Q3 2024 Paramount Global Earnings Call

Operator: Hello everyone, the Paramount Global's Q3 2024 earnings conference call will begin shortly.

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Nadia: Good afternoon, my name is Nadia and I'll be the conference operator today.

Good afternoon, my name is not yet and I'll be the conference operator today.

Nadia: At this time, I would like to welcome everyone to Paramount Global's Q3 2024 earnings conference call. At this time, all lines have been muted to prevent any background noise.

At this time I would like to welcome everyone to Paramount Global's Q3, 'twenty 'twenty four earnings conference call.

At this time all lines have been muted to prevent any background noise.

Nadia: After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. In order to get as many of your questions as possible, we ask that you please limit yourself to one question.

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If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

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In order to get as many of your questions as possible. We ask you. Please limit yourself to one question.

Jaime Morris: At this time, I would like to turn the call over to Jaime Morris, Paramount Global's EVP, Investor Relations. You may now begin your call.

Speaker Change: At this time I would like to turn the call over to Jamie Morris Pamela Global was E V P of Investor Relations.

May now begin your conference call.

Chris Mccarthy: Good morning, everyone. Thank you for taking the time to join us for our third quarter 2024 earnings call. Joining me for today's discussion are Paramount's co-CEOs, Brian Robbins, Chris McCarthy, and George Cheeks, and our CFO, Naveen Chopra. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.

Speaker Change: Good morning, everyone. Thank you for taking the time to join US for our third quarter 2024 earnings call. Joining me for today's discussion are Paramount's co Ceos, Brian Robbins, Chris Mccarthy, and George Cheeks, and our CFO Naveen Chopra.

Speaker Change: Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.

Chris Mccarthy: 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 financial 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.

Speaker Change: 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.

Speaker Change: These risks and uncertainties are discussed in more detail in our filings with the FCC.

Speaker Change: Some of today's financial remarks will focus on adjusted results.

Speaker Change: Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contains 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 Chris.

Chris Mccarthy: Now, I will turn the call over to Chris. Thank you, Jaime. And good morning, everyone.

Chris Mccarthy: Thank you, Jamie and good morning, everyone.

Chris Mccarthy: I'm Chris McCarthy, and I'm joined here by my fellow co-CEOs, George Cheeks and Brian Robbins. Together, we'll share the results of another very strong quarter, demonstrating the progress we're making against a strategic plan. Then Naveen will take us through the financials. Okay, let's start with some headlines. We are pleased with our very strong performance this quarter, fueled by our hit content and our focus on execution. In D2C, we saw Pluto reach record engagement. And on Paramount+, we had 3.5 million subscribers, reinforcing our position as the number four global streaming service. Paramount Plus continued its momentum with revenue growth up 25% year over year.

Chris Mccarthy: I'm, Chris Mccarthy and I'm joined here by my fellow co Ceos, George Cheeks, and Brian Robbins together will show the results of another very strong quarter, demonstrating the progress were making against our strategic plan.

Speaker Change: Then to beam will take us through the financials.

Speaker Change: Okay, let's start with some headlines.

Speaker Change: Pleased with our very strong performance this quarter fueled by our hit content and our focus on execution.

Speaker Change: D C. We saw poodle reach record engagement.

Speaker Change: Paramount plus we added three 5 million subscribers reinforcing our position as the number four global streaming service.

Speaker Change: Paramount plus continued its momentum with revenue growth up 25% year over year.

Chris Mccarthy: This quarter marks the second quarter in a row where DTC achieved profitability with adjusted OIVD improving more than a billion dollars over the past four quarters. and we remain on track to reach Paramount Plus domestic profitability in 2025. We also made progress in streamlining our organization as we continue to successfully execute cost reductions that will result in $500 million in annual run rate savings. And at the same time, we have not slowed down on doing what we do best, continue to produce some of the biggest and broadest hit films and television. In addition, the Skydance transaction achieved a few key milestones, including the conclusion of the GoShop period, the expiration of the HSR waiting period, and on November 4th, we filed our S-IV registration statement with the SEC.

Speaker Change: This quarter marks the second quarter in a row, where D to C achieve profitability, the adjusted OIBDA, improving more than $1 billion over the past four quarters.

Speaker Change: And we remain on track to reach Paramount plus domestic profitability in 2025.

Speaker Change: We also made progress in streamlining our organization as we continue to successfully execute cost reductions that will result in $500 million in annual run rate savings.

Speaker Change: And at the same time, we have not slowed down on doing what we do best continued to produce some of the biggest and broadest hit films and TV series.

Speaker Change: In addition, this guidance transaction achieved a few key milestones, including the conclusion of the go shop period.

Speaker Change: Exploration of the H S are waiting period.

Speaker Change: On November 4th we filed our S. Four registration statement with the SEC.

Chris Mccarthy: We continue to expect the deal to close in the first half of 2025, subject to regulatory approvals and other customary conditions.

Speaker Change: We continue to expect the deal to close in the first half of 'twenty twenty-five subject to regulatory approvals and other customary conditions.

George Cheeks: And now I'll pass it to George to update us on distribution and advertising. Thanks, Chris. I'll start with distribution. In an evolving landscape, we continue to renew longstanding agreements with key partners, including a number of distribution renewals this year. Our track record of getting deals done speaks to the power of our entertainment, news and sports content, and we'll continue to work with our partners to innovate and deliver for audiences. As an example of that, our Paramount Plus ad supported tier is now available to charter customers. Enhancing the value we're delivering across linear and streaming. Now, it's early days, but we're pleased with the response so far.

Speaker Change: And now I'll pass it to George to update us on distribution and advertising.

George Cheeks: Thanks, Chris.

George Cheeks: I'll start with distribution.

George Cheeks: In an evolving landscape, we continue to renew long standing agreements with key partners, including a number of distribution renewals this year.

George Cheeks: Our track record of getting deals done speaks to the power of our entertainment news and sports content and we will continue to work with our partners to innovate and deliver for audiences.

George Cheeks: That's an example of that are Paramount plus AD supported tier is now available to charter customers enhancing the value, we're delivering across linear and streaming now.

George Cheeks: Now it's early days, but we're pleased with the response so far.

George Cheeks: Now turning to advertising. Q3 benefited from record political spend, as well as the return of NFL and college football. Digital ad growth remains strong, showing notable increase in demand year-over-year, which reflects our valued position from a price, quality, and scale standpoint, and will continue to drive growth. The scale of our digital advertising platform, spanning Paramount Plus, Pluto, as well as other digital properties, is one of the largest addressable footprints in the domestic market. And it represents nearly half of our national domestic advertising revenue when you exclude sports. Major brands continue to tap into the power of Paramount.

George Cheeks: Now turning to advertising.

George Cheeks: Q3 benefited from record political spend as well as the return of NFL and college football.

George Cheeks: Digital AD growth remains strong showing notable increase in demand year over year, which reflects our valued position from a price quality and scale standpoint, and we'll continue to drive growth.

George Cheeks: The scale of our digital advertising platform spanning Paramount plus Pluto as well as other digital properties is one of the largest addressable footprint in the domestic marketplace and it represents nearly half of our national domestic advertising revenue when you exclude sports.

George Cheeks: Major brands continue to tap into the power of Paramount's recent.

George Cheeks: Recently, we launched the summit, a new offering that connects our key ad partners with priority Paramount launches across theatrical, linear and streaming. For our first summit partnership, we brought Pepsi together with Gladiator 2. The campaign launched with the NFL on CBS and included a media blitz across all Paramount Global linear, digital and social platforms. Yet another example of how we're leveraging our creative assets and capabilities to deliver unmatched impact for our biggest advertisers.

George Cheeks: Recently, we launched the summit.

George Cheeks: New offerings that connects our key AD partners with priority Paramount launches across the optical linear and streaming.

George Cheeks: For our first summit partnership we brought Pepsi together with Gladiator too.

George Cheeks: Can't be lost with the NFL on CBS and included a media Blitz across all Paramount global linear digital and social platforms. Yet. Another example of how we're leveraging our creative assets and capabilities to deliver unmatched impact for our biggest advertisers.

George Cheeks: I also want to touch on our ongoing dispute with Nielsen. We remain engaged with them and we're hopeful for a resolution. So far, we're encouraged by our partners' willingness to lean into innovation and adopt alternative measurement solutions. Bottom line, our brand and agency partners are the number one priority, and we're proving every day that content, scale, and value are what matters most to advertisers.

George Cheeks: I also wanted to touch on our ongoing dispute with Nielsen.

George Cheeks: Main engage with them and we're hopeful for resolution.

George Cheeks: So far we're encouraged by our partners willingness to lean into innovation and adopt alternative measurement solutions Bottomline, Our brand and agency partners are the number one priority and we're proving every day that content scale and value are what matters, most advertisers and with that over to Brian for it.

Brian Robbins: And with that, over to Brian for an update on our strategic Thanks, George. We are pleased with the progress we have made in advancing our business by transforming D2C and streamlining our organization to reduce cost. starting with DTC. The segment was profitable again in the Sports, including the return of the NFL and UEFA, originals like Mayor of Kingstown and Tulsa King, as well as post-theatrical releases such as A Quiet Place Day One and If, all drove acquisition in the quarter. For Pluto, we're continuing to see a strong performance. Years 8, Pluto delivered its highest consumption ever of 5% to 5.6 billion viewing hours.

Brian Robbins: Date on our strategic plan.

Brian Robbins: Thanks George.

Brian Robbins: We are pleased with the progress we have made in advancing our business by transforming D to C and streamlining our organization to reduce costs.

Brian Robbins: Starting with the D to C. The segment was profitable again in the quarter sports, including the return of the NFL anyway for original like mayor of Kingstone, and Tulsa, King as well as post theatrical releases such as a quiet place day, one and if all drove acquisition in the quarter.

Brian Robbins: For Putto, we're continuing to see a strong performance year to date <unk> delivered its highest consumption ever up 5% to five 6 billion viewing hours grow.

Brian Robbins: Growth is being driven by increased use of video on demand with more available content, enhanced discoverability, and a better user experience. And as we said before, we are evaluating potential partnerships and streaming through a lens of creating value for the business and our shareholders over the long term. And given the complexity, we are being deliberate and thoughtful in our approach and assessment.

Brian Robbins: <unk> is being driven by increased use of video on demand with more available content enhanced discover ability and a better user experience.

Brian Robbins: And as we've said before we are evaluating potential partnerships in streaming through a lens of creating value for the business and our shareholders over the long term and given the complexity, we are being deliberate and thoughtful in our approach and assessment.

Brian Robbins: Moving to streamlining our organization, we have made progress on realizing $500 million in non-content cost savings, which will reduce our U.S.-based workforce by 15%. Today, we have executed 90% of these reductions and expect to have a remaining completed by the end of the year. Our objective has been to unlock operational efficiency. and right size the cost. while continuing to invest in the growth levers that are the key to the future, including content, streaming and advertising. In addition, we remain diligent as we optimize our The sale of our equity interest in Biocom 18 is a great example, which will result in an attractive financial return on our investment.

Brian Robbins: Moving to streamlining our organization, we have made progress on realizing $500 million in non content cost savings, which will reduce our U S based workforce by 15%.

Brian Robbins: To date, we have executed 90% of these reductions and expect to have a remaining completed by the end of the year.

Brian Robbins: Our objective has been to unlock operational efficiencies and rightsize the cost base, while continuing to invest in the growth levers that are the key to the future, including content streaming and advertising and.

Brian Robbins: In addition, we remain diligent as we optimize our asset mix the sale of our equity interest in Viacom 18 is a great example, which will result in an attractive financial return on our investment we expect the sale to close in Q4.

Brian Robbins: We expect the sale to close in Q4.

Brian Robbins: Now let's move to the core of what we do best, making some of the biggest and broadest hit films and TV series.

Speaker Change: Now, let's move to the core of what we do best making some of the biggest and broadest hit films and TV series I will pass to Chris to kick us off.

Chris Mccarthy: I will pass to Chris to kick us off. Thanks, Bryan. Let's start with Paramount Plus, where this fall we kicked off one of our most ambitious slates to date, seeing the return of our biggest hit series, like Merrick Kingstown and Tulsa King, which returned to great fanfare, each quickly soaring into a top 10 streaming original across all S.O.U.T. servers. and Tulsa King also broke records as the number one global debut in Paramount Plus history. Internationally, where we have South Park exclusively for SVOD, it ranks as a top five star driver and the number two engagement driver.

Chris Mccarthy: Thanks, Brian, let's start with Paramount plus where this fall we kicked off one of our most ambitious slate to date.

Chris Mccarthy: Return of our biggest hit series like Merit, Kingstown, and Tulsa, King, which returned to great fanfare each quickly soaring into a top 10 streaming original across all asphalt services and Tulsa King also broke records as the number one global debut and Paramount plus history.

Chris Mccarthy: Internationally, where we have south park exclusively for S fought it ranked as a top five star driver and the number two engagement driver and we're excited to have the South Park series returned to Paramount plus here in the U S. Starting in June of 2025.

Chris Mccarthy: And we're excited to have the South Park series return to Paramount Plus here in the U.S. starting in June of 2025. We're confident this momentum will continue throughout the quarter with the return of Lioness, which premiered October 27th and is off to a great start, scoring as a top five global series premiere in Paramount Plus history. Followed by Landman, a new series from Taylor Sheridan, which will premiere November 17th and stars Billy Bob Thornton, Demi Moore, and Jon Hamm.

Chris Mccarthy: We're confident this momentum will continue throughout the quarter with the return of lineups, which premiered October 27th and is off to a great start scoring as a top five global series premiere and Paramount plus history.

Chris Mccarthy: Followed by Lamin, a new series from tariff Sheridan, which will premiere November 17th and Star as Billy Bob Thornton.

Chris Mccarthy: Moore and Jon Hamm.

Chris Mccarthy: This series has all the makings of a great big hit and promises to do for the oil industry what Yellowstone did for Rancho.

Chris Mccarthy: This series has all the makings of a great big hit and promises to do for the oil industry, what Yellowstone did branching.

Chris Mccarthy: Now, moving over to our premium tier, this quarter marks the beginning of a new, adrenalized Showtime slate with cinematic, high-stake originals and the return of some fan favorites. Starting with the agency. a new global espionage series from executive producer George Clooney starring Michael Fassbender, Richard Gere, Jeffrey Wright, and Jody Turner Smith, which will premiere later this month. And that's followed by the return of Showtime's most successful franchise ever, Dexter, with a new origin story titled Dexter Original Sin.

Chris Mccarthy: Now.

Chris Mccarthy: Moving over to our premium tier this quarter marks the beginning of a new adrenalized Showtime slate with cinematic high stake originals and the return of some fan favorites.

Chris Mccarthy: With the agency a new global S been a series from executive producer George Clooney, starring Michael Fassbender, Richard Gere, Jeffrey Wright, and Jody Turner Smith, which will premiere later this month.

Chris Mccarthy: And that's followed by the return of Showtime's, most successful franchise ever Dexter with a new origin story titled Dexter original Sin.

Chris Mccarthy: And on cable, we also saw some impressive results. The Challenge, a series that created the reality competition genre, celebrated its 40th season with the highest share in franchise history, up 60% versus the previous season. This was followed by the MTV Video Music Awards, which attracted its biggest audience in four years online. And on social, it broke records as the number one most social entertainment telecast in television history, besting all entertainment and sports. And on The Daily Show, the return of Jon Stewart continues to pay off, having won our second primetime Emmy in a row. And on Monday nights with John of the Helm, The Daily Show remains the number one late night show across linear and social.

Chris Mccarthy: And on cable we also saw some impressive results the challenge the series that created the reality competition genre celebrated its 40th season with the highest share in franchise history up 60% versus the previous season.

Chris Mccarthy: This was followed by the MTV video music awards, which attracted a biggest audience in four years on linear and on social It broke records as the number one most social entertainment telecast in television history, besting all entertainment and sports.

Chris Mccarthy: The Daily Show remains the number one late-night show across linear and social, and it's working hard for us on Paramount+, with engagement up 10x.

Chris Mccarthy: And it's working hard for us on Paramount+, with engagement up 10x. And John's not going anywhere. As we just announced, he's extended a stay through 2025.

