Q1 2024 Paramount Global Earnings Call
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Harry: 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.
Harry: Good afternoon, My name is Harry and I'll be your conference operator today I would like to welcome everyone to Pan out Global's Q1, 2024 earnings conference call. At this time I would now like to turn the call over to Jamie Moses 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 have also have George cheeks, Chris Mccarthy and Brad.
Jamie Moses: Robbins.
Jamie Moses: Before we start please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.
Speaker Change: Also I want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties. These.
Speaker Change: These risks and uncertainties are discussed in more detail on our filings with the SEC.
Speaker Change: Some of today's financial remarks will focus on adjusted results.
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.
Speaker Change: 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.
Speaker Change: I also want to note that we will not be taking questions. Following our prepared remarks.
Speaker Change: The main purpose of today's call is to provide you with the information regarding our first quarter 2020 for performance.
Now I will turn the call over to George 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 is 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 asset that 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 all work 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.
Chris: On that note, we're finalizing a long term strategic plans to best position. This storied company to reach new and greater Heights, and a rapidly changing world. The plan is focused on three pillars.
Chris: First make the most of our head content second strengthen our balance sheet and third optimize our streaming strategy and now here's Brian.
Jaime Morris: 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 in 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.
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.
Brian: We will bring all of that to bear as we chart. Our course forward for our company. We look forward to coming back to you in short order to share our plans and discussing it all in detail at that time.
Brian: And now here's movie.
Brian: Thank you, Brian and good afternoon, everyone. In Q1, we generated significant growth in earnings and free cash flow and improved our balance sheet.
Speaker Change: Paramount delivered total company revenue growth of 6% to $7 7 billion.
Speaker Change: 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.
Speaker Change: T V media operating margins expanded year over year and filmed entertainment adjusted OIBDA improved by nearly $100 million versus the year ago period.
Jaime Morris: 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 information regarding our first quarter 2024 performance. Now I will turn the call over to George.
Speaker Change: As always you'll find a comprehensive review of our financial results in our press release.
Speaker Change: But I'd like to focus on a few areas of note.
Speaker Change: Starting with advertising, which was a highlight in the quarter.
Speaker Change: Total company advertising grew 17% benefiting from Super Bowl 58, which contributed 22 percentage points to the growth rate.
Speaker Change: The game broke records across CBS, Paramount plus and Nickelodeon a great example of the power of our multi platform offerings.
Speaker Change: T V media advertising grew 14% in the quarter, including a 23 percentage point contribution from the Super Bowl.
George Cheeks: 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, Bryan, and I want to speak briefly about 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 on that. And now, over to Chris.
Sports continue to over deliver with the NFL playoffs, and N C double a college basketball contributing to growth in the quarter.
Direct to consumer advertising grew 31% drew.
Speaker Change: Driven by growth from Pluto, TV, and Paramount plus including the benefit of the Super Bowl.
Speaker Change: Beyond the Super Bowl impact on engagement.
Speaker Change: Revenue growth reflects a combination of increased sell through and higher CPM.
Speaker Change: Next total company affiliate and subscription revenue, which grew 6% in Q1.
Speaker Change: And TV media affiliate revenue declined 3% year over year, reflecting overall pay TV ecosystem declines partially offset by pricing.
Speaker Change: D to see subscription revenue on the other hand grew 22% in the quarter anchored by greater than 50% growth in Paramount plus subscription revenue.
Speaker Change: Paramount plus added $3 7 million subscribers in the quarter.
Reaching a total of $71 2 million.
Speaker Change: Subscriber growth benefited from the NFL and the Super Bowl.
Speaker Change: And finally on the DTC segment.
Speaker Change: Revenue grew 24% year over year in Q1 led by 51% growth in Paramount plus revenue and 26% global <unk> expansion.
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 Bryan.
Speaker Change: ARPA growth reflects a full quarter of our domestic price increase.
Speaker Change: And the addition of international subscribers and higher RP markets.
Speaker Change: Domestic <unk> 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.
