC. Adjusted operating income in the second quarter reflected the decline in revenue as well as increased investments on our various digital initiatives.

As a reminder, since our last earnings call, we announced the sale of DMC, the Amsterdam-based technical operations facility. We're pleased with the transaction which closed in July as it removes a non-core asset from our portfolio. Moving to EPS. For the second quarter, EPS on a GAAP basis was $1.54 compared to $1.05 in the prior-year period.

Year-over-year increase principally reflects the increase in AOI as well as the absence of a $24 million of charges related to foreign currency transaction losses in the second quarter of 2016. On an adjusted basis, EPS was $1.88 compared to $1.15 in the prior year.

In terms of free cash flow, the company generated $113 million in free cash flow for the six months ended June 2017. Through six months, tax payments were $124 million, cash interest was $57 million, capital expenditures were $40 million and distributions to non-controlling interest were $13 million.

Program rights amortization for the six-month period was $433 million and program rights payments were $458 million, resulting in a use of cash of $25 million. This compares to a use of cash for programming of $93 million for the prior-year period.

Turning to the balance sheet, as of June 30, AMC Networks had a net debt in capital leases of $2.6 billion. Our leverage ratio, based on LTM AOI of $880 million, was 2.9 times, up slightly from 2.8 times at the end of the first quarter.

In July, we also took advantage of the interest rate environment to refinance a portion of our debt and strengthen our liquidity position by issuing $800 million of 4.75% notes that mature in 2025 and extending the maturity date of our term loan to 2023.

In terms of capital allocation, our primary focus remains investment in our core business as we believe this will allow us to continue to grow adjusted operating income on a sustainable basis. We will continue to be disciplined and opportunistic in our use of capital for repurchases and non-organic investments.

In the second quarter, we continued to take advantage of what we believe were attractive trading levels in our stock. In June, the company announced that the board of directors authorized an increase of $500 million to our previously-announced program.

This new authorization was an addition to the $500 million authorization that was announced in March of 2016. During the quarter, the company repurchased $153 million of stock. This represents approximately 2.8 million shares. Subsequent to the end of the quarter, the company has repurchased an additional $52 million or approximately 925,000 shares.

As of last Friday, the company had $480 million available under its existing authorization program. Program to-date, we've repurchased approximately 13% of our outstanding shares. We view our equity as an attractive investment alternative and expect to continue to utilize our share repurchase program opportunistically.

During the quarter, we also announced the broadening of our strategic partnership with RLJ Entertainment. We believe this investment is strategic as it expands our presence on emerging digital platforms.

Overall, we're consistently evaluating ways we can be opportunistic, but disciplined in the use of our capital, with our focus being on how best to generate the greatest value for our shareholders over the long-term.

So, looking ahead, for the full year 2017, we continue to expect to grow both total company revenue and adjusted operating income in the low to mid single-digit range. And at National Networks, we continue to anticipate managing the segment to a margin that is largely consistent with 2016.

At our International and Other segment, we now expect a modest decline in revenue year-over-year due principally to the sale of DMC. And we continue to expect a modest decline in terms of absolute dollars and adjusted operating income.

With respect to the third quarter, at the National Networks, we expect healthy revenue and AOI growth led by distribution revenue.

Within distribution revenue, we expect affiliate fees to be the more significant driver of growth in the quarter due to the expected sequential acceleration I mentioned earlier in my remarks, as well as the timing availability of our content and ancillary windows, which will impact our non-affiliate results in the quarter.

With respect to advertising revenues, we expect year-over-year growth as favorable programming comps more than offset delivery.

At our International and Other segment, we expect a modest decrease in terms of absolute dollars in both the revenue and AOI year-over-year as organic growth in our international networks is offset by FX headwinds and continued investment in our digital initiatives.

So, overall, we feel good about how the business is positioned for 2017 and the various opportunities for growth that are ahead of us. So with that, we'd like to move to the question-and-answer portion of the call. Operator, if you could please open the call to questions..

Your first question comes from the line of Michael Morris with Guggenheim Securities..

Thank you. Good morning, guys. Two topics. The first, I'm curious if you can share any more detail on kind of the relative economics of the four non-AMC channels. You spoke about them a lot. I know you've done a lot to bolster the programming there.

Are those networks becoming a larger relative contributor to ad revenue, affiliate revenue? If you could talk at that level of detail? And is the revenue contribution sort of keeping pace with the incremental program investment there? That's my first question. And the second one is just on AMC Premiere. Obviously, very new product.

I'm curious if you could share any detail of how it's being presented to the consumer, how they access it, and whether you would consider expanding the content on there, beyond the content from the AMC network? Thank you..