Chris Mccarthy: And John's not going anywhere. As we just announced, he's extended a stay through 2025.

Chris Mccarthy: And to continue our momentum, this Sunday, Yellowstone, one of the most eagerly anticipated shows of the year, will return on the Paramount Network in the U.S. and internationally on Paramount+, where it's been the number one star driver and the number one engagement driver for the full year to date.

Chris Mccarthy: And to continue our momentum, this Sunday, Yellowstone, one of the most eagerly anticipated shows of the year, will return on the Paramount Network in the U.S. and internationally on Paramount+, where it's been the number one star driver and the number one engagement driver for the full year to date.

George Cheeks: And now, I'll turn it over to George to walk us through CBS Entertainment, Sports & News. For CBS, fall means football and the launch of our new primetime schedule. The network's coming off a record-setting 23-24 NFL season. as well as a top-rated primetime schedule that includes the return of last year's number one show. In the first five weeks of this season, the NFL and CBS is averaging more than 20 million viewers. That's up 5% from last year. and streaming of the games on Paramount Plus is up over 50% year over year. CBS Primetime, which just launched its new season, is off to a great start.

George Cheeks: And now, I'll turn it over to George to walk us through CBS Entertainment Sports & News.

George Cheeks: For CBS, fall means football and the launch of our new primetime schedule.

George Cheeks: The network's coming off a record-setting 23-24 NFL season, as well as a top-rated primetime schedule that includes the return of last year's number one show.

George Cheeks: In the first five weeks of this season, the NFL and CBS is averaging more than 20 million viewers. That's up 5% from last year. And streaming of the games on Paramount Plus is up over 50% year over year.

George Cheeks: CBS Primetime, which just launched its new season, is off to a great start. Tracker is once again the most watched series on TV, Matlock is the number one new show, and Georgie and Mandy, a spin-off of Young Sheldon, is the most watched comedy.

George Cheeks: Tracker is once again the most watched series on TV. Matlock is the number one news show. And Georgie and Mandy, a spinoff of Young Sheldon, is the most watched comedy. And our shows are winning across platforms. Matt Locke's first episode reached more than 22 million viewers in its first 30 days. Tracker's Season 2 premiere delivered over 15 million multiplatform viewers in just its first seven days. That's up 25% from its time period premiere last year.

George Cheeks: Tracker's season 2 premiere delivered over 15 million multi-platform viewers in just its first seven days. That's up 25% from its time period premiere last year.

George Cheeks: Now turning to news, the total minutes watched on our CBS News 24-7 streaming network continues to grow, up 56% over 2023, and up 78% versus third quarter last year. We expanded and rebranded the platform with more live programming and the increased presence of key CBS News talent. All of this speaks to the collective power of broadcast and streaming, working together to aggregate more unduplicated viewership while optimizing the value and efficiency of our content. Our programming strategy remains laser-focused on entertainment, news, and sports that excel on both CBS and Paramount+.

George Cheeks: Now, turning to news, the total minutes watched on our CBS News 24-7 streaming network continues to grow, up 56% over 2023 and up 78% versus third quarter last year.

George Cheeks: We expanded and rebranded the platform with more live programming and the increased presence of key CBS News talent.

George Cheeks: All of this speaks to the collective power of broadcast and streaming, working together to aggregate more unduplicated viewership while optimizing the value and efficiency of our content investments.

Brian Robbins: Our programming strategy remains laser-focused on entertainment, news, and sports that excel on both CBS and Paramount+. Over to you, Brian.

Brian Robbins: Over to you, Bryan. On the Paramount Pictures front, at the end of the second quarter, A Quiet Place day one opened to nearly 100 million worldwide and set the franchise record for the biggest opening at the global box Today, the film has grossed $261 million worldwide. Transformers 1 also debuted as the first animated Transformers film in nearly four decades, grossing $127 million at the global box office to date. And most recently, the October release of Smile 2 from homegrown talent Parker Finn saw a record-breaking global premiere, out-earning its predecessors debut weekend. It also makes Smile 2, Paramount's fourth number one opening this year.

Brian Robbins: On the Paramount Pictures front, at the end of the second quarter, A Quiet Place Day One opened to nearly 100 million worldwide and set the franchise record for the biggest opening at the global box office.

To date, the film has grossed $261 million worldwide.

Brian Robbins: Transformers 1 also debuted as the first animated Transformers film in nearly four decades.

grossing $127 million at the global box office to date.

Brian Robbins: and, most recently, the October release of Smile 2 from homegrown talent Parker Finn saw a record-breaking global premiere, out-earning its predecessors' debut weekend.

Brian Robbins: It also makes Smile 2 Paramount's fourth number one opening this year after Mean Girls, Bob Marley One Love, and If.

Brian Robbins: After Mean Girls, Bob Marley, One Love, and If.

Brian Robbins: We're confident that the rest of Q4 will build on this momentum thanks to an impressive roster of upcoming releases, including, next up, Ridley Scott's Gladiator 2, one of the most anticipated films of the year with a phenomenal cast, including Paul Muscal, and Academy Award winner Denzel Washington. Early tracking and first reactions are generating optimism and excitement for the movie's release and award season profits.

Brian Robbins: We're confident that the rest of Q4 will build on this momentum.

including, next up, Ridley Scott's Gladiator 2.

Brian Robbins: One of the most anticipated films of the year, with a phenomenal cast including Paul Muscal, and Academy Award winner Denzel Washington.

Brian Robbins: Early tracking and first reactions are generating optimism and excitement for the movie's release and award season prospects.

Brian Robbins: Now rounding out our diverse slate, we're excited to be bringing audiences the journalistic thriller September 5, which has been on the festival circuit generating awards buzz. Also the third installment of fan favorite, Sonica Hedgehog, with Jim Carrey and the original cast reprising their roles. and then Better Man from the director of The Greatest Showman, Michael Gracie and based on the life and music of Robbie Williams. And looking ahead to 2025, we have a fantastic, robust lineup. something for everyone.

Brian Robbins: Now, rounding out our diverse slate, we're excited to be bringing audiences the journalistic thriller September 5, which has been on the festival circuit, generating awards buzz.

Brian Robbins: Also, the third installment of fan-favorite, Sonic the Hedgehog, with Jim Carrey and the original cast reprising their roles.

Brian Robbins: and then Better Man from the director of The Greatest Showman, Michael Gracie and based on the life and music of Robbie Williams.

Brian Robbins: And looking ahead to 2025, we have a fantastic, robust lineup with something for everyone. That includes an 8th Mission Impossible, the reboot of the Naked Gun franchise starring Liam Neeson, and we're also going to have an 8th Mission Impossible, the reboot of the Naked Gun franchise starring Liam Neeson, and we're also going to have an 8th Mission Impossible, the reboot of the Naked

Brian Robbins: That includes an eighth Mission Impossible, the reboot of the Naked Gun franchise starring Liam Neeson. New installments of beloved animated franchises like Smurfs and Spongebob, which is celebrating its 25th anniversary, and Running Man from director Edgar Wright and starring Glenn Powell, to name just a few. Taken together, all of our content reinforces that we have so much to be excited about in this period of evolution and transformation for our business and the industry. It is what continues to create value for our partners, investors, and the broader media landscape. both now and well into the future.

Brian Robbins: New installments of beloved animated franchises like Smurfs and Spongebob, which is celebrating its 25th anniversary and Running Man from director Edgar Wright and starring Glenn Powell. To name just a few.

Brian Robbins: Taken together, all of our content reinforces that we have so much to be excited about in this period of evolution and transformation for our business and the industry.

Brian Robbins: It is what continues to create value for our partners, investors, and the broader media landscape, both now and well into the future.

Naveen Chopra: With that, let me turn it over to Naveen for more detail on our Q3 financials.

Speaker Change: With that, let me turn it over to Naveen for more detail on our Q3 financials. We'll then look forward to taking your question.

Naveen Chopra: We'll then look forward to taking your questions. Thank you, Brian.

Naveen Chopra: Good morning, everyone. Q3 demonstrated the progress we've made in transforming Paramount for the future. We delivered adjusted EBITDA of $858 million in the quarter, up 20% year over year, reflecting significant improvement in our D2C business. which continues to deliver healthy top-line growth and improved operating.

Naveen Chopra: Thank you, Brian. Good morning, everyone. Q3 demonstrated the progress we've made in transforming Paramount for the future.

Naveen Chopra: We delivered adjusted EBITDA of $858 million in the quarter, up 20% year-over-year, reflecting significant improvement in our D2C business, which continues to deliver healthy top-line growth and improved operating leverage.

Naveen Chopra: As always, you'll find a comprehensive review of financial results in our press. For today's call, I'll focus on a few areas of note.

Naveen Chopra: As always, you'll find a comprehensive review of financial results in our press release.

Naveen Chopra: News. Total company advertising grew 2%, powered by direct-to-consumer, which delivered strong growth of 18%, an acceleration versus the 16% growth we saw in Q2. D2C advertising growth was driven by a double-digit increase in sold impressions and higher CPM.

Naveen Chopra: For today's call, I'll focus on a few areas of note, starting with advertising.

Naveen Chopra: Total company advertising grew 2%, powered by direct-to-consumer, which delivered strong growth of 18% and acceleration versus the 16% growth we saw in Q2.

Naveen Chopra: D-to-C advertising growth was driven by a double-digit increase in sold impressions and higher CPMs.

Naveen Chopra: And these trends have continued in Q4, where we expect another quarter of double-digit B2C advertising. In TV media, advertising revenue declined 2%, an improvement versus last quarter, reflecting the return of football and higher political success. Similar to last quarter, international advertising benefited from the recognition of revenue that was underreported by an international sales partner in prior periods.

Naveen Chopra: And these trends have continued in Q4, where we expect another quarter of double-digit B2C advertising growth.

Naveen Chopra: In TV media, advertising revenue declined 2%, an improvement versus last quarter, reflecting the return of football and higher political spend.

Naveen Chopra: Similar to last quarter, international advertising benefited from the recognition of revenue that was underreported by an international sales partner in prior periods.

Naveen Chopra: Looking ahead, we expect TV media advertising growth in Q4. to be similar to the reported growth rate in Q3. The Q4 growth will benefit from record political spend. But we'll also have less sports inventory compared to the prior year.

Looking ahead, we expect TV media advertising growth in Q4.

to be similar to the reported growth rate in Q3.

In Q4, growth will benefit from record political spend.

Naveen Chopra: But we'll also have less sports inventory compared to the prior year.

Naveen Chopra: Our forecast for Q4 does not assume any additional revenue true ups from a third party underreporting.

Naveen Chopra: Our forecast for Q4 does not assume any additional revenue true-ups from third-party underreporting.

Naveen Chopra: Next, let me turn to affiliate and subscription revenue, which declined 1% in Q3. Now, as a reminder, last year's third quarter included Showtime pay-per-view events that did not recur this year as we exited Showtime Sports at the end of 2023. This comparison reduced the Q3 growth rate by 270 basis points. Absent the impact of Showtime pay-per-view, affiliate and subscription revenue increased 1%, with growth in direct-to-consumer more than offsetting declines in linear. In the TV media segment, affiliate revenue declined 6.6% year over year, reflecting ecosystem trends and the Showtime pay-per-view headwind I just mentioned. D2C subscription revenue grew 6.8% in the quarter.

Naveen Chopra: Next, let me turn to affiliate and subscription revenue, which declined 1% in Q3. Now, as a reminder, last year's third quarter included Showtime pay-per-view events that did not recur this year as we exited Showtime Sports at the end of 2023.

Naveen Chopra: This comparison reduced the Q3 growth rate by 270 basis points.

Naveen Chopra: Absent the impact of Showtime pay-per-view, affiliate and subscription revenue increased 1%, with growth in direct-to-consumer more than offsetting declines in linear.

Naveen Chopra: In the TV media segment, affiliate revenue declined 6.6% year-over-year, reflecting ecosystem trends and the Showtime pay-per-view headwind I just mentioned.

Naveen Chopra: D to C subscription revenue grew 6.8% in the quarter, with Paramount Plus subscription revenue up 27% year over year.

Naveen Chopra: with Paramount Plus subscription revenue up 27% year-over-year. Paramount Plus added 3.5 million subscribers in the quarter, reaching 72 million subscribers overall. Subscriber trends benefited from the expansion of an international hard bundle deal and the return of NFL and college football, new originals, and theatrical releases. And in Q4, we expect continued subscriber growth at Paramount+, driven by a strong slate of originals and the CBS fall schedule.

Naveen Chopra: Paramount Plus added 3.5 million subscribers in the quarter, reaching 72 million subscribers overall.

Naveen Chopra: Subscriber trends benefited from the expansion of an international hard bundle deal and the return of NFL and college football, new originals, and theatrical releases.

Naveen Chopra: And in Q4, we expect continued subscriber growth at Paramount+, driven by a strong display of originals and the CBS fall schedule.

Naveen Chopra: Unlike Q3, we do not expect to add new hard bundle partnerships in Q4. Global ARPU for Paramount Plus grew 11% in the quarter. Our pre-growth was tempered by the lapping of last year's price increase and a greater than expected shift in the mix of our subscriber base toward our essential tier and hard bundle subscribers. Additionally, the price change we announced in August of 2024 will take some time to be reflected in ARPU due to the grandfathering of existing essential tier subscribers. And these dynamics will continue to influence ARPU growth in Q4.

Naveen Chopra: Unlike Q3, we do not expect to add new hard bundle partnerships in Q4.

Thank you.

Global ARPU for Paramount Plus grew 11% in the quarter.

Naveen Chopra: Our per growth was tempered by the lapping of last year's price increase and a greater than expected shift in the mix of our subscriber base toward our essential tier and hard bundle subscribers.

Naveen Chopra: Additionally, the price change we announced in August of 2024 will take some time to be reflected in ARPU due to the grandfathering of existing essential tier subscribers.

Naveen Chopra: and these dynamics will continue to influence ARPU growth in Q4.

Naveen Chopra: The combination of continued healthy revenue growth and expense discipline in Q3 helped deliver our second consecutive quarter of D to C profitability. In Q4, we expect continued top line growth. However, the timing of content marketing spend will result in a quarterly loss for the D2C segment.

Naveen Chopra: The combination of continued healthy revenue growth and expense discipline in Q3 helped deliver our second consecutive quarter of D-to-C profitability.

Naveen Chopra: In Q4, we expect continued top line growth. However, the timing of content marketing spend will result in a quarterly loss for the D2C segment.

Naveen Chopra: And that said, we like the trajectory of the business over the last few quarters and believe we're well positioned to reach Paramount Plus domestic profitability in 2025.

Naveen Chopra: That said, we like the trajectory of the business over the last few quarters and believe we're well positioned to reach Paramount Plus domestic profitability in 2025.

Naveen Chopra: Next, I'll touch on license. Licensing and other revenue declined 9% in the quarter, primarily reflecting a lower volume of licensing in the secondary market and lower home entertainment revenue. Now, as I've previously noted, licensing revenue can be fairly uneven from quarter to quarter.

Next, I'll touch on licensing.

Naveen Chopra: Licensing and other revenue declined 9% in the quarter, primarily reflecting a lower volume of licensing in the secondary market and lower home entertainment revenues.

Naveen Chopra: Now, as I've previously noted, licensing revenue can be fairly uneven from quarter to quarter.

Naveen Chopra: For the full year 2024, we expect licensing revenue to decline relative to 2023. More than half the year-over-year decline will come from made-for-third-party production. And these productions are strategically valuable, but the scale of our business has been impacted by the decision to steer more content to internal platforms. A smaller part of the year-over-year decline in licensing is related to our second run and library licensing activity. partially reflecting lingering strike impact on the business. Even though we'll benefit from the return of the CBS fall slate in Q4, it will take longer than expected to return to our pre-strike level of output.

Naveen Chopra: And for the full year 2024, we expect licensing revenue to decline relative to 2023.

Naveen Chopra: More than half the year-over-year decline will come from made-for-third-party productions.

Naveen Chopra: And these productions are strategically valuable, but the scale of our business has been impacted by the decision to steer more content to internal platforms.