Speaker Change: D to C. Adjusted OIBDA improved 44% year over year led by improvement in Paramount plus domestic profitability.
Healthy revenue growth and a disciplined focus on cost drove improved leverage in content marketing and other overhead costs, which all decreased as a percentage of revenue relative to the prior year.
Speaker Change: I'd also like to share some important notes regarding our balance sheet.
Speaker Change: In Q1, we delivered $209 million of free cash flow, an improvement of over $750 million versus a year ago.
Speaker Change: We also remain focused on reducing leverage which improved three quarters of a turn to four three times benefiting from growth in adjusted OIBDA.
Speaker Change: Additionally, last month, we entered into an agreement with reliance industries to sell our equity interest in Viacom 18 for approximately $500 million based on current exchange rates.
Speaker Change: 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.
Bryan Kraft: 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. We each have 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 discuss it all in detail at that time. Thank you, and now here's...
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 Change: And lastly on April 1st we paid the last dividend on our mandatory convertible preferred stock, which converted to <unk> 11, and a half million class B common shares on the same day.
Speaker Change: Going forward, our cash dividend payments will be reduced by about $55 million on an annual basis as a result of the conversion.
Speaker Change: In closing.
Speaker Change: We are proud of our first quarter results, although the operating environment continued to be dynamic we remain focused on execution.
And on a final note I'd.
Speaker Change: 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 Change: 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.
Naveen Chopra: Thank you, Bryan, and good afternoon, everyone. In Q1, we generated significant growth in earnings and free cash flow and improved our balance. Paramount delivered total company revenue growth of 6% to $7.7 billion. The adjusted OEBDA grew 80% to $987 million, reflecting improvement across all three of our business segments. Our direct consumer business delivered healthy top-line growth and improved operating efficiency. TV media operating margins expanded year-over-year, and filmed entertainment adjusted OEBDA 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 room.
Speaker Change: 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.
Speaker Change: They are long standing seasoned executives with deep expertise across their businesses.
Speaker Change: And are well positioned to guide the next chapter of Paramount.
Speaker Change: With that we'll conclude our first quarter earnings call. Thank you for joining us.
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Naveen Chopra: But I'd like to focus on a few areas. 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.
Naveen Chopra: TV media advertising grew 14% in the quarter, including a 23 percentage point contribution from the Super Bowl. Sports continue to over-deliver, with the NFL playoffs and NCAA college basketball contributing to growth in the quarter. Direct-to-consumer advertising grew 31 percent, 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 CPM. Next, total company affiliate and subscription revenue, which grew 6% in Q1. In TV media, affiliate revenue declined 3% year-over-year, reflecting an overall pay TV ecosystem decline, partially offset by price.
Naveen Chopra: 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 3.7 million subscribers in the quarter, reaching a total of 71.2 million. Subscriber growth benefited from the NFL and the Super Bowl.
Speaker Change: [music].
Naveen Chopra: Revenue grew 24% year over year in Q1, led by 51% growth in Paramount Plus revenue and 26% global ARPU expansion. Our food 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.
Naveen Chopra: D2C-adjusted OEBDA improved 44% year-over-year, led by improvement in Paramount Plus domestic profitability. Healthy revenue growth and a disciplined focus on cost drove improved leverage in content, marketing, and other overhead, 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.
Naveen Chopra: We also remain focused on reducing leverage, which improved three-quarters of a turn to 4.3 times, benefiting from growth in adjusted OEBD. Additionally, last month, we entered into an agreement with Reliance Industries to sell our equity interest in Viacom 18 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 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 Change: [music].
Naveen Chopra: And lastly, on April 1st, 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.
Naveen Chopra: In closing, we are proud of our first quarter results. Although the operating environment continued to be dynamic, we remain focused on... 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 us navigate a number of challenges, but I'm proud of all we've accomplished, and it's been my privilege to work together with him.
Naveen Chopra: I'm also looking forward to working closely with George, Bryan, and Chris, who will be stepping in to lead the Office of the CEO. They are longstanding, seasoned executives with deep expertise across their business, 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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