Q4 2024 Paramount Global Earnings Call
Don't give much better top down.
Days like this we don't Miss Neville.
Hello, everyone at the Paramount label was key for 'twenty 'twenty four earnings conference call will begin in one minutes time if.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
Thank you for your patience.
[music].
Nadia: Good afternoon, My name is Nadia and I'll be the conference operator today.
Speaker Change: At this time I would like to welcome everyone to Pan out Labor was key for 'twenty 'twenty four adding a conference call.
Nadia: At this time all lines have been muted to prevent any background noise.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session.
Speaker Change: He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star two.
Speaker Change: In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.
Jamie Morris: At this time I would now like to turn the call over to Jamie Morris, Pamela <unk> EVP Investor Relations.
Speaker Change: Now begin your conference calls.
Speaker Change: Good afternoon, everyone. Thank you for taking the time to join US for our fourth quarter 2024 earnings call. Joining me for today's discussion are Paramount co Ceos, Brian Robbins, Chris Mccarthy, and George Cheeks, and our CFO Naveen Chopra. Please.
Speaker Change: Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.
Speaker Change: Before we start 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 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.
Brian Robbins: Website, now I will turn the call over to Brian.
Brian Robbins: Good afternoon, everyone. Thanks for joining us for our fourth quarter and full year 2024 earnings call.
Brian Robbins: Brian Robbins and I'm joined here by my fellow Ceos, George sheets, and Chris Mccarthy.
Brian Robbins: First we want to say that our thoughts are with all those who have been impacted by the tragic fires. We will continue to support our teams and partners impacted for what we hope will be a rapid recovery process now.
Brian Robbins: Now turning to our financials. We are proud of the results we achieved for the full year, which reflect the progress we have made since becoming co Ceos 'twenty 'twenty four demonstrated meaningful progress against our long term goals, including significant improvement in D to C profitability driven by continued.
Brian Robbins: Topline growth powered by one of the strongest content fleets in the industry.
Brian Robbins: All while strengthening our balance sheet.
Chris Mccarthy: Now, let me turn it over to Chris to provide more details on the year.
Chris: Thanks, Brian and good afternoon, everyone, let's start with the headlines 2024 was a transformative year and marks a significant turning point for Paramount.
Chris: Total company adjusted OIBDA returned to growth up 30% year over year to $3 $1 billion we.
Chris: We improved net leverage one three turns.
Chris: And we generated $489 million of free cash flow up significantly year over year and the highest in four years.
Chris: These results were driven by a success of our D to C segment.
Chris: At Paramount plus we saw growth in subscribers record engagement and an impressive growth in revenue.
Chris: We added 10 million new subscribers for the year driven by a very strong Q4 with $5 6 million new subscribers the strongest quarter in sub growth in two years.
Chris: In Q4 engagement sword.
Chris: Global watch time per user improved 20% driving a measurable improvement in churn of over 100 basis points year over year.
Chris: As a result revenues increased significantly up 33% for the year.
This success was powered by a very strong content slate with a mix of big returning hits and the launch of some new ones.
Chris: Plus reached a new high ranking as the number two domestic as spot for hours watched across all original series up from number six this time last year.
Chris: Poodle also had a record year for global watch time up 8% year over year.
And 16% in Q4 showing strong momentum.
Chris: Taken together D to C generated significant improvement in profitability of $1.2 billion for the year, which gives us great confidence Paramount plus will achieve full year domestic profitability for 2025.
Chris: At the same time, we continue to do what we do best produce some of the biggest broadest blockbuster films and hit television series across every platform.
Chris: And now I'll toss to George to provide an update on distribution Nielsen and agile.
George Cheeks: Thanks, Chris.
George Cheeks: 24, we negotiated a number of deals with our longstanding distribution partners in Q4, we renewed our deal with Comcast and just last week, we renewed our distribution agreement with Youtube TV.
George Cheeks: Our track record in 2024 reinforces the value proposition of our content with mass hit series Award, winning news and a top tier sports portfolio.
George Cheeks: In addition were very pleased to have closed a multiyear deal with Nielsen.
George Cheeks: Paramount is committed to addressing Tvs cross platform future for the benefit of all stakeholders, including our brand and agency partners. This is a top priority for us.
George Cheeks: Now turning to advertising we.
George Cheeks: We continue to proactively transitioned the business from linear to digital as demonstrated by healthy growth in DTC AD revenue, which increased 18% in 2024.
George Cheeks: With one of the largest addressable footprint in the U S marketplace Paramount delivers premium high engagement video for advertisers, who are increasingly focused on quality and impact when choosing where to spend their AD dollars. Additionally, we're growing the demand side of the equation over.
George Cheeks: Over the past couple of years, we've expanded our client base to tens of thousands of small and mid sized businesses that are now advertising with Paramount every quarter.
George Cheeks: We're also investing in data technology, as well as identity frameworks, which expand our attribution capabilities.
George Cheeks: These product enhancements will set us up to compete more effectively over time for a larger share of social media budgets Brian.
Brian Robbins: Thanks, George in quarter four of Paramount Pictures had a very active release slate with a smile to gladiator to Sonic the Hedgehog and September five in total the studio growth nearly $900 million at the global box office in Q4 with a lot of momentum as we continue with our 2025 fleet.
Brian Robbins: Across the business film television and streaming we continue to focus on franchise growth and management and capitalizing on Paramount's Rich library and IP, we saw our strategy of capitalizing on our franchises pay off most recently with Sonic the Hedgehog, which continues to deliver approach.
Brian Robbins: Nearly $500 million at the worldwide box office. This makes sonic three the highest grossing film in the franchise and on its way to be one of the 10, most profitable Paramount pictures releases of the last decade across its three installments. The Sonic the Hedgehog series has now exceeded $1 2 billion.
Brian Robbins: At the global box office.
As part of this franchise strategy, our spin off series Knuckles on Paramount plus drummed up fan excitement it expanded our audience on streaming the series debuted last spring. It's the number one Paramount plus original kids and families series ever in terms of both active subscribers.
Brian Robbins: And ours.
Brian Robbins: This is just one example of how we're implementing our multiplatform franchise model and we are executing our vision across the Africa series and streaming with franchises like Yellowstone N C. I S. They're spinoffs and prequels and Paw patrol just to name a few our approach to franchise management.
Brian Robbins: As a long term view cultivating active fan bases and building audiences over time and one that continues to pay dividends.
Brian Robbins: We're excited for a dynamic and robust twenty-five fleet that includes the highly anticipated mission impossible. The final reckoning and original live action comedy coming from the creators of South Park and Kendrick Lamar Edgar.
Chris: And go right to the running man starring Lynne Powell and for families and animated Smiths film with Rihanna voicing Smurfit and an all new Spongebob Squarepants film to close out the year Chris.
Brian Robbins: Chris.
Chris Mccarthy: Thanks, Brian, let's start with Paramount plus where our strategy of fewer bigger breakthrough series with Big movie stars is setting us apart in a crowded space starts.
Chris Mccarthy: Starting with the series that everyone is talking about land men, which broke records as the most watched Paramount series ever.
Chris Mccarthy: Plus the addition of two of our biggest returning hits Tulsa King and Linux.
Chris Mccarthy: Both of which are up significantly versus the previous season.
Chris Mccarthy: In Q4, Landman lineups and Tulsa King all scored as top 10 original series across all asphalt services in the U S.
Chris Mccarthy: We also launched two new Showtime series, which scored.
Chris Mccarthy: The extra original thing was the most streamed global Showtime series ever.
Chris Mccarthy: And the agency was the most streamed new series ever.
Chris Mccarthy: Taken together Paramount plus was able to achieve a new high ranking as the number two domestic as spot for hours watched across all original series in Q4.
Chris Mccarthy: Now that's an amazing achievement, considering the volume of originals, we produce versus our peers, demonstrating our proven ability to deliver big broad hit content that is also highly efficient.