Naveen Chopra: A smaller part of the year-over-year decline in licensing is related to our second run and library licensing activity.

partially reflecting lingering strike impact on the business.

Naveen Chopra: Even though we'll benefit from the return of the CBS false slate in Q4, it will take longer than expected to return to our pre-strike level of output.

Naveen Chopra: Turning to the balance sheet, in Q3 we delivered $214 million of free cash flow and reduced leverage to 3.8 times. Free cash flow in Q4 will be negative given the timing of content spend and the headwind of approximately $150 million of cash restructuring payments. However, this shouldn't negatively impact leverage, as we expect to receive nearly $500 million of proceeds from the Viacom 18 transaction. which is expected to close this quarter.

Naveen Chopra: Turning to the balance sheet, in Q3 we delivered $214 million of free cash flow and reduced leverage to 3.8 times.

Naveen Chopra: Free cash flow in Q4 will be negative given the timing of content spend.

Naveen Chopra: and the headwind of approximately $150 million of cash restructuring payments.

Naveen Chopra: However, this shouldn't negatively impact leverage as we expect to receive nearly 500 million of proceeds from the Viacom 18 transaction, which is expected to close this quarter.

Naveen Chopra: Putting it all together, we remain on track to achieve our key financial goals for 2020. That includes significant growth in total company OEBDA, enabled by the progress in D2C profitability you've seen over the last few quarters, and the execution of cost savings initiatives across Similarly, our expectations for full year free cash flow growth remain unchanged. Overall, I think 2024 will demonstrate meaningful progress in the ongoing transition of Paramount, encompassing streaming growth, enhanced cost efficiency, and of course, continued investment in our renowned content portfolio.

Naveen Chopra: Putting it all together, we remain on track to achieve our key financial goals for 2024.

Naveen Chopra: That includes significant growth in total company OEBDA, enabled by the progress in D2C profitability you've seen over the last few quarters, and the execution of cost savings initiatives across the company.

Naveen Chopra: Similarly, our expectations for full year free cash flow growth remain unchanged.

Naveen Chopra: Overall, I think 2024 will demonstrate meaningful progress in the ongoing transition of Paramount, encompassing streaming growth, enhanced cost efficiency, and of course, continued investment in our renowned content portfolio.

Operator: With that, operator, please open the line for questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask that you please limit yourself to one question.

With that, Operator, please open the line for questions.

Speaker Change: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to remove your question, please press star followed by 2. When preparing to ask your question, please ensure your phone is unmuted locally.

Ben Swinburne: Our first question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead.

We ask that you please limit yourself to one question.

Speaker Change: Our first question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead.

Ben Swinburne: Reporting. Bryan, you talked about being deliberate, given the complexity around direct-to-consumer and partnerships.

Good morning.

Speaker Change: Ryan, you talked about being deliberate, given the complexity around direct-to-consumer and partnerships. I'm just wondering if you could talk a little bit more, now that you guys have been working on it, as to sort of what you're solving for, what are the key variables you're looking for, what would lead the company to kind of pull the trigger on...

Ben Swinburne: I'm just wondering if you could talk a little bit more, now that you guys have been working on it, as to sort of what you're solving for, what are the key variables you're looking for, what would lead the company to kind of pull the trigger on either a partnership or a change in how you're kind of working internationally? I think that's been kind of one of your focus areas in streaming.

Speaker Change: either a partnership or a change in how you're kind of working internationally. I think that's been kind of one of your focus areas in streaming. And then, you know, Naveen, it's been, I think, almost a year since you talked about domestic streaming profitability next year.

Ben Swinburne: And then, you know, Naveen, it's been, I think, almost a year since you talked about domestic streaming profitability next year. Given the progress we've seen this year and the cost action you've taken, how far away are you from overall D2C profitability? Any way to update us and dimensionalize the international versus domestic D2C situation as we look at 2025 would be helpful.

Speaker Change: Given the progress we've seen this year and the cost action you've taken,

Speaker Change: you know, how far away are you from overall D2C profitability? Any way to kind of update us and dimensionalize sort of the international versus domestic D2C situation as we look at 25 would be helpful. Thank you guys.

Ben Swinburne: Thank you guys.

Chris Mccarthy: Hey, Ben, how you doing? This is Chris.

Chris Mccarthy: I'll take your first part of the question, and then I'll pass to Naveen for the second part of that. First, let me start by saying that we're very proud of the success that we've had with Paramount+. This quarter saw revenue growth up 27%. It's our second quarter of profitability. And for 2025, we're on track for full year domestic profitability. So we feel good about our position and our ability to remain a standalone.

Thank you. Thank you.

Chris Mccarthy: Hey Ben, how you doing? This is Chris. I'll take your first part of the question and then I'll pass to Naveen for the second part of that.

Speaker Change: First, let me start by saying that we're very proud of the success that we've had with Paramount Plus. This quarter saw revenue growth up 27%. It's our second quarter of profitability.

Naveen Chopra: And for 2025, we're on track for full-year domestic profitability. So we feel good about our position and our ability to remain a standalone. Now, that being said, you can absolutely count on us to be opportunistic.

Chris Mccarthy: Now, that being said, you can absolutely count on us to be opportunistic. We're looking at partnerships from a strategic lens to drive more value. And you can be sure that in deciding that will take key factors into consideration. But the ultimate value will be, is this going to drive increased value for our business today, our consumers and our investors. But as it stands today, we have our momentum driven by our strategy, our execution, and are driven by our hit content. And so we feel good about our position as a standalone, and we'll continue to look for opportunities.

Naveen Chopra: We're looking at partnerships from a strategic lens to drive more value. And you can be sure that in deciding that, we'll take key factors into consideration, but the ultimate value will be, is this going to drive increased value for our business today, our consumers, and our investors?

Naveen Chopra: But as it stands today, we have our momentum driven by our strategy, our execution, and are driven by our hit content. And so we feel good about our position as a standalone, and we'll continue to look for opportunities.

Naveen Chopra: Naveen? Great. Thanks, Chris.

Naveen Chopra: And hey, Ben. With regard to your question on D2C profitability in 2025, as you said, we've made tremendous progress this year. Chris mentioned some of the stats, and I think it's fair to say that progress has been really multidimensional between subscriber growth, improvements in ARPU, strong digital advertising growth, and, by the way, some real efficiency improvements on the marketing side of the So, I think we're well set up for 2025. And as you heard us say, we do continue to expect the business to get to domestic profitability next year. In terms of how that translates to the segment as a whole, I'd note a few things.

Have a great day.

Great. Thanks Chris and hey Ben.

Speaker Change: With regard to your question on D to C profitability in 25, as you said, we've made tremendous progress this year. Chris mentioned some of the stats.

Speaker Change: I think it's fair to say that progress has been really multidimensional between subscriber growth.

Speaker Change: improvements in ARPU, strong digital advertising growth, and by the way, some real efficiency improvements on the marketing side of the equation.

Speaker Change: So, I think we're well set up for 2025, and as you heard us say, we do continue to expect the business to get to domestic profitability next year.

Speaker Change: In terms of how that translates to the segment as a whole, I'd note a few things. First, domestic, we do expect to be profitable next year.

Naveen Chopra: First, domestic, we do expect to be profitable next year. Pluto is already a profitable business. And so, the real variable is what the P&L for the Paramount Plus international business looks like. And I've generally described that as tracking somewhere in the sort of 12 to 18 months behind the domestic business, just given the relative maturity and the timing of when we launched internationally versus domestic. And I think that's still the right way to think about the business as a whole, and obviously we'll keep you updated on progress as we continue to move down that path.

Speaker Change: Pluto is already a profitable business. And so the real variable is what the P&L for the Paramount Plus international business looks like.

Speaker Change: And I've generally described that as tracking somewhere in the sort of 12 to 18 months behind the domestic business Just given the the relative maturity and the timing of when we launched internationally versus domestic

Speaker Change: and I think that's still the the right way to to think about the business as a whole and obviously we'll keep you updated on progress as we continue to move down that path.

Naveen Chopra: Thanks Ben.

Bryan Kraft: Operator, next question. The next question goes to Bryan Kraft of Deutsche Bank. Bryan, please go ahead.

Thanks Ben. Operator, next question.

Speaker Change: The next question goes to Brian Kraft of Deutsche Bank. Brian, please go ahead.

Bryan Kraft: Oh, thanks.

Bryan Kraft: Good morning. I guess the last answer, Naveen, was a good segue to my question, which was, you've been making various moves in international markets, but I think you've also been reviewing the strategy on a market-by-market basis.

Oh, thanks. Good morning.

Speaker Change: The last answer, Naveen, was a good segue to my question, which was, you've been making various moves in international markets, but I think you've also been reviewing the strategy on a market-by-market basis. So I wanted to ask if, at this point, there is a clear path forward yet for Paramount+.

Bryan Kraft: So, I wanted to ask if, at this point, there is a clear path forward yet for Paramount Plus in international markets, and if so, if you could talk about what that looks like and how it's differed from the approach up until now.

Speaker Change: in international markets, and if so, if you could talk about what that looks like and how it's differed from the approach up until now.

Bryan Kraft: And then, just a housekeeping question, Naveen, and sorry if I missed it, but would you be able to quantify for us the impact of the revenue for prior period international ad sales under that partner underreporting? Thank you.

Speaker Change: And then just a housekeeping question, Naveen, and sorry if I missed it, but would you be able to quantify for us the impact of the revenue for prior period international ad sales under that partner underreporting? Thank you.

Chris Mccarthy: Hey, Bryan, how you doing? This is Chris. Listen, let me start by saying we think it is very important to globally monetize our content in the widest possible basis, and our success today really proves that out. Now, we're taking a market-to-market approach when we're looking through the lens of how do we drive the most value. In some cases, that'll be an owned and operated situation where we control. In other cases, it'll be a hard bundle with a market leader. And in other cases, it may make more sense for us to really go in a license.

Thank you.

Chris Mccarthy: Hey Brian, how you doing? This is Chris. Listen, let me start by saying we think it is very important to globally monetize our content in the widest possible basis and our success to date really proves that out.

Chris Mccarthy: Now, we're taking a market-to-market approach when we're looking through the lens of how do we drive the most value. In some cases, that'll be an owned and operated situation where we control. In other cases, it'll be a hard bundle with a market leader. And in other cases, it may make more sense for us to really go in a licensing model.

Naveen Chopra: But you can rest assured our goal here is to maximize the value for our hit content and look at all opportunities very opportunistically through that lens.

Speaker Change: But you can rest assured our goal here is to maximize the value for our hit content and look at all opportunities very opportunistically through that lens. And now I'll pass it to Naveen for the second half of that.

Naveen Chopra: And now I'll pass to Naveen for the second half. Yeah. Bryan, with respect to your question on the size of the underreported revenue in Q3, it is a relatively important factor in the year-over-year trend for international advertising, similar in magnitude to Q2, actually I think a little larger in magnitude in Q3 versus Q2. You know, I'd size it in the call it plus or minus $50 million range.

Yeah.

Naveen Chopra: Brian, would you like to ask a question on the size of the underreported revenue?

Naveen Chopra: in Q3. It is a relatively important factor in the year-over-year trend for international advertising.

Speaker Change: similar in magnitude to Q2, actually I think a little larger in magnitude in Q3 versus Q2. You know it's I size it in the call it plus or minus 50 million range.

Naveen Chopra: And importantly, as I said in our prepared remarks, our forecast for next quarter assumes that there is no further two-up required due to the underreporting.

Speaker Change: And, importantly, as I said in our prepared remarks, our forecast for next quarter assumes that there is no further true-up required due to the underreporting.

Naveen Chopra: Thanks, Brian.

Rich Greenfield: Operator, next question, please. The next question goes to Rich Greenfield of Light Shed Partners.

Thanks, Brian. Operator, next question, please.

Rich Greenfield: Rich, please go ahead. Hi, thanks for taking the question. I've got a couple.

Speaker Change: The next question goes to Rich Goodfield of Lightshed Partners. Rich, please go ahead.

Rich Greenfield: First on Nielsen. I think you dropped, uh, I think it's been, you know, now over a month, maybe it's been five weeks. I think the last time you had an impasse, it was only like 14 or 15 days. was, you know, I think there's been a lot of speculation in the market that you've saved or you're that you're in the run rate savings are hundreds of millions of dollars on the cost side. But on the other side, I want to understand what's happening in terms of not being able to sell advertising against Nielsen data. Have you seen any material impact in Q4 from not having Nielsen data and I guess related to that any top advertisers that have left CBS or your cable networks because you can't sell against Nielsen.

Rich Goodfield: Hi, thanks for taking the question. I've got a couple. First on Nielsen, I think you dropped, I think it's been, you know, now over a month, maybe it's been five weeks. I think the last time you had an impasse, it was only like 14 or 15 days.

Rich Goodfield: I think there's been a lot of speculation in the market that you've saved or that you're in the run rate savings are hundreds of millions of dollars on the cost side.

Rich Goodfield: But on the other side, I want to understand what's happening in terms of not being able to sell advertising against Nielsen data. Have you seen any material impact in Q4 from not having Nielsen data, and I guess related to that, any top advertisers that have left?

Rich Greenfield: And I think you're using video lamp.

Rich Goodfield: CBS or your cable networks, because you can't sell against Nielsen and I think you're using video amp and then just maybe a housekeeping question for for Chris or George, I guess. On the TV media side of the equation,

George Cheeks: And then just maybe a housekeeping question for for Chris or George, I guess, on the TV media side of the equation. I think everyone's trying to understand sort of the potential of cost cutting longer term. Could you just give us a sense in TV media today? How many employees roughly do you still have in that division after all of the cost cuts that you've done to date?

Rich Goodfield: I think everyone's trying to understand sort of the potential of cost-cutting longer term. Could you just give us a sense, in TV media today, how many employees roughly do you still have in that division after all of the cost cuts that you've done to date? Thanks.

George Cheeks: Hey Rich, it's George, I'll take this. So starting with Nielsen, I want to level set, this really is not about affordability. It's about getting the value we need for what we pay. And I think it's important to consider all of this in the context of the media industry. I mean, as we all know, linear audiences, especially basic cable linear, are declining and shifting to streaming. This, of course, is going to affect how we look at the appropriate spend here. I mean, for example, we wouldn't want the Nielsen fee for certain networks to be greater than the ad revenue those networks actually generate.

George Cheeks: Hey Rich, it's George, I'll take this. So starting with Nielsen, I want to level set, this really is not about affordability.

George Cheeks: It's about getting the value we need for what we pay. And I think it's important to consider all of this in the context of the media industry. I mean, as we all know, linear audiences, especially basic cable linear, are declining and shifting to streaming. This, of course, is going to affect how we look at the appropriate spend here. I mean, for example, we wouldn't want the Nielsen fee for certain networks to be greater than the ad revenue those networks actually generate.

George Cheeks: Now, as to your point on impact, we haven't seen any adverse impact on ad revenue to date, and we don't expect a material impact in Q4. But I do want to be clear that we do recognize that Nielsen can be a valuable resource. It's just that the economics have to make sense for the business.

George Cheeks: Now, as to your point on impact, we haven't seen any adverse impact on ad revenue to date, and we don't expect a material impact in Q4. But I do want to be clear that we do recognize that Nielsen can be a valuable resource. It's just that the economics have to make sense for the business.

George Cheeks: Now, as to your second question, you know, setting. Right now the number is about 6000 plus in domestic and about 3000 plus Now, you have to remember that that all Big Sports Production Infrastructure, and our 27 local stations, which obviously requires a lot of employees as well. But, you know, as Chris mentioned before, we're very... ...organization.

Now, as to your second question, you know,

George Cheeks: setting right now the numbers about 6,000 plus in domestic and about 3,000 plus

Now, you have to remember that that all...

George Cheeks: big sports production infrastructure and our 27 local stations, which obviously requires a lot of employees as well. But, you know, as Chris mentioned before, we're very

organization.

George Cheeks: Is there a second question about TV media?

Is there a second question about TV media?

Steven Cahall: Operator, next question, please. The next question goes to Steven Cahall of Wells Fargo. Steven, please go ahead.

Operator, next question please.

