AMC Global Media Inc. (AMCX) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for AMC Networks Inc. Our host for today's call is Josh Sapan, CEO. I will now turn the call over to your host, Mr. Sapan. You may begin, sir.

Well, thank you. Good morning, everyone. Welcome to AMC Networks Annual Meeting of Stockholders. I am Josh Sapan, AMC Networks' Chief Executive Officer. This year's annual meeting will be run, of course, in a virtual format. Joining me today are some other members of AMC Networks' executive team including: Sean Sullivan, our Chief Financial Officer; Jamie Gallagher, our General Counsel; Anne Kelly, Senior Vice President and Corporate Secretary; and Seth Zaslow, our Senior Vice President of Investor Relations. We also have joining us via teleconference today, members of AMC Networks Board of Directors: William Bell, Charles Dolan, James Dolan, Kristin Dolan, Patrick Dolan, Thomas Dolan, Jonathan Miller, Brian Sweeney, Vincent Tese, Leonard Tow, David Van Zandt, Carl Vogel, Marianne Dolan Weber, and Robert C. Wright. I'm also pleased to welcome Mike Crescent, Pat Edgar and [indiscernible] [ Greg Luthrow ] from KPMG LLP, our independent auditors, who are also participating via teleconference. I'd now like to turn today's meeting over to Anne Kelly to explain the procedures we'll be following for today's meeting.

Thank you, Josh. As is our custom, we will conduct the formal portion of today's meeting first and answer questions at the end of the meeting. Our meeting agenda and the rules of conduct for this meeting are provided on our virtual meeting website and will be strictly followed. Today's meeting has been duly called and is being conducted in conformity with Delaware law and the company's charter and bylaws. The meeting is held pursuant to a written notice mailed to all stockholders of record as of April 13, 2020. I have received an affidavit from Broadridge Financial Solutions stating that the notice and accompanying proxy materials and annual report were mailed or made available to our stockholders of record on or about April 29, 2020. A list of stockholders entitled to notice of and to vote at this meeting is available for inspection on the web portal. We have appointed Lou Larsen, a representative of Broadridge Financial Solutions to act as our inspector of election for today's meeting. Mr. Larsen has informed me that from a preliminary count, there are a majority of Class A and Class B shares present at the meeting, either in person or by proxy. As a result, and pursuant to the bylaws of the company, I declare that a quorum is present, and this meeting is duly organized for business. I would now like to declare the polls open for the proposal to be transacted at this meeting. At the completion of the questions-and-answer period regarding the proposals, the polls will be closed. Please note that if we experience technical issues, such as the loss of audio or webcast connection, we ask that shareholders and guests stand by for at least 15 minutes and allow us time to try and resolve the issue and resume the meeting. If a technical disruption occurs that prevents us from continuing the meeting, but the polls have already closed, all votes received prior to the interruption will be deemed to have been validly cast and will be counted. The meeting will not be reconvened and will be deemed to have been validly completed. And the vote results will be announced publicly. We have 6 proposals to be voted on today. All of the proposals and votes required to decide each matter were set forth in the meeting notice and proxy statement. These matters are the only matters properly brought before the meeting. I will present the 5 management proposals in the order that they are listed in the proxy statement and then ask the proponent to introduce the sixth proposal. If other shareholders would like to comment or submit a question on a proposal, you may do so by clicking on the Ask a question box at the bottom of the virtual shareholder meeting page. Because this is a meeting of our shareholders, only shareholders who are holders of record on April 13 are permitted to vote and ask questions during the meeting. The 5 management proposals to be voted on at this meeting are as follows: the first proposal is election of directors, election of 4 directors by our Class A stockholders and election of 10 directors by our Class B stockholders. Biographical information and the qualifications of each director nominee are included in the proxy statement. The second proposal is the ratification of KPMG LLP as the company's independent registered public accounting firm for fiscal 2020. The third proposal is approval on a nonbinding advisory basis of the compensation of the company's named executive officers as described in the proxy statement. The fourth proposal is approval of the company's amended and restated 2016 employee stock plan as described in the proxy statement. The fifth proposal is approval of the company's amended and restated 2011 stock plan for non-employee directors as described in the proxy statement. The Board of Directors unanimously recommends that stockholders vote in favor of each of these proposals presented by management. The sixth proposal is being submitted by Kenneth Steiner. Item 6 on the proxy card request an amendment to our company's articles of incorporation and/or bylaws to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders with a plurality vote standard retained for contested director elections. Mr. John Chevedden will be presenting this proposal. Mr. Chevedden, as stated in the rules of conduct, we ask that you limit your time to 3 minutes and confine your comments to the subject matter of the proposal. Operator, please open Mr. Chevedden's line.

Hello. This is John Chevedden. Can you hear me okay?

Sure, can.

Yes.

