ViacomCBS Reports Q1 2020 Earnings Results

ViacomCBS Reports Q1 2020 Earnings Results

Financial, Operational and Strategic Progress in Unlocking Value from Merged Company

Sequential Improvement in Operating Income and Adjusted OIBDA, Diluted EPS and Adjusted Diluted EPS, as well as Operating Cash Flow and Free Cash Flow

Proactive Response to COVID-19 Included Actions to Significantly Increase Financial Flexibility and Materially Reduce Costs, while Ensuring the Safety of Employees and Supporting Communities

Significant Growth in Domestic Streaming and Digital Video Revenue, Subscribers and Consumption Reinforces Demand for ViacomCBS Content

May 07, 2020 08:55 AM Eastern Daylight Time

NEW YORK--ViacomCBS Inc. (NASDAQ: VIAC; VIACA) today reported financial results for the quarter ended March 31st, 2020.

Statement from Bob Bakish, President & CEO

“ViacomCBS delivered solid results in our first full quarter, including sequential improvement on key financial metrics, as well as clear operating momentum. In the wake of the COVID-19 pandemic, we also took decisive action to fortify our balance sheet, protect our employees and help communities in need. And through new creative strategies and production models, we continue to deliver must-watch content that big audiences love. Importantly, we are just beginning to tap into the potential of our combined assets, and our growing scale, audience reach and earnings power will become even more apparent as the market rebounds and we put the power of our portfolio behind our streaming strategy. I thank ViacomCBS employees around the world for their adaptive creativity and continued focus on serving our audiences, commercial partners and shareholders amid these unprecedented circumstances.”

OVERVIEW OF Q1 REVENUE

Advertising revenue declined 19% year-over-year, but increased 2% excluding a 21-percentage point unfavorable impact from the comparison against CBS’ broadcasts of Super Bowl LIII and the NCAA Tournament in the prior year quarter. International advertising revenue included a 10-percentage point unfavorable F/X impact.

- Affiliate revenue increased 1%, reflecting growth in station affiliation and retransmission fees, as well as subscription streaming revenue, which more than offset declines in pay-TV subscribers. International affiliate revenue included an 8-percentage point unfavorable F/X impact.

- Domestic streaming and digital video revenue – which includes streaming subscription and digital video advertising revenue – grew to $471 million, up 51% year-over-year.

- Content licensing revenue grew 9%, fueled by growth in original studio production for third parties. Paramount Television Studios, CBS Television Studios and Cable Networks’ studios all benefited from strong content deliveries during the quarter.

- Theatrical revenue declined 3% as strong results from Sonic the Hedgehog were more than offset by prior year quarter revenues, which included carryover performance from Bumblebee.

- Publishing revenue rose 4%, driven by higher sales of electronic and digital audio books.

BALANCE SHEET & LIQUIDITY

- In April, the company raised $2.5 billion of capital through a 5- and 10-year bond offering.

- On May 4, 2020, the company redeemed all of its outstanding 4.30% senior notes due February 15, 2021, and will redeem all of its outstanding 4.50% senior notes due March 1, 2021 on May 18, 2020.

- ViacomCBS has access to a committed and undrawn $3.5 billion revolving credit facility and other sources of liquidity to reinforce financial flexibility going forward.

- The company also had a strong start to the year, with Q1 2020 Operating Cash Flow of $356 million and Free Cash Flow† of $305 million, marking a significant sequential improvement from Q4 2019.

† Non-GAAP measures referenced in this release are detailed in the Supplemental Disclosures at the end of this release.

RESPONSE TO COVID-19

In response to COVID-19, ViacomCBS focused on reinforcing financial flexibility and business continuity, while supporting its employees and communities.

- Reinforced financial flexibility: ViacomCBS strengthened its balance sheet and liquidity with a $2.5 billion debt offering in April and implemented cost savings initiatives to mitigate revenue impacts.

- Evolved content operations: Leveraging alternative production models and its extensive library, the company ensured the continuity of its linear and streaming programming, including national and local news and late night. It also shifted its film releases to preserve the value of its strong slate.

- Ensured employee safety: The company quickly pivoted to remote working, with strict protocols for protecting employees, and committed $100 million to support impacted TV and film production personnel.

- Supported community wellbeing: The company launched an expansive PSA campaign, #AloneTogether, resulting in over 80,000 linear spots and more than half a billion video views on social. It also aired relief specials, including BET’s Saving Our Selves and Global Citizen’s One World: Together at Home.

Q1 STREAMING & DIGITAL VIDEO HIGHLIGHTS

In Q1, ViacomCBS delivered strong revenue growth, and saw record sign-ups and consumption across pay and free streaming.