George Cheeks: The next question goes to Stephen Carhall of Wells Fargo. Stephen, please go ahead.

Steven Cahall: Thank you.

Steven Cahall: So another one on streaming, the S-Core indicated that one of the parties might have been interested in a combination or even licensing Paramount+. And, you know, you've done bundles, we've seen a lot of bundles in the industry. I don't think we've actually seen any app integration or streaming integration deals. So I'm wondering how you think about that. You know, one of your peers also has a streaming product that has a lot of sports, has a good film library, seems like very strong customer overlap. So how do you think about the opportunities in streaming to go beyond just, you know, bundle deals and into something that's a little bit deeper from a consumer perspective?

Stephen Carhall: Thank you. So another one on streaming, the S-Corps indicated that one of the parties might have been interested in a combination or even licensing Paramount Plus and, you know,

Speaker Change: You've done bundles, we've seen a lot of bundles in the industry. I don't think we've actually seen any app integration or streaming integration deals.

Speaker Change: So, I'm wondering how you think about that, you know, one of your peers also has a streaming product that has a lot of sports, has a good film library, seems like.

Speaker Change: very strong customer overlap. So how do you think about the opportunities in streaming to go beyond just...

Steven Cahall: And then Naveen, just just an accounting question, what's the method for allocating content costs like sports and series between DTC and TV media, when the air on air on both, you know, you're growing revenue and subscribers so strongly at Paramount+. And you've given the domestic profitability guidance. So just wondering if there's a way for us to think about how content expense grows there, since it's shared between the two segments. Thank you.

Speaker Change: you know, bundle deals and into something that's a little bit deeper from a consumer perspective.

Speaker Change: And then, Naveen, just an accounting question. What's the method for allocating content costs like sports and series between DTC and TV media when they air on both? You know, you're growing revenue and subscribers so strongly at Paramount+.

Speaker Change: and you've given the domestic profitability guidance. So just wondering if there's a way for us to think about how content expense grows there since it's shared between the two segments. Thank you.

Chris Mccarthy: Hey, Steve, it's Chris.

Chris Mccarthy: I'll take the first part of that question, and then I'll pass to Naveen. You know, as we talked about, we are seeing real momentum at Paramount+, and across Pluto. We've got great growth, second quarter profitability, and on track in 25. So we feel really good about the position, and frankly, our ability to remain as a standalone. Now you talk about bundles, and you know, we've, we've got some great, great partnerships and great bundles in the way of Walmart, and with Delta Airlines. Now, these are ones that are very specific, that add incremental value to us, they bring new consumers, and really enhance the value proposition from a total business perspective for us.

Chris Mccarthy: Hey Steve, it's Chris. I'll take the first part of that question and then I'll pass to Naveen.

Speaker Change: As we talked about, we are seeing real momentum at Paramount Plus and across Pluto. We've got great growth, second quarter profitability, and on track in 25. So we feel really good about the position and frankly, our ability to remain as a standalone.

Naveen Chopra: Now you talk about bundles, and we've got some great partnerships and some great bundles in the way of Walmart and with Delta Airlines.

Chris Mccarthy: Now, that being said, you can always count on us to be strategically looking through the lens of creating value. Now part of that, part of that exercise is really to be opportunistic about both looking at things from a market to market perspective, and from a broader partnership perspective. And when doing that, we ask ourselves, you know, is this the right market? Or is there something better that we can get and something more value? And you can count on us to continue to do that.

Naveen Chopra: Now, that being said, you can always count on us to be strategically looking through the lens of creating value.

Naveen Chopra: Now, part of that exercise is really to be opportunistic about both looking at things from a market-to-market perspective and from a broader partnership perspective.

Speaker Change: And in doing that, we ask ourselves, you know, is this the right market or is there something better that we can get and something more value? And you can count on us to continue to do that. But as of today, there's no change. We feel great about where we are, and we feel really strong about the position moving forward. Naveen?

Chris Mccarthy: But as of today, there's no change. We feel great about where we are, and we feel really strong about the position moving forward.

Naveen Chopra: Naveen? Thanks, Chris. Steve, the question regarding how we allocate the cost of content that is shared between our streaming business and our traditional linear businesses, I think there's a couple of important concepts to understand. Number one, it does differ somewhat based on the type of content, but it's all based on the principle that the allocations of that cost should reflect the relative value of the content windows that each of the platforms has rights to. So what that means is that effectively, as more of the viewership moves to streaming, you will see more of the cost being allocated to streaming and moving away from linear.

Thanks Chris.

Naveen Chopra: Steve, the question regarding how we allocate the cost of content that is shared between our streaming business and our traditional linear businesses, I think there's a couple of important concepts to understand. Number one, it does differ somewhat based on the type of content.

Naveen Chopra: But it's all based on the principle that the allocations of that cost should reflect the relative value of the content windows that each of the platforms has rights to.

Naveen Chopra: So what that means is that effectively as more of the viewership moves to streaming, you will see more of the cost being allocated to streaming and moving away from linear.

Naveen Chopra: And that's certainly been reflected in the way that we do that allocation for sports, for movies, you know, library and the like. Thanks, Steve.

Naveen Chopra: and that's certainly been reflected in the way that we do that allocation for sports, for movies, you know, library and the like.

Michael Morris: Operator, next question. The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.

Thank you.

Thanks, Steve. Operator, next question.

Speaker Change: The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.

Michael Morris: Thank you.

Michael Morris: Good morning, and thanks for all the answers. I wanted to ask first about the DTC trends, and specifically, you said you were pleased with the response so far from charter customers. I'm hoping you can share a little bit more detail on whether the third quarter results reflected the full impact from that charter partnership at both TV and DTC, and anything you can share about customer activation and any churn from charter subs who are already Paramount Plus subs, those types of things. I'd love to hear any additional detail you can share.

Thank you, good morning, and thanks for all the answers.

Speaker Change: Wanted to ask first about the DTC trends and specifically you said you were pleased with the response so far from charter customers

Speaker Change: I'm hoping you can share a little bit more detail on whether the third quarter results reflected the full impact from that charter partnership.

Speaker Change: at both TV and at DTC, and anything you can share about customer activation and any churn from Charter subs who are already Paramount Plus subs. Those types of things, we'd love to hear any additional detail you can share.

Naveen Chopra: And then secondly, it was a very strong EBITDA quarter, you know, growing 20% year-over-year, kind of begs the question whether we should expect any incremental cost in 4Q to maybe offset the strength that you had in the third quarter, or whether this outperformance kind of flows through to the full year. Thank you, guys.

Speaker Change: And then secondly, it was a very strong EBITDA quarter, you know, growing 20% year over year.

Speaker Change: kind of begs the question whether we should expect any incremental cost in 4Q to maybe offset the strength that you had in the third quarter, or whether this outperformance kind of flows through to the full year. Thank you guys.

Naveen Chopra: Yeah, hey, Mike, it's Naveen. I'll take both of those. Starting with the question on third quarter sub growth, and specifically the impact of charter. So just zooming out a little bit, you know, the three and a half million subs that we added in the quarter, I'd note that there's a contribution from both international and domestic, as I noted in prepared remarks, international did have a new hard bundle that we signed. So that was an important contributor. And on the domestic side, we did see some sub growth coming out of the charter bundle, though, I would note that it's still relatively early in terms of time since the launch of that bundle.

Naveen Chopra: Yeah, hey Mike, it's Naveen. I'll take both of those. Starting with the question on

Naveen Chopra: third quarter sub growth and specifically the impact of charter. So just zooming out a little bit, you know, the three and a half million subs that we added in the quarter, I'd note that there's a contribution from both international and domestic, as I noted in prepared remarks. International did have a new hard bundle that we signed. So that was an important contributor.

Naveen Chopra: And on the domestic side, we did see some subgrowth coming out of the charter bundle, though I would note that it's still relatively early in terms of time since the launch of that bundle.

Naveen Chopra: And I expect the contribution will continue to grow over time. That being said, when we look at the first few months, if you will, we're actually quite pleased with the results, both in terms of the take up from charter subs, and the the impact on direct sub acquisition. So we continue to like the trends there.

Naveen Chopra: and I expect the contribution will continue to grow over time.

Naveen Chopra: That being said, when we look at the first few months, if you will,

Naveen Chopra: We're actually quite pleased with the results, both in terms of the take-up from charter subs and the impact on direct sub acquisition. So we continue to like the trends there.

Naveen Chopra: Then moving to your second question on fourth quarter and how that is impacted by some of the overperformance in the third quarter. Let me give you sort of a big picture answer on that too. If you think about the third quarter, the overperformance was really driven by the D to C segment, which came in better than we expected. As I mentioned earlier, that's multidimensional. But in particular, we saw some real strength in marketing efficiency that we were able to realize in the quarter. I would say that the restructuring work had a relatively modest impact in Q3, just given the timing of when those actions were taken.

Then move into your...

Speaker Change: Second question, on fourth quarter and how that is impacted by some of the overperformance in the third quarter.

Let me give you sort of a...

Speaker Change: a big picture answer on that too. If you think about the third quarter, the overperformance was really driven by the D to C segment, which came in better than we expected. As I mentioned earlier, that's multidimensional. But in particular, we saw some real strength in marketing efficiency that we were able to realize in the quarter.

Speaker Change: I would say that the restructuring work had a relatively modest impact in Q3, just given the timing of when those actions were taken, more of that benefit is going to be realized in Q4.

Naveen Chopra: More of that benefit is going to be realized in Q4. So then if you think about Q4 specifically, there are some moving pieces that are probably worth calling out. First, some of the tailwinds. We will see more of that restructuring benefit that I mentioned. There will also be, as you would anticipate, some real strength in political advertising that will benefit Q4. And Q4 tends to be, relative to the first three quarters of the year, the strongest quarter for advertising generally. And so I think that will benefit us relative to Q3. There are a couple of headwinds to keep in mind.

Speaker Change: So then if you think about Q4 specifically, there are some moving pieces that are probably worth calling out. First, some of the tailwinds. We will see more of that restructuring benefit that I mentioned.

Speaker Change: There will also be, as you would anticipate, some real strength in political advertising that will benefit Q4. And Q4 tends to be, relative to the first three quarters of the year, the strongest quarter for advertising generally. And so I think that will benefit us relative to Q3.

Naveen Chopra: We will have higher content expenses in Q4 than we did in Q3, just given the timing of sports and some of the streaming originals. And as I mentioned, we do not expect to have any incremental. True Ups for past period under-reporting on those third-party advertising partnerships. And then there is some shift of marketing expense from Q3 into Q4.

Speaker Change: There are a couple of headwinds to keep in mind. We will have higher content expenses in Q4 than we did in Q3, just given the timing of sports and some of the streaming originals. And as I mentioned, we do not expect to have any incremental...

Speaker Change: true-ups for past period under-reporting on those third-party advertising partnerships. And then there is some shift of marketing expense from Q3 into Q4.

Naveen Chopra: But when you put all of that together, I think the key takeaways for you should be that number one, the vast majority of the over performance that we saw in Q3, I do expect to flow through to the full year. And number two, I think we're really well set up for 2025, particularly given the progress in D2C and the significant improvements that we've made in profitability for that part of the Thanks, Mike.

Speaker Change: But when you put all of that together, I think the key takeaways for you should be that number one, the vast majority of the overperformance that we saw in Q3.

Speaker Change: I do expect to flow through to the full year, and number two, I think we're really well set up for 2025, particularly given the progress in D2C and the significant improvements that we've made in profitability for that part of the business.

Operator: Operator, we'll take one last question, please. Thank you.

and the other one.

Thanks, Mike. Operator, we'll take one last question, please.

Michael Ng: The last question goes to Michael Ng of Goldman Sachs. Michael, please go ahead.

Hi.

Speaker Change: Thank you. The last question goes to Michael Ng of Goldman Sachs. Michael, please go ahead.

Michael Ng: Hey, good morning. Thank you for squeezing me in. I wanted to just follow up on the last question around DTC efficiencies. Naveen talked about the marketing efficiencies. I was wondering if you could just expand on that a little bit in DTC, because obviously DTC FX was an area of positive surprise.

Michael Ng: Hey, good morning. Thank you for squeezing me in. I wanted to just follow up on...

Michael Ng: The last question around DTC efficiencies, you know, Naveen, you talked about the marketing efficiencies. I was wondering if you could just expand on that a little bit in DTC, because obviously DTC FX was an area of positive surprise. And then relatedly, I was wondering if any of the programming charges taken earlier in the year had any potential benefit to cost amortization for DTC in the quarter as well. Thank you.

Michael Ng: And then relatedly, I was wondering if any of the programming charges taken earlier in the year had any potential benefit to cost amortization for DTC in the quarter as well. Thank you.

Naveen Chopra: Yeah, sure.

Naveen Chopra: Hi, Mike. I'll, I'll take both of those. You know, the D2C improvement that we saw, as I mentioned, did benefit from marketing efficiency, but there's kind of a bigger story behind that, which relates to the composition of our subscriber base. You know, we've talked about for some time now the importance of having a diverse subscriber base that spans multiple channels, the direct channel, partner-based distribution on platforms like Amazon, Roku, Apple, hard bundles, both domestically and internationally, commercial bundles like what we have with Walmart Plus. And when you have that sort of go-to-market approach, there are some real benefits with respect to acquisition costs and churn.

Yeah, sure. Hi, Mike. I'll take both of those.

Naveen Chopra: You know, the D to C improvement that we saw, as I mentioned, did benefit from marketing efficiency, but there's kind of a bigger story behind that, which relates to the composition of our subscriber base. You know, we've talked about for some time now...

the importance of having

a diverse subscriber base.

Naveen Chopra: partner-based distribution on platforms like Amazon, Roku, Apple, hard bundles both domestically and internationally, commercial bundles like what we have with Walmart Plus.

Naveen Chopra: and when you have that sort of go-to-market approach there are some real benefits with respect to acquisition costs and churn and I think we're starting to see those in fall into the P&L of the business.

Naveen Chopra: And I think we're starting to see those fall into the P&L of the business, which is why I called out the marketing efficiencies. That is enabled by the fact that we have these channels where we're able to acquire and keep subscribers very, very efficiently. And that's really flowing through to the bottom line. And then with respect to your second question regarding programming charges, you know, yes, that does obviously have some and more benefit in future periods. But I think we're really focused on driving the top line growth, continued sub growth, ARPU growth, and capturing these improvements in marketing and churn reduction as a way of continuing to drive the business toward profit.

Naveen Chopra: which is why I called out the marketing efficiencies. That is enabled by the fact that we have these channels where we're able to acquire and keep subscribers very, very efficiently. And that's really flowing through to the bottom line.

Naveen Chopra: And then, with respect to your second question regarding programming charges, you know, yes, that does obviously have some and more benefit in future periods.

Naveen Chopra: but I think we're really focused on driving the top-line growth, continued sub-growth, ARPU growth, and capturing these improvements in marketing and churn reduction as a way of continuing to drive the business toward profitability.

Naveen Chopra: Thanks, Naveen.

Brian Robbins: This is Brian. And on behalf of my fellow co-CEOs, we'd like to thank you all for joining the call today. We had another very strong quarter with continued strength in streaming, improving momentum in advertising, and meaningful progress in making the business more efficient, all of which sets us up well for the future. All at the same time, while we've been doing what we do best, which is making some of the biggest and broadest hit TV series and blockbuster films, thanks to our tremendously talented teams and creative partners.

Brian Robbins: Thanks, Naveen. This is Brian and on behalf of my fellow co-CEOs, we'd like to thank you all for joining the call today.

Brian Robbins: We had another very strong quarter with continued strength in streaming, improving momentum in advertising, and meaningful progress in making the business more efficient. All of which sets us up well for the future.

Brian Robbins: All at the same time, while we've been doing what we do best, which is making some of the biggest and broadest hit TV series and blockbuster films, thanks to our tremendously talented teams and creative partners.

Brian Robbins: We look forward to updating you all on our progress again soon.

Brian Robbins: Thank you and have a great day.

Brian Robbins: We look forward to updating you all on our progress again soon. Thank you and have a great day

Operator: Thank you.

Operator: This now concludes today's call. Thank you for joining. You may now disconnect your line.

