Viacom Reports Strong Fourth Quarter and Full Year Results

Viacom Reports Strong Fourth Quarter and Full Year Results

- Company Delivered Turnaround of Core Business and Grew Full Year Consolidated Operating Income for First Time Since Fiscal 2014

- Consolidated Revenues Increased 5% in the Quarter, Driven by Double Digit Gains at Paramount

- Media Networks Grew Total Affiliate Revenues 4% in the Quarter, with Domestic Affiliate Revenues Up 3% – Sequential Improvement of 1,100 Basis Points in Growth Rate in the Year

- Viacom International Media Networks Delivered Record Year of Revenues and Profitability

- Full Year Net Cash Provided by Operating Activities Grew 9% to $1.82 Billion; Operating Free Cash Flow Up 9% to $1.64 Billion; and Total Debt Reduced by Over $1 Billion

NEW YORK -- Viacom Inc. (NASDAQ:VIAB, VIA) today reported financial results for the quarter and fiscal year ended September 30th, 2018.



STATEMENT FROM BOB BAKISH, PRESIDENT & CEO

“Our strong performance in the fourth quarter capped off a pivotal year for Viacom. We successfully turned around our core business, with dramatic improvements across our networks, at Paramount and in distribution. We also took important steps to evolve Viacom for the future – investing in our portfolio of advanced marketing solutions, digital and experiential offerings and global studio production business. As we head into 2019, we are excited about the company’s evolution and expect to return to topline growth.”

FILMED ENTERTAINMENT

Paramount Pictures continued its momentum in FQ4 with strong growth at the box office and in television production, delivering $241 million in full year adjusted operating income improvement.

--- Paramount Pictures has improved YOY adjusted operating income for seven straight quarters, with growth in FQ4 benefitting from the performances of Mission: Impossible – Fallout, A Quiet Place and Book Club.

--- Double-digit gains in FQ4 total revenues were driven by a nearly 3X increase in worldwide theatrical revenues and growth in worldwide licensing.
-- Higher worldwide theatrical revenues in FQ4 reflect the strong box office performance of Mission: Impossible – Fallout.

--- The increase in FQ4 worldwide licensing revenues benefited from continued growth at Paramount Television, with notable deliveries, including Maniac.
-- Paramount Television grew revenues +127% YOY to over $400 million in FY18.

--- Lower worldwide home entertainment revenues in FQ4 reflect the number and mix of available titles.

--- The decrease in FQ4 worldwide ancillary revenues reflects lower international revenues, partially offset by domestic growth.

Operational Highlights

--- Mission: Impossible – Fallout was #1 at the global box office in FQ4. It is the most successful film of the franchise, grossing nearly $800 million to date.

--- With a production cost of approximately $20 million, A Quiet Place grossed more than $340 million at the worldwide box office. Released in April, it is the second highest grossing horror film in the U.S. over the past decade.

--- Comedy hit Book Club grossed nearly $75 million worldwide – more than seven times its acquisition cost of $10 million.

--- Paramount Pictures has built a diverse theatrical film slate of 13 titles for FY19 – up from nine in FY18 – that feature big-budget tentpoles, targeted-audience productions and Viacom-branded films.- Upcoming releases include the latest installment of the Transformers franchise, Bumblebee; the BET co-branded film What Men Want; animated feature Wonder Park; a reboot of Stephen King’s horror classic Pet Sematary; and the Elton John biopic Rocketman.

--- Paramount Television delivered nine series to air in FY18, with FQ4 premieres including Tom Clancy’s Jack Ryan on Amazon and Maniac on Netflix.

-- Anticipated to grow revenues +50% in FY19, with 16 series ordered for production:

- Nine new shows, including The Haunting of Hill House for Netflix, Catch-22 for Hulu and First Wives Club for Paramount Network.

- Seven returning series, including third seasons of 13 Reasons Why for Netflix and Berlin Station for EPIX, and second seasons of Tom Clancy’s Jack Ryan for Amazon and The Alienist for TNT.

MEDIA NETWORKS

Viacom Media Networks returned domestic affiliate revenues and total adjusted operating income to growth in FQ4, strengthened audience share and accelerated initiatives in content production, digital consumption and ad solutions.

