Title : Viacom Reports Strong Second Quarter Results
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Viacom Reports Strong Second Quarter Results
Viacom Reports Strong Second Quarter ResultsCompany Delivered Significant Gains in Operating Income, EPS
Worldwide Growth in Media Networks Driven by Double-Digit Gains Across All International Revenue Streams
Paramount Pictures Returned to Profitability in the Quarter as Turnaround Efforts Advance, and Continued its Momentum in April with Box Office Hit A Quiet Place, the First Film Produced and Released by the Studio's New Management Team
NEW YORK--Viacom Inc. (NASDAQ: VIAB, VIA) today reported financial results for the second quarter of fiscal 2018 (2Q18) ended March 31, 2018, with gains in operating income and earnings per share.
Bob Bakish, President and Chief Executive Officer, said, “Viacom continued to accelerate progress against its strategic priorities, delivering improvements across key metrics in the quarter. Our flagship brands increased audience share among important demos for the fourth consecutive quarter, and we saw sequential improvements in domestic advertising and affiliate revenue performance. Internationally, Viacom continued its winning streak, achieving double-digit revenue and profit gains in the quarter while expanding its global footprint through new channel launches and innovative mobile distribution deals across Europe and Asia. Our cost transformation initiatives are well under way; we anticipate more than $100 million in cost savings in fiscal 2018, and now expect over $300 million in run-rate savings in fiscal 2019 and beyond.
In the quarter, Viacom accelerated progress against its three strategic priorities for growth. (Credit: Viacom)
“At Paramount Pictures, turnaround efforts have firmly taken hold as the studio improved margins and returned to profitability. This month's outstanding box-office performance of A Quiet Place, the first film produced and released under the new team at Paramount, is a clear sign of our progress.
“Looking forward, we see continued momentum as we pivot from stabilization and revitalization of our business to a new phase of growth.”
Revenues in the second fiscal quarter decreased 3% to $3.15 billion, as segment growth in Media Networks was more than offset by lower Filmed Entertainment revenues principally due to fewer theatrical releases and the performance of Paramount's legacy slate. Operating income increased 37% to $456 million, reflecting improvement in Filmed Entertainment operating results and the lapping of a significant programming charge in the prior year quarter. Adjusted operating income grew 5% to $641 million in the quarter. Net earnings from continuing operations attributable to Viacom grew 112% to $256 million, principally due to higher operating income as well as the impact of tax reform. Adjusted net earnings from continuing operations attributable to Viacom increased 17% to $371 million in the quarter. Diluted earnings per share for the quarter increased 113% to $0.64, and adjusted diluted earnings per share were $0.92, an increase of 16%.
MEDIA NETWORKS
Media Networks revenues increased 1% to $2.43 billion in the quarter, as strong international growth more than offset modest declines in domestic revenues. Worldwide advertising revenues and affiliate revenues remained flat at $1.11 billion and $1.16 billion respectively. Domestic revenues decreased 3% to $1.86 billion while international revenues grew 18% to $566 million. Excluding a 9-percentage point favorable impact from foreign exchange, international revenues grew 9% in the quarter, driven by increases across all revenue streams.
Domestic advertising revenues decreased 3% to $841 million, reflecting lower linear impressions, partially offset by higher pricing and growth in Advanced Marketing Solutions revenue, which increased 29%. International advertising revenues grew 11% to $264 million. Excluding a 10-percentage point favorable impact from foreign exchange, international advertising revenues increased 1% in the quarter.
Domestic affiliate revenues decreased 4% to $934 million, primarily due to subscriber declines, partially offset by rate increases. International affiliate revenues grew 23% to $222 million in the quarter. Excluding a 9-percentage point favorable impact from foreign exchange, international affiliate revenues increased 14%, driven by increased SVOD and other OTT revenues.
Ancillary revenues grew 30% to $168 million in the quarter, primarily driven by growth in consumer product, recreation and live event revenues. Domestic ancillary revenues increased 26% to $88 million, and international ancillary revenues increased 36% to $80 million, including a 12-percentage point favorable impact from foreign exchange.
Adjusted operating income for Media Networks decreased 5% to $706 million in the quarter, reflecting higher segment expenses.
Viacom International Media Networks delivered another strong quarter of double-digit revenue growth. (Credit: Viacom)
Performance highlights:
- Viacom International Media Networks delivered another strong quarter of double-digit revenue and profit gains, while expanding its reach across platforms with new channel launches in the U.K. and Poland, and innovative mobile distribution deals in the Nordics and Indonesia. In January 2018, Viacom sold a 1% stake in joint venture Viacom18 to their partner Network18 to further align their operational strengths and position the business for an exciting new wave of growth in India.