- Domestic streaming and digital video revenue – which includes streaming subscription and digital video advertising revenue – grew to $471 million, up 51% year-over-year.

- Domestic streaming subscribers surpassed 13.5M, up 50% year-over-year.

−- CBS All Access and Showtime OTT delivered record subscribers, sign-ups and consumption, reflecting original programming, including Star Trek: Picard and Homeland.

- In free, Pluto TV’s domestic monthly active users (MAUs) grew to a record of 24M+, an increase of 55% year-over-year.

−- In March, Pluto TV rolled out its most significant product upgrade, introducing a new interface, updated features and improved search capabilities for an enhanced user experience.

-− Pluto TV expanded distribution in the US and internationally, including with XBOX, Roku, Verizon in April and TiVo in May. In the quarter, Pluto TV also launched in 17 countries in Latin America, with more than 12,000 hours of Spanish-language programming.

SURGE IN GROWTH IN APRIL

- With more consumers at home, ViacomCBS streaming platforms had their best month, with accelerated subscriber growth and consumption, reinforcing consumer demand for its content.

- CBS All Access and Showtime OTT sign-ups, daily average streams and minutes watched all rose substantially, versus the prior month.

-− Live TV and original programming, such as Star Trek: Discovery, Star Trek: Picard, The Good Fight and Survivor, drove consumption records in April on CBS All Access, with total streams and minutes watched up significantly.

−- Showtime OTT delivered its best month ever in time watched and total streams. Viewers took advantage of the full catalogue, with streaming of original series, such as Homeland and Penny Dreadful: City of Angels, and movies growing +50% and +110% year-over-year, respectively.

−- CBS All Access and Showtime OTT are seeing strong account activation, as well as consistent paid subscription conversion rates.

REPORTING SEGMENTS

TV ENTERTAINMENT

- CBS will finish the broadcast season as America’s most-watched network for the 12th straight year. In the quarter, CBS had the top 2 dramas, 5 of the top 6 comedies and #1 news program, as well as 5 of the top 6 freshmen series.

- Revenue declined 13%, including a 20-percentage point unfavorable impact from the comparison against CBS’ broadcasts of Super Bowl LIII and the NCAA Tournament in the prior year quarter. Excluding that impact, revenue increased 7%, driven by growth in affiliate, advertising and content licensing revenue.

-⎯ Affiliate revenue rose 20%, fueled by increased station affiliation fees and retransmission revenues, as well as strong subscription streaming revenue.

⎯- Advertising revenue decreased 30%, reflecting the comparison to CBS’ broadcast of Super Bowl LIII and the NCAA Tournament in the prior year quarter. Taken together, these two events had an unfavorable impact of 34 percentage points on advertising revenue compared to the prior year quarter. This impact was partially offset by higher political advertising sales and the broadcast of an additional NFL playoff game on CBS.

⎯- Content licensing revenue increased 2% due to growth in original studio production for third parties.

- Adjusted OIBDA decreased 23% as a result of the comparison against sporting events in the prior year quarter, lower profits from the mix of programming under licensing arrangements and an increased investment in content.

CABLE NETWORKS

- ViacomCBS grew share year-over-year in a majority of its cable networks and had the most top 30 original cable series with viewers 2-11 and 18-34.

- Revenue decreased 2% as higher streaming and studio production revenue was more than offset by linear subscriber declines.

⎯- Advertising revenue was flat, including a 3-percentage point unfavorable F/X impact, as strong growth in domestic streaming and digital video advertising, which includes Pluto TV, offset lower linear advertising.

⎯- Affiliate revenue fell 6% year-over-year, including a 1-percentage point unfavorable F/X impact, as growth in streaming was more than offset by linear subscriber declines. Importantly, the rate of change improved sequentially by 2 percentage points from Q4 2019.

⎯- Content licensing revenue increased 19%, driven by growth in original studio production for third parties.

- Adjusted OIBDA declined 11%, a significant sequential improvement versus Q4 2019, which included early cost savings in Cable Networks following the merger.

FILMED ENTERTAINMENT

- Sonic the Hedgehog had the #1 opening weekend and domestically became the highest grossing movie based on a video game of all time. Worldwide, the film earned approximately $307 million at the box office.

- Revenue increased 11% due to strong growth in licensing and home entertainment, which more than offset a 3% decline in theatrical revenue.

⎯- Theatrical revenue declined 3% as strong results from Sonic the Hedgehog were more than offset by prior year quarter revenues, which included carryover performance from Bumblebee.

⎯- Home entertainment revenue rose 13%, driven by the mix of titles in release and higher sales of catalog titles.

