Paramount (PARA)2024-11-08 14:53Revenue Performance - Paramount's Q3 2024 revenue decreased by 6% to $6.73 billion, driven by lower theatrical releases and licensing revenues, partially offset by growth in streaming services led by Paramount+[154][155] - For the nine months ended September 30, 2024, revenue decreased by 4% to $21.23 billion, with streaming growth partially offsetting declines in licensing and theatrical revenues[159][160] - Total revenues for the three months ended September 30, 2024 decreased by 6% to $6,731 million, compared to $7,133 million in the same period in 2023[176] - Total revenues for Q3 2024 decreased by 6% to $6.731 billion, with TV Media revenues down 6% to $4.298 billion and Direct-to-Consumer revenues up 10% to $1.860 billion[220] - Total revenues for the nine months ended September 30, 2024 decreased by 4% to $21.229 billion, with TV Media revenues down 7% to $13.800 billion[223] Operating Income and Adjusted OIBDA - Q3 2024 operating income declined by 46% to $337 million, impacted by restructuring charges, transaction-related costs, and an impairment charge[154][156] - Adjusted OIBDA for Q3 2024 increased by 20% to $858 million, reflecting improved streaming service performance[154][157] - The nine-month operating loss widened to $5.40 billion in 2024, compared to $855 million in 2023, due to significant programming and impairment charges[159][161] - Adjusted OIBDA for the nine months increased by 45% to $2.71 billion, driven by streaming service improvements[159][161] - Operating income (GAAP) for the three months ended September 30, 2024 was $337 million, compared to $621 million in the same period in 2023[167] - Adjusted OIBDA (Non-GAAP) for the three months ended September 30, 2024 was $858 million, up from $716 million in the same period in 2023[167] - Adjusted OIBDA for Q3 2024 increased by 20% to $858 million, driven by a $287 million improvement in Direct-to-Consumer Adjusted OIBDA[222] - Nine-month Adjusted OIBDA increased by 45% to $2.712 billion, driven by an $842 million improvement, with Direct-to-Consumer Adjusted OIBDA improving by $962 million[223] - Adjusted OIBDA improved by $287 million to $49 million for the three months ended September 30, 2024, reflecting revenue growth and lower marketing and content costs[245] - Adjusted OIBDA improved by $962 million for the nine months ended September 30, 2024, reflecting revenue growth and lower marketing and content costs[251] Net Loss and Earnings - Paramount reported a net loss of $4 million in Q3 2024, compared to net earnings of $247 million in Q3 2023[154][158] - Reported net loss from continuing operations (GAAP) for the nine months ended September 30, 2024 was $(5,980) million, compared to $(1,288) million in the same period in 2023[172] - Adjusted earnings from continuing operations (Non-GAAP) for the nine months ended September 30, 2024 was $1,112 million, compared to $359 million in the same period in 2023[172] - The company reported a net loss from continuing operations attributable to Paramount of $4 million for the three months ended September 30, 2024, compared to net earnings of $247 million in the same period in 2023[214] Streaming Services Performance - Adjusted OIBDA for Q3 2024 increased by 20% to $858 million, reflecting improved streaming service performance[154][157] - Direct-to-Consumer revenues grew 10% to $1.860 billion, with subscription revenues up 7% to $1.343 billion and advertising revenues up 18% to $507 million[239] - Paramount+ global subscribers increased by 8.5 million (13%) to 71.9 million as of September 30, 2024, compared to 63.4 million in 2023[240] - Paramount+ revenues grew by $290 million (25%) to $1.428 billion for the three months ended September 30, 2024[240] - Advertising revenues increased by 18% for the three months ended September 30, 2024, driven by growth in impressions for Paramount+ and Pluto TV[242] - Subscription revenues increased by 7% for the three months ended September 30, 2024, driven by Paramount+ subscriber growth and domestic pricing increases[243] - Global Paramount+ subscribers increased by 3.5 million (5%) to 71.9 million during the quarter, reflecting international expansion[244] - Paramount+ revenues increased by $1.239 billion (40%) to $4.332 billion for the nine months ended September 30, 2024[247] - Advertising revenues increased by 21% for the nine months ended September 30, 2024, driven by growth in impressions from Pluto TV and Paramount+[249] - Subscription revenues increased by 13% for the nine months ended September 30, 2024, driven by Paramount+ subscriber growth and pricing increases[250] Advertising Revenues - Advertising revenues increased by 2% to $2,174 million in the three months ended September 30, 2024, compared to $2,133 million in the same