- Viacom secured distribution of Nickelodeon's Noggin app as one of Amazon's Prime Video Channels. Launching in the third fiscal quarter, this relationship will expand consumer access to Nickelodeon pre-school programming.
- With the newly-created Viacom Digital Studios, Viacom brands saw year-over-year domestic increases in social video views and minutes viewed by 70% and 78%, respectively. VDS has also led a significant increase in the volume of original content from MTV, BET, Comedy Central and Nickelodeon, with more than 600 hours to be published this year. In April, Viacom renewed its global partnership with Snap to expand its programming slate and increase content for Viacom's tentpoles and live events.
- Led by its flagship brands, which grew audience share year-over-year for the fourth consecutive quarter, Viacom continued to hold the top share of basic cable viewing in key demos, including Adults 18-34, African Americans and Kids 2-11, among others.
- MTV achieved its third straight quarter of year-over-year growth in primetime audience share and ratings, driven by eight of the top 40 unscripted cable series. The April premiere of Jersey Shore: Family Vacation broke records as the most watched unscripted debut on cable since 2012, with more than 10 million viewers tuning in over its premiere weekend.
- Comedy Central increased audience share year-over-year for the fourth consecutive quarter, finishing as the #1 ad-supported entertainment network in cable among millennial men and growing ratings 20% among women 18-49 - an industry best and the network's biggest quarterly increase in more than a decade.
- BET delivered its third straight quarter of double-digit year-over-year growth in audience share (up 14%) and ratings (up 10%). BET's massive online footprint continued to expand with a 120% increase in views on social platforms, culminating in the first-ever BET Social Awards to celebrate the best of the medium.
- Paramount Network launched in January as a new home for premium content. Driven by the early success of original miniseries Waco, the network has boosted Live +3 ratings for its original series by 94% since launch.
- VH1, CMT and TV Land continued their winning streaks, growing year-over-year audience share and ratings in the quarter. VH1 has now delivered 11 consecutive quarters of year-over-year ratings improvement while TV Land and CMT each recorded their highest-rated quarters in four years.
Short-Form Video Consumption Caption: Viacom brands continue to drive significant gains in social views and watch time through original digital video content. (Credit: Viacom)
FILMED ENTERTAINMENT
Filmed Entertainment revenues decreased 17% to $741 million in the quarter, with domestic and international revenues each down 17% to $378 million and $363 million, respectively. Theatrical revenues decreased 79% to $50 million, primarily due to fewer titles in the quarter and a modified release strategy that resulted in certain legacy slate titles moving from theatrical to licensing distribution. Domestic and international theatrical revenues decreased 64% and 86%, respectively. Licensing revenues grew 37% to $477 million in the quarter, primarily driven by the release of The Cloverfield Paradox, as well as Paramount Television product, including The Alienist. Domestic licensing revenues increased 46% while international licensing revenues grew 31%. Home entertainment revenues were down 18% to $163 million, primarily reflecting the number and mix of current quarter releases. Domestic home entertainment revenues decreased 29% while international home entertainment revenues increased 13%. Ancillary revenues decreased 54% to $51 million, with domestic and international ancillary revenues down 63% and 11%, respectively.
Filmed Entertainment reported adjusted operating income of $9 million in the quarter compared to a loss of $66 million in the prior year quarter, an improvement of $75 million that reflects lower distribution expenses related to fewer theatrical releases.
Performance highlights:
- Paramount Pictures returned to profitability in the quarter, and is on track to continue growing profits for the second half of fiscal 2018 and into fiscal 2019. The studio continued to advance its turnaround and improve margins through a modified release strategy that guided the successful release of The Cloverfield Paradox and the sale of international distribution rights of Annihilation.
- The success of A Quiet Place, the first film produced and released under Paramount's new management team, illustrates continued momentum at the studio. The film, which debuted in April, grossed more than $50 million domestically in its first weekend - Paramount's biggest opening since 2016. The film, which cost approximately $20 million to produce, has grossed more than $200 million globally.
- Upcoming theatrical releases in the fiscal year include Book Club and Mission: Impossible - Fallout, with Overlord and Bumblebee scheduled for 2019. Paramount Players also continued to build up its 2019 slate of branded films, including BET's What Men Want, MTV's psychological horror film Eli and an upcoming comedy from Tyler Perry.
