Q1 2023 Paramount Global Earnings Call
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Okay.
Good morning, My name is not yet and I'll be the conference operator today.
At this time I would like to welcome everyone to the Paramount Global's Q1 of 2023 earnings Conference call.
At this time all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question. Please press star, but it might change.
In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.
At this time I would now like to turn the call over to Kristin Southey, how my global with Edp Investor Relations. Kristin you May now begin your conference call.
Good morning, everyone. Thank you for taking the time to join US for our first quarter 2023 earnings call. Joining me for today's discussion are Bob package, our president and CEO and da Vinci Oprah Our CFO . Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our web.
Site before we start this morning, 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 in our filings with the SEC. Some of today's financial remarks will focus on adjusted results reconciliations of these non-GAAP fight.
She'll measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case can be found in the Investor Relations section of our website now I will turn the call over to Bob. Good morning, everyone. Thank you for joining US today My remarks will cover Q1 highlights as well.
For some perspective on the balance of the year, but.
But let me start with the Big picture.
The media landscape is evolving and we are executing on our plan to transform paramount with it we're leveraging our traditional media base, both financially and operationally to invest in build and scale a set of streaming networks for the 20 <unk> century.
With a robust content engine at the core all in service of delivering long term value to our shareholders.
We're also navigating a challenging and uncertain macroeconomic environment.
You see the impact of that in our financials as the combination of peak streaming investment intersects with cyclical softness.
All of this makes us even more focused on making the necessary decisions to return the company to earnings growth and positive free cash flow in 2024 and to that end, we continue to hold our cost structure align resources with growth areas and divest non core assets.
Because it's a fundamental level our strategy is working and our momentum is strong we are producing popular content, adding subscribers, increasing engagement growing streaming revenue and progressing towards key business objectives.
As we do that we see several things that encourage us.
First we are seeing signs of stabilization in the AD market.
But perhaps more importantly, we're seeing your unquestionable and growing value of our content and platforms to both the consumer and business community as exemplified by growing usage as well as a broadening range of deals and partnerships.
<unk> is transforming we are confident in the company's execution and shareholder value creation remains our top priority.
With that let's dive in.
I'll begin with a look at our popular content.
Foundation of Paramount and the engine has powered our company for decades.
And today that engine is stronger than ever.
It's this content that underpins our D C momentum, where revenue grew 39% year over year to an annual run rate of more than $6 billion and this quarter. We reached two big global milestones for our flagship streaming services.
Paramount plus grew to 60 million total subscribers, adding $4 1 million subs, while Pluto TV hit 80 million monthly active users.
Accordingly, both are resonating globally, not just in the U S.
Paramount plus saw a 65% year over year revenue increase while total global viewing hours across Paramount plus and Pluto TV increased over 50% year over year and over 20% sequentially.
And viewers don't just subscribe to Paramount plus or watch Pluto TV because of a single hit they come for our broad bold slate of content.
The film franchises they crave the news they rely on and the T V series and sporting events, they're obsessed with.
In the quarter, we saw a paramount plus subscriber growth driven by newly released original like Tulsa, King Mayor of Kingstone 1923, and teen Wolf the movie.
As well as from theatrical movies like top gun Maverick and sports like the NCWA and UEFA Champions League soccer and.
On Pluto, we see the engagement of our broad and deep libraries led by the CBS brand as well as great content, we source from third parties.
In Q1, the Paramount plus with Showtime bundle also benefited from strong Showtime content.
Clearly your honor and yellow jackets not.
Not only were they both top acquisition drivers in the quarter.
Two shows also dominated consumption driving nearly 30% of the hours streamed on Showtime.
This thanks to our devoted enthusiastic fan basis.
We see this as an extremely good sign as Paramount plus is about to transition to Paramount plus with Showtime.
Looking at the quarter more broadly CBS programming strongly attracts viewers across linear and streaming.
To illustrate the power of CBS I'd note that CBS programming accounted for 281 billion minutes of viewing in the quarter.