Sure, Mike. It's Josh. On BBC America, Sundance, IFC and WE tv, I'll say this, we manage them carefully. We manage them as individual P&Ls within our company, and we manage all aspects of what they do and how they perform. We've happily grown their distribution rather dramatically over the past five years.

They've been a big growers which has been against industry trend. So, we're really pleased with each of those channels, which we take and treat each discreetly with absolute focus. In terms of their economic contribution, as a pattern, as you know, we don't tend to provide individual P&Ls within our operating business.

In general, I would say, they probably occupied a similar sort of percentage of our aggregate economics on the top and bottom line, and they're all very, very good performers.

If I could just offer one broader comment against that financial comment, which I think is important, which is we believe that each of these things are brands and they matter to a discrete audience.

And they have to be supported by content that makes them relevant because what's occurring in the industry, which we see in virtual MVPDs and the not breakup of the big fat bundle, but certainly some loosening of it, is that every channel needs to stand for itself in its stature, its strength, its rate, its efficacy and its economics.

And we've followed that discipline since we developed, bought, partnered with or made each of these channels, and I think it served us well, Mike. I would point to an industry which I think was arguably less careful about the sort of sanctity of the brands and the content that supported each channel.

And I think that that's perhaps not served the industry as well as it might, and so there is a bit of a day now of reconsideration of whether 15 and 20 channels that don't have discrete brand identities and a core constituent audience and, frankly, adequate investment makes sense.

So, we think we did establish a proper path and we will continue to pursue that path. As to AMC Premiere, we're very pleased to be partnering with Comcast on something that is admittedly novel. And it's extraordinarily early days, so I can't give you much a report other than to say it was a long time in development.

It's driven by considerations that we think are sort of profound and fundamental for us, meaning that people like our content. And they want to access it in various different platforms and different ways, and that the more we give them the chance to access it with our MVPD partners, the better off we'll be and they'll be.

And that sounds sort of simple and fundamental, but it is similar, if I may, in tone to my earlier comment which is that all this material matters a lot. It's not just a set of numbers that move around and can be managed for 12 months. They're brands and they're shows that people actually care a lot about. So, we're really pleased with Comcast.

Of course, Xfinity, offering now a commercial-free option for a price, very early days, very encouraged about what it is. And frankly, we'll monitor and see where it goes..

Great. Thank you, Josh..

Your next question comes from the line of Michael Nathanson with MoffettNathanson..

Thanks. I've one for Josh and one for Sean.

Josh, following up on the Comcast-AMC relationship, I wonder if this idea takes hold across other places, does it make you reconsider how you sell your products to SVOD services in the future? And what will allow you, what will stop you from going to Apple and Amazon and selling a channel package direct to consumers or direct through their platform as well over time?.

Right. So, Michael, I think that on the first part of your question, we've attempted to be very careful about the pattern with which we offer and the bad word is exploit, the content that increasingly own to domestic SVOD platforms because we live within the current ecosystem and it's a very important part of our constitution and our economics.

So, we've worked with our MVPD partners when we windowed content. And in a general sense, as you may know, have maintained round numbers a year of delay before content goes from the linear window to a third-party SVOD-owned service.

And that has been, I think, a reasonably good pattern to pursue that has then put us in reasonably good stead with our current MVPD partners and has had some beneficial effects, frankly, on exposure, awareness and attention to our series and has also maximized economics and allowed us to step up our studio content investment from what was, several years ago, one show to today more than a dozen that are in production around the world that we're the beneficiary of the rights and the rights management of.

We'll have to see how all of this goes as life goes on. We tend to have longish term deals in general, not all of them, longish term deals with all of our distribution partners on every front, in every format. We think that provides stability for us.

And so, I wouldn't comment on whether Premiere and an expression that is without commercials on an existing partner might or might not influence that in 2, 5 or 10 years. We'll really have to see how it goes.

Now you may see also that we did something with Charter, which is different than Premiere which is brand-new shows, not in the AMC channel mix that will premiere on Charter, and they'll come to AMC later.

So that's variation on a theme to be, if you will, and we think it's an interesting way to relate to a distributor because we take what we think is our wherewithal and capability, and we give them, I hope, incremental benefit from it in an absolute economic partnership manner where truly we're aligned.

And it's commanding and we think interesting approach with Charter. So, to say it simply, the sort of world is changing as we all know, and we'd like to be part of all of those changes in a way that fits squarely within our strategic approach, which is great stuff that we own, partners that work with us and who have alignment.

And so we may see a change in the mix of manner of consumption and economics, and that's what we've been charting and doing for a decade plus..