- Paramount Television delivered another strong performance this quarter, driving increased licensing revenues with the release of TNT's The Alienist, which drew 13 million viewers in its premiere, ranking as this season's #1 new cable drama series in Live +3. Upcoming Paramount Television series premieres include season three of Shooter on USA and the highly-anticipated Tom Clancy's Jack Ryan on Amazon, with 15 more series ordered or in production.
- The studio continued its efforts to diversify beyond its core businesses; in April, the stage adaptation of Mean Girls opened on Broadway to rave reviews, and the studio recently completed license agreements with developers of theme parks in the Middle East and China.
Viacom continues to strengthen its live events business, doubling global attendance in the quarter. (Credit: Viacom)
BALANCE SHEET AND LIQUIDITY
In the six months ended March 31, 2018, the Company continued to execute on its plan to strengthen its balance sheet, reduce leverage and enhance liquidity, redeeming over $1.0 billion of senior notes and debentures. At March 31, 2018, total debt outstanding was $10.08 billion, compared with $11.12 billion at September 30, 2017, a reduction of $1.04 billion.
The Company’s cash balance was $417 million at March 31, 2018, a decrease from $1.39 billion at September 30, 2017. In the six months, net cash provided by operating activities decreased $106 million to $299 million.
About Viacom
Viacom is home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, games, consumer products, podcasts, live events and social media experiences - for audiences in 183 countries. Viacom's media networks, including Nickelodeon, Nick Jr., MTV, BET, Comedy Central, Paramount Network, VH1, TV Land, CMT, Logo, Channel 5 (UK), Telefe (Argentina), Colors (India) and Paramount Channel, reach approximately 4.3 billion cumulative television subscribers worldwide. Paramount Pictures is a major global producer and distributor of filmed entertainment. Paramount Television develops, finances and produces original programming for television and digital platforms.
For more information about 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 company blog (blog.viacom.com), Twitter feed (twitter.com/viacom) and Facebook page (facebook.com/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: the public acceptance of our brands, programs, motion pictures and other entertainment content on the various platforms on which they are distributed; technological developments, alternative content offerings and their effects in our markets and on consumer behavior; the potential for loss of carriage or other reduction in the distribution of our content; significant changes in our senior leadership and the ability of our strategic initiatives to achieve their operating objectives; various uncertainties and risks related to a potential combination with CBS Corporation, including that an agreement may or may not be reached or may take an uncertain amount of time, and that the effect of any potential transaction on Viacom and our business cannot be ascertained at this time; economic fluctuations in advertising and retail markets, and economic conditions generally; evolving cybersecurity and similar risks; the impact of piracy; increased costs for programming, motion pictures and other rights; the loss of key talent; competition for content, audiences, advertising and distribution; fluctuations in our results due to the timing, mix, number and availability of our motion pictures and other programming; other domestic and global economic, political, business, competitive and/or regulatory factors affecting our businesses generally; changes in the Federal communications or other laws and regulations; and other factors described in our news releases and filings with the Securities and Exchange Commission, including but not limited to our 2017 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 2nd Quarter 2018 report in full, including tables of Viacom's statements and balance sheets, here on BusinessWire.com.
Viacom's Q2 2018 Earnings Conference Call can be listened to on the company's official Investor Relations website. Additionally, a transcript of the conference call is available to read on Seeking Alpha.
From Viacom's corporate blog:
Viacom Posts Strong Second Quarter 2018 Earnings, Revitalization Accelerates
Viacom posted strong second quarter 2018 earnings this morning, outperforming projections with significant gains in both adjusted operating income and adjusted earnings per share as the company accelerates its pivot from stabilization and revitalization to growth.
Double-digit gains across all international Media Networks revenue streams, Paramount Pictures’ return to profitability, ratings increases at key flagship networks, significant benefits from cost savings, further diversification into live events and other adjacent businesses, and an increased focus on next-generation platforms and solutions all set Viacom on a trajectory toward a full fiscal year of growth.
“Viacom continued to accelerate progress against its strategic priorities, delivering improvements across key metrics in the quarter,” said Viacom President and CEO Bob Bakish. “Our flagship brands increased audience share among important demos for the fourth consecutive quarter, and we saw sequential improvements in domestic advertising and affiliate revenue performance. Internationally, Viacom continued its winning streak, achieving double-digit revenue and profit gains in the quarter while expanding its global footprint through new channel launches and innovative mobile distribution deals across Europe and Asia. Our cost transformation initiatives are well under way; we anticipate more than $100 million in cost savings in fiscal 2018, and now expect over $300 million in run-rate savings in fiscal 2019 and beyond.