Chris Mccarthy: Now all of these shows are performing exceptionally well at Paramount plus internationally, along with Yellowstone and South Park, which we have exclusively for <unk>.
Chris Mccarthy: Youll soon is having another record year ranking as the number one star driver and the number one engagement driver and South Park continues to rank as a top five star driver and the number two engagement driver.
Chris Mccarthy: Now moving to 2025, we've already kicked off another exciting slate on Valentine's day, we launched one of the most eagerly anticipated shows of the year with season three of yellow jacket, which is up over 50% versus the previous season.
Chris Mccarthy: And this past Sunday season, two of Yellowstone 1920, threes or globally on launch day as the most watched original premier and Paramount plus history.
Chris Mccarthy: And that's just the beginning coming up later this quarter are the premier of two new series.
Chris Mccarthy: Bob land from Guy Ritchie, starring Tom Hardy, Helen Mirren, and Pierce Brosnan as the head of an organized crime family fighting for power within a global crime Syndicate.
Chris Mccarthy: This is followed by a new series from executive producers, Robert and Michelle King titled Happy Face Thrilling true crime series. These are just a few of the many original series that we have to make up 2025, our strongest slate to date for Paramount plus as our momentum continues and now I'll hand, it off to George to talk about CBS.
George Cheeks: So at CBS, our multiplatform strategy led to another outstanding quarter.
George Cheeks: Tracker in Matlock are the two most watched entertainment series on television with more than $18 million and 16 million viewers per episode, respectively across CBS and Paramount plus and.
George Cheeks: In fact, the network had seven of the top 10 series in Prime time now.
George Cheeks: Now turning to sports the NFL on CBS deliberate another season of massive broadcast audiences with year over year streaming growth in Paramount plus at nearly 60%.
George Cheeks: Our late Sunday afternoon National game was number one for the second consecutive year, averaging over 24 million viewers and we kept the season with a record setting AFC Championship game watch by close to 58 million viewers.
George Cheeks: In addition, our CBS sports your wafer coverage, which is mostly exclusive to Paramount plus is having its most watched season ever up 47% from last year.
George Cheeks: All of this speaks to the enduring relevance of broadcast television and its ability to reach mass audiences, while also driving growth for our streaming platforms.
George Cheeks: Volume abroad hits across Paramount Global reinforces why we have much to be excited about during this period of evolution and transformation for our business, including our pending Sky dance transaction, which we expect to close in the first half of this year.
Speaker Change: Bigger picture, we're laser focused on creating value for our audiences, our partners and our investors now and well into the future over to you to be.
Speaker Change: Thank you George and good afternoon, everyone. In 2024, we delivered significant earnings growth and strengthened our balance sheet, while continuing to position Paramount for the future.
Speaker Change: Full year, adjusted OIBDA grew 30% to $3 1 billion, reflecting significant improvement in our direct to consumer business.
Speaker Change: Additionally, we generated $489 million of free cash flow and reduce net leverage to three eight times.
Speaker Change: You will find a comprehensive review of the quarter's financials in our press release.
On today's call I'll provide color on our fourth quarter results and then discuss our outlook for 2025.
Speaker Change: So, let's dig into Q4, starting with direct to consumer.
Speaker Change: Our D to C business delivered another quarter of healthy top line growth and improved operating leverage.
Mount plus added $5 6 million subscribers in the quarter, reaching a total of $77 5 million.
Speaker Change: Subscriber growth benefited from a particularly high volume of acquisition oriented content, including a robust slate of originals theatrical the NFL and college football.
Speaker Change: Engagement was also very strong.
Speaker Change: Watch time per user grew more than 20% contributing to over 100 basis points of reduction in churn relative to the year ago period.
Speaker Change: Paramount plus <unk> grew 1% year over year in Q4, reflecting several factors, including the lapping of the 2023 price increase and a continued shift in the mix of our subscriber base toward our essential tier.
Speaker Change: It's also worth noting that when we implemented our most recent price increase in August of 2024.
Speaker Change: Existing essential tier subscribers were grandfathered.
Speaker Change: As a result, it will take longer for this most recent price change to flow through to overall Paramount plus ARPA.
Speaker Change: The combination of subscriber growth churn reduction and ARPA improvement helped deliver 14% growth in Paramount plus subscription revenue.
Speaker Change: Paramount plus growth was a key ingredient in the DTC segment, where revenue grew 8% to $2 billion.
Speaker Change: This includes 9% growth in direct to consumer advertising driven by our IQ digital platform.
Speaker Change: DTC advertising also benefited from higher political spend.
Speaker Change: Subscription revenue growth for the segment was 7%.
Speaker Change: The growth rate for <unk> subscription revenue was impacted by the cannibalization of Showtime OTT revenue following the integration of Showtime into Paramount plus.
Speaker Change: While this integration has temporarily diluted revenue growth. It has been a key enabler of this significant improvement in <unk> profitability, we've delivered over the past several quarters.
Speaker Change: Speaking of which in Q4 D to C OIBDA improved by more than $200 million year over year How's.
Speaker Change: However, as we previewed over the last couple of quarters, the segment swung to a loss of $286 million.
Speaker Change: Due to the seasonality of our content slate.
Speaker Change: But looking at the full year DTC profitability improved nearly $1 $2 billion to a loss of $497 million.
Speaker Change: Okay.
Speaker Change: Now turning to television media.
Speaker Change: Revenue declined 4% in the quarter to $5 billion as linear ecosystem trends continue to weigh on television media affiliate and advertising revenue.
Speaker Change: Affiliate revenue declined six 7% in the quarter and advertising revenue declined 4%.
Speaker Change: Advertising trends saw a 350 basis point headwind from fewer NFL and college football games versus the year ago period.
Speaker Change: Results were also impacted by softer college football ratings.
Speaker Change: And international advertising, including FX headwinds.
Speaker Change: T V media licensing revenue grew 3% in the quarter, primarily driven by secondary licensing growth, partially offset by fewer made for third party productions.
Speaker Change: Secondary licensing the largest component of TV media licensing.
Speaker Change: Benefited from a normalized content slate for the first time since the strike.
Speaker Change: <unk> and strong double digit growth in the domestic market.
International licensing revenue, which consist largely of distribution of current season CBS programming.
Speaker Change: <unk> grew at a slower rate as deals are occurring later in the broadcast season relative to historical buying patterns.
Speaker Change: TV media OIBDA was $949 million in the quarter.
Speaker Change: Expenses were flat year over year as cost reduction initiatives were offset by higher content costs from our new fall asleep and variable compensation costs, which I will touch on in a moment.
Speaker Change: We remain highly focused on proactively managing expenses to maximize earnings in our TV media business.
Speaker Change: In filmed entertainment, we generated revenue of $1 1 billion in Q4.
Speaker Change: Filmed entertainment OIBDA was a loss of $42 million, a decrease of $66 million versus the comparable period, which includes marketing costs associated with the theatrical release of five films compared to one film in the year ago period, as well as the timing of Sonic three which was really.
Speaker Change: <unk> late in the quarter.
Speaker Change: On a consolidated basis, we generated $406 million of adjusted OIBDA in Q4 <unk>.
Speaker Change: Adjusted OIBDA was impacted by company wide variable compensation.
Speaker Change: And actions taken to mitigate <unk> exposure.
Speaker Change: Together. These resulted in expenses that were about $90 million higher than expected.
Speaker Change: The biggest portion of the compensation increase was incurred at TV media given the relative size of it is head count.
Speaker Change: However, the impact was seen across all components of the business.
Speaker Change: Free cash flow was $56 million in Q4 and for the full year free cash flow was $489 million, including $347 million in payments for restructuring and other initiatives.
Speaker Change: Now on to 2025.