⎯- Licensing revenue grew 18%, fueled by original studio productions for third parties, as well as the licensing of The Lovebirds to Netflix.

- Adjusted OIBDA declined 29%, driven by the incurrence of marketing expenses for A Quiet Place Part II, which was postponed to later in the year due to COVID-19.

PUBLISHING

- Bestselling titles for the quarter included Stephen King’s If It Bleeds and The Outsider, and Cassandra Clare’s Chain of Gold.

- Strong performing audiobook titles included Garrett Graff’s The Only Plane in the Sky and Rebecca Serle’s In Five Years.

- First quarter revenue increased 4%, reflecting 16% growth in digital sales.

- Adjusted OIBDA was flat as revenue growth was offset by higher costs from the mix of titles.

You can read Viacom's press release featuring the company's 1st Quarter 2020 results report in full, including tables of ViacomCBS' statements and balance sheets, here on BusinessWire.com.

ABOUT VIACOMCBS

ViacomCBS (NASDAQ: VIAC; VIACA) is a leading global media and entertainment company that creates premium content and experiences for audiences worldwide. Driven by iconic consumer brands, its portfolio includes CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, CBS All Access, Pluto TV and Simon & Schuster, among others. The company delivers the largest share of the US television audience and boasts one of the industry’s most important and extensive libraries of TV and film titles. In addition to offering innovative streaming services and digital video products, ViacomCBS provides powerful capabilities in production, distribution and advertising solutions for partners on five continents.

For more information about ViacomCBS, please visit www.viacbs.com and follow @ViacomCBS on social platforms.

VIAC-IR

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This communication contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements reflect our current expectations concerning future results and events; generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “may,” “could,” “estimate” or other similar words or phrases; and involve known and unknown risks, uncertainties and other factors that are difficult to predict and which may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. These risks, uncertainties and other factors include, among others: the impact of the COVID-19 pandemic (and other widespread health emergencies or pandemics) and measures taken in response thereto; technological developments, alternative content offerings and their effects in our markets and on consumer behavior; the impact on our advertising revenues of changes in consumers’ content viewership, deficiencies in audience measurement and advertising market conditions; the public acceptance of our brands, programming, films, published content and other entertainment content on the various platforms on which they are distributed; increased costs for programming, films and other rights; the loss of key talent; competition for content, audiences, advertising and distribution in consolidating industries; the potential for loss of carriage or other reduction in or the impact of negotiations for the distribution of our content; the risks and costs associated with the integration of the CBS Corporation and Viacom Inc. businesses and investments in new businesses, products, services and technologies; evolving cybersecurity and similar risks; the failure, destruction or breach of critical satellites or facilities; content theft; domestic and global political, economic and/or regulatory factors affecting our businesses generally; volatility in capital markets or a decrease in our debt ratings; strikes and other union activity; fluctuations in our results due to the timing, mix, number and availability of our films and other programming; losses due to asset impairment charges for goodwill, intangible assets, FCC licenses and programming; liabilities related to discontinued operations and former businesses; 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 most recent Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K. There may be additional risks, uncertainties and factors that we do not currently view as material or that are not necessarily known. The forward-looking statements included in this communication are made only as of the date of this communication, and we do not undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.

From Barron's via Nasdaq:

ViacomCBS Reports Better-Than-Feared Earnings and Stock Soars

ViacomCBS reported largely better-than-expected results in the first quarter—its first as a combined company—most of which came before a wave of coronavirus lockdowns began spreading across the U.S. It also began to show the greater scale and negotiating leverage with distributors that was among management’s greatest selling points of the merger late last year.

ViacomCBS stock (ticker: VIAC) soared 12% on Thursday morning, to about $17, versus a 1.2% rise for the S&P 500. Shares had slumped 64% in 2020 going into the first-quarter report.

ViacomCBS reported $1.13 in adjusted earnings per share, which excludes merger-related and some other costs. That compares with Wall Street’s estimate of 99 cents in adjusted EPS, which had dropped from $1.40 as recently as February. Revenue came in at $6.7 billion, a hair above analysts’ consensus.


Canceled sports events, including the NCAA March Madness basketball tournament, hit the company’s advertising revenues in the first quarter, which fell 19% from the same quarter last year. Businesses looking to save cash during the coronavirus crisis have also been pulling back on their advertising spending, ViacomCBS CEO Bob Bakish said on the earnings call Thursday morning.

For many companies, it isn’t worth buying ads for stores, restaurants, or dealerships that are closed due to stay-at-home orders. Bakish warned that would continue in 2020, but that political advertising would increase as the November election approaches.