That's nearly 50% more than the closest broadcast competitor and nearly four times more than the combined total minutes spent watching original content on Amazon, Hulu, Disney plus and HBO Max.
A testament to the power and scale of CBS content.
I'd also note that C. B S with its powerful entertainment lineup essential news offerings and marquee sports is on track to be the most watched broadcast network for the 15th consecutive season.
And then film Paramount Pictures released the latest installment of this screen franchise Scream, six which opened at number one in March and is now the highest grossing installment domestically in the franchise.
This to US is yet another example of the power of our franchises and how that power keeps growing and it's not just the theatrical story it extends to streaming too with screen six debuted on Paramount plus on April 25th to great results.
More on its performance next quarter Big.
Big picture, our franchisers deliver consistently excellent content and drive high fan base engagement advantages that you will see play out again and again as we look ahead.
But it's not just content, it's how do we go to market and deploy that content, including in streaming since launch our streaming strategy has been built on a dual revenue stream model, one that spans both subscription and advertising and benefits from strong innovative partnerships with iconic brands.
To that end, we're very happy with our Walmart partnership and we're thrilled that now includes Pluto TV <unk>.
And in March Paramount plus launched on the subscription hub for Verizon plus play customers. This partnership is another step forward as we continue to introduce third party partnerships to deliver ubiquitous distribution to consumers and coming soon delta loyalty members on planes originating in the U S. We will have.
Access to a special free trial of the Paramount plus premium service.
Members will have the opportunity to customize their in flight entertainment experience via Paramount plus on their personal mobile device with big broad and beloved hits across every genre.
These powerful partnerships represent just one component of a multifaceted strategy.
A strategy that has led to our streaming business with total revenue that's more than double what it was two years ago and our subscriber base on Paramount plus alone that has grown over three and a half times since launch. This business is in fact scaling at a rapid rate and one that benefits from a tam that is much bigger than TV.
Yes. This takes investment and as we've described 2023 represents our peak investment year.
There is no question that our investment is producing results and as we scale. We are very much on our related path to streaming profitability.
Advertising the health of the market and where we are in the cycle is a topic of industry conversation as I mentioned earlier, there are signs of stabilization in the AD market, we like what we're seeing in many categories and we like what we're seeing in the direct side of digital.
And as the market continues to turn AD growth will improve as it does we are confident that the strength of our multi platform strategy puts us in a unique position to capitalize on it something my recent conversations with agency and client leaders during our series of upfront advent has me more convinced of.
Than ever we have the right strategy assets and team in place to succeed in the evolving landscape.
For example, IQ, our integrated suite of streaming and creative AD solutions helps brands place ads across all of our digital platforms with a combined reach of 90 million full episode monthly unique viewers. This proprietary advertising product is built on our investments in Pluto and Paramount plus.
And it is a product whose reach has grown more than 50% in two years, whose AD tech and targeting capabilities are advancing at a rapid pace.
That is only one example, and across our company Theres No question that our investments are creating compelling sought after products for consumers advertisers and distributors.
But at the same time, we recognize how these investments on top of the macroeconomic headwinds that have impacted the AD market also impact earnings and our balance sheet in the short term.
So with creating shareholder value and financial flexibility as fundamental goals. We're deploying three key tactics all of which Levine will provide additional color on.
First we are implementing significant cost saving measures across certain parts of our business.
We're assessing and executing on the value creation opportunities associated with the divestiture of noncore assets.
With respect to Simon and Schuster, where we have restarted the sale process.
Finally, we are amending our dividend policy. This decision will further enhance our ability to deliver long term value for our shareholders as we move towards streaming profitability.
As we look ahead, we're producing popular content across genres and platforms and while the writer's strike may cause some disruption we are confident in our ability to manage through it given the many levers we have to pull and we will continue to deploy content across platforms in an efficient way from theatrical movies that.
Create revenue at the box office, then moved to Paramount plus to CBS Entertainment news and sports content, which drives massive reach and engagement in broadcast and streaming.