period in 2023[176] - Advertising revenues increased by 5% to $7.521 billion for the nine months ended September 30, 2024, driven by growth from Paramount+ and Pluto TV, higher political advertising revenue, and adjustments from prior period underreporting[178] - TV Media advertising revenues for Q3 2024 decreased by 2% to $1.666 billion, with domestic advertising down 7% to $1.33 billion and international advertising up 24% to $339 million[227] Theatrical and Licensing Revenues - Theatrical revenues decreased by 71% to $108 million in the three months ended September 30, 2024, compared to $377 million in the same period in 2023[176] - Theatrical revenues decreased by 46% to $399 million for the nine months ended September 30, 2024, due to fewer and less successful releases compared to the previous year[183] - Licensing and other revenues decreased by 9% to $1,234 million in the three months ended September 30, 2024, compared to $1,361 million in the same period in 2023[176] - Licensing and other revenues decreased by 22% to $3.462 billion for the nine months ended September 30, 2024, impacted by lower secondary market licensing and reduced content production due to labor strikes[185] - Licensing and other revenues for Q3 2024 decreased by 12% to $760 million, reflecting lower licensing volume in the secondary market[229] Affiliate and Subscription Revenues - Affiliate and subscription revenues decreased by 1% to $3,215 million in the three months ended September 30, 2024, compared to $3,262 million in the same period in 2023[176] - Affiliate and subscription revenues increased by 2% to $9.847 billion for the nine months ended September 30, 2024, with Paramount+ subscribers growing to 71.9 million from 63.4 million in the same period last year[182] - Affiliate and subscription revenues for Q3 2024 decreased by 7% to $1.872 billion, primarily due to linear subscriber declines and the absence of pay-per-view boxing events[228] Content Costs and Operating Expenses - Total operating expenses decreased by 7% to $4.342 billion for the three months ended September 30, 2024, primarily due to lower content costs and distribution expenses[186] - Content costs decreased by 9% to $10.539 billion for the nine months ended September 30, 2024, reflecting lower theatrical and licensing costs, partially offset by Super Bowl LVIII broadcast costs[189] - Selling, general, and administrative expenses decreased by 9% to $4.772 billion for the nine months ended September 30, 2024, driven by lower marketing and compensation costs[196] Impairment and Restructuring Charges - The company recorded a goodwill impairment charge of $5.98 billion for the Cable Networks reporting unit in the second quarter of 2024[198] - Restructuring and transaction-related costs totaled $595 million for the nine months ended September 30, 2024, including severance and exit costs[200] - The company recorded programming charges of $1.12 billion in the first quarter of 2024, primarily for content impairment and development cost write-offs[192] - The company recorded severance charges of $513 million for the nine months ended September 30, 2024, with $288 million recorded in the third quarter, primarily due to strategic workforce changes and the exit of the former CEO[201] Investments and Transactions - Paramount entered into a $6.0 billion investment agreement with Skydance Media, with up to $4.5 billion allocated for cash-stock elections and $1.5 billion remaining at New Paramount[147] - The Skydance transaction includes the issuance of up to 400 million shares of New Paramount Class B Common Stock at $15.00 per share and warrants for 200 million shares at $30.50 per share[147] - The Skydance transaction is expected to close in the first half of 2025, subject to regulatory approvals and customary closing conditions[149] - The company recorded a loss of $4 million from the sale of an investment in the first quarter of 2024, compared to a gain of $168 million in the second quarter of 2023 from the dilution of its interest in Viacom18 from 49% to 13%[206] - The company recorded additional pretax gains of $19 million from the sale of Simon & Schuster during the nine months ended September 30, 2024, with $7 million recorded in the third quarter[215] Debt and Financial Position - The company's total notes and debentures outstanding as of September 30, 2024, were $14.62 billion with a weighted average interest rate of 5.17%, compared to $15.66 billion at 5.11% in 2023[205] - The company's interest expense decreased by 10% to $209 million for the three months ended September 30, 2024, compared to $232 million in the same period in 2023[204] - Total debt at September 30, 2024, was $14.62 billion, slightly up from $14.60 billion at December 31, 2023, with senior debt at $12.99 billion