Viacom Inc. Q2 adjusted earnings Beat Estimates

Viacom Inc. Q2 adjusted earnings Beat Estimates

Viacom Inc. Q2 adjusted earnings Beat Estimates

The FINANCIAL -- Viacom Inc. on April 25 reported financial results for the second quarter of fiscal 2018 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.

"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.

"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%, according to Viacom.

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.

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 our partner Network18 to further align our 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.

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.

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.