It was also a difficult year-over-year comparison for ViacomCBS, as the year-ago quarter included advertising revenues from CBS’ broadcast of Super Bowl LIII, which moved to Fox (FOXA) this year. Excluding the Super Bowl and March Madness events, ViacomCBS says its advertising sales rose 2% from a year earlier.

“ViacomCBS is leveraged to bundled basic cable networks, and has significant exposure to advertising,” wrote Cowen analyst Doug Creutz on Thursday. “Viacom has incremental exposure through its Paramount film and TV studio, but we see the impacts there as being relatively minor compared to our expectation for significant pressure on advertising revenue.”

Creutz rates ViacomCBS shares the equivalent of Hold, with a $17 price target.

ViacomCBS’ affiliate fee revenue—which distributors like cable or satellite companies pay to include channels in their bundles—ticked up 1% from a year ago. That was driven by a 20% jump in revenue from the company’s TV Entertainment segment, which includes the CBS broadcast channels. Affiliate fees at ViacomCBS’ Cable Networks unit—the former Viacom channels like MTV, Nickelodeon, and Comedy Central—fell 6% as more TV subscribers cut the cord. In a weak economy with high unemployment later this year, ViacomCBS may see those cancellations increase.

ViacomCBS also said on Thursday that it had signed a new deal with Alphabet’s (GOOGL) YouTube TV live-TV streaming service to eventually include 14 additional ViacomCBS cable networks in the bundle. In the lead-up to the merger last year, Bakish emphasized the combined company’s ability to leverage its larger portfolio to get distributors to carry more of their channels and pay higher fees.

BET, Comedy Central, MTV, Nickelodeon, Paramount Network, VH1, and other former Viacom channels will join CBS and CBS Sports on YouTube TV starting this summer. It remains to be seen whether customers will be happy to accept more channels and a higher monthly subscription fee that YouTube passes along to them.

“This sets YouTubeTV up with a justification for their next price increase, whenever it comes, which it still needs if it ever wants to be profitable,” wrote Bernstein analyst Todd Juenger on Thursday. “This brings ViacomCBS closer to an equivalent distribution footprint as its peers, although it is still less represented on or absent from some important services.… We certainly expect this unexpected news to reset the stock at a new, higher level, but from there it still faces the same fierce structural headwinds on viewership and subscribers as everybody else.”

Growing market share and revenue from linear TV bundles is a near-term positive for ViacomCBS, but the long-term cord-cutting trend isn’t going away. Juenger rates the stock at the equivalent of Sell, with a $10 price target.

ViacomCBS’ streaming segment did get a boost from viewers being stuck at home. Revenues jumped 51% from a year ago, to $471 million. Subscribers to its paid offerings, which include CBS All Access and Showtime, reached 13.5 million, while the ad-supported Pluto TV hit 24 million monthly active users. Both were up at least 50% year over year.

Paramount Pictures film studio had a solid first quarter, driven by a 18% increase in licensing revenues. Sonic the Hedgehog, which was the main theatrical release in the first quarter, brought in $307 million at the box office. The film studio also produces content for third parties like Netflix (NFLX). Paramount had planned to release a romantic comedy called The Lovebird in April, but sold it to Netflix instead due to theater closings during the coronavirus outbreak.

ViacomCBS won’t release any movies in the second quarter and has pushed planned debuts to later this year. The SpongeBob Movie: Sponge on the Run and Top Gun: Maverick had been the company’s biggest planned releases in May.

The company raised $2.5 billion from bond sales in April, and has $3.5 billion available on its revolving credit facility. Free cash flow was $305 million in the first quarter. It expects to achieve $250 million in annual cost savings from its merger this year, on track to realize at least $750 million in three years.

Citing the uncertainty of the economic backdrop and the coronavirus outbreak, ViacomCBS withdrew its 2020 guidance issued on March 26.

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From FierceVideo:

ViacomCBS says its domestic SVODs now have 13.5M subscribers

ViacomCBS said its U.S. SVOD services now have 13.5 million subscribers combined, up 50% year over year.

During today’s earnings call, CEO Bob Bakish said the growth was driven by original programming at CBS All Access and Showtime OTT. He said both services broke their own records for sign-ups, streams and time watched during the quarter.

It’s unclear if ViacomCBS’s other subscription streaming services including BET+ and Noggin are included in the new total. However, if it’s only for CBS All Access and Showtime OTT, that’s significantly ahead of the 10 million combined subscribers those services had in January.

ViacomCBS also said Pluto TV’s monthly active users grew 55% year over year to more than 24 million at the end of the quarter.

Overall, ViacomCBS said its domestic streaming revenue for the quarter was up more than 50% year over year and Bakish said his company is still on track to launch a new broad subscription streaming service within the next 12 months.