Speaker Change: As we work to close the <unk> transaction, we're focused on continuing to leverage paramount's content assets to transform our business for the streaming era.
Speaker Change: That means continuing to invest in sports powerhouse film and TV franchises and streaming original to support <unk> growth.
Speaker Change: Means continuing the transition of our advertising business from linear to digital.
Speaker Change: And it means delivering domestic profitability for Paramount plus while identifying additional cost reduction opportunities across the company.
Speaker Change: And by executing on these priorities, we expect Paramount to deliver a another year of free cash flow growth.
Speaker Change: In addition, we expect strong OIBDA growth when adjusting for the contribution of the Super Bowl and political advertising in 2024.
Speaker Change: Looking more closely at Q1, we expect continued subscriber growth at Paramount plus though not at the same level as Q4, given the timing of content releases.
Speaker Change: Paramount plus <unk> growth should accelerate as we fully lap the 2023 price increase and we will see a full quarter impact from Q4 sub editions, which by the way skewed heavily towards direct subscribers, which generate attractive ARPA.
Speaker Change: In TV media, we expect the rate of decline in affiliate revenue to increase in Q1 due to the impact of recent renewals and an evolving pay TV ecosystem.
Speaker Change: However, as our D to C business continues to scale, we expect the combination of our traditional and streaming business to yield net growth in total company affiliate and subscription revenue.
Speaker Change: In advertising, we expect similar underlying trends in linear and digital in Q1 relative to Q4.
Speaker Change: <unk> reported advertising growth in TV media and DTC will be impacted by the comparison to the 2020 for Super Bowl.
Speaker Change: Putting it all together, while full year OIBDA will grow on an underlying basis Q1, adjusted OIBDA will decline year over year, reflecting the underlying business trends I discussed as well as the comparison against the Super Bowl, which significantly benefited Q1 of 2024.
Speaker Change: The combination of Super Bowl timing and additional cost reductions planned for the second half.
Speaker Change: It means OIBDA growth will be weighted toward the back half of the year.
Speaker Change: In terms of free cash flow Q1 will include cash restructuring payments of approximately $150 million.
Speaker Change: And when combined with the headwind from lapping last year's Super Bowl will lead to free cash flow being lower year over year.
Speaker Change: However, as I mentioned earlier for the full year, we expect free cash flow to increase in 2025, even when including the impacts of the Super Bowl and political advertising in 2004.
Speaker Change: Stepping back it's clear that our financial progress in 2024 has positioned us well for the future.
Speaker Change: We generated significant OIBDA growth a substantial improvement in <unk> profitability increased full year free cash flow and reduce net leverage all while continuing to invest in and produce hit content.
Speaker Change: We look forward to continuing this momentum in 2025.
With that operator, please open the line for questions.
Speaker Change: Thank him if he would like to ask a question. Please press star followed by one on the kind of thing keypad.
Speaker Change: If you would like to remove your question. Please press star followed by <unk>.
Speaker Change: Josh Your question. Please ensure your financing needs.
Speaker Change: The occupation yourself to one question.
Speaker Change: The first question I guess, you bought that Fishman of Morpheus Nathan.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon, everyone.
Speaker Change: On Paramount plus you guys talked a lot about the success with the original it'll be great to hear your updated thoughts on whether the full slate of programming is enough to drive the necessary scale as a standalone service.
Speaker Change: In order to compete with the larger outside platforms and any progress maybe on exploring the Paramount plus partnerships in the U S and internationally.
Speaker Change: If I can just add one.
Speaker Change: How do you think about Paramount.
Speaker Change: Sorry, Paramount <unk>.
Speaker Change: <unk> plans for content spending across all the different.
Speaker Change: Segments. This year. Thank you.
Chris Mccarthy: Hey, Robert This is Chris I'll take the first part of your question and then I've got a path and have been for the contents then.
Speaker Change: So listen as it stands for Paramount plus we are very proud of the success that we've had to date our content is working.
Speaker Change: Great number of subscribers sign up for the service both in Q4 and for the year and in Q4, we saw record engagement.
Speaker Change: There were up 20%, which led to a really strong improvement in churn and we talk about the content slate itself Q4 saw a new high for us as we ranked as the number two spot.
Speaker Change: When looking at our hour spent across all original series, which really is a remarkable achievement considering the volume of content, we create versus our competitors now all of those things helped to drive really strong revenue growth up 33% and together that's improved profitability for our DTC segment by $1 $2 billion now.
Speaker Change: All of that gives us great confidence that we are well on our way to hit profitability in 2025, which I've often noted a record time for a U S. S. Five.
Speaker Change: Now, we like where we stand we really made some strong progress and we feel good about where we're going into 2025 with real momentum behind US now that said, we're going to always look at opportunities to drive more value.
Speaker Change: And as opportunities come together, we'll evaluate those but no new no news to share today.
Speaker Change: Hey, Robert.
Speaker Change: Just a follow up on your question related to content spend.
Speaker Change: The simplest way to think about content spend in 2025 is that we expect it to be relatively flat on a total company basis to 2024.
Speaker Change: That's.
Speaker Change: Progress if you will because I think as you're well aware.
Speaker Change: <unk> been a little noisy over the last few years between the impact of ramping up content spend to support Paramount plus and then ramping out of the strike et cetera. So this is really the first year in a little while what we've now got to where we think is a more normalized level of.
Speaker Change: Content spend.
Speaker Change: Now, even though the total company content spend will be relatively flat you should continue to assume that there's ongoing remixing in favor of streaming meaning more content is either being used exclusively for streaming or dual purpose between both our linear platforms and our streaming platforms.
Speaker Change: As on a whole relatively flat.
Speaker Change: Operator next question please.
Speaker Change: Our next question.
Speaker Change: Morgan Stanley. Please go ahead.
Speaker Change: Thank you just a couple of clarifications, Chris I think you just said profitability for <unk> 25, I think I think the last guidance from you guys that might be still on this was domestic profitability at Paramount plus and 25 I just want to make sure we get that.
Speaker Change: Correct and then <unk>.
Speaker Change: On free cash flow great to hear that you expect growth in 'twenty five and if you can give the cash restructuring number for the first quarter, but any help in thinking about.
Speaker Change: Restructuring costs for the year and anything else you'd want to flag that might be important on free cash flow growing off that $500 million number. Thanks.
Speaker Change: Hey, Ben Thanks for the question and thanks for the clarification I actually misspoke at as a profitability for Paramount plus domestic.
Speaker Change: Okay Gotcha.
Speaker Change: So Ben let me add some color around our expectations on free cash flow for <unk>.
Speaker Change: 2025, because you're right that the restructuring component.
Speaker Change: It does actually have a fairly material impact.
So you've heard me say that we expect free cash flow to be higher on a year over year basis. Despite by the way the significant contribution from the Super Bowl and political which benefited 2024.
Speaker Change: And that's driven in large part by my earlier comments about the trend on cash.
Speaker Change: Content spend where the stability that we're seeing there reduces.
Speaker Change: Dollars that were tied up in working capital over the last few years, which ultimately benefits free cash flow. So we actually expect to see some pretty significant improvement in free cash flow conversion.
Speaker Change: As we continue to progress.
Speaker Change: That number has been diluted by cash restructuring payments and in fact, if I look at 2025, I think there's probably something on the order of about 10 percentage points of conversion.
Speaker Change: That is impacted by restructuring meeting cash conversion will be about 10.
Speaker Change: 10 percentage points higher absent the restructuring expense, which is obviously something that goes away in the future.
Speaker Change: Thanks, Ben Operator next question.
Speaker Change: The next question guys you Michael Morris.
Mike: Hi, Mike hoping you go ahead.
Speaker Change: Thank you good afternoon.
Speaker Change: I wanted to ask you about DTC the viewing growth metrics that you shared that are in excess of 20% or.
Speaker Change: Clearly well ahead of revenue growth and so my question is do you see that as a leading indicator of potential acceleration on the top line in the future and sort of what's the gap between.