--- Worldwide affiliate growth in FQ4 partially offset lower worldwide advertising revenues. Domestic revenues held flat, while the impact of foreign exchange drove lower international revenues.

--- Worldwide affiliate revenues in FQ4 were driven by domestic growth and double-digit international gains.

-- Domestic affiliate revenues delivered +1,100 bps of sequential improvement in growth rate in the year.

--- Advanced Marketing Solutions (AMS) revenues – including those from Vantage – grew +32% YOY in FQ4, partially offsetting the decrease in linear domestic ad revenues, while the unfavorable impact of foreign exchange drove lower international ad revenues.

--- Live events and consumer products drove double-digit growth in FQ4 domestic ancillary revenues, offsetting lower international revenues.
Adjusted OI returned to growth in FQ4, benefiting from lower programming expenses and cost transformation savings.

Operational Highlights

--- Viacom held the #1 share of U.S. basic cable viewing across key audiences in FQ4, including viewers 2-49, 2-11, 12-17, 18-34 and 18-49, with particular strength at MTV, BET and Comedy Central.

-- Viacom brands in FQ4 had six of the 10 highest-rated original cable series among Adults 18-34, including season two of MTV’s Jersey Shore: Family Vacation – the most-watched unscripted show on cable in the demo.

--- Internationally, Channel 5 returned to audience share growth in FQ4, while Telefe achieved 10 months of ratings leadership as of October.

--- Viacom more than doubled YOY global social video views in FQ4, jumping from #24 to #10 in Tubular media industry rankings. Viacom doubled its YouTube subscribers in FY18 with launches of dedicated channels for hit franchises including MTV’s Wild ‘N Out.

--- AMS continued to scale, generating more than $300 million in full-year revenues, and doubling its contribution from 5% of total domestic advertising revenues in FY16 to 10% in FY18. Vantage had its best quarter ever in FQ4, with revenues up 75% YOY.

--- Viacom continued to build its studio production business to create content for third parties globally. Recent wins include:

-- The August release of Awesomeness’ To All the Boys I’ve Loved Before – one of Netflix’s most-watched original films ever.

-- Nickelodeon’s partnership with Netflix on a live-action series of Avatar: The Last Airbender, with production starting in 2019.

-- The launch of MTV Studios, which announced a three-season deal with Facebook Watch in October to reimagine MTV’s The Real World for global audiences.

-- The growth of Viacom International Studios (VIS), driven by production partnerships with Amazon, Cablevisión, Fox Network Group Latin America, Netflix and Telemundo. Through VIS, Viacom is now a leading global producer of original Spanish-language content, with more than 700 hours delivered in FY18.

BALANCE SHEET AND LIQUIDITY

Progress in operating performance combined with de-levering actions strengthened the balance sheet and drove improvements across key metrics in the full year.

--- At September 30, 2018, total debt outstanding was $10.08 billion, a reduction of over $1 billion during the year and approximately $3 billion since we announced our strategy to de-lever in February 2017. Total adjusted gross debt was $9.43 billion.

--- Cash balance grew by $168 million to approximately $1.6 billion for the full year.

--- Net cash provided by operating activities increased $150 million, or 9%, to $1.82 billion for the full year.

--- Free cash flow grew $167 million, or 11%, to $1.64 billion, and operating free cash flow grew $134 million, or 9%, to $1.64 billion for the full year.

Slides & Infographics:

Viacom more than doubled total watch time of its digital content since fiscal '16, with audiences consuming approximately 17 billion minutes in the quarter. (Graphic: Viacom)

Viacom Media Networks returned domestic affiliate revenues to growth in the quarter, and delivered +1,100 basis points of sequential improvement in growth rate in the year. (Graphic: Viacom)

Paramount delivered a third consecutive quarter of profitability and $241 million in full-year adjusted operating income improvement. (Graphic: Viacom)

Paramount Television continues to grow, increasing revenues +127% year-over-year to over $400 million in fiscal '18 and driving Viacom Filmed Entertainment licensing revenues in the quarter. (Graphic: Viacom)

Viacom brands held 9 of the top 10 original unscripted cable shows among Adults 18-34 in the quarter, including #1 rated Jersey Shore: Family Vacation. (Graphic: Viacom)

Viacom's studio production businesses gathered momentum in 2018, supplying third-parties with premium television, film and digital content for audiences around the world. (Graphic: Viacom)

About Viacom

Viacom creates entertainment experiences that drive conversation and culture around the world. Through television, film, digital media, live events, merchandise and solutions, our brands connect with diverse, young and young at heart audiences in more than 180 countries.