Proposal 6, directors to be elected by a majority vote, sponsored by Kenneth Steiner of Great Neck, New York shows request that our Board of Directors take the steps necessary as soon as possible to amend our company's articles of incorporation and/or bylaws to provide that director nominees shall be elected by the affirmative vote of the majority of votes casted at an annual meeting of shareholders with a plurality vote standard retained for contested director elections, that is, when the number of director nominees exceeds the number of board seats. In order to provide shareholders a meaningful role in director elections, our company's current director election standard should be changed from a plurality vote standard to a majority vote standard. The majority vote standard is the most appropriate voting standard for director elections where only board nominated candidates are on the ballot. This will establish a more meaningful standard for board nominees and could lead to improved performance by individual directors and the entire board. Under our company's current system, a director can be elected with only his or her own vote. In other words, a director can be elected if all other shareholders oppose that director. More than 77% of the companies in the Standard & Poor's 500 have already adopted majority voting for uncontested elections. Our company has an opportunity to join the growing list of companies that already adopted this standard. It is expected that a majority of the non-insider shares will vote for this proposal. A majority votes standard might give directors Carl Vogel, Leonard Tow, aged 91, and Jonathan Miller an incentive to perform better than obtained from 24% to 30% in negative director votes each as they did in 2019. Now is a good time for this reform since its stock price has fallen from $84 to $29 in 5 years of a mostly robust market. And management would not even allow AMC Network shareholders to cast an advisory vote in 2019 for a one-share, one-vote structure for our company in spite of the numerous advantages of management accountability in a one-share, one-vote company. Please vote, yes, directors to be elected by majority vote, proposal 6.

Thank you, Mr. Chevedden. The Board of Directors unanimously recommends that stockholders vote against the 6 proposal. This concludes the presentation of the proposals at this meeting. Now we would like to open the meeting up for shareholder questions related to any of the proposals. I'd like to introduce Seth Zaslow, our Senior Vice President of Investor Relations, who will moderate the Q&A session.

Thanks, Anne. Our first question is for you. It is, what was the final voting for each director?

Thanks. We will be filing the voting results of each proposal with the SEC in a Form 8-K within 4 business days from today. At the moment, we now still have preliminary voting, so we want to make sure we are accurate, and so we'll be filing it -- all voting results then.

Great. Thank you. There are no further questions related to the proposals. At this time, I would now like to turn the meeting back over to Anne to proceed with the voting.

Great. Thank you, Seth. If you have already voted, you do not need to vote again. If you haven't voted or if you want to change your vote, you may do so now online by clicking on the vote here button on your virtual shareholder meeting screen. Please note that if you've already voted by proxy, you do not need to vote again. [Voting]

Now that everyone has had the opportunity to vote, I hereby declare the polls closed for voting. I have been informed by the inspector of election that based on the preliminary voting results, each of the 14 nominees was elected as a director of the company. The appointment of KPMG as the company's independent registered public accounting firm for the year ending December 31, 2020, was ratified. The advisory vote on executive compensation was approved. The company's amended and restated 2016 employee stock plan and the company's amended and restated 2011 stock plan for non-employee directors, as described in the proxy statement were approved. And the stockholder proposal regarding implementing a standard requiring majority voting for director nominees was not approved. This completes the business to be conducted at this meeting. As I previously mentioned, the final voting results will be contained in a Form 8-K that will be filed with the SEC within 4 business days of this meeting. We now like to open things up for questions. I'd like to remind you that some of the statements made at this meeting may be considered forward-looking and are subject to certain risks, and uncertainties that are described in our filings with the SEC. I'd like to turn the meeting over to Seth, who will moderate our question-and-answer session.

Thanks, Anne. Our first question is for Josh. It relates to how the company's dealing with the changing media landscape.

Our key areas of focus at AMC Networks are: first, creating strong content and acquiring valuable intellectual property as part of that content. Also diversifying our revenue, particularly by growing our targeted subscription on demand services, while maximizing the value of our linear, as they're often called, cable channels and employing data to sell advertising in new ways. In sum, we have been transforming from what was a linear cable networks company into a content company that creates and distributes premier high-quality content on multiple platforms with multiple means of monetization. Behind this, the company has a very strong balance sheet and free cash flow, which provides us with attractive financial flexibility to invest and change and accomplish all of these initiatives.

Great. Thanks, Josh. Our next question is also for you, and it relates to COVID-19. How has COVID-19 impacted AMC Networks? And how have you adjusted your operations or strategy as a result of the pandemic?

I guess, before I answer that specifically, if I may, I would like to acknowledge the impact that COVID-19 has had on so many people, and the challenges and there's actually suffering that's caused for so many, particularly in our home city. We hope that everyone's families and colleagues are all healthy and safe. In specific answer to your question, despite the challenges presented by the pandemic, I am quite proud of how the company and our team has responded. We took immediate steps to ensure the safety of our employees. We quickly transitioned our employee base to work remotely. And through the hard work of our approximately 2,000 employees across the globe, we have been able to continue to operate the business quite effectively. In terms of the business, the pandemic is impacting our company in several key ways. Most notably, it has had an adverse impact on our advertising sales categories such as travel, auto, restaurants and theatrical exhibition. And not surprisingly, it's forced us to suspend television production, leading to delays in the creation and availability of some of our TV content. And it has affected our financial performance, but we are very well positioned to weather this crisis.

Thanks, Josh. Our next question is for Anne. When was the last in-person Board meeting?

Our last in person Board meeting was held on March 11. Since then, we've been holding telephonic Board meetings.

Great. Thank you. We also had one additional question. What percentage of employees are currently working remotely? And I'll answer that one. The answer is that essentially all of our employee base is currently working remotely at this point in time. At this time, there are no further questions. We'll pause for a moment to see if there are any further questions. At this point, there are no further questions. So I would now like to turn the meeting over to Josh, who will provide some closing comments.

Sure. I just would like to thank everyone for taking time during this period to attend today's meeting, for your interest in and investment in AMC Networks very much appreciated. I now declare the meeting adjourned. Thank you again.

This now concludes the meeting. Thank you for joining, and have a pleasant day.