Speaker Change: The viewership strength and revenue strength and how do you close that so that's my first question and then just maybe a clarification we talked about the EBITDA look for 25, excluding the impact of the Super Bowl and political could you size for us how much benefit you saw from Super Bowl and political in 'twenty four.
Speaker Change: <unk>.
Speaker Change: Yeah, Hi, Mike, it's the V and I'll try to take.
Speaker Change: Are those.
Speaker Change: So as it relates to D to C. I'll, just say viewership versus monetization, yes, we do see viewership as a leading indicator of where we think we can go in DTC monetization, both with respect to AD sales, but also with respect to subscription.
Speaker Change: Revenue because.
Speaker Change: There is no rocket science behind the fact that the more engagement that you have.
Speaker Change: The more ability you have to reduce churn and continue to.
Speaker Change: Grow price over time, and we do think and this is a very important part of our overall economic plan is the growth in the DTC business is going to include a combination of both subscriber growth and continued ARPA growth. So we're very focused on making sure that we're continuing to drive.
Speaker Change: The engagement because ultimately.
Speaker Change: That drives the <unk> growth both in terms of advertising and subscription.
Speaker Change: Not necessarily we.
Speaker Change: Won't happen necessarily the exact same time, because we want to build the engagement as we then start to drive price.
Speaker Change: Moving to your second question about OIBDA and the benefit in.
Speaker Change: From the Super Bowl and political in 'twenty four let me give you maybe a little more color on what we're expecting in terms of OIBDA.
Speaker Change: OIBDA in 'twenty five as you pointed out.
Speaker Change: The Super Bowl.
Speaker Change: Was a very meaningful contributor in 2024, and that's one of the reasons why there's a headwind in Q1 by the way the impact from the Super Bowl was seen in both the TV media segment and the DTC segment.
Speaker Change: But that's not the only factor in Q1.
Speaker Change: We also have to take into account.
Speaker Change: Of the headwinds that I mentioned related to affiliate revenue.
Speaker Change: And a number of deals since the end of Q1 in 2024 with some of our largest distributors and so Q1 is really the quarter in which youre going to see the cumulative impact of those renewals. So that's.
An important factor and looking at Q1 and then the other.
Speaker Change: The thing I'd just mention on on the full year is that.
Speaker Change: It is going to be somewhat back half weighted but very importantly.
Speaker Change: Even with the impact of.
Speaker Change: Excuse me on FLIR as I said.
Speaker Change: Earnings will grow materially excluding the impact of the Super Bowl and political and if you were to think about it on a reported basis, meaning including the Super Bowl and political I think full year adjusted EBITDA is probably down slightly.
Speaker Change: Thanks, Mike Operator next question please.
Speaker Change: The next question go to Steven Cahall of Wells Fargo. Stephen. Please go ahead.
Steven Cahall: Yeah. So.
Steven Cahall: Thanks, You mentioned that you expect the companywide affiliate growth in 2025, I didn't hear that comment about company wide advertising growth. So maybe you could just touch on that excluding Super Bowl and political I think DTC slowed a little bit in Q4 might have come in a touch below what you expected it to be.
Speaker Change: No that when your TV has some challenges and advertising. So do you think you can return the company to advertising growth in 2025, again kind of excluding the Super Bowl and political comp and then maybe you could just update us on what youre seeing in the licensing market.
Speaker Change: Been a lot of supply that's come to market, especially in the TV product over the last probably 18 months. So what are your expectations for content licensing in 2025. Thank you.
Chris McCarty: Hey, Steve This is Chris I'll I'll take the first half of that question and then I'm going to pass to Brian for the content licensing piece.
Brian Robbins: So listen if we take a step back what we're doing here is we're transitioning our business our audience and our advertisers pardon me from.
Chris McCarty: From linear to streaming and.
Chris McCarty: We're seeing great growth there on the streaming side, we have really strong engagement really anchored in Q4, that's both on the Paramount plus side and on the Pluto side I'm very pleased with that progress and the scale that we're getting in DTC advertising, where we're up about 18% for the year and I'll have to say also important to note. We have one of the largest address.
Chris McCarty: Both domestic footprint now.
Chris McCarty: Now on the linear side, we have a different set of assets a differentiated we're anchored by Cvs, which has an incredibly strong sports weight the.
George Cheeks: The best in class Primetime lineup of hits, George talked about seven of the top 10 hits and over 50% of the top 25 is that gives us real strength and it helps to insulate us from the pressures that are happening in the linear landscape.
George Cheeks: So there's no question, there's more pressure on the cable side, but frankly, that's a much smaller part of our business today than it has ever been.
George Cheeks: Put that into some numbers you know, it's really low double digits as a percent of our total AD revenue. So.
Feel good about the momentum as we're going into 2025, and we are seeing a good response from Q1 scatter.
George Cheeks: And our content slate is going to be one of the strongest we've ever produced as we head into the upfront.
George Cheeks: And what we're hearing great things from advertising partners. So we feel good about where we stand and feel good about heading into 2025 right.
Steve: Sure Hi, Steve.
Steve: Our licensing business is still very strong and it remains an essential component of what we do we also.
Steve: Have a great deal of licensing internally, which you have to realize does not show up in our reported results and this will pay real dividends downstream in the growth of our D to C platforms, which is why we are making fewer original for third parties.
Steve: Additionally, we believe there is real room for innovation in windowing strategy in <unk>.
Steve: Deal structures that could unlock even more value from our content in the future.
Speaker Change: Thanks, Steve Operator, we'll take one last.
Steve: Question.
Steve: Thank you. The final question guys who've gotten morale of Evercore ISI. Please go ahead.
Speaker Change: Good afternoon. Thanks for taking the questions I was hoping for your perspective on paramount's positioning across linear going forward in the context of your comments around the rate of decline.
Speaker Change: Revenues accelerating in Q1, maybe thinking to the sports and news centric bundles launching in the market are there any protections in the distribution deals that you have into that you could speak to like with Youtube TV.
Speaker Change: Potentially help mitigate the risks of customers down to hearing or cord shaving and then just a quick one on film I didn't know if there was any more background you could share on the on the slate financing deal with domain capital and how we should think about the EBITDA and free cash flow impact in the coming years. Thank you.
George Cheeks: Hey, guys. This is George cheeks taken it I will start with the first part so look given our portfolio of must have sports it's difficult to imagine a sports bundle that's going to satisfy the sports fan without CBS and actually in fact, we are part of Comcast sports in new TV package and we're also in discussions.
Speaker Change: With Directv by joining their my sports offering.
Speaker Change: But the bottom line is when you look at these distribution relationship. If you look at them Holistically, meaning we negotiate our economic distribution commitments across all tiers of service, they're gonna be offered our proposed by the applicable distributor and when it makes business sense for US overall, we're going to agree to at tiers, just like we did with Comcast.
Speaker Change: So we're going to continue to experiment with skinny bundles, we know they're here, but we're just not at this point convinced theres a compelling value proposition relative to the full bundle.
Speaker Change: From what we've seen so far the price benefit where the consumer is just quite small.
Speaker Change: But nevertheless, we're going to be committed to working with our partners to help them create the most compelling offerings with the greatest value.
Speaker Change: Brian.
Speaker Change: Sure.
Speaker Change: I'd say that slate financing is really nothing new for us, but this deal establishes a long term alliance between domain and Paramount pictures to provide financing for upcoming films across Paramount slate and various genres and budget level.
Speaker Change: And this partnership also will help spread the production cash outlay over more films.
Speaker Change: So this type of deal is not unique to us and in fact domain also is a multi year financing deal with another film studio, but in domain, we found our committed and experienced partner to be in business with in a structure that really have positive free cash flow and attributes.