Bakish also used part of his opening comments to outline recent streaming distribution deals the company has reached. The company earlier this year announced a deal to launch CBS All Access on Comcast’s Xfinity platform and Bakish said the rollout has officially started today.

In April, ViacomCBS said it closed its first true combined company affiliate deal with Verizon despite the previous CBS and Viacom deals not being co-terminus heading into negotiations.

“This is agreement marks a truly comprehensive multi-platform partnership spanning pay TV, connected TV and mobile, and it will drive a tremendous expansion of Pluto’s distribution footprint,” Bakish said.

Today, ViacomCBS said it set a new distribution deal with YouTube TV that will add Viacom’s channels including Comedy Central and Nickelodeon this summer. The companies said that other channels including Nick Jr. and MTV2 will arrive on the service at a later date.

All the streaming updates from ViacomCBS arrived alongside the company’s first-quarter earnings marked by 6% decline in revenues, due largely to a 19% decline in advertising revenue.

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From Variety:

ViacomCBS Q1 Profit Slumps On Decline In Ad Revenue

ViacomCBS said first-quarter profit tumbled as the company suffered a 19% decline in advertising revenue due in part to the cancellation of the NCAA “March Madness” men’s basketball championship this year.

The New York owner of the CBS television network, MTV and the Paramount movie studio said overall revenue fell 6%, to nearly $6.67 billion, compared with $7.1 billion in the year-earlier period.

The company posted net income of $508 million, or 82 cents a share, compared with $1.946 billion, or $3.15 a share,in the year-earlier period.

ViacomCBS said ad revenue overall would have increased 2% if the company had not faced comparisons to a 2019 first quarter that included last year’s NCAA event as well as the broadcast of Super Bowl LIII. The NCAA canceled this year’s tournament, one of the nation’s most-watched sports events, due to the coronavirus pandemic. ViacomCBS shares broadcast rights to the games along with AT&T’s WarnerMedia.

Still, first-quarter results were better than what Wall Street had anticipated, and CEO Bob Bakish predicted the company, formed late last year by the merger of Viacom Inc. and CBS Corp., would rebound as the nation recovers from the contagion. “We are just beginning to tap into the potential of our combined assets, and our growing scale, audience reach and earnings power will become even more apparent as the market rebounds and we put the power of our portfolio behind our streaming strategy,” he said in a prepared statement.

The company saw noticeable gains in its streaming-video operations. Revenue from U.S. streaming and digital-video soared 51%, up to $471 million. ViacomCBS said U.S. streaming subscribers rose 50% to 13.5 million, with streaming venues CBS All Access and Showtime notching record levels of subscribers.

The ad-revenue shortfalls occurred at the company’s broadcast operations, where ad revenue was off 30%. Ad revenue was flat the company’s cable networks. Revenue from affiliates and distribution rose 1% overall across the company.

ViacomCBS has been under intense scrutiny from Wall Street, as the value of its shares have plummeted since the merger was set. Investors are concerned about the effect of the company’s cable operations, which are aimed at younger viewers and have seen viewrship erode as that demographic adopts mobile video and on-demand streaming, on the finances of the CBS TV network and the Showtime premium pay-cable operation.

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From the New York Post:

ViacomCBS sees streaming revenue rise despite no ‘March Madness’

ViacomCBS delivered a narrower-than-expected profit drop despite the cancellation of the NCAA “March Madness” men’s basketball championship that had been slated to air on CBS.

The New York-based media giant — which also owns the Paramount movie studio and cable channels Comedy Central, Nickelodeon and MTV — saw sharp gains in its streaming-video business, as house-bound customers are watching more content.

Revenue from US streaming and digital-video soared 51 percent, up to $471 million. ViacomCBS said US streaming subscribers rose 50 percent to 13.5 million, with streaming services, CBS All Access and Showtime grabbing record levels of subscribers.

ViacomCBS shares rose more than 14 percent to $17 in early-morning trading Thursday.

On the negative end, ad revenue fell 30 percent at the company’s broadcast operations and was flat at its cable networks. Chief Executive Bob Bakish said that overall, ad revenue at ViacomCBS would have edged up 2 percent if the company had not faced comparisons to a 2019 first quarter that included last year’s NCAA event as well as the broadcast of Super Bowl LIII.

ViacomCBS shares broadcast rights to the NCAA tournament along with AT&T’s WarnerMedia.

Bakish told investors that despite the pandemic, ViacomCBS is seeing green shoots from the merger of Viacom and CBS, which took shape late last year. The company, whose cost cuts have included a fresh round of layoffs last week, sees $750 million in savings over the next three years.