For more information on Viacom and its businesses, visit www.viacom.com. Viacom may also use social media channels to communicate with its investors and the public about the company, its brands and other matters, and those communications could be deemed to be material information. Investors and others are encouraged to review posts on Viacom’s Twitter feed (twitter.com/viacom), Facebook page (facebook.com/viacom) and LinkedIn profile (linkedin.com/company/viacom).

Cautionary Statement Concerning Forward-Looking Statements

This news release contains both historical and forward-looking statements. All statements that are not statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements reflect our current expectations concerning future results, objectives, plans and goals, and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause future results, performance or achievements to differ. These risks, uncertainties and other factors include, among others: technological developments, alternative content offerings and their effects in our markets and on consumer behavior; competition for content, audiences, advertising and distribution in a swiftly consolidating industry; the public acceptance of our brands, programs, films and other entertainment content on the various platforms on which they are distributed; the impact on our advertising revenues of declines in linear television viewing, deficiencies in audience measurement and advertising market conditions; the potential for loss of carriage or other reduction in the distribution of our content; evolving cybersecurity and similar risks; the failure, destruction or breach of our critical satellites or facilities; content theft; increased costs for programming, films and other rights; the loss of key talent; domestic and global political, economic and/or regulatory factors affecting our businesses generally; volatility in capital markets or a decrease in our debt ratings; a potential inability to realize the anticipated goals underlying our ongoing investments in new businesses, products, services and technologies; fluctuations in our results due to the timing, mix, number and availability of our films and other programming; potential conflicts of interest arising from our ownership structure with a controlling stockholder; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to our 2018 Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. The forward-looking statements included in this document are made only as of the date of this document, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. If applicable, reconciliations for any non-GAAP financial information contained in this news release are included in this news release or available on our website at www.viacom.com.

You can read Viacom's press release featuring the company's 4th Quarter and fiscal year report in full, including tables of Viacom's statements and balance sheets, here on BusinessWire.com.

During Viacom's Q418 conference, Viacom revealed that Nickelodeon plans to strengthen its Nick@Nite programming line-up. Additionally, Viacom expects Nickelodeon to see significant ratings growth during the "back-half of 2019".

From Viacom News:

VIACOM RELEASES FOURTH QUARTER, FULL-YEAR 2018 FINANCIAL RESULTS

Accelerates transformation behind strengthened core business and growth initiatives.

Viacom released its fourth quarter and full-year 2018 financial results today, demonstrating the impact of turning around the core business and articulating a blueprint for the company’s continued transformation into a pre-eminent global supplier of multiplatform content for both in-house and third-party platforms.

“Our strong performance in the fourth quarter capped off a pivotal year for Viacom,” said Viacom President and CEO Bob Bakish. “We successfully turned around our core business, with dramatic improvements across our networks, at Paramount and in distribution. We also took important steps to evolve Viacom for the future – investing in our portfolio of advanced marketing solutions, digital and experiential offerings and global studio production business. As we head into 2019, we are excited about the company’s evolution and expect to return to topline growth.”

Strong financial performance underscored the company’s progress, with year-over-year quarterly growth in consolidated revenue, adjusted diluted EPS and adjusted operating income. The full fiscal year ended with a return to full-year growth in consolidated operating income for the first time since 2014, record revenue and profitability for Viacom’s international networks, and another $1 billion reduction in the company’s debt.

With the content-driven core business strengthened and growth initiatives accelerating to scale, Viacom is set to return to full-year growth in fiscal 2019. Here is a closer look at five areas of strength that are driving the company’s transformation:

1) A laser focus on content has driven increased share across Viacom’s flagship networks and digital presence

When it comes to content, Viacom’s goal is to be a pre-eminent global supplier of multiplatform entertainment – created for its owned-and-operated networks and platforms, and, increasingly, for others. The company has already made significant progress toward this goal.