Speaker Change: Alright. Thanks, everybody. This is Chris and on behalf of my fellow co Ceos, we'd like to thank you for joining us for our call. Today. We are very proud of the success that we had in 2024 the momentum that we have going into 2025 and this is all proof that we're making the successful transformation into a streaming first company.
Speaker Change: Now these remarkable achievements would not be possible without our incredibly talented teams, our creative partners for whom of which we are deeply appreciative. Thank.
Speaker Change: Thank you for joining us again for the call and I Hope you have a great night.
Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Okay.
Speaker Change: [music].
Speaker Change: Good afternoon, my name is not yet and I'll be the conference operator today.
Speaker Change: At this time I would like to welcome everyone to Pan out Labor was key for 'twenty 'twenty four adding a conference call.
Speaker Change: This time all lines have been nature to prevent any background noise.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star two.
Speaker Change: In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.
Speaker Change: At this time I would now like to turn the call over to Jamie Morris, how about global was E. D. P. Investor Relations you May now begin your conference calls.
Jamie Morris: Good afternoon, everyone. Thank you for taking the time to join US for our fourth quarter 2024 earnings call. Joining me for today's discussion are Paramount as co Ceos, Brian Robbins, Chris Mccarthy, and George Cheeks, and our CFO Naveen Chopra. Please.
Jamie Morris: Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.
Jamie Morris: Before we start I want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties. These.
Jamie Morris: 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.
Brian Robbins: Our website now I will turn the call over to Brian.
Brian Robbins: Good afternoon, everyone. Thanks for joining us for our fourth quarter and full year 2024 earnings call.
Brian Robbins: Brian Robbins and I'm joined here by my fellow co Ceos, George sheets, and Chris Mccarthy.
Brian Robbins: First we wanted to say that our thoughts are with all those who have been impacted by the tragic fires. We will continue to support our teams and partners impacted for what we hope will be a rapid recovery process now.
Brian Robbins: Now turning to our financials. We are proud of the results we achieved for the full year, which reflect the progress we have made since becoming co Ceos 2024 demonstrated meaningful progress against our long term goals, including significant improvement in <unk> profitability driven by continued.
Brian Robbins: Topline growth powered by one of the strongest content fleets in the industry.
All while strengthening our balance sheet.
Chris: Now, let me turn it over to Chris to provide more details on the year.
Chris: Thanks, Brian and good afternoon, everyone, let's start with the headlines 2024 was a transformative year and marks a significant turning point for Fairmount <unk>.
Chris: Company adjusted OIBDA returned to growth up 30% year over year to $3 $1 billion, we improved net leverage one <unk> three turns and.
Chris: And we generated $489 million of free cash flow up significantly year over year and the highest in four years.
Chris: These results were driven by a success of our DTC segment.
Chris: At Paramount plus we saw growth in subscribers record engagement and an impressive growth in revenue.
Chris: We added 10 million new subscribers for the year driven by a very strong Q4 with $5 6 million new subscribers the strongest quarter in sub growth in two years.
Chris: In Q4 engagement sword.
Chris: Global watch time per user improved 20% driving a measurable improvement in churn of over 100 basis points year over year.
Chris: As a result revenues increased significantly up 33% for the year.
Chris: This success was powered by a very strong content slate with the mix of big returning hit and the launch of some new ones.
Chris: Plus reached a new high ranking as the number two domestic as spot for hours watched across all original series upfront number six this time last year.
Chris: Poodle also had a record year for global watch time up 8% year over year.
Chris: And 16% in Q4, showing strong momentum take.
Chris: Taken together DTC generated significant improvement in profitability of $1 $2 billion for the year, which gives us great confidence Paramount plus will achieve full year domestic profitability for 2025.
Chris: At the same time, we continue to do what we do best produce some of the biggest broadest blockbuster films and hit television series across every platform.
George Cheeks: And now I'll toss to George to provide an update on distribution Nielsen and agile.
George Cheeks: Thanks, Chris.
George Cheeks: 24, we negotiated a number of deals with our longstanding distribution partners in Q4, we renewed our deal with Comcast and just last week, we renewed our distribution agreement with Youtube TV.
George Cheeks: Our track record in 2024 reinforces the value proposition of our content with mass hit series Award, winning news and a top tier sports portfolio.
George Cheeks: In addition were very pleased to have closed a multi year deal with Nielsen.
George Cheeks: Paramount is committed to addressing Tvs cross platform future for the benefit of all stakeholders, including our brand and agency partners. This is a top priority for us.
George Cheeks: Now turning to advertising.
George Cheeks: We continue to proactively transitioned the business from linear to digital as demonstrated by healthy growth in DTC AD revenue, which increased 18% in 2024.
George Cheeks: With one of the largest addressable footprint in the U S marketplace Paramount delivers premium high engagement video for advertisers, who are increasingly focused on quality and impact when choosing where to spend their AD dollars. Additionally, we're growing the demand side of the equation over.
George Cheeks: Over the past couple of years, we've expanded our client base to tens of thousands of small and midsized businesses that are now advertising with Paramount every quarter.
George Cheeks: We're also investing in data technology, as well as identity frameworks, which expand our attribution capabilities.
George Cheeks: These product enhancements will set us up to compete more effectively over time for a larger share of social media budgets Brian.
Brian Robbins: Thanks, George in quarter for Paramount Pictures had a very active release slate with smile to Gladiator to Sonic the Hedgehog and September five in total the studio growth nearly $900 million at the global box office in Q4 with a lot of momentum as we continue with our 2025 fleet.
Brian Robbins: Across the business film television and streaming we continue to focus on franchise growth and management and capitalizing on Paramount's Rich library and IP, we saw our strategy of capitalizing on our franchises pay off most recently with Sonic the Hedgehog, which continues to deliver approach.
Brian Robbins: Nearly $500 million at the worldwide box office. This makes sonics III the highest grossing film in the franchise and on its way to be one of the 10, most profitable Paramount pictures releases of the last decade across its three installments. The Sonic the Hedgehog series has now exceeded $1 2 billion.
Brian Robbins: At the global box office.
Brian Robbins: As part of this franchise strategy, our spin off series Knuckles on Paramount plus drummed up fan excitement it expanded our audience on streaming the series debuted last spring. It's the number one Paramount plus original kids and families series ever in terms of both active subscribers.
Brian Robbins: And ours.
Brian Robbins: This is just one example of how we're implementing our multiplatform franchise model and we are executing our vision across the <unk> series and streaming with franchises like Yellowstone Ncis, Theyre spinoffs, and prequels and Paw patrol just to name a few our approach to franchise management.
Brian Robbins: As a long term view cultivating active fan bases and building audiences over time and one that continues to pay dividends.
Brian Robbins: We're excited for a dynamic and robust twenty-five fleet that includes the highly anticipated mission impossible. The final reckoning and original live action comedy coming from the creators of South Park, and Kendrick Lamar and go right to the running man starring Lynne Powell and for families and animated Smiths film.
Brian Robbins: With Rihanna voicing smurfit and an all new Spongebob Squarepants film to close out the year.
Brian Robbins: Chris.
Chris: Thanks, Brian, let's start with Paramount plus where our strategy of fewer bigger breakthrough series with Big movie stars is setting us apart in a crowded space starts.
Chris: Starting with the series that everyone is talking about land men, which broke records as the most watched Paramount series ever.
Chris: Plus the addition of two of our biggest returning hits Tulsa King and Linux.
Chris: Both of which are up significantly versus the previous season.
Chris: In Q4 Landman lineup and also King all scored as top 10 original series across all asphalt services in the U S.
Chris: We also launched two new Showtime series, which scored.
Chris: The extra original thing was the most streamed global Showtime series ever.
Chris: And the agency was the most streamed new series ever.
Taken together Paramount plus was able to achieve a new high ranking as the number two domestic as spot for hours watched across all original series in Q4.