Okay. And then for Sean, the question I have for you is, when you look at your cost buckets over the first half of the year, in the growth rates we've seen, and in the second half you have more originals coming off.

Can you give us a sense of whether or not the two rates of growth we've seen in the two big buckets, tech operating expenses and SG&A, will those be consistent with the second half of the year or will there be material changes in rates of growth?.

Yeah. I guess, Michael, I would say that if you look at the six month, I think SG&A and tech and ops as a percentage of revenue really haven't changed that materially. I think the best thing I can do to guide you for the back half of the year is the comment I made in my remarks about managing to a consistent margin.

So, I think we take a balanced approach to programming investment to supporting and marketing the shows in the context of the monetization opportunities that we have. So, again, we expect to manage to a largely consistent margin.

As you know, there will be quarter-to-quarter variability given the timing and significance of the premiers and the shows are returning. So, I'll leave it at that..

Okay. Thanks, Sean. And thanks, Josh..

Your next question comes from the line of Ben Swinburne with Morgan Stanley..

Thank you. Good morning.

Maybe for Ed, could you talk a little bit about the advertising market and the sort of countervailing forces of strong pricing and down deliveries, particularly in the context of the upfront results you talked about, strong pricing growth? I'm curious as Walking Dead, in particular, matures and let's assume extrapolate the last couple seasons that that show declines, do you still get the kind of high single-digit pricing growth on that show and really driving the portfolio, or does the relative size of that show versus other shows start to weigh a bit on the power ratio? How should we think about that over time?.

Thanks, Ben. So, Walking Dead is interesting. It is unprecedented. It's been the top television show now for a long time. And it becomes more valuable in terms of its ability to reach a large audience and an audience that advertisers highly value in terms of demographic and overall appeal.

And what we saw in this upfront, and I would say generally, it was a strong upfront. We're happy with the way it went. As Josh mentioned, it wrapped earlier than anticipated, which probably speaks to the relative strength. And specifically to The Walking Dead, we have something a little special as we're premiering the 100th episode of the series.

So that generated even more enthusiasm and passion from advertisers to sort of be a part of that. So, we're excited about the show. And if anything, Ben, it has increased its lead over any other show on television. So, we think it's strong. We're very excited about the season to come..

Great. And just one follow-up for Josh or Sean if you're willing to go there, guessing you probably won't be but I'll ask it anyway.

With YouTube TV now in the market for, I guess, three or four months, when you guys look at your subscriber trends, particularly through your primary networks, eliminating kind of the beneficial tiering you talked about, are you seeing any improvement in the underlying trend? And if you're not one to comment, do you expect to see any, given what you know about YouTube TV so far? Any color since we're all trying to understand these trends, even though the numbers aren't out there, would be appreciated..

Well, Ben, I'm not sure what I'm going to say is really helpful to you. I would say, in general on virtual MVPDs, you probably have a better number than I do. I think (39:47) somewhere just south of 3 million today, around that. It's an interesting number.

I don't know if we all would have thought when Sling launched that that number would be in place today, the 3 million. I don't know if we would have thought that Sony would have had an offering essentially through its home game devices and/or that, of course, DIRECTV would have had an offering or that YouTube and Hulu would have launched.

So, there've been some surprises, I think, over the past, so to say, 24 months. I find that to be an encouraging number. And I do think that YouTube has done a spectacular job with their interface and their marketing. I think it's world-class.

So, it's encouraging to me and we partner with them actively, and I hope they do it not just because we're hopefully nice people but because we have content that really matters for their offering.

And what that suggests to me, but this is not a quantitative response to your comment, is that there is a big part of the audience, of course, that thinks device and mobility first and then they think content second. And so, they are younger people, of course, and they talk about apps. They tend to talk about apps, not channels.

And so, I am encouraged that we can see a major uptake of a new form of linear TV aggregation and consumption that will put us in good stead, and I think we see signs of it happening. I probably can't give you any early trends that would be something that you're not privy to, just a sense of encouragement.

And I will say the appraisal of particularly YouTube as being just extraordinarily strong in their execution..

Thank you very much..

Your next question comes from the line of Todd Juenger with Stanford Bernstein..

All right. Good morning. I'm going to, if you don't mind, pick up right where Ben left off on the advertising side, and then I have a super quick one for Sean. I hope you don't mind me sort of breaking the advertising question down to a really, really simple mechanics. And maybe this is for Ed or Josh, whoever wants to take it.

As outsiders, we see Nielsen ratings and ultimately we see revenue. We always try and understand how these are related. Can I just ask very basically, for your big original program franchises, do you tend to sell your advertising with audience guarantees or not? Because you've said you sell them with guarantees.

