AMC Networks saw its streaming platform and content licensing strategy accelerate during the second quarter (Q2) of the year, but ongoing issues in the cable and satellite TV industry coupled with softness in the advertising market weighed on the company’s overall financial earnings.

On Friday, AMC Networks said it raked in $600 million in overall revenue during Q2, down 4 percent from $625.9 million a year earlier. Net income came in at $50.3 million, or $0.91 per diluted share, compared with a loss of $29.2 million, or $0.66 per share, in the prior-year period. Adjusted earnings per share fell 44 percent to $0.69.

Operating income surged to $64 million from $10.8 million last year, but adjusted operating income dropped 28 percent to $109 million, reflecting linear revenue pressures partially offset by streaming and content licensing gains. Adjusted operating margin stood at 18 percent.

Free cash flow totaled $96 million in the quarter, with management now expecting about $250 million for the full year, up from prior guidance.

Domestic operations, which account for the bulk of revenue, declined 2 percent to $527 million. Subscription revenue — which includes fees charged to streaming subscribers coupled with earnings from cable and satellite — dipped 1 percent to $320 million as linear subscriber losses outweighed streaming growth. Affiliate revenue, which only includes earnings from pay TV, fell 12 percent to $151 million, while advertising revenue declined 18 percent to $123 million.

Streaming revenue rose 12 percent to $169 million on the back of price increases. AMC’s global subscriber count now totals 10.4 million, up 2 percent from a year ago. Most of those subscribers pay for AMC Plus, though the company also runs a handful of ancillary services like Shudder and Acorn TV. AMC doesn’t break out specific subscriber figures for each service.

Content licensing revenue jumped 26 percent to $84 million, boosted by delivery timing, a music catalog sale and fees from “Silo” on Apple TV Plus.

International operations posted revenue of $76 million, down 16 percent year over year, with adjusted operating income halving to $15 million. The declines were partly due to a $13.4 million retroactive adjustment recorded in the prior year and the loss of a Spanish distribution deal.

Programming highlights included renewals for “The Walking Dead: Dead City” and “The Walking Dead: Daryl Dixon,” the record-breaking theatrical release of “Clown in a Cornfield,” and Acorn TV’s best month ever during its “Murder Mystery May” event. AMC also expanded its free ad-supported streaming TV footprint with 11 channel launches on TCL TV Plus and new channels Acorn TV Mysteries and Love After Lockup.

On the advertising front, AMC cited more than 25 percent growth in digital commitments in its current Upfront negotiations, with total volumes tracking in line with last year.

The company made significant progress on its balance sheet, reducing gross debt by approximately $400 million since March 31 and capturing $138 million in debt discount. Actions included issuing $400 million in 10.50 percent senior secured notes due 2032, repurchasing $99 million of senior notes at a discount, and fully prepaying $90 million under its Term Loan A Facility. AMC also repurchased 1.6 million shares at an average price of $6.48 during the quarter.

Chief Executive Officer Kristin Dolan said the company remains focused on “programming, partnerships and profitability” and is committed to delivering “high-quality and distinctive series and films” across all platforms.

Committed to Cable

During a conference call with financial analysts and investors on Friday, executives reaffirmed their commitment to streaming while downplaying the idea that cable, satellite and other pay TV businesses were no longer viable channels for its content.

When asked if AMC Networks might follow in the footsteps of some of its peers in spinning out its cable networks business from the more-lucrative streaming side, Chief Financial Officer Patrick McConnell quickly shot down the idea, saying his company was substantially different from peers like Comcast’s NBC Universal and Warner Bros Discovery (WBD), each of which are doing precisely that.

“We have a studio, we have a big streaming business,” he said. “There’s a lot of [intellectual property] housed within this company. We’ve also got an amazing portfolio of streaming products that work really hard alone, and they work even harder together. I think that’s thematically how we think about the business as a whole — all the pieces kind of work together, strength compounding strength.”

AMC Networks is also invested in the pay TV business, with the company counted as one of four major investors in wallet-conscious streaming service Philo. The $28 per month service offers its entire portfolio of linear cable networks and bundles access to the ad-supported tier of AMC Plus at no extra cost. AMC’s free, ad-supported streaming TV channels are also available through the Philo app without a subscription. Charter Communications, which sells TV service under the Spectrum brand, also includes AMC Plus in some of its packages.

That doesn’t mean all pay TV providers see value in AMC Networks. Two years ago, sports-heavy streamer Fubo dropped AMC and its other channels after discussions over a new distribution agreement broke down.

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