Chris: Now that's an amazing achievement, considering the volume of originals, we produce versus our peers, demonstrating our proven ability to deliver big broad hit content that is also highly efficient now.
Chris: Now all of these shows are performing exceptionally well at Paramount plus internationally, along with Yellowstone and South Park, which we have exclusively for S. Five.
Chris: <unk> is having another record year ranking as the number one star driver and the number one engagement driver and South Park continues to rank as a top five star driver and the number two engagement driver.
Chris: Now moving to 2025, we've already kicked off another exciting slate on Valentine's day, we launched one of the most eagerly anticipated shows of the year with season three of yellow jacket, which is up over 50% versus the previous season.
Speaker Change: And this past Sunday season, two of Yellowstone 1923 scored globally on launch date as the most watched original premier and Paramount plus history.
Speaker Change: And that's just the beginning coming up later this quarter are the premier of two new series <unk>.
Speaker Change: Bob land from Guy Ritchie, starring Tom Hardy, Helen Mirren, and Pierce Brosnan as the head of an organized crime family fighting for power within a global crime Syndicate.
Speaker Change: This is followed by a new series from executive producers, Robert and Michelle King titled Happy face and thrilling true crime series. These are just a few of the many original series that we have to make 2025, our strongest slate to date for Paramount plus as our momentum continues and now I'll hand, it off to George to talk about CBS.
George: So at CBS, our multiplatform strategy led to another outstanding quarter tracker.
George Cheeks: Tracker in Matlock are the two most watched entertainment series on television with more than $18 million and 16 million viewers per episode, respectively across CBS and Paramount plus and.
George: In fact, the network had seven of the top 10 series in Prime time.
George: Now turning to sports the NFL on CBS delivered another season of massive broadcast audiences with year over year streaming growth in Paramount plus at nearly 60%.
George: Our late Sunday afternoon National game was number one for the second consecutive year, averaging over 24 million viewers and we kept the season with a record setting AFC Championship game watch by close to 58 million viewers.
George: In addition, our CBS sports your wafer coverage, which is mostly exclusive to Paramount plus is having its most watched season ever up 47% from last year.
George: All of this speaks to the enduring relevance of broadcast television and its ability to reach mass audiences, while also driving growth for our streaming platforms.
George: The volume of broad hits across Paramount Global reinforces why we have much to be excited about during this period of evolution and transformation for our business, including our pending Sky dance transaction, which we expect to close in the first half of this year.
Devine: Bigger picture, we're laser focused on creating value for our audiences, our partners and our investors now and well into the future over to you Devine.
Devine: Thank you George and good afternoon, everyone. In 2024, we delivered significant earnings growth and strengthened our balance sheet, while continuing to position Paramount for the future.
Devine: Full year, adjusted OIBDA grew 30% to $3 1 billion, reflecting significant improvement in our direct to consumer business. Additionally.
Devine: Additionally, we generated $489 million of free cash flow and reduce net leverage to three eight times.
Devine: You will find a comprehensive review of the quarter's financials in our press release.
Devine: On today's call I'll provide color on our fourth quarter results and then discuss our outlook for 2025.
Devine: So, let's dig into Q4, starting with direct to consumer.
Devine: Our D to C business delivered another quarter of healthy topline growth and improved operating leverage.
Devine: Mount plus added $5 6 million subscribers in the quarter, reaching a total of $77 5 million.
Devine: Subscriber growth benefited from a particularly high volume of acquisition oriented content, including a robust slate of originals theatrical the NFL and college football.
Devine: Engagement was also very strong.
Devine: Watch time per user grew more than 20% contributing to over 100 basis points of reduction in churn relative to the year ago period.
Devine: Paramount plus <unk> grew 1% year over year in Q4, reflecting several factors, including the lapping of the 2023 price increase and a continued shift in the mix of our subscriber base toward our essential tier.
Devine: It's also worth noting that when we implemented our most recent price increase in August of 2024.
Devine: Existing essential tier subscribers were grandfathered.
Devine: As a result, it will take longer for this most recent price change to flow through to overall Paramount plus ARPA.
Devine: The combination of subscriber growth churn reduction and <unk> improvement helped deliver 14% growth in Paramount plus subscription revenue.
Devine: Paramount plus growth was a key ingredient in the <unk> segment.
Devine: Where revenue grew 8% to $2 billion.
Devine: This.
Devine: <unk>, 9% growth in direct to consumer advertising driven by our IQ digital platform.
Devine: DTC advertising also benefited from higher political spend.
Devine: Subscription revenue growth for the segment was 7%.
Devine: The growth rate for <unk> subscription revenue was impacted by the cannibalization of Showtime OTT revenue following the integration of Showtime into Paramount plus.
Devine: While this integration has temporarily diluted revenue growth. It has been a key enabler of the significant improvement in DTC profitability, we've delivered over the past several quarters.
Devine: Speaking of which in Q4 D to C OIBDA improved by more than $200 million year over year.
Devine: However, as we previewed over the last couple of quarters, the segment swung to a loss of $286 million.
Devine: Due to the seasonality of our content slate.
Devine: But looking at the full year DTC profitability improved nearly $1 $2 billion to a loss of $497 million.
Devine: Okay.
Devine: Now turning to television media.
Devine: Revenue declined 4% in the quarter to $5 billion as linear ecosystem trends continue to weigh on television media affiliate and advertising revenue.
Devine: Affiliate revenue declined six 7% in the quarter and advertising revenue declined 4%.
Devine: Advertising trends saw a 350 basis point headwind from fewer NFL and college football games versus the year ago period.
Devine: Results were also impacted by softer college football ratings.
Devine: And international advertising, including FX headwinds.
Devine: TV media licensing revenue grew 3% in the quarter, primarily driven by secondary licensing growth, partially offset by fewer made for third party productions.
Devine: Secondary licensing the largest component of TV media licensing.
Devine: Benefited from a normalized content slate for the first time since the strike.
Devine: <unk> and strong double digit growth in the domestic market.
Devine: International licensing revenue, which consist largely of distribution of current seasons CBS programming.
Devine: <unk> grew at a slower rate as deals are occurring later in the broadcast season relative to historical buying patterns.
Devine: TV media OIBDA was $949 million in the quarter.
Devine: Expenses were flat year over year as cost reduction initiatives were offset by higher content cost from a new fall asleep and variable compensation costs, which I'll touch on in a moment.
Devine: We remain highly focused on proactively managing expenses to maximize earnings in our TV media business.
Devine: In filmed entertainment, we generated revenue of $1 1 billion in Q4.
Devine: Filmed entertainment OIBDA was a loss of $42 million, a decrease of $66 million versus the comparable period, which includes marketing costs associated with the theatrical release of five films compared to one film in the year ago period, as well as the timing of Sonic three which was really.
Devine: <unk> late in the quarter.
Devine: On a consolidated basis, we generated $406 million of adjusted OIBDA in Q4 <unk>.
Devine: Adjusted OIBDA was impacted by company wide variable compensation.
Devine: And actions taken to mitigate <unk> exposure.
Devine: Together. These resulted in expenses that were about $90 million higher than expected.
Devine: The biggest portion of the compensation increase was incurred at TV media given the relative size of its head count.
Devine: However, the impact was seen across all components of the business.
Devine: Free cash flow was $56 million in Q4 and for the full year free cash flow was $489 million, including $347 million in payments for restructuring and other initiatives.
Devine: Now on to 2025.
Devine: As we work to close the <unk> transaction, we're focused on continuing to leverage paramount's content assets to transform our business for the streaming era.
Devine: That means continuing to invest in sports powerhouse film and TV franchises and streaming originals to support <unk> growth.
Devine: Means continuing the transition of our advertising business from linear to digital.
Devine: And it means delivering domestic profitability for Paramount plus while identifying additional cost reduction opportunities across the company.
Devine: And by executing on these priorities, we expect paramount to deliver another year of free cash flow growth.