And more this multi.
Form approach starts with our strong upcoming theatrical film slate, including four franchises in just the next four months the highly anticipated Transformers rise at the Beast in June the return of Tom Cruise in July and mission impossible Dead Reckoning part, one Seth Rogen teenage mutant Ninja turtles mute ma'am.
In August and Paw patrol the Mighty movie in September .
All of which have incredible buzz, including coming out of last week's cinema Khan in Vegas.
Paramount plus is increasingly a destination for excellent streaming content sure. The films I, just mentioned will make their way to Paramount plus after theatrical run, but there is much more than that to it.
Attraction just debuted on the platform and we're excited to release Taylor Sheraton's next show Special Ops lineups, starring Zoe Saldana with Morgan Freeman and Nicole Kidman in the summer. We will also shortly see the unscripted side of sylvestris alone in the family Stallone.
And in sports the combination of Cvs and Paramount plus has a strong slate coming including the UEFA Champions League final and all of the PGA Tour's Fedex playoff Cup events.
All of it by Big 10 football later in the year, our company and the return of the NFL and SEC.
Likewise news willpower engagement, both on CBS , and Paramount plus including favorites like CBS mornings, which has been consistently growing share and.
From Nickelodeon Studios will have all new series and movies based on classic Nick properties, including good Burger to Zoey 102, the Thunder men's and the loud house coming to Paramount plus and Nickelodeon linear finally, we're thrilled to begin to bring the integrated Paramount plus with Showtime product to market.
Summer a game changing multi platform offering we are very excited about this product will integrate paramount plus content with the Showtime slate, including highly successful series like the Chi which will be returning for season six this summer along with the collection of Showtime franchises as we looked at the balance.
For the year and early 'twenty four.
So once again, there's a lot here for the whole household and that will drive subs and engagement as Paramount plus rapidly becomes a cornerstone streaming service.
Before I hand, it off to intervene I want to close by underscoring what remains our top priority generating long term shareholder value from our franchise fueled content slate to our innovative partnerships to the powerful scale of our platforms. This is a company that knows its strengths knows how to build on them and why.
And that is positioned to succeed including as the macro environment continues to stabilize which makes us excited about the path ahead and with that I'll hand, it over to Naveen. Thank you Bob Good morning, everyone.
Our Q1 results reflect a combination of strong momentum from Paramount content.
Investment in our DTC business and the continued impact of macro headwinds.
Today I'm going to cover three things first I'll provide additional color on a few elements of our Q1 results.
I will talk about optimizing our capital allocation.
And third I'll discuss our expectations for earnings and free cash flow improvement in the back half of this year and into 2024.
In Q1, we delivered total company revenue of $7 3 billion and adjusted OIBDA of $548 million.
Our press release includes a comprehensive review of key financial and operational results for the quarter.
I'm going to focus my comments here on four specific areas.
And subscription revenue advertising, our filmed entertainment results and cash flow.
Affiliate and subscription revenue growth accelerated to 12%. This quarter continued evidence that the ecosystem shift from pay TV to streaming yields material growth for our business, notably we saw improving trends in both linear and streaming.
On the linear side TV media affiliate revenue declined 1% year over year and improvement versus Q4.
And in streaming D to see subscription revenue was up 50% year over year.
Paramount plus subscription revenue saw even stronger growth driven by subscriber additions and increasing <unk> and improvements in domestic churn.
Looking ahead, we expect healthy levels of year over year affiliate and subscription revenue growth to continue over the next several quarters aided in part by the integration of Showtime and Paramount plus.
From a subscriber perspective, we expect net adds in Q2 will be seasonally soft ahead of the release of key content titles and marketing initiatives.
Aligned with the rollout of the integrated service, which will occur throughout Q3 and Q4.
Now, let's turn to advertising.
The global AD market continued to experience weakness in Q1, resulting in a 7% decline in total advertising revenue.
This consisted of 15% growth in DTC advertising and an 11% decline in TV media advertising.