“We are just beginning to tap into the potential of our combined assets, and our growing scale, audience reach and earnings power will become even more apparent as the market rebounds and we put the power of our portfolio behind our streaming strategy,” Bakish said.

For the quarter ended March 31, the company reported earnings of $516 million, or 84 cents a share, down from earnings of $1.96 billion, or $3.20 a share a year ago. Adjusted EPS totaled $1.13 a share, well ahead of the 94-cent Street forecast.

Revenue totaled $6.67 billion, down 6% from a year ago, and ahead of Wall Street’s call for $6.57 billion.

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From Reuters:

ViacomCBS beats revenue, profit estimates as lockdowns boost streaming demand

(Reuters) - Media company ViacomCBS Inc (VIAC.O) on Thursday beat first-quarter revenue and profit estimates, as higher demand for its streaming services from people hunkered down at home more than offset a drop in advertising revenue due to the coronavirus pandemic.

Shares were up nearly 15% to $17.1 in morning trading.

ViacomCBS reported over 13.5 million domestic streaming subscribers, up 50% year-over-year, based on demand for original programming such as “Star Trek: Picard” on CBS All Access and “Homeland” on Showtime OTT.

“The appeal of our streaming and digital offerings has been made even more clear over the last six weeks, where we’ve seen a strong acceleration in momentum across both free and pay as audiences follow stay-at-home guidelines,” Chief Executive Officer Robert Bakish said on a conference call with analysts.

Total advertising revenue declined 19% to $2.48 billion, due in part to the cancellation of the NCAA “March Madness” basketball tournament because of the pandemic.

Chief Financial Officer Christina Spade, speaking on the same call, said the company expects “significantly lower ad demand” in the second quarter, with advertising improving in the third and fourth quarters if businesses reopen.

ViacomCBS, which produces content for other streaming services in addition to distributing its own films and TV shows, has been preparing to launch a new streaming service that will build on CBS All Access. Bakish said the company is accelerating its plans for that service, with major changes coming this summer.

The company also announced that it entered into an expanded distribution agreement with Alphabet Inc’s (GOOGL.O) Google for YouTube TV subscribers, adding 14 new ViacomCBS channels to the service.

Spade said the company does not expect to release any new movies in the second quarter or until theaters reopen broadly.

Viacom and CBS — controlled by Sumner and Shari Redstone’s National Amusements Inc, — completed their merger in December to better compete against Netflix, Walt Disney Co (DIS.N), Apple Inc (AAPL.O) and other media and technology giants. The company has said the deal would result in $750 million in cost savings, up from the previous target of $500 million.

Revenue fell 6.1% to $6.67 billion in the quarter ended March 31, but beat the average analyst estimate of $6.59 billion, according to IBES data from Refinitiv.

Revenue from domestic streaming and digital video jumped 51% to $471 million.

Adjusted earnings of $1.13 per share beat analysts’ expectations of $0.96, according to IBES data from Refinitiv. The company reported net income of $516 million, or 84 cents per share, compared with $1.96 billion, or $3.18 per share.

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From the Los Angeles Times:

Comedy Central, BET, Nickelodeon coming to YouTube TV

Amid the coronavirus crisis, ViacomCBS managed a rare bit of good news: Comedy Central, BET, Nickelodeon, MTV and the Paramount Network are coming to YouTube TV.

The deal, announced Thursday, validates a key motivation to bring the two companies together: America's most watched TV network, CBS, is strong enough to help lift the weaker Viacom channels when it comes to distribution on pay-TV systems.

Google Inc.'s YouTube TV launched three years ago with the CBS network as an inaugural partner, but the $49.99 a month streaming service didn't see the need to have MTV, Nickelodeon and the other Viacom channels — until now.

The two companies announced an expanded distribution deal, that kicks in this summer and extends distribution for CBS, Showtime, CW and Pop and also adds 14 Viacom channels. YouTube TV, which has about 2 million subscribers and targets young adults who don't have cable or satellite TV.

The added distribution "is a clear proof point for the Viacom-CBS combination," ViacomCBS Chief Executive Bob Bakish said Thursday morning on a conference call with analysts to discuss first-quarter earnings. "ViacomCBS is a resilient company ... and our content is in demand."

The merger of CBS and Viacom was completed in early December, and its stock has since cratered, falling 60%. But the company's first-quarter earnings of $516 million, or 84 cents a share, exceeded Wall Street's expectations. That was down from earnings of $1.96 billion, or $3.20 a share, a year ago.

Revenue of $6.7 billion, down 6% compared with last year, also exceeded estimates. (Last year, CBS televised the Super Bowl in the first quarter, which drove advertising revenue.)