Devine: In addition, we expect strong OIBDA growth when adjusting for the contribution of the Super Bowl and political advertising in 2024.
Devine: Looking more closely at Q1, we expect continued subscriber growth at Paramount plus though not at the same level as Q4, given the timing of content releases.
Devine: Paramount plus <unk> growth should accelerate as we fully lap the 2023 price increase and we will see a full quarter impact from Q4 sub editions, which by the way skewed heavily toward direct subscribers, which generate attractive ARPA.
Devine: In TV media, we expect the rate of decline in affiliate revenue to increase in Q1 due to the impact of recent renewals and an evolving pay TV ecosystem.
However, as our D to C business continues to scale, we expect the combination of our traditional and streaming business to yield net growth in total company affiliate and subscription revenue.
Devine: In advertising, we expect similar underlying trends in linear and digital in Q1 relative to Q4 <unk>.
Devine: However reported advertising growth in TV media and DTC will be impacted by the comparison to the 2020 for Super Bowl.
Devine: Putting it all together, while full year OIBDA will grow on an underlying basis Q1, adjusted OIBDA will decline year over year, reflecting the underlying business trends I discussed as well as the comparison against the Super Bowl, which significantly benefited Q1 of 2024.
Devine: The combination of Super Bowl timing and additional cost reductions planned for the second half.
Devine: It means OIBDA growth will be weighted toward the back half of the year.
Devine: In terms of free cash flow Q1 will include cash restructuring payments of approximately $150 million.
Devine: And when combined with the headwind from lapping last year's Super Bowl will lead to free cash flow being lower year over year.
However, as I mentioned earlier for the full year, we expect free cash flow to increase in 2025, even when including the impacts of the Super Bowl and political advertising in 2004.
Devine: Stepping back it's clear that our financial progress in 2024 has positioned us well for the future.
Devine: We generated significant OIBDA growth a substantial improvement in <unk> to see profitability increase.
Devine: Increased full year free cash flow and reduce net leverage all while continuing to invest in and produce hit content.
Devine: We look forward to continuing this momentum in 2025.
Devine: With that operator, please open the line for questions.
Speaker Change: Thank you Rishi, we'd like to ask a question. Please press star followed by one on your telephone keypad.
Devine: Pat Thank.
Devine: If you would like to remove your question. Please press star followed by <unk>.
Devine: To ask a question. Please ensure your partisan nature lately.
Devine: The occupation yourself to one question.
Speaker Change: The first question I guess, you Robert Fishman of Moffett Nathanson.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon, everyone.
Speaker Change: On Paramount plus you guys talked a lot about the success with the original <unk>. It would be great to hear your updated thoughts on whether the full slate of programming is enough to drive the necessary scale as a standalone service.
Speaker Change: In order to compete with the larger asphalt platforms and any progress maybe on exploring the Paramount plus partnerships in the U S and internationally.
Speaker Change: Levine, if I can just add one.
Speaker Change: How do you think about Paramount plus sorry, Paramount companies' plans for content spending across all the different <unk>.
Speaker Change: <unk> this year. Thank you.
Chris McCarty: Hey, Robert This is Chris I'll take the first part of your question and then I've got a path and have been for the <unk>.
Speaker Change: Since then.
Speaker Change: Listen as it stands for Paramount plus we are very proud of the success that we've had to date. Our content is working we saw a great number of subscribers sign up for the service both in Q4 and for the year and in Q4, we saw record engagement, where we're up 20%, which led to a really strong improvement in churn and we talk about the <unk>.
Speaker Change: Content slate itself Q4 saw a new high for us as we ranked as the number two spot.
Speaker Change: When looking at our hour spent across all original series, which really is a remarkable achievement considering the volume of content, we create versus our competitors now all of those things helped to drive really strong revenue growth up 33% and together thats improved profitability for our DTC segment by $1 $2 billion now.
Speaker Change: All of that gives us great confidence that we are well on our way to hit profitability in 2025, which I've often noted a record time for our USS spot.
Speaker Change: Now, we like where we stand we really made some strong progress and we feel good about where we're going into 2025 with real momentum behind US now that said, we're going to always look at opportunities to drive more value.
Speaker Change: And as opportunities come together, we'll evaluate those but no new no news to share today.
Speaker Change: Hey, Robert.
Speaker Change: Just a follow up on your question related to content spend.
Speaker Change: The simplest way to think about content spend in 2025 is that we expect it to be relatively flat on a total company basis to 2024.
Speaker Change: Progress if you will because I think as you're well aware.
Speaker Change: <unk> been a little noisy over the last few years between the impact of ramping up content spend to support Paramount plus and then ramping out of the strike et cetera. So this is really the first year in a little while where we've now got to where we think is a more normalized level of.
Speaker Change: Content spend.
Speaker Change: Now, even though the total company content spend will be relatively flat you should continue to assume that there's ongoing remixing in favor of streaming meaning more content is either being used exclusively for streaming or dual purpose between both our linear platforms and our streaming platforms.
Speaker Change: On a whole relatively flat.
Speaker Change: Operator next question please.
Speaker Change: Our next question go to Ben Swinburne Morgan Stanley. Please go ahead.
Ben Swinburne: Thank you just a couple of clarifications, Chris I think you just said profitability for DTC and 25, I think I think the last guidance from you guys that might be still on this was domestic profitability at Paramount plus and 25 I just want to make sure we get that.
Speaker Change: Correct and then.
Speaker Change: On free cash flow great to hear that you expect growth in 'twenty five is kicking of the cash.
Speaker Change: Structuring number for the first quarter, but any help in thinking about.
Speaker Change: Kind of restructuring costs for the year and anything else you'd want to flag that might be important on free cash flow growing off that $500 million number. Thanks.
Hey, Ben Thanks for the question and thanks for the clarification I actually misspoke at as a profitability for Paramount plus domestic.
Speaker Change: Gotcha. Thanks.
Speaker Change: So Ben let me add some color around our expectations on free cash flow for.
Speaker Change: 2025, because you're right that the restructuring component.
Speaker Change: It does actually have a fairly material impact.
Speaker Change: So you've heard me say that we expect free cash flow to be higher on a year over year basis. Despite by the way the significant contribution from the Super Bowl and political which benefited 2024.
Speaker Change: And that's driven in large part by my earlier comments about the trend on cash content spend where the stability that we're seeing there reduces.
Speaker Change: Dollars that were tied up in working capital over the last few years, which ultimately benefits free cash flow. So we actually expect to see some pretty significant improvement in free cash flow conversion.
Speaker Change: As we continue to progress that number has been diluted by cash restructuring payments and in fact, if I look at 2025, I think there's probably something on the order of about 10 percentage points of conversion.
Speaker Change: That is impacted by restructuring, meaning cash conversion will be about 10.
Speaker Change: 10 percentage points higher absent the restructuring expense, which is obviously something that goes away in the future.
Speaker Change: Thanks, Ben Operator next question.
Speaker Change: The next question guys you Michael Morris.
Speaker Change: Hi, Michael Please go ahead.
Speaker Change: Thank you good afternoon.
Speaker Change: I wanted to ask you about DTC the viewing growth metrics that you share that are in excess of 20% or.
Speaker Change: Clearly well ahead of revenue growth and so my question is do you see that as a leading indicator of potential acceleration on the top line in the future and sort of what's the gap between.
Speaker Change: The viewership strength and revenue strength and how do you close that so that's my first question and then just maybe a clarification we talked about the EBITDA look for 25, excluding the impact of the Super Bowl and political could you size for us how much benefit you saw from Super Bowl and political in 'twenty four.
Speaker Change: <unk>.
Speaker Change: Yeah, Hi, Mike, it's the V and I'll try to take.
Speaker Change: Are those.