Speaker Change: Thank you, this now concludes today's call. Thank all for joining, you may now disconnect your lines.

Thank you.

The End

[music]

huh… How long has it been?

Nadia: Good afternoon, my name is Nadia and I'll be the conference operator today.

Nadia: Good afternoon, my name is Nadia and I'll be the conference operator today.

Nadia: At this time, I would like to welcome everyone to Paramount Global's Q3 2024 earnings conference call. At this time, all lines have been muted to prevent any background noise.

Nadia: At this time, I would like to welcome everyone to Paramount Global's Q3 2024 Earnings Conference Call.

Nadia: At this time, all lines have been muted to prevent any background noise.

Nadia: After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. In order to get as many of your questions as possible, we ask that you please limit yourself to one question.

After the speaker's remarks, there will be a Q&A session.

Nadia: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Nadia: If you would like to withdraw your question, please press star followed by 2.

Nadia: In order to get as many of your questions as possible, we ask that you please limit yourself to one question.

Jaime Morris: At this time, I would like to turn the call over to Jaime Morris, Paramount Global's EVP, Investor Relations.

Speaker Change: At this time, I would like to turn the call over to Jaime Morris, Paramount Global's EVP, Investor Relations. You may now begin your conference call.

Chris Mccarthy: You may now begin your commencement.

Chris Mccarthy: Good morning, everyone. Thank you for taking the time to join us for our third quarter 2024 earnings call. Joining me for today's discussion are Paramount's co-CEOs, Brian Robbins, Chris McCarthy, and George Cheeks, and our CFO, Naveen Chopra. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.

Speaker Change: Good morning, everyone. Thank you for taking the time to join us for our third quarter 2024 earnings call. Joining me for today's discussion are Paramount's co-CEOs, Brian Robbins, Chris McCarthy, and George Cheeks, and our CFO, Naveen Chopra.

Speaker Change: Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.

Chris Mccarthy: 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.

Speaker Change: 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.

Chris Mccarthy: Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contains supplemental information, and in each case can be found in the Investor Relations section of our website.

Some of today's financial remarks will focus on adjusted results.

Speaker Change: Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contains 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 Chris.

Chris Mccarthy: Now, I will turn the call over to Chris. Thank you, Jaime. And good morning, everyone. I'm Chris McCarthy, and I'm joined here by my fellow co-CEOs, George Cheeks and Brian Robbins. Together, we'll share the results of another very strong quarter, demonstrating the progress we're making against our strategic plan. Then Naveen will take us through the financials.

Speaker Change: Thank you, Jaime. And good morning, everyone. I'm Chris McCarthy, and I'm joined here by my fellow co-CEOs, George Cheeks and Brian Robbins. Together, we'll share the results of another very strong quarter, demonstrating the progress we're making against our strategic plan.

Chris Mccarthy: Okay, let's start with some headlines. We are pleased with our very strong performance this quarter, fueled by our hit content and our focus on execution. In D2C, we saw Pluto reach record engagement, and on Paramount+, we had 3.5 million subscribers, reinforcing our position as the number four global streaming service. Paramount Plus continued its momentum with revenue growth up 25% year over year. This quarter marks the second quarter in a row where D2C achieved profitability with adjusted OEBD improving more than a billion dollars over the past four quarters. and we remain on track to reach Paramount Plus domestic profitability in 2025.

Then Naveen will take us through the financials.

Okay, let's start with some headlines.

Speaker Change: We are pleased with our very strong performance this quarter, fueled by our hit content and our focus on execution.

Speaker Change: In DBC, we saw Pluto reach record engagement, and on Paramount+, we had 3.5 million subscribers, reinforcing our position as the number four global streaming service.

Speaker Change: Paramount Plus continued its momentum with revenue growth up 25% year-over-year.

Speaker Change: This quarter marks the second quarter in a row where D2C achieved profitability, with adjusted OEBDA improving more than a billion dollars over the past four quarters. And we remain on track to reach paramount plus domestic profitability in 2025.

Chris Mccarthy: We also made progress in streamlining our organization as we continue to successfully execute cost reductions that will result in $500 million in annual run rate savings. And at the same time, we have not slowed down on doing what we do best, continue to produce some of the biggest and broadest hit films and television.

Speaker Change: We also made progress in streamlining our organization as we continue to successfully execute cost reductions that will result in $500 million in annual run rate savings.

Speaker Change: And at the same time, we have not slowed down on doing what we do best, continue to produce some of the biggest and broadest hit films and television series.

Chris Mccarthy: In addition, the Skydance transaction achieved a few key milestones, including the conclusion of the GoShop period, the expiration of the HSR waiting period, and on November 4th, we filed our S-IV registration statement with the SEC. We continue to expect the deal to close in the first half of 2025, subject to regulatory approvals and other customary conditions.

Thank you. Thank you.

Speaker Change: We continue to expect the deal to close in the first half of 2025, subject to regulatory approvals and other customary conditions.

George Cheeks: And now I'll pass it to George to update us on distribution and advertising. Thanks, Chris. I'll start with distribution. In an evolving landscape, we continue to renew longstanding agreements with key partners, including a number of distribution renewals this year. Our track record of getting deals done speaks to the power of our entertainment, news and sports content, and we'll continue to work with our partners to innovate and deliver for audiences. As an example of that, our Paramount Plus ad supported tier is now available to charter customers. Enhancing the value we're delivering across linear and streaming. Now, it's early days, but we're pleased with the response so far.

Speaker Change: And now, I'll pass it to George to update us on distribution and advertising.

Thanks Chris. I'll start with distribution.

George Cheeks: In an evolving landscape, we continue to renew long-standing agreements with key partners, including a number of distribution renewals this year.

George Cheeks: Our track record of getting deals done speaks to the power of our entertainment, news, and sports content, and we'll continue to work with our partners to innovate and deliver for audiences.

George Cheeks: As an example of that, our Paramount Plus ad-supported tier is now available to Charter customers.

enhancing the value we're delivering across linear and streaming.

George Cheeks: Now turning to advertising. Q3 benefited from record political spend, as well as the return of NFL and college football. Digital ad growth remains strong, showing notable increase in demand year-over-year, which reflects our valued position from a price, quality, and scale standpoint, and will continue to drive growth. The scale of our digital advertising platform, spanning Paramount Plus, Pluto, as well as other digital properties, is one of the largest addressable footprints in the domestic market. And it represents nearly half of our national domestic advertising revenue when you exclude sports. Major brands continue to tap into the power of Paramount.

George Cheeks: Now, it's early days, but we're pleased with the response so far.

Now turning to advertising.

George Cheeks: Q3 benefited from record political spend, as well as the return of NFL and college football.

George Cheeks: Digital ad growth remains strong, showing notable increase in demand year over year, which reflects our valued position from a price, quality, and scale standpoint, and will continue to drive growth.

George Cheeks: The scale of our digital advertising platform, spanning Paramount+, Pluto, as well as other digital properties, is one of the largest addressable footprints in the domestic marketplace.

George Cheeks: and it represents nearly half of our national domestic advertising revenue when you exclude sports.

George Cheeks: Recently, we launched the summit, a new offering that connects our key ad partners with priority Paramount launches across theatrical, linear and streaming. For our first summit partnership, we brought Pepsi together with Gladiator 2. The campaign launched with the NFL on CBS and included a media blitz across all Paramount Global linear, digital and social platforms. Yet another example of how we're leveraging our creative assets and capabilities to deliver unmatched impact for our biggest advertisers.

George Cheeks: Major brands continue to tap into the power of Paramount. Recently, we launched The Summit, a new offering that connects our key ad partners with priority Paramount launches across theatrical, linear, and streaming.

George Cheeks: For our first summit partnership, we brought Pepsi together with Gladiator 2. The campaign launched with the NFL on CBS and included a media blitz across all Paramount Global linear, digital, and social platforms.

George Cheeks: Yet another example of how we're leveraging our creative assets and capabilities to deliver unmatched impact for our biggest advertisers.

George Cheeks: I also want to touch on our ongoing dispute with Nielsen. We remain engaged with them and we're hopeful for a resolution. So far, we're encouraged by our partners' willingness to lean into innovation and adopt alternative measurement solutions. Bottom line, our brand and agency partners are the number one priority, and we're proving every day that content, scale, and value are what matters most to advertisers.

George Cheeks: I also want to touch on our ongoing dispute with Nielsen.

George Cheeks: We remain engaged with them and we're hopeful for a resolution.

George Cheeks: So far, we're encouraged by our partners' willingness to lean into innovation and adopt alternative measurement solutions.

George Cheeks: Bottom line, our brand and agency partners are the number one priority, and we're proving every day that content, scale, and value are what matters most to advertisers.

George Cheeks: And with that, over to Brian for an update on our strategic Thanks, George. We are pleased with the progress we have made in advancing our business by transforming D2C and streamlining our organization to reduce costs. Starting with DTC, the segment was profitable again in the Sports, including the return of the NFL and UEFA, originals like Mayor of Kingstown and Tulsa King, as well as post-theatrical releases such as A Quiet Place Day One and If, all drove acquisition in the quarter. For Pluto, we're continuing to see a strong performance. Years 8, Pluto delivered its highest consumption ever of 5% to 5.6 billion viewing hours.

Brian Robbins: And with that, over to Brian for an update on our strategic plan.

Brian Robbins: Thanks George. We are pleased with the progress we have made in advancing our business by transforming D2C and streamlining our organization to reduce costs.

Brian Robbins: Starting with D2C, the segment was profitable again in the quarter.

Brian Robbins: Sports, including the return of the NFL and UEFA, originals like Mayor of Kingstown and Tulsa King, as well as post-theatrical releases such as A Quiet Place Day One and If, all drove acquisition in the quarter.

For Pluto, we're continuing to see a strong performance.

Brian Robbins: Year-to-date, Pluto delivered its highest consumption ever of 5% to 5.6 billion viewing hours.

Brian Robbins: Growth is being driven by increased use of video-on-demand with more available content, enhanced discoverability, and a better user experience. And as we said before, we are evaluating potential partnerships and streaming through a lens of creating value for the business and our shareholders over the long term. And given the complexity, we are being deliberate and thoughtful in our approach and assessment.

Brian Robbins: Growth is being driven by increased use of video on demand, with more available content, enhanced discoverability, and a better user experience.

Brian Robbins: And as we said before, we are evaluating potential partnerships in streaming.

Brian Robbins: through a lens of creating value for the business and our shareholders over the long term. And given the complexity, we are being deliberate and thoughtful in our approach and assessment.

Brian Robbins: Moving to streamlining our organization, we have made progress on realizing $500 million in non-content cost savings, which will reduce our U.S.-based workforce by 15%. Today, we have executed 90% of these reductions and expect to have a remaining completed by the end of the year. Our objective has been to unlock operational and Right Size to Cost. while continuing to invest in the growth levers that are the key to the future, including content, streaming and advertising.

moving to streamlining our organization.

Brian Robbins: We have made progress on realizing $500 million in non-content cost savings.

Brian Robbins: which will reduce our U.S.-based workforce by 15 percent. To date, we have executed 90 percent of these reductions and expect to have the remaining completed by the end of the year.

Brian Robbins: Our objective has been to unlock operational efficiencies and right-size the cost base, while continuing to invest in the growth levers that are the key to the future, including content, streaming, and advertising.

Brian Robbins: In addition, we remain diligent as we optimize our The sale of our equity interest in Biocom 18 is a great example, which will result in an attractive financial return on our investment. We expect the sale to close in Q4.

Brian Robbins: In addition, we remain diligent as we optimize our asset mix.

Brian Robbins: The sale of our equity interest in Biocom 18 is a great example, which will result in an attractive financial return on our investment. We expect the sale to close in Q4.

Brian Robbins: Now let's move to the core of what we do best, making some of the biggest and broadest hit films and TV series.

Brian Robbins: Now let's move to the core of what we do best.

Chris Mccarthy: I will pass to Chris to kick us off. Thanks, Bryan. Let's start with Paramount Plus, where this fall we kicked off one of our most ambitious slates to date, seeing the return of our biggest hit series, like Merrick Kingstown and Tulsa King, which returned to great fanfare, each quickly soaring into a top 10 streaming original across all asphalt servers. and Tulsa King also broke records as the number one global debut in Paramount Plus history. Internationally, where we have South Park exclusively for SVOD, it ranks as a top five star driver and the number two engagement driver.

Chris Mccarthy: making some of the biggest and broadest hit films and TV series. I will pass to Chris to kick us off.

Chris Mccarthy: Thanks, Brian. Let's start with Paramount+, where this fall, we kicked off one of our most ambitious slates to date.

Chris Mccarthy: seeing the return of our biggest hit series like Mary Kingstown and Tulsa King which returned to great fanfare, each quickly soaring into a top ten streaming original across all S.O.B. services.

Chris Mccarthy: and Tulsa King also broke records as the number one global debut in Paramount Plus history.

Chris Mccarthy: Internationally, where we have South Park exclusively for SVOD, it ranks as a top five star driver and the number two engagement driver. And we're excited to have the South Park series return to Paramount Plus here in the U.S. starting in June of 2025.

Chris Mccarthy: And we're excited to have the South Park series return to Paramount Plus here in the U.S. starting in June of 2025. We're confident this momentum will continue throughout the quarter with the return of Lioness, which premiered October 27th and is off to a great start, scoring as a top five global series premiere in Paramount Plus history. followed by Landman, a new series from Taylor Sheridan, which will premiere November 17th and stars Billy Bob Thornton, Demi Moore, and Jon Hamm. This series has all the makings of a great big hit and promises to do for the oil industry what Yellowstone did for Rancher.

Chris Mccarthy: We're confident this momentum will continue throughout the quarter, with the return of Lioness, which premiered October 27th, and is off to a great start, scoring as a top five global series premiere in Paramount Plus history.

Chris Mccarthy: Followed by Landman, a new series from Taylor Sheridan which will premiere November 17th and stars Billy Bob Thornton, Demi Moore, and Jon Hamm. This series has all the makings of a great big hit and promises to do for the oil industry what Yellowstone did for ranching.

Chris Mccarthy: Now, moving over to our premium tier, this quarter marks the beginning of a new adrenalized Showtime slate with cinematic, high-stake originals and a return of some fan favorites. Starting with the agency. a new global espionage series from executive producer George Clooney starring Michael Fassbender, Richard Gere, Jeffrey Wright, and Jody Turner-Smith, which will premiere later this month. And that's followed by the return of Showtime's most successful franchise ever, Dexter, with a new origin story titled Dexter Original Sin.

Chris Mccarthy: Now, moving over to our premium tier, this quarter marks the beginning of a new, adrenalized Showtime slate with cinematic, high-stake originals and the return of some fan favorites.

Chris Mccarthy: starting with The Agency, a new global espionage series from executive producer George Clooney starring Michael Fassbender, Richard Gere, Jeffrey Wright and Jody Turner Smith, which will premiere later this month.

Chris Mccarthy: And that's followed by the return of Showtime's most successful franchise ever, Dexter, with a new origin story titled Dexter Original Sin.

Chris Mccarthy: And on cable, we also saw some impressive results. The Challenge, the series that created the reality competition genre, celebrated its 40th season with the highest share in franchise history, up 60% versus the previous season. This was followed by the MTV Video Music Awards, which attracted its biggest audience in four years on... And on social, it broke records as the number one most social entertainment telecast in television history, besting all entertainment and sports. And on The Daily Show, the return of Jon Stewart continues to pay off, having won our second primetime Emmy in a row. And on Monday nights with John of the Helm, The Daily Show remains the number one late night show across linear and social.

And on cable, we also saw some impressive results.

Chris Mccarthy: The Challenge, the series that created the reality competition genre, celebrated its 40th season with the highest share in franchise history, up 60% versus the previous season.

Chris Mccarthy: This was followed by the MTV Video Music Awards, which attracted its biggest audience in four years on Linear. And on social, it broke records as the number one most social entertainment telecast in television history, besting all entertainment and sports.

Chris Mccarthy: And it's working hard for us on Paramount+, with engagement up 10x. And John's not going anywhere. As we just announced, he's extended a stay through 2025.

Chris Mccarthy: And John's not going anywhere. As we just announced, he's extended a stay through 2025.