Viacom continues to hold the No. 1 share of U.S. basic cable groups across key demographics, and that share has increased year-over-year across the flagship networks for six consecutive quarters, with MTV, BET and Comedy Central demonstrating particular strength in the fourth quarter. Viacom held nine of the top 10 unscripted cable shows and six of the top 10 highest-rated original cable series in the key 18-34 demographic this quarter.

Viacom Digital Studios continues to drive social video engagement, as the company more than doubled views year-over-year in fiscal 2018, jumping 14 places to the No. 10 spot on Tubular’s media industry rankings. YouTube subscribers doubled over the same timeframe.

Internationally, Channel 5 in the UK drove four percent share growth this quarter, while Telefe in Argentina recorded its 10th consecutive month of ratings leadership.

2) Domestic affiliate revenue returned to growth behind deepened and expanded partnerships

The strength of Viacom’s brands played a key role in our return to growth in domestic affiliate revenue. So too did the company’s expanded and strengthened relationships with its distribution partners.

As Viacom has renewed deals with Charter, Comcast, Altice, Mediacom and others, the company has in many cases updated digital rights and sewn AMS products and original content partnerships into these agreements. The result is vastly expanded dynamic ad targeting across linear and digital platforms, a video-on-demand share increase that leads all cable groups, and, most importantly, a three percent return to domestic affiliate growth in the fourth quarter.

These core distributors remain immensely important even in an era of cord-cutting, but Viacom is also meeting consumers who have migrated online, securing partnerships with an increasing number of digital platforms across the OTT, SVOD and vMVPD spaces, including DirecTV Now, Sling and Philo.

3) Renewed management, content strategy, boost Paramount Pictures to third straight profitable quarter

As Paramount Television has quietly grown into a third-party television production powerhouse, a new management team has transformed Paramount Pictures’ other three divisions: Motion Picture Group, Animation, and Paramount Players. The studio has strengthened its content engine, better monetized its century-old library, more fully integrated with Viacom’s constellation of IP via Paramount Players, and secured long-term external partnerships with franchise hubs such as Hasbro and talent that includes David Ellison at Skydance and Fast and the Furious producer Neal Moritz.

The result: a third consecutive profitable quarter and a $241 million full-year improvement in adjusted operating income. The studio will ride the momentum of smash hits A Quiet Place and Mission: Impossible — Fallout into a 13-release 2019, with a diverse slate reflecting Chairman and CEO Jim Gianopulos’ make-it-for-someone-or-make-it-for-everyone philosophy, from blockbuster-in-waiting Bumblebee to BET co-branded What Men Want. Ten of these films will carry net production costs below $50 million.

The studio will continue to build revenue streams beyond theater and television, with a concerted effort to significantly boost revenue in the home media and global television distribution realms and a multi-picture first-run partnership with Netflix.

4) A $1 billion business is sprouting as Viacom’s studio production business begins to scale

Driven by production expertise, fueled by a nearly bottomless vault of IP, and enabled by the company’s vast global reach, some of Viacom’s most iconic brands are complementing their core network content with productions for third-party platforms.

MTV Studios, launched in June, is creating three regional versions of MTV’s The Real World for Facebook. Nickelodeon is reviving Avatar: The Last Airbender for Netflix. Viacom’s newest acquisition, Awesomeness, produced Netflix’s To All The Boys I’ve Loved Before—one of the most watched movies in the history of the platform. And the newly consolidated Viacom International Studios – already one of the world’s top producers of Spanish-language content – announced two new series for Amazon earlier this week.

At the vanguard of Viacom’s third-party production machine sits Paramount Television – an arm of Paramount Pictures that did not exist four years ago – which clocked revenues of almost $400 million in fiscal 2018 behind highly regarded hits such as Tom Clancy’s Jack Ryan on Amazon and The Haunting of Hill House and Maniac on Netflix. Sixteen more shows have been ordered or are in production for fiscal 2019.

This collection of premium content production houses is set to become a $1 billion business within a couple of years.

5) Advanced Marketing Solutions continues to rise

Just as Viacom’s third-party studio production business barely existed a few years ago, what the company is calling its Advanced Marketing Solutions (AMS) – a basket of seven products across the linear, branded content, influencer and shopper marketing, experiential and other spaces – has formed relatively recently.