Are they on traditional metrics like C3 and demos like 18-49 or 25-54? And to the extent you have guarantees on traditional metrics.

As we think about any of your big original programming franchises and the promises you're making for next season, any comment on sort of, do you think those guarantees are sort of flattish or more likely down in terms of absolute audience? And then finally, to the extent that the ultimate delivery fall short of your guarantees.

What options do you have to burn off this make-goods assuming that your advertisers expect make-goods? So, I know it's a long chain of logic, but it would really be helpful to me at least, to at least hear some of the answers of mechanics. And I might as well, while I'm on the line, just a super quick one for Sean.

There's this miscellaneous net line on the P&L, and you mentioned sort of last year there was the FX minus 25. This quarter, there was a plus 19.

Just wondered what was behind that, if you can simplify it? And then I know, I guess, it's really hard to predict, but anything that you can see on that line forward? Because it tends to be kind of a swing factor. Thanks..

Hey, Todd. It's Ed. To your first question, there's not one answer to it. We do sell, in some cases, individual programs. We do sell other programs that are packaged with a broader schedule, with a rotation of movies and/or other specials. We do tend to guarantee audience delivery.

We obviously model our projections carefully at the beginning of each quarter. And in this upfront, we are seeing an increase in delivery on our digital platforms, the so-called advanced platforms. And those can extend beyond live/same day and beyond the three-day period. So, sort of all of the above is in the mix.

I would just say, generally, we think consumption of many of our shows is up overall, but it's not always within the live/same day, sometimes it's over a longer window, sometimes it's over the advanced or so-called digital platforms.

So, we work harder and more specifically with the advertisers on each of those media buys to monetize those plans, and we think we have been and we'll continue to be successful doing that..

And, Todd, on the miscellaneous net, I think you'll get more information when we file the Q later today. But at least for the three-month period, roughly $10 million of what you're seeing in miscellaneous net is related to our investment and relationship with RLJE, the remainder of the balance is foreign currency.

Unfortunately, I can't give you a guide against the back half of the year because some of these obviously are tied to the changes in market price of either RLJE security or underlying derivatives. But you'll see in the Q today there'll be a little more disclosure that may help you at least in the historical periods..

Got it. Thank you, guys..

Your next question comes from the line of Bryan Kraft with Deutsche Bank..

Hi. Good morning. I wanted to ask another question on subscribers.

And I don't think you said this specifically, and if you did I apologize, but what are you seeing as far as subscriber declines at the fully distributed networks? And how has that trend changed over the past couple of quarters? And then also, how long do you think that that runway you spoke about is to grow distribution on the non-fully distributed networks when you consider some of those broader trends that you're talking about in the industry with respect to virtual MVPDs and also even smaller traditional packages? Thank you..

Hey, Bryan. Sorry, the second part of your question, forgive me but I just want to make sure I understood it..

Yeah. You were talking. Go ahead, sorry..

Go ahead, that's it. Yeah..

So, you were talking about how you're seeing growth in the non-fully distributed networks.

And my question is, how long do you think that runway for growth is when you consider the other trends that are going on in the industry, which is more virtual MVPDs and smaller traditional packages increasing as a percentage of the mix?.

Got it. Okay. So, the first part of your question, really, when we make a reference to fully distributed, we're talking about AMC, and the other four channels are not fully distributed. They're not essentially in every or nearly every household that is available.

So, as you know, there has been some decline in aggregate subscribers in the paid MVPD universe in America over the past few years and it moves by quarter.

You'll get the best track of it just by counting, of course, from the actual companies themselves as they report because that's the purest count and not a surrogate count either through a programmer like ourselves whose sort of second party to it or through the Nielsen UE, which creates all degree in the math.

The fundamental trend, which I think is important if I can just stay on what is fundamental, is there's been some erosion in the overall universe. I would say that round numbers, it seems that half of that erosion has been offset by virtual MVPDs, round numbers.

And so that trend, I personally really can't predict, but I'm personally encouraged that offering Internet first, whether it's from an incumbent MVPD or a new MVPD, is attractive for multiple reasons, including price flexibility, interface, et cetera, and the MVPDs are also improving their job to their better.

When you look at their interfaces, they're really getting a lot better.

I'll make a self-serving point within that and then get to your second question, which is that inasmuch as there is a bit of a shift from sort of Internet first, whether it's an incumbent MVPD or a new one, and there is a re-organization and a re-election of the channels that are carried there, which there often is that we've seen, it serves us and it serves us because we have a higher bang for the buck, and frankly, a low price for great stuff.