Adjusted earnings were $1.13 a share. Analysts were expecting the company to post earnings of 95 cents a share.

The stronger-than-expected performance led to a rally of ViacomCBS' shares Thursday. The stock jumped 15% to more than $17 a share in early morning trading.

The company's Los Angeles-based Paramount Pictures unit turned in a solid quarter. Even though the studio was forced to postpone the release of its highly anticipated "Quiet Place II," it benefited from "Sonic the Hedgehog," which brought in $300 million worldwide. Studio revenue increased 11% to $730 million in the quarter.

Licensing revenue grew 18% to $442 million because the studio was cranking out content for other companies. For example, Paramount sold "The Lovebirds" to Netflix in the quarter.

The company said it was aggressively cutting costs, including imposing layoffs and offering buyouts, to achieve cost-savings from the merger.

Meanwhile, analysts have been concerned about a severe drop in advertising revenue because many businesses are shut down to slow the spread of the coronavirus. On Wednesday, Fox Corp. Chief Executive Lachlan Murdoch startled analysts by saying that local TV station advertising revenue was on pace to be 50% lower in the current April through June period, compared with a year ago.

Five categories of advertisers — automakers, movie studios, restaurants, retail stores and travel companies — have slashed their advertising.

"It's not as bad as what Fox said, that's for sure, but it's not pretty either," Bakish said, noting the ViacomCBS networks have seen glimmers of hope that advertising will pick up this summer. CBS is expecting the Professional Golf Assn. to resume its season in June.

ViacomCBS and its controlling shareholder Shari Redstone have faced scrutiny over the merits of the combination. Some investors have blasted the merger, because it led to a steep decline in the value of CBS, the stronger of the two companies. The two companies were worth more than $30 billion last year, but now the combined company is worth about $10 billion.

A sweeping class action lawsuit was filed earlier this year in Delaware Chancery Court on behalf of two Pennsylvania institutional investors. The suit contends the deal — to reunite the companies after 13 years apart — was forced to protect the fortunes of the Redstone family and its investment vehicle National Amusements Inc., not rank-and-file CBS shareholders. The Redstone family controls 80% of the voting stock of the combined ViacomCBS, and Redstone now presides over ViacomCBS as its chairwoman.

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From The Hollywood Reporter:

ViacomCBS Ad Revenue, Film Profit Drop, Streaming Services Have "Best Month" Amid Pandemic

The stock jumps as financials beat estimates and the firm, led by CEO Bob Bakish, says its "proactive response to COVID-19 included actions to significantly increase financial flexibility and materially reduce costs."

ViacomCBS, in its second financial report since the recombination of Viacom and CBS Corp. in December and its first for a full quarter of the merged firm, on Thursday reported lower first-quarter earnings and revenue, including advertising revenue, as the novel coronavirus pandemic led to the cancellation of March Madness and the delay of a key film release.

The stock in pre-market trading jumped more than 16 percent as results exceeded Wall Street expectations and the company touted growth in streaming and an expanded carriage deal with YouTube TV.

The company said that advertising has been affected by the virus crisis, with the biggest hit expected in the current second quarter, while ratings and streaming momentum have been stronger. "With more consumers at home, ViacomCBS streaming platforms had their best month, with accelerated subscriber growth and consumption, reinforcing consumer demand for its content," it said.

Domestic streaming and digital video revenue grew 51 percent to $471 million, while domestic streaming subscribers surpassed the 13.5 million mark. "CBS All Access and Showtime OTT delivered record subscribers, sign-ups and consumption, reflecting original programming, including Star Trek: Picard and Homeland," the firm said. Free streaming service Pluto TV’s domestic monthly active users grew to a record of 24 million-plus.

ViacomCBS also said its "proactive response to COVID-19 included actions to significantly increase financial flexibility and materially reduce costs." The firm didn't detail the cost savings.

"ViacomCBS delivered solid results in our first full quarter, including sequential improvement on key financial metrics, as well as clear operating momentum," said CEO Bob Bakish. "In the wake of the COVID-19 pandemic, we also took decisive action to fortify our balance sheet, protect our employees and help communities in need. And through new creative strategies and production models, we continue to deliver must-watch content that big audiences love."

He added: "Importantly, we are just beginning to tap into the potential of our combined assets, and our growing scale, audience reach and earnings power will become even more apparent as the market rebounds and we put the power of our portfolio behind our streaming strategy.”