“At Paramount Pictures, turnaround efforts have firmly taken hold as the studio improved margins and returned to profitability. This month’s outstanding box-office performance of A Quiet Place, the first film produced and released under the new team at Paramount, is a clear sign of our progress.
“Viacom also took strides to advance its participation into next generation platforms and solutions. We continued to benefit from growth in the vMVPD space, delivered revenue gains in Advanced Marketing Solutions, and significantly increased original content production through Viacom Digital Studios to drive off-linear consumption. Additionally, we continue to diversify into adjacent businesses by building on our live events strategy with upcoming tentpoles including Comedy Central’s Clusterfest, the BET Experience, Nickelodeon’s U.S. debut of SlimeFest and our first-ever VidCon.”
Viacom’s core business continues to strengthen
Improved performance throughout Viacom’s core business – domestic and international Media Networks and Paramount Pictures – allowed the company to meet or beat guidance on key metrics year-over-year for the quarter, producing five percent adjusted operating income growth and a 16 percent jump in adjusted earnings per share.
Domestically, both advertising and affiliate revenues increased. Viacom’s flagship brands (Nickelodeon, Nick Jr., MTV, BET, Comedy Central, Paramount Network), grew audience share year-over-year for the fourth consecutive quarter, while the company continued to hold the top share of basic cable viewing in key demos, including adults 18-34, African-Americans, and kids 2-11. BET grew year-over-year ratings and share by double digits for the third consecutive quarter, while VH1, CMT and TV Land notched year-over-year growth in audience share and ratings. MTV’s programming resurgence continued, with a third straight quarter of year-over-year primetime ratings growth led by Jersey Shore: Family Vacation, which, with 10 million viewers on its opening weekend, was the biggest unscripted cable premiere since 2012.
Viacom International Media Networks is on pace for another record year after posting double-digit increases in profitability, as well as across all revenue streams.
Paramount Pictures returns to profitability
After notching a $75 million year-over-year improvement in adjusted operating income under its new management team, Paramount Pictures raised the curtain on the third quarter with the release of smash hit A Quiet Place. The film rode overwhelmingly positive critical response and deft marketing to the studio’s best opening since 2016 and the second biggest domestic opening so far this year, earning more than $200 million in its first three weeks alone on just a $20 million production budget. Additionally, the studio’s Paramount Television production business anticipates $400 million in revenues this year. Behind these and other catalysts, Paramount expects meaningful improvement to its full-year adjusted operating income for the full fiscal 2018.
Viacom is aggressively increasing its digital output on next-generation platforms
Anchored by 850 million social media followers, the newly formed Viacom Digital Studios is poised to create more than 600 hours of short-form original content this year. This quarter alone, social video views shot up 70 percent (to 4.3 billion), and domestic minutes viewed increased by 78 percent (to 4.7 billion minutes) year-over-year.
The addition of Nickelodeon’s Noggin app to Amazon and a renewed agreement that adds more Viacom content to Snap’s programming slate, in addition to recent and forthcoming mobile deals, will continue to expand the reach of Viacom’s increasing volume of on-the-go-content.
Growing ad revenue through Advanced Marketing Solutions
Viacom today detailed how its Advanced Marketing Solutions (AMS) portfolio would provide even greater opportunity to take advantage of new advertising platforms. The company also broke AMS – which increased its revenue 29 percent in the quarter – into two basic categories:
1. Advanced addressable video inventory contains advertising units that Viacom can target to consumers, either through its brands’ apps, or by using set-top-box data from its advanced advertising partners, including Comcast, Charter and Altice USA.
2. Brand solutions is a bundle of consulting, creative services and associated activations that includes social campaigns led by influence marketers WHOSAY, creative integrations with in-house integrated marketing and creative solutions team Viacom Velocity, and experiences at retail stores or Viacom’s growing portfolio of live events.
Viacom live events and consumer products lines continue to grow
Viacom continues to reinforce its brands and drive revenue through live events, recreation, consumer products and other business lines. This quarter marked a nearly 100 percent increase in live-event attendance over 2017, and there are plenty more events in the pipeline, including Comedy Central’s Clusterfest, the BET Experience, Nickelodeon SlimeFest, and the first VidCon since the online video conference joined Viacom – all of which should serve to double live-event and recreation revenue this year.
Viacom’s future looks strong
“Looking forward, we see continued momentum as we pivot from stabilization and revitalization of our business to a new phase of growth,” Bakish said.
To see what Viacom will debut in the months ahead, scroll through the timeline below, or click here to view the full-screen version.
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