Chris Mccarthy: And to continue our momentum, this Sunday, Yellowstone, one of the most eagerly anticipated shows of the year, will return on the Paramount Network in the U.S. and internationally on Paramount+, where it's been the number one start driver and the number one engagement driver for the full year to date.

Chris Mccarthy: And to continue our momentum, this Sunday, Yellowstone, one of the most eagerly anticipated shows of the year, will return on the Paramount Network in the U.S.

Chris Mccarthy: and internationally on Paramount+, where it's been the number one star driver and the number one engagement driver for the full year to date.

George Cheeks: And now, I'll turn it over to George to walk us through CBS Entertainment, Sports & News. For CBS, fall means football and the launch of our new primetime schedule. The network's coming off a record-setting 23-24 NFL season. as well as a top-rated primetime schedule that includes the return of last year's number one show. In the first five weeks of this season, the NFL and CBS is averaging more than 20 million viewers. That's up 5% from last year. and streaming of the games on Paramount Plus is up over 50% year over year.

George Cheeks: And now I'll turn it over to George to walk us through CBS Entertainment Sports and News

George Cheeks: For CBS, fall means football and the launch of our new primetime schedule.

George Cheeks: The network's coming off a record-setting 23-24 NFL season, as well as a top-rated primetime schedule that includes the return of last year's number one show.

George Cheeks: In the first five weeks of this season, the NFL and CBS is averaging more than 20 million viewers. That's up 5% from last year.

George Cheeks: and streaming of the games on Paramount Plus is up over 50% year-over-year.

George Cheeks: CBS Primetime, which just launched its new season, is off to a great start. Tracker is once again the most watched series on TV. Matlock is the number one news show. And Georgie and Mandy, a spinoff of Young Sheldon, is the most watched comedy. And our shows are winning across platforms. Matt Locke's first episode reached more than 22 million viewers in its first 30 days. Tracker's season two premiere delivered over 15 million multiplatform viewers in just its first seven days. That's up 25% from its time period premiere last year.

George Cheeks: CBS Primetime, which just launched its new season, is off to a great start.

George Cheeks: Tracker's once again the most watched series on TV, Matlock is the number one new show, and Georgie and Mandy, a spin-off of Young Sheldon, is the most watched comedy.

And our shows are winning across platforms.

George Cheeks: Tracker's season 2 premiere delivered over 15 million multi-platform viewers in just its first seven days. That's up 25% from its time period premiere last year.

George Cheeks: Now turning to news, the total minutes watched on our CBS News 24-7 streaming network continues to grow, up 56% over 2023, and up 78% versus third quarter last year. We expanded and rebranded the platform with more live programming and the increased presence of key CBS News talent. All of this speaks to the collective power of broadcast and streaming, working together to aggregate more unduplicated viewership while optimizing the value and efficiency of our content investment.

George Cheeks: Now, turning to news, the total minutes watched on our CBS News 24-7 streaming network continues to grow, up 56% over 2023, and up 78% versus third quarter last year.

George Cheeks: We expanded and rebranded the platform with more live programming and the increased presence of key CBS News talent.

George Cheeks: All of this speaks to the collective power of broadcast and streaming, working together to aggregate more unduplicated viewership while optimizing the value and efficiency of our content investments.

George Cheeks: Our programming strategy remains laser-focused on entertainment, news, and sports that excel on both CBS and Paramount+.

Brian Robbins: Our programming strategy remains laser-focused on entertainment, news, and sports that excel on both CBS and Paramount+. Over to you, Brian.

Brian Robbins: Over to you, Bryan. On the Paramount Pictures front, at the end of the second quarter, A Quiet Place, day one, opened to nearly 100 million worldwide and set the franchise record for the biggest opening at the global box Today, the film has grossed $261 million worldwide. Transformers 1 also debuted as the first animated Transformers film in nearly four decades, grossing $127 million at the global box office to date. And most recently, the October release of Smile 2 from homegrown talent Parker Finn saw a record-breaking global premiere, out-earning its predecessors debut weekend. It also makes Smile 2 Paramount's fourth number one opening this year, after Mean Girls, Bob Marley, One Love, and If.

Brian Robbins: On the Paramount Pictures front, at the end of the second quarter, A Quiet Place Day One opened to nearly 100 million worldwide and set the franchise record for the biggest opening at the global box office.

To date, the film has grossed $261 million worldwide.

Brian Robbins: Transformers 1 also debuted as the first animated Transformers film in nearly four decades, grossing $127 million at the global box office to date.

Brian Robbins: And, most recently, the October release of Smile 2 from homegrown talent Parker Finn saw a record-breaking global premiere, out-earning its predecessor's debut weekend.

Brian Robbins: It also makes Smile 2 Paramount's fourth number one opening this year after Mean Girls, Bob Marley One Love, and If.

Brian Robbins: We're confident that the rest of Q4 will build on this momentum thanks to an impressive roster of upcoming releases, including, next up, Ridley Scott's Gladiator 2, one of the most anticipated films of the year with a phenomenal cast, including Paul Muscal, and Academy Award winner Denzel Washington. Early tracking and first reactions are generating optimism and excitement for the movie's release and award season process.

Brian Robbins: We're confident that the rest of Q4 will build on this momentum.

Brian Robbins: thanks to an impressive roster of upcoming releases including, next up, Ridley Scott's Gladiator 2, one of the most anticipated films of the year with a phenomenal cast including Paul Muscal and Academy Award winner Denzel Washington.

Brian Robbins: Early tracking and first reactions are generating optimism and excitement for the movie's release and award season prospects.

Brian Robbins: Now rounding out our diverse slate, we're excited to be bringing audiences the journalistic thriller September 5, which has been on the festival circuit generating awards buzz. Also the third installment of fan favorite, Sonic the Hedgehog, with Jim Carrey and the original cast reprising their roles. and then Better Man from the director of The Greatest Showman, Michael Gracie and based on the life and music of Robbie Williams. and looking ahead to 2025.

Brian Robbins: Now, rounding out our diverse slate, we're excited to be bringing audiences the journalistic thriller, September 5, which has been on the festival circuit, generating awards buzz. Also, the third installment of fan favorite, Sonica Hedgehog, with Jim Carrey and the original cast reprising their roles.

Brian Robbins: and then Better Man from the director of The Greatest Showman, Michael Gracie and based on the life and music of Robbie Williams.

Brian Robbins: We have a fantastic robust line Something for Everyone. That includes in 8th Mission Impossible, the reboot of the Naked Gun franchise starring Liam Neeson. New installments of beloved animated franchises like Smurfs and Spongebob, which is celebrating its 25th anniversary, and Running Man from director Edgar Wright and starring Glenn Powell, to name just a few. Taken together, all of our content reinforces that we have so much to be excited about in this period of evolution and transformation for our business and the industry. It is what continues to create value for our partners, investors, and the broader media landscape.

Brian Robbins: And looking ahead to 2025, we have a fantastic, robust lineup with something for everyone. That includes an 8th Mission Impossible, the reboot of the Naked Gun franchise starring Liam Neeson,

Brian Robbins: new installments of beloved animated franchises like Smurfs and Spongebob, which is celebrating its 25th anniversary and Running Man from director Edgar Wright and starring Glenn Powell to name just a few

Brian Robbins: Taken together, all of our content reinforces that we have so much to be excited about in this period of evolution and transformation for our business and the industry.

Brian Robbins: It is what continues to create value for our partners, investors, and the broader media landscape, both now and well into the future.

Brian Robbins: both now and well into the future.

Naveen Chopra: With that, let me turn it over to Naveen for more detail on our Q3 financials.

Speaker Change: With that, let me turn it over to Naveen for more detail on our Q3 financials. We'll then look forward to taking your questions.

Naveen Chopra: We'll then look forward to taking your questions. Thank you, Brian.

Naveen Chopra: Good morning, everyone. Q3 demonstrated the progress we've made in transforming Paramount for the future. We delivered adjusted EBITDA of $858 million in the quarter, up 20% year over year, reflecting significant improvement in our D2C business. which continues to deliver healthy top line growth and improved operating.

Thank you, Brian. Good morning, everyone.

Naveen Chopra: Q3 demonstrated the progress we've made in transforming Paramount for the future.

Naveen Chopra: We delivered adjusted OEBDA of $858 million in the quarter, up 20% year-over-year, reflecting significant improvement in our D2C business, which continues to deliver healthy top-line growth and improved operating leverage.

Naveen Chopra: As always, you'll find a comprehensive review of financial results in our press For today's call, I'll focus on a few areas of note.

Naveen Chopra: As always, you'll find a comprehensive review of financial results in our press release.

Naveen Chopra: Starting with Advertising. Total company advertising grew 2%, powered by direct-to-consumer, which delivered strong growth of 18%, an acceleration versus the 16% growth we saw in Q2. D2C advertising growth was driven by a double-digit increase in sold impressions and higher CPM.

Naveen Chopra: For today's call, I'll focus on a few areas of note, starting with advertising.

Naveen Chopra: Total company advertising grew 2%, powered by direct-to-consumer, which delivered strong growth of 18%, an acceleration versus the 16% growth we saw in Q2.

Naveen Chopra: D-to-C advertising growth was driven by a double-digit increase in sold impressions and higher CPMs.

Naveen Chopra: And these trends have continued in Q4, where we expect another quarter of double-digit B2C advertising. In TV media, advertising revenue declined 2%, an improvement versus last quarter, reflecting the return of football and higher political success. Similar to last quarter, international advertising benefited from the recognition of revenue that was underreported by an international sales partner in prior periods.

Naveen Chopra: And these trends have continued in Q4, where we expect another quarter of double-digit B2C advertising growth.

Naveen Chopra: In TV media, advertising revenue declined 2%, an improvement versus last quarter, reflecting the return of football and higher political spend.

Naveen Chopra: Similar to last quarter, international advertising benefited from the recognition of revenue that was underreported by an international sales partner in prior periods.

Naveen Chopra: Looking ahead, we expect TV media advertising growth in Q4. to be similar to the reported growth rate in Q3. The Q4 growth will benefit from record political spend. But we'll also have less sports inventory compared to the prior year. Our forecast for Q4 does not assume any additional revenue true ups from a third party underreporting.

Looking ahead, we expect TV media advertising growth in Q4.

to be similar to the reported growth rate in Q3.

In Q4, growth will benefit from record political spend.

Naveen Chopra: But we'll also have less sports inventory compared to the prior year.

Naveen Chopra: Our forecast for Q4 does not assume any additional revenue true-ups from third-party underreporting.

Naveen Chopra: Next, let me turn to affiliate and subscription revenue, which declined 1% in Q3.

Naveen Chopra: Next, let me turn to affiliate and subscription revenue, which declined 1% in Q3. Now, as a reminder, last year's third quarter included Showtime pay-per-view events that did not recur this year as we exited Showtime Sports at the end of 2023.

Naveen Chopra: Now, as a reminder, last year's third quarter included Showtime pay-per-view events that did not recur this year as we exited Showtime Sports at the end of 2023. This comparison reduced the Q3 growth rate by 270 basis points. Absent the impact of Showtime pay-per-view, affiliate and subscription revenue increased 1%, with growth in direct-to-consumer more than offsetting declines in linear. In the TV media segment, affiliate revenue declined 6.6% year over year, reflecting ecosystem trends and the Showtime pay-per-view headwind I just mentioned. D2C subscription revenue grew 6.8% in the quarter. with Paramount Plus subscription revenue up 27% year over year.

Naveen Chopra: This comparison reduced the Q3 growth rate by 270 basis points.

Naveen Chopra: Absent the impact of Showtime pay-per-view, affiliate and subscription revenue increased 1%, with growth in direct-to-consumer more than offsetting declines in linear.

Naveen Chopra: In the TV media segment, affiliate revenue declined 6.6% year-over-year, reflecting ecosystem trends and the Showtime pay-per-view headwind I just mentioned.

Naveen Chopra: D to C subscription revenue grew 6.8% in the quarter, with Paramount Plus subscription revenue up 27% year over year.

Naveen Chopra: Paramount Plus added 3.5 million subscribers in the quarter, reaching 72 million subscribers overall. Subscriber trends benefited from the expansion of an international hard bundle deal and the return of NFL and college football, new originals, and theatrical releases. And in Q4, we expect continued subscriber growth at Paramount+, driven by a strong slate of originals and the CBS fall schedule.

Naveen Chopra: Paramount Plus added 3.5 million subscribers in the quarter, reaching 72 million subscribers overall.

Naveen Chopra: Subscriber trends benefited from the expansion of an international hard bundle deal and the return of NFL and college football, new originals, and theatrical releases.

Naveen Chopra: And in Q4, we expect continued subscriber growth at Paramount+, driven by a strong slate of originals and the CBS fall schedule.

Naveen Chopra: Unlike Q3, we do not expect to add new hard bundle partnerships in Q4. Global ARPU for Paramount Plus grew 11% in the quarter. Our pre-growth was tempered by the lapping of last year's price increase and a greater than expected shift in the mix of our subscriber base toward our essential tier and hard bundle Additionally, the price change we announced in August of 2024 will take some time to be reflected in ARPU due to the grandfathering of existing essential tier subscribers. And these dynamics will continue to influence ARPU growth in Q4. The combination of continued healthy revenue growth and expense discipline in Q3 helped deliver our second consecutive quarter of D to C profitability.

Naveen Chopra: Unlike Q3, we do not expect to add new hard bundle partnerships in Q4.

Speaker Change: Robbins, Robert Bakish, Robert Chopra, Jaime Morris, George Cheeks, Naveen Chopra, Jaime Morris, Chris McCarthy.

Global ARPU for Paramount Plus grew 11% in the quarter.

Speaker Change: Our pre-growth was tempered by the lapping of last year's price increase and a greater than expected shift in the mix of our subscriber base toward our essential tier and hard bundle subscribers.

Speaker Change: Additionally, the price change we announced in August of 2024 will take some time to be reflected in ARPU due to the grandfathering of existing essential tier subscribers.

Speaker Change: And these dynamics will continue to influence ARPU growth in Q4.

Speaker Change: The combination of continued healthy revenue growth and expense discipline in Q3 helped deliver our second consecutive quarter of D-to-C profitability.

Naveen Chopra: In Q4, we expect continued top line growth. However, the timing of content marketing spend will result in a quarterly loss for the D2C segment. That said, we like the trajectory of the business over the last few quarters, and believe we're well positioned to reach Paramount Plus domestic profitability in 2025.

Speaker Change: In Q4, we expect continued top-line growth. However, the timing of content marketing spend will result in a quarterly loss for the D2C segment.

Speaker Change: That said, we like the trajectory of the business over the last few quarters and believe we're well positioned to reach Paramount Plus domestic profitability in 2025.

Naveen Chopra: Next, I'll touch on license. Licensing and other revenue declined 9% in the quarter, primarily reflecting a lower volume of licensing in the secondary market and lower home entertainment revenue. Now, as I've previously noted, licensing revenue can be fairly uneven from quarter to quarter.

Next, I'll touch on licensing.

Speaker Change: Licensing and other revenue declined 9% in the quarter, primarily reflecting a lower volume of licensing in the secondary market and lower home entertainment revenues.

Speaker Change: Now, as I've previously noted, licensing revenue can be fairly uneven from quarter to quarter.

Naveen Chopra: For the full year 2024, we expect licensing revenue to decline relative to 2023. More than half the year-over-year decline will come from made-for-third-party production. And these productions are strategically valuable, but the scale of our business has been impacted by the decision to steer more content to internal platforms. A smaller part of the year-over-year decline in licensing is related to our second run and library licensing activity. partially reflecting lingering strike impact on the business. Even though we'll benefit from the return of the CBS fall slate in Q4, it will take longer than expected to return to our pre-strike level of output.

Speaker Change: And for the full year 2024, we expect licensing revenue to decline relative to 2023.

Speaker Change: More than half the year-over-year decline will come from made-for-third-party productions.

Speaker Change: And these productions are strategically valuable, but the scale of our business has been impacted by the decision to steer more content to internal platforms.

Speaker Change: A smaller part of the year-over-year decline in licensing is related to our second run and library licensing activity.

partially reflecting lingering strike impact on the business.

