Paramount Global (NASDAQ: NASDAQ:PARA) reported strong first quarter results for 2024, highlighting a 6% increase in total company revenue to $7.7 billion and an 80% surge in adjusted OIBDA to $987 million. The company's direct-to-consumer (D2C) segment showed impressive performance with a 24% year-over-year revenue increase, driven by a significant 51% growth in Paramount+ revenue.
Advertising revenue grew notably by 17%, largely due to the impact of Super Bowl LVIII. Paramount Global also announced its plan to sell its equity interest in Viacom18, which is expected to further improve its balance sheet upon completion.
Key Takeaways
- Total company revenue grew by 6% to $7.7 billion in Q1 2024.
- Adjusted OIBDA increased by 80% to $987 million across all business segments.
- Direct-to-consumer advertising revenue jumped 31%, with Paramount+ adding 3.7 million subscribers, totaling 71.2 million.
- The Super Bowl contributed notably to advertising revenue growth, with a 22 percentage point impact.
- Paramount Global plans to sell its stake in Viacom18 for approximately $500 million, enhancing financial leverage.
Company Outlook
- Paramount Global is finalizing a strategic plan focusing on maximizing hit content, strengthening the balance sheet, and optimizing streaming strategy.
- The company is looking to leverage its content and partnerships to navigate the rapidly evolving media landscape.
Bearish Highlights
- TV Media affiliate revenue declined by 3% year-over-year due to overall pay TV ecosystem declines, though this was partially offset by pricing.
Bullish Highlights
- The company's film entertainment segment saw nearly $100 million in adjusted OIBDA improvement compared to the previous year.
- D2C subscription revenue increased by 22%, with Paramount+ experiencing greater than 50% growth in subscription revenue.
Misses
- Domestic ARPU was negatively impacted by lower than expected engagement, attributed to the lingering effects of last year's strikes limiting new programming availability.
Q&A highlights
- No Q&A session was held following the prepared remarks.
Paramount Global's first-quarter performance demonstrates the company's ability to generate substantial growth amidst a dynamic operating environment. With a strategic plan in the works and a disciplined focus on cost management, Paramount Global is poised to continue its positive trajectory in the competitive media landscape. The company's efforts to reduce leverage, as evidenced by the planned sale of its Viacom18 stake, indicate a commitment to maintaining a strong balance sheet. Although challenges such as the decline in TV Media affiliate revenue and the impact of content availability on engagement levels present hurdles, the overall outlook for Paramount Global remains optimistic as it leverages its content and strategic partnerships to navigate the rapidly evolving media industry.
InvestingPro Insights
Paramount Global's recent financial performance paints a picture of a company capitalizing on the growth of its direct-to-consumer segment and robust advertising revenue, particularly from events like the Super Bowl. The following insights from InvestingPro further contextualize the company's market position and financial health:
InvestingPro Data:
- Market Cap (Adjusted): Paramount Global has a market capitalization of $8.16 billion, reflecting its significant presence in the media industry.
- Price / Book (last twelve months as of Q4 2023): At 0.38, the company's stock is trading below its book value, which could indicate that it is undervalued.
- Dividend Yield: With a dividend yield of 1.63%, Paramount Global continues to return value to shareholders, maintaining dividend payments for 19 consecutive years.
InvestingPro Tips:
- Analysts' Optimism: 10 analysts have revised their earnings upward for the upcoming period, suggesting confidence in Paramount Global's financial prospects.
- Profitability Forecast: Despite not being profitable over the last twelve months, analysts predict the company will be profitable this year, which is a positive sign for potential investors.
For readers interested in a deeper dive into Paramount Global's financials, InvestingPro offers a comprehensive suite of tools and additional tips. There are over 10 additional "InvestingPro Tips" available for Paramount Global, which can be accessed at: https://www.investing.com/pro/PARA. To enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Viacom Cl B (PARA) Q1 2024:
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 Jaime Morris, Paramount Global's EVP Investor Relations. You may now begin your conference call.
Jaime Morris: Good afternoon, everyone. Thank you for taking the time to join us for our first quarter 2024 earnings call. Joining me for today's discussion is Naveen 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. 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. The main purpose of today's call is to provide you with the information regarding our first quarter 2024 performance. Now, I will turn the call over to George.
George Cheeks: Thanks, Jaime. 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. 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.
Chris McCarthy: 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 our rapidly changing world. The plan is focused on three pillars. First, make the most of our hit content. Second, strengthen our balance sheet. And third, optimize our streaming strategy. And now here's Brian.
Brian Robbins: 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. Thank you, and now here's Naveen.
Naveen Chopra: 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 $7.7 billion. Adjusted OIBDA grew 80% to $987 million, 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 film entertainment adjusted OIBDA improved, by nearly $100 million versus the year-ago period. 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 LVIII, which contributed 22 percentage points to the growth rate. The game broke records across CBS, Paramount+, and Nickelodeon, a great example of the power of our multi-platform offering. 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+, 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. 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+ subscription revenue. Paramount+ added 3.7 million subscribers in the quarter, reaching a total of 71.2 million. 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+ revenue and 26% global ARPU expansion. 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 effects 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+ 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. In Q1, we delivered $209 million of free cash flow, an improvement of over $750 million versus a year ago. We also remained focused on reducing leverage, which improved 3/4 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 Viacom18 for approximately $500 million, based on current exchange rates. The after-tax proceeds will further benefit leverage when the transaction closes at the end of 2024, or early in 2025, subject to regulatory approval. Selling our stake in Viacom18 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. And lastly on April 1, we paid the last dividend on our mandatory convertible preferred stock, which converted to 11.5 million Class B common shares on the same day. Going forward, our cash dividend payments will be reduced by about $55 million on an annual basis as a result of the conversion. In closing, we are proud of our first quarter results. Although the operating environment continued to be dynamic, we remained 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. 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 longstanding, 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 first quarter earnings call. Thank you for joining us.
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