Paramount Global Q1 2024 Earnings Report

Paramount Global EPS Results

• Actual EPS: $0.62
• Consensus EPS: $0.34
• Beat/Miss: Beat by +$0.28
• One Year Ago EPS: $0.09

Paramount Global Revenue Results

• Actual Revenue: $7.69 billion
• Expected Revenue: $7.73 billion
• Beat/Miss: Missed by -$41.63 million
• YoY Revenue Growth: +5.80%

Paramount Global Announcement Details

• Quarter: Q1 2024
• Date: 4/29/2024
• Time: After Market Closes
• Conference Call Date: Monday, April 29, 2024
• Conference Call Time: 4:30PM ET

Paramount Global (NASDAQ:PARA) is a multinational company that operates in various entertainment industries, including media production, entertainment, streaming technology and content development. The company is headquartered in New York City, New York. The company has multiple classes of stock, with the major difference in its Class B stock being that it is a non-voting stock class. 

Paramount Global was founded in 2019 in a merger between Viacom and CBS Corporation. The company was initially founded under the name ViacomCBS but changed its name the day after the Q4 presentation in 2022. Key highlights of the company include its strong brand recognition, a diverse range of businesses and ability to generate significant cash flow and profits across multiple industries and countries.

Robert M. Bakish became CEO of Paramount Global immediately after the merger of the two original companies, Viacom and CBS. He joined Viacom in 1997 as the Vice President of Planning and Development. Bakish was later transferred to Viacom's subsidiary MTV Networks as the Chief Operating Officer of Advertising and Sales. 

Other notable members of the Paramount Global team include Alex Berkett, the Chief Corporate Development and Strategy Officer, who, like Robert Bakish, came from Viacom and was appointed to his position after the merger. Also notable is George Cheeks, the Chief Content Officer with a development history at over ten significant networks in the television industry.

Over the past few years, Paramount Global has delivered mixed financial performance, with consistent revenue growth, healthy profit margins and a balance sheet consistent with industry peers. The company's profit margins have remained stable over the past few years, with an average net margin of 3.66% since the merger.

Paramount Global has also maintained a strong balance sheet, with total assets adequately more than total liabilities keeping the company's debt levels manageable. Paramount Global is currently trading at a price-to-earnings ratio in line with the industry average.

The company's price-to-book ratio is slightly higher than the industry average. The company's valuation metrics suggest that it is fairly valued relative to its peers in the industry. Paramount Globals' stock performance has been mixed, which is to be expected from a company primarily focusing on the volatile streaming entertainment industry. 

Paramount Global operates in several different entertainment industry sectors, giving it a degree of diversification and resilience against industry-specific risks. However, Paramount Global's primary focus is streaming internet entertainment, an emerging and volatile industry sector.

The media and entertainment industry is one of the company's largest businesses, and it is highly competitive and constantly evolving. Paramount Global's strong brand recognition, extensive content library and deep relationships with distributors and advertisers give it a competitive advantage. In Q2 of 2022, Warren Buffet revealed a $2.6 billion investment in Paramount Global, contributing to its continued growth. 

Paramount Global has several growth opportunities in the years ahead, including new product launches, acquisitions and expansions into new markets and countries. The company is focused on expanding its content library and developing new digital platforms and distribution channels in the media and entertainment space.

The company recently launched a new streaming service called Paramount Plus, which has been well-received by consumers and has the potential to drive significant revenue growth in the years ahead. In the technology space, Paramount Global is focused on investing in emerging technologies such as artificial intelligence and cybersecurity.

While Paramount Global has significant growth opportunities, the company also faces many risks and challenges. One of the company's most significant risks is changing consumer preferences in media and entertainment. As consumers increasingly shift towards streaming services and digital content, Paramount Global must keep its finger on the pulse of consumer trends and expectations.

Paramount Global is subject to rapid technological change and intense competition in the technology space. The company will need to continue investing in research and development and stay ahead of the curve to maintain its competitive advantage.

Paramount Global Q1 2024 Earnings Call Transcript

[Operator]

Good afternoon. My name is Harry, and I'll be your conference operator today. I would like to welcome everyone to Paramount Global's Q1 2024 Earnings Conference Call. At this time, I would now like to turn the call over to Jamie Morris, Paramount Global's EVP, Investor Relations. You may now begin your conference call.

[Speaker 1]

Good afternoon, everyone. Thank you for taking the time to join us for our Q1 2024 earnings call. Joining me for today's discussion is Navin Chopra, our CFO and to make some brief introductory remarks on behalf of our new Office of the CEO, we also have George Cheeks, Chris McCarthy and Brian Robbins. Before we start, please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Also, I want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties.

[Speaker 1]

These risks and uncertainties are discussed in more detail on our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information. And in each case, these can be found in the Investor Relations section of our website. I also want to note that we will not be taking questions following our prepared remarks.

[Speaker 1]

The main purpose of today's call is to provide you with the information regarding our Q1 2024 performance. Now, I will turn the call over to George.

[Speaker 2]

Thanks, Jamie. First, we want to thank Bob for his many years of leadership and steadfast support for all Paramount Global Businesses, Brands and People. Now Chris, Brian and I want to speak briefly on our partnership, our excitement about this collaboration and what we're addressing as our first order of business. Let me start by saying that Paramount Global has the greatest content in the world. That is the most important point.