The decline in TV media was impacted by international markets and fewer NFL games than in the prior year.
However, we are seeing signs of market stabilization.
Within the domestic AD market sports remains an area of strength.
We also saw improvement in key buying categories, including pharmaceuticals, food and beverage travel and auto.
Though categories like insurance web services, and Big Tech remain relatively weak.
With respect to Q2, we expect the year over year trend in TV media advertising to be slightly favorable to what we reported in Q1.
And indeed as see advertising, we expect continued acceleration.
Related to digital advertising Pluto TV hit a new milestone in Q1, reaching 80 million M of use.
We're proud of this milestone and we expect global growth to continue.
The key driver of Pluto's future revenue growth will be the strong engagement trends we're seeing.
Fact, total viewing hours on Pluto increased 35% in Q1 after growing nearly 20% in 2022.
Going forward, we will provide updates on engagement rather than reporting quarterly M. A use as we believe this is more indicative of pluto's revenue growth opportunity.
Moving on to filmed entertainment revenue and OIBDA were down versus the prior year due in part to the timing and performance of the film slate.
In terms of timing Dungeons and Dragons honor among thieves was released on the last day of the quarter such that expenses were incurred without significant revenue contribution.
And in terms of performance Q1 included operation Fortune for Miramax, which contributed to lower profitability of the film slate relative to the prior year.
Filmed entertainment OIBDA was also negatively impacted by macro driven softness in consumer products licensing.
Looking ahead to Q2 filmed entertainment revenue and OIBDA will be down significantly versus the prior year due to the tough comp against top gun Maverick.
This year Q2 will include Transformers rises the beef our next big franchise film, which will be released on June nine.
The quarter will also include significant marketing expenses related to mission impossible, which will be released in early Q3.
As a result of these timing dynamics, we expect a filmed entertainment OIBDA loss in Q2 that will be somewhat better than Q1.
Given that the expenses for our biggest films. This year are weighted to the front half we expect significant improvement in filmed entertainment OIBDA in the back half of the year.
Driven by our strong lineup of franchise films, including mission impossible, seven Paw patrol and teenage mutant Ninja turtles.
Moving on to cash flow in.
In Q1 free cash flow was a use of $554 million.
This reflects our previously shared expectations for negative free cash flow for the full year 2023 with.
With the first half of the year showing a use of capital in the back half of the year turning positive.
The improvement in the back half will be driven by the timing of our film slate.
Dreaming ARPA growth and improvement in advertising trends.
Now, let's turn to capital allocation as we stated in the past our capital allocation goals are threefold.
First we want to invest in organic growth.
Second we want to Delever, the balance sheet and third to return capital to shareholders.
In order to continue to accomplish these goals and an uncertain macroeconomic environment, we're doing the following.
First with respect to organic growth, we're highly focused on efficiency.
While growing our streaming business to an annual run rate of over 6 billion.
We're capturing 700 million of future annual expense savings through the integration of Showtime.
And as we progress through the integration, we're increasingly confident about our ability to get even more from our core franchise content investments and believe we will ultimately capture more than the $700 million in future expense savings.
In fact, the programming charge incurred in Q1 illustrates our ability to concentrate content investments going forward.
Second we continue to manage net debt by divesting noncore assets.
We have restarted the sale process for Simon and Schuster.
And we see a path to potentially closing a transaction this year.
The combination of initial interest and strong operating performance of the business over the last several years gives us confidence in our ability to maximize the value of this asset for our shareholders.
With respect to capital returns, we will be reducing paramount's quarterly dividend on common shares to five <unk>.
Or 20 cents annually.
This change provides additional financial flexibility and enhances long term value creation.
While continuing to return capital to shareholders.
The dividend modification will be effective as of our next payment and will result in approximately $500 million of annualized cash savings.
We believe this combination of actions across organic investment and expense reduction noncore asset sales and dividend policy reflect a prudent capital allocation strategy and an error, which presents both macro uncertainty and tremendous growth opportunity.