Speaker Change: So as it relates to D to C. I will just say viewership versus monetization, yes, we do see viewership as a leading indicator of where we think we can go in DTC monetization, both with respect to AD sales, but also with respect to subscription.
Speaker Change: Revenue because.
Speaker Change: There is no rocket science behind the fact that the more engagement that you have.
The more ability you have to reduce churn and continue to.
Speaker Change: Grow price over time and.
Speaker Change: And we do think and this is a very important part of our overall economic plan is the growth in the D to C business is going to include a combination of both subscriber growth and continued ARPA growth. So we're very focused on making sure that we're continuing to drive the engagement because ultimately.
Speaker Change: That drives the ARPA growth both in terms of advertising and subscription.
Speaker Change: Not necessarily we.
Speaker Change: Won't happen necessarily the exact same time, because we want to build the engagement as we then start to drive price.
Speaker Change: Moving to your second question about OIBDA and the benefit in <unk>.
Speaker Change: From the Super Bowl and political in 'twenty four let me give you maybe a little more color on what we're expecting in terms of OIBDA.
Speaker Change: OIBDA in 'twenty five as you pointed out.
Speaker Change: The Super Bowl.
Speaker Change: It was a very meaningful contributor in 2024, and that's one of the reasons why there's a headwind in Q1 by the way the impact from the Super Bowl was seen in both the TV media segment and the <unk> segment.
Speaker Change: But that's not the only factor in Q1.
Speaker Change: We also have to take into account.
Speaker Change: Some of the headwinds that I mentioned related to affiliate revenue.
Speaker Change: We've signed a number of deals since the end of Q1 in 2024 with some of our largest distributors and so Q1 is really the quarter in which youre going to see the cumulative impact of those renewals. So that's it.
Speaker Change: An important factor and looking at Q1 and then the other.
Speaker Change: I would just mention on the full year is that.
Speaker Change: It is going to be somewhat back half weighted but very importantly.
Speaker Change: Even with the impact of.
Speaker Change: Excuse me on the FLIR as I said.
Speaker Change: Earnings will grow materially excluding the impact of Super Bowl and political and if you were to think about it on a reported basis, meaning including the Super Bowl and political I think full year adjusted EBITDA is probably down slightly.
Speaker Change: Thanks, Mike Operator next question please.
Speaker Change: The next question guys to Steven Cahall of Wells Fargo. Stephen Please go ahead.
Steven Cahall: Yes so.
Steven Cahall: Thanks, You mentioned that you expect companywide affiliate growth in 2025, I didn't hear that comment about company wide advertising growth. So maybe you could just touch on that excluding Super Bowl and political I think DTC slowed a little bit in Q4 might have come in a touch below what you expected it to be.
Steven Cahall: No that when your TV has some challenges and advertising. So do you think you can return the company to advertising growth in 2025, again kind of excluding the Super Bowl and political comp and then maybe you could just update us on what youre seeing in the licensing market theirs.
Steven Cahall: Been a lot of supply that's come to market, especially in the TV product over the last probably 18 months. So what are your expectations for content licensing in 2025. Thank you.
Steven Cahall: Hey, Steve This is Chris I'll I'll take the first half of that question and then I'm going to pass to Brian for the content licensing piece.
Speaker Change: So listen if we take a step back what we're doing here is we're transitioning our business our audience and our.
Speaker Change: Advertising pardon me.
Speaker Change: From linear to streaming and.
Speaker Change: We're seeing great growth there on the streaming side, we have really strong engagement really anchored in Q4, that's both on the Paramount plus side and on the <unk> side.
Speaker Change: We're very pleased with that progress and the scale that we're getting in DTC advertising, where we're up about 18% for the year.
Speaker Change: And I'll have to say also important to note we have one of the largest addressable domestic footprint now.
Speaker Change: Now on the linear side, we have a different set of assets a differentiate it were anchored by CBS, which has an incredibly strong sports weight the.
George Cheeks: The best in class Primetime lineup of hits, George talked about seven of the top 10 hits and over 50% of the top 25 is that gives us real strength and it helps to insulate us from the pressures that are happening in the linear landscape.
So there's no question, there's more pressure on the cable side, but frankly, that's a much smaller part of our business today than it's ever been.
Put that into some numbers you know, it's really low double digits as a percent of our total AD revenue. So are we.
George Cheeks: Feel good about the momentum as we're going into 2025, and we are seeing a good response from Q1 scatter.
George Cheeks: And our content slate is going to be one of the strongest we've ever produced as we head into the upfront and we're hearing great things from advertising partners. So we feel good about where we stand and feel good about heading into 2025 right.
Speaker Change: Sure Hi, Steve.
Speaker Change: Our licensing business is still very strong and it remains an essential component of what we do we also have.
Speaker Change: Have a great deal of licensing internally, which you have to realize does not show up in our reported results and this will pay real dividends downstream in the growth of our D to C platforms, which is why we are making fewer original for third parties additional.
Speaker Change: Additionally, we believe there is real room for innovation in windowing strategy and deal structures that could unlock even more value from our content in the future.
Speaker Change: Thanks, Steve Operator, we'll take one last.
Speaker Change: Question.
Speaker Change: Thank you. The final question guys who've gotten morale of Evercore ISI. Please go ahead.
Speaker Change: Good afternoon. Thanks for taking the questions I was hoping for your perspective on paramount's positioning across linear going forward in the context of your comments around the rate of decline.
Speaker Change: Revenues accelerating in Q1, maybe thinking to the sports and news centric bundles launching in the market are there any protections in the distribution deals that you've inked that you could speak to like with Youtube TV.
Speaker Change: Potentially help mitigate the risks of customers down tearing or cord shaving and then just a quick one on film I didn't know if there was any more background you could share on the on the slate financing deal with domain capital and how we should think about the EBITDA and free cash flow impact in the coming years. Thank you.
George Cheeks: Thanks, Hey, guys. This is George cheeks taken it I will start with the first part so look given our portfolio of must have sports it's difficult to imagine a sports bundle that's going to satisfy the sports fan without CBS and actually in fact, we are part of Comcast sports a new TV package and we're also in discussions.
George Cheeks: With Directv by joining their my sports offering.
George Cheeks: But bottom line is when you look at these distribution relationship. If you look at them Holistically, meaning we negotiate our economic distribution commitments across all tiers of service, they're going to be offered our proposed by the applicable distributor and when it makes business sense for US overall, we're going to greet at tiers, just like we did with Comcast So.
George Cheeks: We're going to continue to experiment with skinny bundles, we know they're here, but we're just not at this point convinced theres a compelling value proposition relative to the full bundle.
George Cheeks: From what we've seen so far the price benefit where the consumer is just quite small.
George Cheeks: Nevertheless, we're going to be committed to working with our partners to help them create the most compelling offerings with the greatest value.
Brian.
George Cheeks: Sure.
Brian Robbins: I'd say that slate financing is really nothing new for us, but this deal establishes a long term alliance between domain and Paramount pictures to provide financing for upcoming films across Paramount slate and various genres and budget levels.
George Cheeks: And this partnership also will help spread the production cash outlay over more films.
George Cheeks: So this type of deal is not unique to us and in fact, I mean also as a multi year financing deal with another film studio, but in domain, we found our committed and experienced partner to be in business with in a structure that really has positive free cash flow NOI attributes.
George Cheeks: Alright. Thanks, everybody. This is Chris and on behalf of my fellow co Ceos, we'd like to thank you for joining us for our call. Today. We are very proud of the success that we had in 2024 and momentum that we have going into 2025 and this is all proof that we're making the successful transformation into a streaming first company.
George Cheeks: Now these remarkable achievements would not be possible without our incredibly talented teams, our creative partners for whom of which we are deeply appreciative. Thank.
George Cheeks: Thank you for joining us again for the call and hope you have a great night.
George Cheeks: Thank you. This now concludes today's call. Thank you all for joining you may now disconnect your lines.