On the earnings call, Bakish said the pandemic has shown potential for cost reductions beyond the $750 million in targeted merger synergies, with the firm looking for "continued cost and operating opportunities that will create both immediate and lasting benefits." Informed by "how we had to rethink our operations over the past six weeks," which "have proven we can do more with less and can operate without being physically co-located," he said ViacomCBS is "now exploring opportunities to further consolidate facilities, migrate more activities to lower-cost locations and increase sharing of capabilities."

Film unit adjusted operating income before depreciation and amortization (OIBDA) for the first quarter fell 29 percent from the year-ago period to $27 million "driven by the incurrence of marketing expenses for A Quiet Place Part II, which was postponed to later in the year due to COVID-19." Sonic the Hedgehog was Paramount's big release of the quarter, with its digital release moved up to March 31 amid the pandemic.

Film revenue increased 11 percent due to growth in licensing and home entertainment, which more than offset a 3 percent decline in theatrical revenue due to difficult comparisons with the prior-year period, which had included carryover revenue from Bumblebee. Licensing revenue grew 18 percent, "fueled by original studio productions for third parties, as well as the licensing of The Lovebirds to Netflix."

The firm's cable networks unit, which houses the likes of MTV, Comedy Central, BET, Nickelodeon, Paramount Network and Showtime, posted a first-quarter affiliate revenue drop of 6 percent, slightly better than the 8 percent decline recorded in the fourth quarter of 2019. Advertising revenue was virtually unchanged "as strong growth in domestic streaming and digital video advertising, which includes Pluto TV, offset lower linear advertising." Cable networks unit adjusted OIBDA fell 11 percent to $794 million.

ViacomCBS' TV entertainment unit, which is made up of many former CBS operations, including the CBS broadcast network, posted a 30 percent drop in quarterly advertising revenue compared with the same period in 2019 as the pandemic led to the cancellation of March Madness and CBS had aired the Super Bowl last year. "Taken together, these two events had an unfavorable impact of 34 percentage points on advertising revenue compared to the prior year quarter," the firm said. Affiliate revenue rose 20 percent, though, thanks to "increased station affiliation fees and retransmission revenues, as well as strong subscription streaming revenue." Overall, adjusted OIBDA for the unit dropped 23 percent to $573 million as revenue fell 13 percent.

ViacomCBS' total first-quarter revenue fell 6 percent to $6.67 billion, while net earnings from continuing operations dropped 74 percent to $508 million, or 82 cents per share, and adjusted OIBDA came in 18 percent lower at $1.26 billion. The results mostly beat Wall Street estimates.

In late March, ViacomCBS raised $2.5 billion in debt to pay back existing debt after withdrawing its 2020 financial guidance due to the pandemic and said it could have a "material" financial impact on the firm despite increased viewership. "Due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent of the negative impact on ViacomCBS’ operating results, cash flows and financial position — including advertising and filmed entertainment revenues — particularly over the near to medium term," the company said.

In its late February earnings report, ViacomCBS said it was planning a "House of Brands" streaming service that builds on CBS All Access and draws from both sides of the recombined company. The company back then also outlined three strategic priorities: "maximizing the power of content;" unlocking value from its biggest revenue lines, namely distribution, ad sales and content licensing; and accelerating momentum in streaming.

It also raised its planned cost-savings guidance from $500 million to $750 million over three years back then, but its first financials fell short of Wall Street estimates, and its stock fell.

Bakish on April 29 sent a note to employees with an update on the company's progress, writing: "I know that even before the coronavirus pandemic, we were already in a period of significant change to integrate our newly combined company." He added that the company plans to continue "to integrate and streamline our operations, manage our costs as diligently as we can, and follow through on our committed post-merger synergy targets."

Staffers at ViacomCBS' advertising sales division as well as MTV News and other units were cut that day as part of the ongoing restructuring, with executives at the Smithsonian Channel, Paramount Network, Comedy Central and Nickelodeon also impacted by the cost-saving measures.

ViacomCBS and telecom giant Verizon's FiOS in late April struck a new carriage agreement, the second major pact for the entertainment giant since the recombination of Viacom and CBS and the first one that covers the complete ViacomCBS portfolio.

ViacomCBS has amid the virus pandemic put on hold plans to sell Manhattan's CBS headquarters Black Rock and book unit Simon & Schuster for $2.0 billion-$2.5 billion on a combined basis.

But in early April it closed its acquisition of a 49 percent stake in Miramax, which has a library of 700-plus titles, including the likes of Pulp Fiction, Chicago and Good Will Hunting, from BeIN Media Group in a $375 million deal.

And on April 6, its ViacomCBS Networks International unit acquired full control of Ananey Communications Group, an Israeli pay TV channel provider and content producer.

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More Nick: Nickelodeon Upfront 2020 Roundup!

Originally published: Thursday, May 07, 2020.

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