Finally, I'd like to address our path to earnings and free cash flow improvement, which starts with our World Class Studios, who continue to deliver popular franchise content.
And Leverages, our global distribution platforms.
Monetize content across the optical linear streaming and licensing channels.
At the same time, we are keenly focused on commercial execution.
Which preserves the earnings and cash flow from our traditional television media businesses.
I'll also narrowing DTC losses.
And there are several key levers that enable us to accomplish these goals.
T V media OIBDA will benefit from contractual rate increases as well as ongoing cost rationalization.
Importantly, we expect to generate meaningful revenue and OIBDA in this large segment of our business for the foreseeable future.
Thank you guys good morning.
Bob first maybe I'll ask you on direct to consumer you've had strong subscriber and subscription growth revenue growth Paramount plus.
As you look forward. This year can you expand a little bit more on the balance of subscriber growth and pricing power that you expect to drive.
That continued subscription revenue growth from here.
I apologize I have to ask a second though levine I need to ask you why now was the time to reduce the dividend. So significantly so based on your comments overall it seems that the level of investment that you're going through is consistent with the plan you've had all along and that dividend level is such an important outwards signal.
Your sustained confidence so I'm, hoping you can dig in a little bit more and help us specifically with what drove that change now. Thank you guys.
Sure Mike Let me start and then I'll toss it to Devine to me for a little more D to C. And then the dividend piece. So look we're thrilled with the momentum we continue to see for Paramount plus we talked about the.
<unk> 60 million subscriber milestone in the quarter.
And we do look to growth both on the subscriber side and very importantly, a revenue side as we continue in the year and beyond and that goes along with the associated path to profitability.
Focusing on Paramount plus growth in the back half of the year, but it starts with content at the end of the day. Some of their set of content is king. It is what people come to any media service for including Paramount plus.
And you saw or the success of our slate in the first quarter.
We feel really good about it for the balance of the year.
And again, it's entertainment, which is a great driver of subscriber additions and engagement. It's news, which is more of an engagement vehicle in exports, which has been great for us on both.
As the year tracks out the second quarter in terms of subscriber addition is probably seasonally a little softer.
And then we pick it up in the back half of the year again.
Part of that is in the U S. The combination of Paramount plus with Showtime.
We think that is clearly.
Additive to the Paramount plus sub base.
And then but part of it is just the content slate writ large add to that.
The Walmart one is working very well for us we're about to light up Delta that's going to be interesting as well. So we're doing a bunch of stuff on the marketing side to add to it and then go to revenue our pool as you know we are effectuate a price increase as we move forward in the summer we feel really great about that.
So the levers are in place to continue to drive our Paramount plus subscribers revenue and ultimately continue down this path to profitability Devine.
Particularly with respect to <unk> we.
We continue to see growth there both from a favorable mix shift in terms of tiers channels geography.
And at ARPA growth perspective, so that's going to continue to growth to growth continue to contribute to growth going forward.
And it benefits from.
Nice.
The growth that we're seeing in terms of engagement hours per sub and the like.
And then the pricing piece, which which Bob mentioned and I think it's really worth reiterating.
Raise pricing without a significant impact on churn and growth.
The value proposition for P plus both relative to other streaming services and traditional pay TV.
It remains incredibly strong and as I said engagement on the service is only getting deeper so.
We're very encouraged by what we can do there.
And we're going to be taken really just the first step. This year I think there are also future opportunities to grow price down the road, both domestically and internationally.
So.
That's b to C. And then with respect to your question on the dividend.
Look I think the capital allocation policy. The changes we made to our capital allocation policy are totally appropriate for a company that has both the compelling growth opportunity, we see today, but operating in the current macro environment. There's no debate that are streaming momentum has obviously continued to build.
But the reality is the macro environment has not gotten less complex.
So it's prudent really for all companies to optimize their balance sheet for flexibility and that's exactly what we're doing by reducing the quarterly dividend to <unk> that does translate to significant cash savings roughly $500 million annually as I mentioned, while still returning some capital to shareholders.