[Speaker 2]

We've got incredible assets at this company, both in what we produce and the amazing people who make it all possible. Everything will build from that. And now over to Chris.

[Speaker 3]

Thank you, George. And just as important is the fact that we've all worked together collaboratively for years and have known each other for decades. It's a true partnership. We have a deep respect for one another and we're going to lead and manage this company together. On that note, we're finalizing a long term strategic plan to best position this storied company to reach new and greater heights in a rapidly changing world.

[Speaker 3]

The plan is focused on 3 pillars. 1st, make the most of our hit content. 2nd, strengthen our balance sheet. And 3rd, optimize our streaming strategy. And now here's Brian.

[Speaker 3]

Thank you, Chris. George, Chris and I have been collaborating with each other for years, transforming our businesses and most importantly, making hit films and television, which is the core of Paramount Global. Each of us has deep industry knowledge, relationships and experience as business leaders and creative executives. We will bring all of that to bear as we chart a course forward for our company. We look forward to coming back to you in short order to share our plan and discussing it all in detail at that time.

[Speaker 3]

Thank you. And now here's Navin.

[Speaker 4]

Thank you, Brian, and good afternoon, everyone. In Q1, we generated significant growth in earnings and free cash flow and improved our balance sheet. Paramount delivered total company revenue growth of 6% to $7,700,000,000 Adjusted OIBDA grew 80% to $987,000,000 reflecting improvements across all three of our business segments. Our direct to consumer business delivered healthy top line growth and improved operating leverage. TV Media operating margins expanded year over year and filmed entertainment OIBDA improved by nearly $100,000,000 versus the year ago period.

[Speaker 4]

As always, you'll find a comprehensive review of our financial results in our press release. But I'd like to focus on a few areas of note. Starting with advertising, which was a highlight in the quarter. Total company advertising grew 17%, benefiting from Super Bowl 58, which contributed 22 percentage points to the growth rate. The game broke records across CBS, Paramount Plus and Nickelodeon, a great example of the power of our multi platform offering.

[Speaker 4]

TV media advertising grew 14% in the quarter, including a 23 percentage point contribution from the Super Bowl. Sports continued to over deliver with the NFL playoffs and NCAA College Basketball contributing to growth in the quarter. Direct to consumer advertising grew 31%, driven by growth from Pluto TV and Paramount Plus including the benefit of the Super Bowl. Beyond the Super Bowl impact on engagement, revenue growth reflects a combination of increased sell through and higher CPMs. Next, total company affiliate and subscription revenue, which grew 6% in Q1.

[Speaker 4]

In TV Media, affiliate revenue declined 3% year over year, reflecting overall pay TV ecosystem declines, partially offset by pricing. D2C subscription revenue, on the other hand, grew 22% in the quarter, anchored by greater than 50% growth in Paramount Plus subscription revenue. Paramount Plus added 3,700,000 subscribers in the quarter, reaching a total of 71,200,000. Subscriber growth benefited from the NFL and the Super Bowl. And finally, on the D2C segment, revenue grew 24% year over year in Q1, led by 51% growth in Paramount Plus revenue and 26% global ARPU expansion.

[Speaker 4]

ARPU growth reflects a full quarter of our domestic price increase and the addition of international subscribers in higher ARPU markets. Domestic ARPU was negatively impacted by lower than expected engagement due to the lagging effect of last year's strikes, which constrained the availability of new programming. D2C adjusted OIBDA improved 44% year over year, led by improvement in Paramount Plus domestic profitability. Healthy revenue growth and a disciplined focus on costs drove improved leverage in content, marketing and other overhead costs, which all decreased as a percentage of revenue relative to the prior year. I'd also like to share some important notes regarding our balance sheet.

[Speaker 4]

In Q1, we delivered $209,000,000 of free cash flow, an improvement of over $750,000,000 versus a year ago. We also remain focused on reducing leverage, which improved 3 quarters of a turn to 4.3 times benefiting from growth in adjusted OIBDA. Additionally, last month we entered into an agreement with Reliance Industries to sell our equity interest in Viacom 18 for approximately $500,000,000 based on current exchange rates. The after tax proceeds will further benefit leverage when the transaction closes at the end of 4 or early in 2025 subject to regulatory approval. Selling our stake in Viacom 18 provided an opportunity to exit our ownership position with an attractive financial return on our investment while preserving our ability to monetize our content in India through ongoing licensing arrangements.

[Speaker 4]

And lastly, on April 1, we paid the last dividend on our mandatory convertible preferred stock, which converted to 11,500,000 Class B common shares on the same day. Going forward, our cash dividend payments will be reduced by about $55,000,000 on an annual basis as a result of the conversion. In closing, we are proud of our Q1 results. Although the operating environment continued to be dynamic, we remain focused on execution. And on a final note, I'd like to take a moment to thank Bob for his leadership of the company through a period of immense change for us and the industry.

[Speaker 4]

Not only did Bob help navigate a number of challenges, but I'm proud of all we've accomplished and it's been my privilege working together with him. I'm also looking forward to working closely with George, Brian and Chris, who will be stepping in to lead the office of the CEO. They are long standing seasoned executives with deep expertise across their businesses and are well positioned to guide the next chapter of Paramount. With that, we'll conclude our Q1 earnings call. Thank you for joining us.