Speaker Change: Even though we'll benefit from the return of the CBS false slate in Q4, it will take longer than expected to return to our pre-strike level of output.

Naveen Chopra: Turning to the balance sheet, in Q3 we delivered $214 million of free cash flow and reduced leverage to 3.8 times. Free cash flow in Q4 will be negative given the timing of content spend and the headwind of approximately $150 million of cash restructuring payments. However, this shouldn't negatively impact leverage, as we expect to receive nearly $500 million of proceeds from the Viacom 18 transaction. which is expected to close this quarter.

Speaker Change: Turning to the balance sheet, in Q3 we delivered $214 million of free cash flow and reduced leverage to 3.8 times.

Speaker Change: Free cash flow in Q4 will be negative given the timing of content spend.

Speaker Change: However, this shouldn't negatively impact leverage as we expect to receive nearly 500 million of proceeds from the Viacom 18 transaction, which is expected to close this quarter.

Naveen Chopra: Putting it all together, we remain on track to achieve our key financial goals for 2020. That includes significant growth in total company Oivida, enabled by the progress in D2C profitability you've seen over the last few quarters, and the execution of cost savings initiatives across Similarly, our expectations for full year free cash flow growth remain unchanged. Overall, I think 2024 will demonstrate meaningful progress in the ongoing transition of Paramount, encompassing streaming growth, enhanced cost efficiency, and of course, continued investment in our renowned content portfolio.

Speaker Change: Putting it all together, we remain on track to achieve our key financial goals for 2024.

Speaker Change: That includes significant growth in total company OEBDA, enabled by the progress in D2C profitability you've seen over the last few quarters, and the execution of cost savings initiatives across the company.

Speaker Change: Similarly, our expectations for full year free cash flow growth remain unchanged.

Speaker Change: Overall, I think 2024 will demonstrate meaningful progress in the ongoing transition of Paramount, encompassing streaming growth, enhanced cost efficiency, and of course, continued investment in our renowned content portfolio.

Operator: With that, operator, please open the line for questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When the parent asks your question, please ensure your phone is unmuted locally. We ask that you please limit yourself to one question.

With that, operator, please open the line for questions.

Ben Swinburne: Our first question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead.

Speaker Change: Our first question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead.

Ben Swinburne: Good morning. Bryan, you talked about being deliberate, given the complexity around direct-to-consumer and partnerships. I'm just wondering if you could talk a little bit more, now that you guys have been working on it, as to sort of what you're solving for, what are the key variables you're looking for, what would lead the company to kind of pull the trigger on either a partnership or a change in how you're kind of working internationally? I think that's been kind of one of your focus areas in streaming.

Good morning.

Speaker Change: Ryan, you talked about being deliberate, given the complexity around direct-to-consumer and partnerships. I'm just wondering if you could talk a little bit more, now that you guys have been working on it, as to sort of what you're solving for, what are the key variables you're looking for, what would lead the company to kind of pull the trigger on.

Speaker Change: either a partnership or a change in how you're kind of working internationally. I think that's been kind of one of your focus areas in streaming. And then, you know, Naveen, it's been, I think, almost a year since you talked about domestic streaming profitability next year.

Ben Swinburne: And then, you know, Naveen, it's been, I think, almost a year since you talked about domestic streaming profitability next year. Given the progress we've seen this year and the cost action you've taken, how far away are you from overall D2C profitability? Any way to update us and dimensionalize the international versus domestic D2C situation as we look at 2025 would be helpful.

Speaker Change: Given the progress we've seen this year and the cost action you've taken,

Speaker Change: you know, how far away are you from overall D2C profitability? Any way to kind of update us and dimensionalize sort of the international versus domestic D2C situation as we look at 25 would be helpful. Thank you guys.

Ben Swinburne: Thank you, guys.

Ben Swinburne: Hey, Ben, how you doing? This is Chris.

Chris Mccarthy: I'll take your first part of the question, and then I'll pass to Naveen for the second part of that. First, let me start by saying that we're very proud of the success that we've had with Paramount+. This quarter saw revenue growth up 27%. It's our second quarter of profitability. And for 2025, we're on track for full year domestic profitability. So we feel good about our position and our ability to remain a standalone.

Speaker Change: Hey Ben, how are you doing? This is Chris. I'll take your first part of your question and then I'll pass to Naveen for the second part of that.

Speaker Change: First, let me start by saying that we're very proud of the success that we've had with Paramount Plus. This quarter saw revenue growth up 27%. It's our second quarter of profitability. And for 2025, we're on track for full-year domestic profitability.

Speaker Change: So, we feel good about our position and our ability to remain a stand alone. Now, that being said, you can absolutely count on us to be opportunistic.

Chris Mccarthy: Now, that being said, you can absolutely count on us to be opportunistic. We're looking at partnerships from a strategic lens to drive more value. And you can be sure that in deciding that, we'll take key factors into consideration, but the ultimate value will be, is this going to drive increased value for our business today, our consumers, and our investors? But as it stands today, we have our momentum driven by our strategy, our execution, and are driven by our hit content. And so we feel good about our position as a standalone, and we'll continue to look for opportunities.

Speaker Change: We're looking at partnerships from a strategic lens to drive more value. And you can be sure that in deciding that, we'll take key factors into consideration, but the ultimate value will be, is this going to drive increased value for our business today, our consumers, and our investors?

Speaker Change: But as it stands today, we have our momentum driven by our strategy, our execution, and our driven by our hit content. And so we feel good about our position as a standalone, and we'll continue to look for opportunities.

Naveen Chopra: Naveen? Great. Thanks, Chris.

Naveen Chopra: And hey, Ben. With regard to your question on D2C profitability in 2025, as you said, we've made tremendous progress this year. Chris mentioned some of the stats, and I think it's fair to say that progress has been really multidimensional between subscriber growth, improvements in ARPU, strong digital advertising growth, and, by the way, some real efficiency improvements on the marketing side of the economy. So, I think we're well set up for 2025. And as you heard us say, we do continue to expect the business to get to domestic profitability next year. In terms of how that translates to the segment as a whole, I'd note a few things.

Naveen?

Great. Thanks Chris and hey Ben.

Speaker Change: With regard to your question on D to C profitability in 25, as you said, we've made tremendous progress this year. Chris mentioned some of the stats.

Speaker Change: And I think it's fair to say that progress has been really multidimensional between subscriber growth, improvements in ARPU, strong digital advertising growth, and, by the way, some real efficiency improvements on the marketing side of the equation.

Speaker Change: So, I think we're well set up for 2025, and as you heard us say, we do continue to expect the business to get to domestic profitability next year.

Speaker Change: In terms of how that translates to the segment as a whole, I'd note a few things. First, domestic, we do expect to be profitable next year.

Naveen Chopra: First, domestic, we do expect to be profitable next year. Pluto is already a profitable business. And so, the real variable is what the P&L for the Paramount Plus international business looks like. And I've generally described that as tracking somewhere in the sort of 12 to 18 months behind the domestic business, just given the relative maturity and the timing of when we launched internationally versus domestic. And I think that's still the right way to think about the business as a whole. And obviously, we'll keep you updated on progress as we continue to move down that path.

Speaker Change: Pluto is already a profitable business. And so the real variable is what the P&L for the Paramount Plus international business looks like.

Speaker Change: And I've generally described that as tracking somewhere in the sort of 12 to 18 months behind the domestic business Just given the the relative maturity and the timing of when we launched internationally versus domestic

Speaker Change: and I think that's still the the right way to to think about the business as a whole and obviously we'll keep you updated on progress as we continue to move down that path.

Bryan Kraft: Thanks Ben. Operator, next question.

Bryan Kraft: The next question goes to Bryan Kraft of Deutsche Bank. Bryan, please go ahead.

Thanks Ben. Operator, next question?

Bryan Kraft: Oh, thanks.

Bryan Kraft: Good morning. I guess the last answer, Naveen, was a good segue to my question, which was, you've been making various moves in international markets, but I think you've also been reviewing the strategy on a market-by-market basis. So, I wanted to ask if, at this point, there is a clear path forward yet for Paramount Plus in international markets, and if so, if you could talk about what that looks like and how it's differed from the approach up until now.

Oh, thanks. Good morning.

Speaker Change: The last answer, Naveen, was a good segue to my question, which was, you've been making various moves in international markets, but I think you've also been reviewing the strategy on a market-by-market basis. So I wanted to ask if, at this point, there is a clear path forward yet for Paramount+.

Speaker Change: in international markets, and if so, if you could talk about what that looks like and how it's differed from the approach up until now.

Bryan Kraft: And then, just a housekeeping question, Naveen, and sorry if I missed it, but would you be able to quantify for us the impact of the revenue for prior period international ad sales under that partner underreporting? Thank you.

Speaker Change: And then just a housekeeping question, Naveen, and sorry if I missed it, but would you be able to quantify for us the impact of the revenue for prior period international ad sales under that partner under reporting? Thank you.

Chris Mccarthy: Hey, Bryan, how you doing? This is Chris. Listen, let me start by saying we think it is very important to globally monetize our content in the widest possible basis, and our success today really proves that out. Now, we're taking a market-to-market approach when we're looking through the lens of how do we drive the most value. In some cases, that'll be an owned and operated situation where we control. In other cases, it'll be a hard bundle with a market leader. And in other cases, it may make more sense for us to really go in a license.

Thank you.

Chris Mccarthy: Hey Brian, how you doing? This is Chris. Listen, let me start by saying we think it is very important to globally monetize our content in the widest possible basis, and our success to date really proves that out.

Chris Mccarthy: Now, we're taking a market-to-market approach when we're looking through the lens of how do we drive the most value. In some cases, that'll be an owned and operated situation where we control. In other cases, it'll be a hard bundle with a market leader.

Chris Mccarthy: And in other cases, it may make more sense for us to really go in a licensing model.

Chris Mccarthy: But you can rest assured our goal here is to maximize the value for our hit content and look at all opportunities very opportunistically through that lens.

Naveen Chopra: But you can rest assured our goal here is to maximize the value for our hit content and look at all opportunities very opportunistically through that lens. And now I'll pass to Naveen for the second half of that.

Naveen Chopra: And now I'll pass to Naveen for the second half. Yeah. Brian, would just like to your question on the size of the underreported revenue in Q3. It is a relatively important factor in the year-over-year trend for international advertising, similar in magnitude to Q2, actually I think a little larger in magnitude in Q3 versus Q2. You know, I'd size it in the call it plus or minus $50 million range. And importantly, as I said in our prepared remarks, our forecast for next quarter assumes that there is no further true up required due to the underreporting.

yeah

in Q3.

year-over-year trend for international advertising.

Naveen Chopra: Similar in magnitude to Q2, actually I think a little larger in magnitude in Q3 versus Q2. You know, I'd size it in the, call it plus or minus 50 million range.

Naveen Chopra: And, importantly, as I said in our prepared remarks, our forecast for next quarter assumes that there is no further true-up required due to the underreporting.

Naveen Chopra: Thanks, Brian.

Operator: Operator, next question, please.

Rich Greenfield: The next question goes to Rich Greenfield of Light Shed Partners. Rich, please go ahead.

Thanks Brian. Operator, next question please.

Speaker Change: The next question goes to Rich Goodfield of Lightshed Partners. Rich please go ahead.

Rich Greenfield: Hi, thanks for taking the question. I've got a couple. First on Nielsen. I think you dropped, uh, I think it's been, you know, now over a month, maybe it's been five weeks. I think the last time you had an impasse, it was only like 14 or 15 days. was, you know, I think there's been a lot of speculation in the market that you've saved or you're that you're in the run rate savings are hundreds of millions of dollars on the cost side.

Rich Goodfield: Hi, thanks for taking the question. I've got a couple. First on Nielsen, I think you dropped I think it's been you know now over a month. Maybe it's been five weeks I think the last time you had an impasse it was only like 14 or 15 days

Rich Goodfield: I think there's been a lot of speculation in the market that the run rate savings are hundreds of millions of dollars on the cost side.

Rich Greenfield: But on the other side, I want to understand what's happening in terms of not being able to sell advertising against Nielsen data. Have you seen any material impact in q4 from not having Nielsen data and I guess related to any top advertisers that have left CBS or your cable networks because you can't sell against Nielsen. And I think you're using video lamp.

Rich Goodfield: But, on the other side, I want to understand what's happening in terms of not being able to sell advertising against Nielsen data. Have you seen any material impact in Q4 from not having Nielsen data, and I guess related to that, any top advertisers that have left?

Rich Goodfield: CBS or your cable networks because you can't sell against Nielsen and I think you're using video amp and then just maybe a housekeeping Question for for Chris or George I guess on the TV media side of the equation

George Cheeks: And then just maybe a housekeeping question for for Chris or George, I guess, on the TV media side of the equation. I think everyone's trying to understand sort of the potential of cost cutting longer term. Could you just give us a sense in TV media today? How many employees roughly do you still have in that division after all of the cost cuts that you've done to date?

Rich Goodfield: I think everyone's trying to understand sort of the potential of cost cutting longer term. Could you just give us a sense in TV media today, how many employees roughly do you still have in that division after all of the cost cuts that you've done to date? Thanks.

George Cheeks: Hey Rich, it's George, I'll take this. So, starting with Nielsen, I want to level set, this really is not about affordability. It's about getting the value we need for what we pay. And I think it's important to consider all of this in the context of the media industry. I mean, as we all know, linear audiences, especially basic cable linear, are declining and shifting to streaming. This, of course, is going to affect how we look at the appropriate spend here. I mean, for example, we wouldn't want the Nielsen fee for certain networks to be greater than the ad revenue those networks actually generate.

George Cheeks: Hey Rich, it's George. I'll take this. So starting with Nielsen, I want to level set, this really is not about affordability.

George Cheeks: It's about getting the value we need for what we pay. And I think it's important to consider all of this in the context of the media industry. I mean, as we all know, linear audiences, especially basic cable linear, are declining and shifting to streaming.

George Cheeks: This, of course, is going to affect how we look at the appropriate spend here. I mean, for example, we wouldn't want the Nielsen fee for certain networks to be greater than the ad revenue those networks actually generate.

George Cheeks: Now, as your point on impact, we haven't seen any adverse impact on ad revenue to date, and we don't expect a material impact in Q4, but I do want to be clear that we do recognize that Nielsen can be a valuable resource. It's just that the economics have to make sense for the business.

George Cheeks: Now, as to your point on impact, we haven't seen any adverse impact on ad revenue to date, and we don't expect a material impact in Q4, but I do want to be clear that we do recognize that Nielsen can be a valuable resource, it's just that the economics have to make sense for the business.

George Cheeks: Now, as to your second question, you know... setting.

George Cheeks: Right now the number is about 6000 plus in domestic and about 3000 plus Now, you have to remember that that all Big Sports Production Infrastructure, and our 27 local stations, which obviously requires a lot of employees as well. But, you know, as Chris mentioned before, we're very... ...organization.

Now, as to your second question, you know,

George Cheeks: cutting right now the numbers about 6,000 plus in domestic and about 3,000 plus

Now, you have to remember that that all...

Speaker Change: big sports production infrastructure, and our 27 local stations, which obviously requires a lot of employees as well. But, you know, as Chris mentioned before, we're very

George Cheeks: Is there a second question about TV media? Operator, next question, please.

organization.

Is there a second question about TV media?

Operator, next question please.

Steven Cahall: And the next question goes to Steven Cahall of Wells Fargo. Steven, please go ahead.

Speaker Change: The next question goes to Stephen Carhall of Wells Fargo. Stephen, please go ahead.

Steven Cahall: Thank you. So another one on streaming, the S-Core indicated that one of the parties might have been interested in a combination or even licensing Paramount+. And, you know, you've done bundles, we've seen a lot of bundles in the industry. I don't think we've actually seen any app integration or streaming integration deals. So I'm wondering how you think about that. You know, one of your peers also has a streaming product that has a lot of sports, has a good film library, seems like very strong customer overlap. So how do you think about the opportunities in streaming?