And to one of the elements of your question I would emphasize that the reduction in the dividend does not mean that we intend to spend more than previously planned on streaming.
You should really think of this as the cash benefit of reducing the dividend along with other initiatives like noncore asset sales and continued cost management.
It is intended to help delever, our balance sheet, which is generally a smart thing to do in an uncertain macro environment and is also a key ingredient in creating long term shareholder value, which is of course the primary goal that we have.
Okay. Operator, we can take the next question.
Thank you. The next question guys, Hey, Brett Feldman of Goldman Sachs. Please go ahead. Your line is open.
Yes, I. Thank you for taking the question Naveen you expressed a great deal of confidence that Youll continue to see significant cash generation out of the T. V media segment for a number of years I think we all appreciate the rate dynamic that you highlighted in terms of the opportunity to continue to get good right out of the affiliate fees I was hoping you could go a little deeper into the P&L and talk about.
And as you said that the top line dynamics are important here as well.
Because even though the traditional ecosystem is obviously evolving.
The financial impact for us is somewhat mitigated.
With the given the combination of rate increases in both the linear advertising side and linear affiliate revenues.
Which offset some of that ecosystem shift you saw that in Q1.
Linear affiliate revenue declines were just 1%, which is much lower than what you see in terms of.
Declines in the pay TV sub base overall.
Moving more production offshore where factory costs are significantly lower.
We're even doing things like adopting AI for content localization, which by the way produces some really high quality results at very very compelling economics, so lots to do on the programming side beyond programming were.
Taking a highly disciplined approach to head count and continuing to find efficiencies there and also.
Evolving marketing budgets, where it makes sense and where we can do so efficiently.
<unk>.
And then we're also doing some things around licensing.
Which is.
Little more revenue related, but we do see opportunities to expand our licensing business in <unk>.
Call It noncore international marketplace.
So the way I think about it it's really the combination of our ability to mitigate some of the ecosystem. The declines on the top line. While also exercising a lot of these levers on the cost side, the combination of which means that TV media OIBDA will continue to be a source of significant <unk>.
Operator.
We have a leadership position overall, plus we have offshore production.
Which I'll come to Big picture, we feel great about our proposition to advertisers and their agencies.
The $2 versus your peers that are upwards of nine or $10 and I assume that's engagement driven and I'm just sort of wondering as advertising becomes a bigger part of Paramount plus what are you doing marketing spend our content production wise, meaning more to drive overall time spent per user per day on Paramount plus I'd love to get your sense there.
Well why don't you start with that.
Significant opportunity for AD monetization, particularly when the AD market improves.
We do things from time to time, particularly in international markets, where the franchise remember Paramount plus isn't fully <unk>.
Combined with a broader licensing strategy.
Yeah. So.
Obviously, we're not going to give you any specific numbers there, though I would say a few things number one.
That business is a is a high margin business and so.
It can be a nice contributor.
It's largely about licensing stuff that has already been produced for other channels. So unlike the original production business, which is a little lower margin. This one can be a nice contributor.
I suspect it'll it'll grow over time.
More importantly.
Yeah.
There are multiple drivers for earnings and free cash flow growth in 'twenty, four and I think it's important to remember.
What those are and the potential that they have.
We talked about them last quarter and they continue to apply.
Expecting to see significant growth in Paramount plus subscribers and <unk> I E revenue growth.
We are tracking nicely in terms of the integration of Showtime and Paramount plus.
Which unlocks both topline benefits as well as a significant savings in content and other places that does mean youll see slowing growth in streaming content spend.
As well as marketing efficiencies that.
We get through content leverage more utilization of promotional inventory et cetera. So.
Those are the big drivers.
<unk> 24 and.
We remain confident in.
What we'll deliver there.
Sure.
Operator, we can take another question.
Thank you. The next question guys, Hey, Doug Mitchelson of Credit Suisse. Please go ahead. Your line is open.
Thanks, so much for taking the question. So I guess I'm curious are there other assets that you're considering selling beyond Simon and Schuster and I was just.