So that trend will be singularly positive for AMC Networks, singularly positive for AMC Networks. So that's just a good thing. More specifically, on your question of our uptick in subscribers on incumbent MVPDs where we get repositioned, which Sean referred to in his prepared remarks, we've come a long way and there's still headroom.

So, we have some existing room to go on getting IFC, WE tv, BBC America and Sundance further, better positioned, if I can use those words, where we are carried.

We just accomplished a major improvement in that regard that Sean mentioned when he talked about second quarter, which is great to see for us and it's an affirmation we think of the quality that we have, and, of course, it results in good economics. So, there's more headroom there.

And a separate issue probably not to be confused is the opportunity that then goes on with virtual MVPDs and the trajectory of their growth..

Great. Thank you for that thoughtful answer, Josh..

Your next question comes from the line of Tim Nollen with Macquarie..

Hi. Thanks. I've got a couple things, please. Another advertising question I'm afraid. A lot of your total viewership, it looks like is from metrics beyond live or three-day or seven-day.

And I wonder if you could speak to how you are monetizing that viewership, if you feel like you are getting the full value in terms of advertising for the viewership even beyond the C3 system.

And secondly, and separately, could you speak a bit more about International please? Because I think, despite how surprisingly I think, for most of us, good your advertising numbers were, and how stable the distribution numbers seem, the International was not a good result.

If you could speak a little bit more about underlying what your approach will be to improve the performance there. Thanks..

Sure, Tim. It's Ed. So, I'll start with International. I can speak to the networks where we're seeing growth in affiliate revenue. We think that growth continues through the year, and we think that's going to be offset a bit by some weakness in ad revenue, that's mainly in the UK.

Generally speaking, I think we've been making great progress with our International assets. We've rebranded one of the large channels to be AMC Global and that's now in about 140 countries and we put a lot of our shows on there. So, Fear the Walking Dead and Badlands and Humans are on it, The Terror is forthcoming to it.

And just in the past few months, we've dramatically increased its footprint with launches in places like Poland and Portugal. In the Ukraine, we also operate some regional sport channels, and Central Europe which have been showing strength and regional movie channels in Iberia, which are doing very well as well.

And we've completed some rather large affiliate renewals lately. So, the affiliate side we think is good. A hiccup in terms of the advertising in the UK is sort of the story on International this year. Your question as it relates to advertising, monetizing beyond C3.

Tim, I think it was, yes, that's important to us an it is increasingly important going forward, selling on the digital or the so-called advanced platforms, and we're seeing consistent double-digit growth in that area and we continue to focus on it..

And Tim, this is Sean. Just to close out the International and Other segment, I think that you're referring to for the quarter. So, just as a reminder, the DMC business was a drag, and therefore that's now a divested asset.

It includes IFC Films, our independent film business, which, as you know, has some variability given the timing of releases and the P&A associated with distributing movies. And then Sundance Now and Shudder, our two developing OTT services, and the investments we're making at that area.

So, that's also in that segment and certainly causal to the results you saw..

Great. Thanks for the color..

Operator, we have time for one last question, please..

Your last question comes from the line of David Joyce with Evercore ISI..

Thank you.

Could you just help us think about some of the ancillary revenue streams, basically your rights that are feeding into the distribution line on the National Networks and then also internationally where you stand on what you could still fill of the content where you do have the rights? Just trying to think of how we can be looking for some upside swing there as you continue to have more demand for your content internationally..

Yeah. So, David, just, again, the ancillary revenue stream, just to highlight as you say, in the National Networks, the exploitation in a subsequent window domestically on SVOD services, the exploitation internationally for the programs, again, it's been a great year of growth for the company. You can see the historical results.

We had greater than 20% growth in the second quarter, as I said in my remarks. We still think there is a great market, great demand. And therefore, the more that we invest in original programs where we control those rights, we're seeing the benefit of that.

Again, on a quarter-to-quarter basis, based on the timing availability and the window being open and exploited will obviously impact the quarter-to-quarter variability, but we continue to see that as a great area of growth for the company..

And internationally, on the networks, you mentioned that you have recently rolled out some of the originals. There's some delay there.

What is the demand internationally to be more day and date with your originals here and do you have the rights to do that?.

Yeah. It's a good question. So, increasingly, that has become important in the international marketplace to get as close to day and date as one can do. And we have been achieving that with the high profile AMC series. We have done it with Fear the Walking Dead and Into the Badlands and we anticipate doing that with The Terror as well..

All right. Thank you very much..

All right. Well, thank you, everyone, for joining us on today's call and for your interest in AMC Networks. Operator, you can now conclude the call..

This concludes today's AMC Networks conference call. You may now disconnect..