Stephen Carhall: Thank you. So another one on streaming, the S-Corps indicated that one of the parties might have been interested in a combination or even licensing Paramount Plus and, you know,

Stephen Carhall: You've done bundles, we've seen a lot of bundles in the industry. I don't think we've actually seen any app integration or streaming integration deals.

Speaker Change: So, I'm wondering how you think about that, you know, one of your peers also has a streaming product that has a lot of sports, has a good film library, seems like.

Steven Cahall: To go beyond just, you know, bundle deals and into something that's a little bit deeper from a consumer perspective.

Speaker Change: very strong customer overlap. So how do you think about the opportunities in streaming to go beyond just...

Speaker Change: you know, bundle deals and into something that's a little bit deeper from a consumer perspective.

Steven Cahall: And then Naveen, just just an accounting question. What's the method for allocating content costs like sports and series between DTC and TV media when the air on air on both, you know, you're growing revenue and subscribers so strongly at Paramount+. And you've given the domestic profitability guidance. So just wondering if there's a way for us to think about how content expense grows there, since it's shared between the two segments. Thank you.

Speaker Change: And then, Naveen, just an accounting question. What's the method for allocating content costs like sports and series between DTC and TV media when they air on both? You're growing revenue and subscribers so strongly at Paramount+.

Speaker Change: and you've given the domestic profitability guidance, so just wondering if there's a way for us to think about how content expense grows there since it's shared between the two segments. Thank you.

Chris Mccarthy: Hey, Steve, it's Chris.

Chris Mccarthy: I'll take the first part of that question, and then I'll pass to Naveen. You know, as we talked about, we are seeing real momentum at Paramount Plus and across Pluto. We've got great growth, second quarter profitability, and on track in 25. So we feel really good about the position and, frankly, our ability to remain as a standalone. Now, you talk about bundles, and, you know, we've got some great partnerships and some great bundles in the way of Walmart and with Delta Airlines. Now, these are ones that are very specific, that add incremental value to us.

Chris Mccarthy: Hey Steve, it's Chris. I'll take the first part of that question and then I'll pass to Naveen.

Naveen Chopra: You know, as we talked about, we are seeing real momentum at Paramount Plus and across Pluto. We've got great growth, second quarter profitability, and on track in 25, so we feel really good about the position and, frankly, our ability to remain as a standalone.

Naveen Chopra: Now you talk about bundles, and we've got some great partnerships and some great bundles in the way of Walmart and with Delta Airlines.

Chris Mccarthy: They bring new consumers and really enhance the value proposition from a total business perspective for us. Now, that being said, you can always count on us to be strategically looking through the lens of creating value. Now, part of that exercise is really to be opportunistic about both looking at things from a market-to-market perspective and from a broader partnership perspective. And in doing that, we ask ourselves, you know, is this the right market, or is there something better that we can get and something more value? And you can count on us to continue to do that.

Naveen Chopra: Now, that being said, you can always count on us to be strategically looking through the lens of creating value.

Naveen Chopra: Now, part of that exercise is really to be opportunistic about both looking at things from a market-to-market perspective and from a broader partnership perspective.

Naveen Chopra: And in doing that, we ask ourselves, you know, is this the right market or is there something better that we can get and something more value? And you can count on us to continue to do that. But as of today, there's no change. We feel great about where we are, and we feel really strong about the position moving forward. Naveen?

Chris Mccarthy: But as of today, there's no change. We feel great about where we are, and we feel really strong about the position moving forward.

Naveen Chopra: Naveen?

Naveen Chopra: Thanks Chris. Steve, the question regarding how we allocate the cost of content that is shared between our streaming business and our traditional linear businesses, I think there's a couple of important concepts to understand. Number one, it does differ somewhat based on the type of content, but it's all based on the principle that the allocations of that cost should reflect the relative value of the content windows that each of the platforms has rights to.

Naveen Chopra: Steve the question regarding how we allocate the cost of content that is shared between our streaming business in our traditional linear businesses I think theres a couple of important concepts to understand number one.

Speaker Change: Does differ somewhat based on the type of content.

Speaker Change: But it's all based on the principle that the allocations of that cost should reflect the relative value of the content windows that each of the platforms has rights to.

Naveen Chopra: So what that means is that effectively as more of the viewership moves to streaming, you will see more of the cost being allocated to streaming and moving away from linear. And that's certainly been reflected in the way that we do that allocation for sports, for movies, you know, library and the like. Thanks, Steve.

Speaker Change: So what that means is that effectively as more of the viewership moves to streaming you will see more of the cost being allocated to streaming and moving away from linear.

Speaker Change: And Thats certainly.

Speaker Change: Been reflected in the way that we do that allocation for sports for movies.

Speaker Change: <unk> library and the like.

Speaker Change: Thanks, Steve Operator next question.

Michael Morris: Operator, next question. The next question goes to Michael Morris of Guggenheim. Michael, please go ahead.

Speaker Change: The next question guys two Michael Morris of Guggenheim Michael. Please go ahead.

Michael Morris: Thank you. Good morning, and thanks for all the answers. I wanted to ask first about the DTC trends, and specifically, you said you were pleased with the response so far from charter customers.

Michael Morris: Thank you good morning, and thanks for all the answers.

Speaker Change: Wanted to ask first about.

Speaker Change: The DTC trends and specifically you said you were pleased with the response so far from charter customers I'm, hoping you can share a little bit more detail on whether the third quarter results reflected the full impact from that charter partnership at both television and it DTC and anything you can share about customer activation.

Michael Morris: I'm hoping you can share a little bit more detail on whether the third quarter results reflected the full impact from that charter partnership at both TV and DTC, and anything you can share about customer activation and any churn from charter subs who are already Paramount Plus subs, those types of things. I'd love to hear any additional detail you can share.

Speaker Change: And any churn from charter subs, who are already Paramount plus subs those types of things I'd love to hear any additional details you can share.

Naveen Chopra: And then secondly, it was a very strong EBITDA quarter, you know, growing 20% year-over-year, kind of begs the question whether we should expect any incremental cost in 4Q to maybe offset the strength that you had in the third quarter, or whether this outperformance kind of flows through to the full year.

Speaker Change: And then secondly.

Speaker Change: It was a very strong EBITDA quarter.

Speaker Change: <unk> growing 20% year over year.

It kind of begs the question, whether we should expect any incremental cost in <unk> to maybe offset the strength that you had in the third quarter weather. This outperformance kind of flows through to the full year. Thank you guys.

Naveen Chopra: Thank you, guys.

Naveen Chopra: Yeah, hey, Mike, it's Naveen. I'll take both of those. Starting with the question on third quarter sub growth, and specifically the impact of charter. So just zooming out a little bit, you know, the three and a half million subs that we added in the quarter, I'd note that there's contribution from both international and domestic, as I noted in prepared remarks international did have a new hard bundle that we signed. So that was an important contributor. And on the domestic side, we did see some sub growth coming out of the charter bundle. Though I would note that it's still relatively early in terms of time since the launch of that bundle.

Speaker Change: Yeah, Hey, Mike it's in the vein I'll I'll take both of those starting with the question on.

Speaker Change: Three third quarter sub growth.

Speaker Change: Specifically the impact of charter so.

Speaker Change: Zooming out a little bit.

Of the $3 5 million subs that we added in the quarter I would note that there is a contribution from both international and domestic as I noted in prepared remarks international did have a new hard bundle that we sign so that was.

An important contributor and on the domestic side.

Speaker Change: We did see some sub growth coming out of the charter bundle.

Speaker Change: I would note that its still relatively early in terms of.

Speaker Change: Time since the launch of that bundle and I expect the contribution will continue to grow over time that being said when we look at.

Naveen Chopra: And I expect the contribution will continue to grow over time. That being said, when we look at the first few months, if you will, we're actually quite pleased with the results, both in terms of the take up from charter subs, and the impact on direct sub acquisition. So we continue to like the trends there. Then moving to your second question on fourth quarter and how that is impacted by some of the overperformance in the third quarter. Let me give you sort of a big picture answer on that too. If you think about the third quarter, the overperformance was really driven by the D to C segment, which came in better than we expected.

The first few months if you will.

Speaker Change: We're actually quite pleased with the results both in terms of the take up from.

Speaker Change: From charter subs and the impact on direct sub acquisition. So we continue to like the trends there than.

Speaker Change: Then moving to your.

Speaker Change: Second question on fourth quarter.

And how that is.

Speaker Change: Impacted by some of the over performance in the third quarter.

Let me give you a sort of a.

Speaker Change: A big picture answer on that too if you think about the third quarter the.

Speaker Change: Over performance was really driven by the DTC segment, which came in better than we expected as I mentioned earlier, that's multi dimensional but in particular, we saw some real strength in marketing efficiency that we were able to realize in the quarter.

Naveen Chopra: As I mentioned earlier, that's multidimensional. But in particular, we saw some real strength in marketing efficiency that we were able to realize in the quarter. I would say that the restructuring work had a relatively modest impact in Q3, just given the timing of when those actions were taken. More of that benefit is going to be realized in Q4. So then if you think about Q4 specifically, there are some moving pieces that are probably worth calling out. First, some of the tailwinds. We will see more of that restructuring benefit that I mentioned. There will also be, as you would anticipate, some real strength in political advertising that will benefit Q4.

I would say that the restructuring work had a relatively modest impact in Q3, just given the timing of when those actions were taken more of that benefit is going to be.

Speaker Change: Realized in Q4. So then if you think about Q4, specifically there are some moving pieces that are probably worth calling out.

Speaker Change: First some of the tailwind.

Speaker Change: We will see more of that restructuring benefit that I mentioned.

There will also be as you would anticipate some real strength in political advertising that will benefit Q4, and Q4 tends to be relative to the first three quarters of the year the strongest quarter for advertising generally and so I think that will benefit us relative to Q3.

Naveen Chopra: And Q4 tends to be, relative to the first three quarters of the year, the strongest quarter for advertising generally. And so I think that will benefit us relative to Q3. There are a couple of headwinds to keep in mind. We will have higher content expenses in Q4 than we did in Q3, just given the timing of sports and some of the streaming originals. And as I mentioned, we do not expect to have any incremental. True Ups for past period under-reporting on those third-party advertising partnerships. And then there is some shift of marketing expense from Q3 into Q4.

Speaker Change: There are a couple of headwinds to keep in mind.

Speaker Change: We will have higher content expenses in Q4 than we did in Q3, just given the timing of <unk>.

Speaker Change: Sports and some of the streaming originals.

And as I mentioned, we do not expect to have any incremental.

Speaker Change: True ups for past period under reporting on those third party advertising partnerships and then there is some shift of marketing expense from Q3 into Q4.

Naveen Chopra: But when you put all of that together, I think the key takeaways for you should be that number one, the vast majority of the over performance that we saw in Q3, I do expect to flow through to the full year.

Speaker Change: But when you put all of that together I think the key takeaways for you should be that number one.

Speaker Change: The the vast majority of the over performance that we saw in Q3.

Speaker Change: I do expect to flow through to the full year and number two I think we're really well set up for 2025, particularly given the progress in D to C.

Naveen Chopra: And number two, I think we're really well set up for 2025, particularly given the progress in D2C and the significant improvements that we've made in profitability for that part of the Thanks, Mike.

Speaker Change: And the significant improvements that we've made in profitability for that part of the business.

Thanks, Mike Operator, we'll take one last question. Please.

Operator: Operator, we'll take one last question, please. Thank you.

Speaker Change: Thank you the last question guys you Michael.

Michael Ng: The last question goes to Michael Ng of Goldman Sachs. Michael, please go ahead.

Speaker Change: Goldman Sachs. Michael Please go ahead.

Michael Ng: Hey, good morning. Thank you for squeezing me in. I wanted to just follow up on the last question around DTC efficiencies. You know, Naveen talked about the marketing efficiencies. I was wondering if you could just expand on that a little bit in DTC, because obviously DTC FX was an area of positive surprise. And then relatedly, I was wondering if any of the programming charges taken earlier in the year had any potential benefit to cost amortization for DTC in the quarter as well. Thank you.

Michael: Hey, good morning. Thank you for squeezing me in I wanted to just follow up on.

Michael: The last question around DTC efficiencies.

Speaker Change: Nadeem you talked about the marketing efficiencies I was wondering if you could.

Speaker Change: Just expand on that a little bit in DTC, because obviously <unk> was an area of positive surprise.

Speaker Change: And then Relatedly I was wondering if any of the programming charges taken earlier in the year.

Speaker Change: Had any potential benefit to cost amortization for DTC.

In the quarter as well thank you.

Michael Ng: Yeah, sure.

Speaker Change: Yes, sure Hi, Mike.

Naveen Chopra: Hi, Mike. I'll, I'll take both of those. You know, the D to C improvement that we saw, as I mentioned, did benefit from marketing efficiency. But there's kind of a bigger story behind that, which relates to the composition of our subscriber base. You know, we've talked about for some time now the importance of having a diverse subscriber base that spans multiple channels, the direct channel, partner-based distribution on platforms like Amazon, Roku, Apple, hard bundles, both, you know, domestically and internationally, commercial bundles like what we have with with Walmart Plus. And when you have that sort of go-to-market approach, there are some real benefits with respect to acquisition costs and churn.

Speaker Change: I'll take both of those.

Speaker Change: You know the.

Speaker Change: The D to C improvement that we saw as I mentioned did benefit from marketing efficiency, but there's kind of a bigger story behind that which which relates to the composition of our subscriber base. We've talked about for some time now the importance of having.

Speaker Change: A diverse subscriber base.

Speaker Change: That spans multiple channels the direct channel.

Speaker Change: Partner base distribution on platforms like Amazon Roku, Apple hard bundles both domestically.

Speaker Change: Domestically and internationally.

Speaker Change: Commercial bundles like what we have with Walmart plus.

And.

Speaker Change: When you have that sort of.

Speaker Change: Go to market approach there are some real benefit.

With respect to acquisition costs and churn and I think we're starting to see those fall.

Naveen Chopra: And I think we're starting to see those fall into the P&L of the business, which is why I called out the marketing efficiencies. That is enabled by the fact that we have these channels where we're able to acquire and keep subscribers very, very efficiently. And that's really flowing through to the bottom line. And then with respect to your second question regarding programming charges, you know, yes, that does obviously have some and more benefit in future periods. But I think we're really focused on driving the top line growth, continued sub growth, ARPU growth, and capturing these improvements in marketing and churn reduction as a way of continuing to drive the business toward profit.

Speaker Change: Fall into the P&L of the business.

Speaker Change: Which is why I called out the marketing efficiencies that is enabled by the fact that we have.

Speaker Change: <unk>.

Speaker Change: These channels, where we're able to acquire and keep subscribers very very efficiently.

Speaker Change: And that's that's really flowing through.

Speaker Change: The bottom line.

Speaker Change: And then with respect to your second question regarding programming charges.

Speaker Change: Yes that does obviously have some and more benefit in future periods.

Speaker Change: But I think we're really focused on driving the topline growth.

Speaker Change: Continued sub growth <unk> growth and capturing these improvements in marketing and churn reduction as a way of continuing to drive the business towards profitability.

Naveen Chopra: Thanks, Naveen.

Speaker Change: Thanks, Steve This is Bryan and on behalf of my fellow co Ceos, we'd like to thank you all for joining the call today, we had another very strong quarter with continued strength in stream in improving momentum in advertising and meaningful progress in making the business more efficient all.

Brian Robbins: This is Brian. And on behalf of my fellow co-CEOs, we'd like to thank you all for joining the call today. We had another very strong quarter with continued strength in streaming, improving momentum in advertising, and meaningful progress in making the business more efficient, all of which sets us up well for the future. All at the same time, while we've been doing what we do best, which is making some of the biggest and broadest hit TV series and blockbuster films, thanks to our tremendously talented teams and creative partners.

Speaker Change: Of which sets us up well for the future all at the same time, while we've been doing what we do best which is making some of the biggest and broadest hit television series and blockbuster films. Thanks to our tremendously talented teams and creative partners. We look forward to updating you all on our progress again.

Brian Robbins: We look forward to updating you all on our progress again soon. Thank you and have a great day.

Speaker Change: Thank you and have a great day.

Operator: Thank you.

Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.

Operator: This now concludes today's call. Thank you for joining. You may now disconnect your line.