It is already surging. AMS revenue shot up 32 percent last quarter, and accounted for 10 percent of total ad sales revenue in fiscal 2018. That share should accelerate into 2019 behind strong growth at Viacom Digital Studios, Viacom’s Vantage ad-targeting product, WhoSay integration and Awesomeness-produced branded content.

To see what Viacom will debut in the months ahead, scroll through the timeline below, or click here to view the full-screen version.



Visit Viacom’s Investor Relations page for more information on Viacom’s fourth quarter and full-year 2018 earnings.

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From Deadline:

Viacom CEO Bob Bakish Concedes “Some Softness” At Nickelodeon: “We Are Actively Working On It”

While Viacom’s fourth-quarter earnings showed some positive signs, edging Wall Street’s estimates and delivering evidence of a turnaround at Paramount, CEO Bob Bakish conceded Nickelodeon has shown “some softness.”

As evidenced by the recent leadership change that saw Brian Robbins succeed Cyma Zarghami as head of Nickelodeon, “we are actively working on it,” Bakish said during a conference call with analysts.

The flagship network, along with MTV, BET, Comedy Central and Paramount Network, is crucial to the longer-term growth of the company. The media networks unit had a stagnant quarter, with revenue slipping 1%, as a 6% downturn in advertising was offset by modest affiliate growth. Kids programming in particular has been under assault for years by YouTube, social media and an array of other rivals for juvenile attention.

“At Nick, we’ve got the playbook,” the CEO maintained. Robbins “is diving in and creating great energy and urgency” at the network. Noting a triple-digit jump in the recent ratings for the season premiere of mainstay Paw Patrol, Bakish said, “A big audience is out there. We just need the product to get ’em.”

During the hour-plus call, Bakish, CFO Wade Davis and Paramount CEO Jim Gianopulos offered a relentlessly upbeat portrait of the company. The appearance on the earnings call by Gianopulos, who took the reins at the studio in March 2017, was unprecedented for the head of Paramount in recent corporate times. During the long tenure of Brad Grey at the studio, relations with Viacom remained fairly icy and arm’s-length. In the pre-Grey era, chairman emeritus Sumner Redstone dominated the quarterly proceedings.

“Viacom is in a fundamentally different — and better — place than it was two years ago,” asserted Bakish, who became CEO in December 2016 after a tumultuous series of years for predecessor Philippe Dauman and controlling shareholder National Amusements. With Viacom on a lower-key frequency lately, at a time when corporate cousin CBS is buffeted by massive changes, none of the questions on the call concerned the M&A fate of Viacom or a possible reunion with CBS, which most analysts expect to eventually happen.

Instead, Paramount’s upswing took up a fair amount of the call, with multiple analysts thanking Gianopulos for sharing his insights. Historically, the studio has taken a beating in the investor community for its lack of profitability. Davis said the studio is now “within striking distance of break-even” on a full-year basis. He joined his colleagues in projecting much healthier margins in 2019 and beyond.

Gianopulos offered an update on several metrics during the call. He said budgets for Paramount’s upcoming slate range from $10 million to $140 million, but “no single film represents more than 12.5%” of the total expected profit for the full slate — “a balanced approach.” Singling out films for which the studio has hopes, he mentioned next month’s Transformers spinoff, Bumblebee, and next spring’s Rocket Man, the Elton John biopic due next spring that aims to ride Bohemian Rhapsody‘s blockbuster coattails. For 2020, the studio is touting James Cameron Terminator entry as well as its Top Gun reboot and director Ang Lee’s Gemini Man, starring Will Smith.

Paramount Players, the synergistic unit steered by Robbins before his move to Nickelodeon, which channels Viacom properties into Paramount film releases, has four of the studio’s 13 releases in 2019, Gianopulos noted. Among them is a live-action Dora the Explorer feature about the teen-aged Dora’s “Indiana Jones-like” adventure. In future years, the unit is expected supply six to eight annual projects, roughly one-third of the overall slate.

In fiscal 2020, Paramount expects to release 19 films and Gianopulos said the longer-term target level is between 15 and 20 titles a year, a more robust output than the latter years of the Grey regime.

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