And clear from the preamble, if you were thinking more broadly there and and then Levine on the positive free cash flow 2024, I was just hoping you could outline the bridge and you can kind of just mentioned part of it on DTC is it as simple as flowing through EBITDA growth or are there other drivers of free cash flow beyond our operating growth. Thanks, so much.
Yeah, Doug I'll speak to the asset sales and throw it to intervene.
Look we're always looking for ways to maximize shareholder value.
That might involve divesting acquiring or potentially partnering on an asset and by the way we've done all three of those things. So we look at everything.
Hi.
As I indicated in.
My remarks, we are now back in the market with Simon and Schuster, we feel very good about the value creation opportunity there given both its operating performance which is substantially.
Superior to what it was when we bought it to the market before and frankly, the level of buyer interest and a lot of interest. So we feel good about that and depending on who the ultimate buyer ends up being we see what type of buyer really we see.
Our path to potentially closing that deal this year.
I'm not going to comment on any other speculative there's a bunch of speculation out there transactions, what we might or might do other than again to reinforce we are always looking for ways to maximize shareholder value.
Yes, Doug with respect to your question on free cash flow.
I think I'd just took you through some of the sort of operational levers. If you will that will drive the business into 24, if you think about it through more of just a pure financial lens.
<unk>.
Yes.
The improvement is a a big contributor too.
The improvement that we expect to see in free cash flow, but there are also benefits from a working capital perspective, we've talked about this dynamic.
Over the last few years as we've ramped up in streaming.
So you saw significant growth in sort of cash content spend.
And then it takes a little while for the expense side of that to the P&L side of that to show up because of the nature of amortization, what you will see going into 'twenty four and beyond is actually that the <unk>.
Cash content growth.
It really starts to slow very significantly.
And.
You start to get to a place where the.
The rate of growth in cash content, and P&L expense will start to converge, but theres going to be real benefits from a working capital perspective.
Over the next couple of years because of those dynamics.
Okay, operator, we can take our last question.
Thank you. Our final question. This is Phil Cusick of J P. Morgan Stanley . Please go ahead. Your line is open.
Hi, Thank you for getting me in.
I heard the comment around lower content costs in 'twenty four for DTC.
Should we think about your 24 goals around revenue and subscribers given the Showtime integration.
And then maybe <unk>, you and I've talked about this before but how was retail churn trending in the Paramount plus base, both overall and as the cohorts mature. Thank you.
Yeah.
Yes, Thanks, Bill so first.
First with respect to 'twenty four goals, we talked about this a little bit on our last call. We continue to be very bullish about.
DTC growth overall.
There are.
<unk>.
Some puts and takes in terms of what's going on in terms of the AD market, but.
We're I would say ahead of our plans with respect to <unk>.
Paramount plus growth subs revenue.
Et cetera.
I noted that with respect to content expense, the integration of Showtime and Paramount plus.
We think does put us in a position where we will actually be spending less in 2024, then we originally indicated so.
I think in general we continue to be.
Very excited about.
The trajectory of the DTC business relative to our plans.
Regarding the question on retail churn characteristics I think the short answer is.
Churn continues to improve we saw that in Q1.
And it's been pretty consistent theme as we see really nice.
Improvements in engagement the content portfolio continues to expand we get.
More partnerships in place all of those things are beneficial from a churn perspective, and that's definitely one of the key ingredients, that's going to drive revenue growth going forward. So we like what we're seeing there yes.
And with that in closing look I want to emphasize that we have momentum and importantly, we have conviction. So we're going to focus on driving market, leading streaming growth while navigating this dynamic macroeconomic environment and know that the decisions, we're making will position us well for Pat.
The streaming profitability significant earnings growth and a return to positive cash flow free cash flow in 2024.
So we're laser focused thank you everyone. We appreciate your support and be well, we'll talk to you soon.
Thank you. This now concludes today's call. Thank you so much for joining you may now disconnect your lines.
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