and junior debt at $1.63 billion[280] - The company has a $3.50 billion revolving credit facility maturing in January 2027, with no borrowings outstanding as of September 30, 2024[285] - The maximum Consolidated Total Leverage Ratio was 5.75x for the quarter ended September 30, 2024, and is set to decrease to 4.5x by March 31, 2026[286] - Outstanding letters of credit and surety bonds totaled $675 million at September 30, 2024, with $464 million issued under a $1.9 billion standby letter of credit facility[290] Tax and Equity - The reported effective income tax rate for the nine months ended September 30, 2024 was 5.6%, compared to 30.4% in the same period in 2023[172] - The company recorded a tax benefit of $342 million for the nine months ended September 30, 2024, reflecting an effective income tax rate of 5.6%, primarily due to tax benefits on pretax impairment charges and programming charges[208] - The company's equity in earnings (loss) of investee companies improved by 22% to a loss of $60 million for the three months ended September 30, 2024, compared to a loss of $77 million in the same period in 2023[210] Cash Flow and Dividends - Operating cash flow from continuing operations increased due to lower spending on content, compensation, and marketing, with payments of $198 million in 2024 and $288 million in 2023 for restructuring and transformation initiatives[272] - Net cash flow used for investing activities from continuing operations was $365 million in 2024, compared to $341 million in 2023, with capital expenditures of $151 million in 2024 and $213 million in 2023[274] - Net cash flow used for financing activities was $298 million in 2024, a significant decrease from $744 million in 2023, driven by lower debt repayments and common stock dividends[275] - Total common stock dividends declared were $104 million in 2024, down from $228 million in 2023, with dividends per common share at $0.15 in 2024 compared to $0.34 in 2023[278] Goodwill and Intangible Assets - The company performed an interim goodwill impairment test in Q2 2024, assessing fair value using discounted cash flow, traded values, and transaction values of comparable businesses[296] - Cable Networks reporting unit recorded a goodwill impairment charge of $5.98 billion due to downward adjustments in expected cash flows, primarily driven by linear affiliate market indicators and company market value estimates[298] - CBS Entertainment reporting unit's fair value exceeded its carrying value by 4%, with a goodwill balance of $5.16 billion as of June 30, 2024[300] - Paramount+ reporting unit's fair value exceeded its carrying value by 5%, with a goodwill balance of $1.47 billion as of June 30, 2024[301] - Pluto TV reporting unit's fair value exceeded its carrying value by 4%, with a goodwill balance of $1.26 billion as of June 30, 2024[303] - FCC licenses impairment tests resulted in a $15 million charge for two markets in Q2 2024 and a $104 million charge for five markets in Q3 2024, reducing the carrying value to $1.03 billion[307][309] - A 50 basis points decrease in the long-term growth rate or a 50 basis points increase in the discount rate could reduce the aggregate fair value of FCC licenses by $67 million and $86 million, respectively[310] Legal and Environmental Liabilities - As of September 30, 2024, the company had approximately 19,360 pending asbestos claims, down from 19,970 as of December 31, 2023[320] - Total costs for settlement and defense of asbestos claims after insurance recoveries and net of tax were approximately $54 million in 2023 and $57 million in 2022[320] - The company recorded an accrual for asbestos liabilities based on a 10-year estimable period, considering factors like claim volume, average cost per claim, and disease type breakdown[321] - The company faces potential future liabilities from environmental cleanup costs and personal injury claims related to historical operations, with accruals subject to change based on future circumstances[322] Market Risks and Forward-Looking Statements - No significant changes to market risk since the Annual Report on Form 10-K for the year ended December 31, 2023[327] - Forward-looking statements include risks related to streaming business, advertising revenues, competitive industries, and evolving technologies[325] - Potential risks include asset impairment charges for goodwill, intangible assets, FCC licenses, and content[325] - Risks related to environmental, social, and governance (ESG) matters are highlighted[325] - Cybersecurity, privacy, and data protection risks are evolving concerns[325] - Risks associated with labor disputes and inability to retain key employees or creative talent[325] - Potential conflicts of interest due to ownership structure with a controlling stockholder[325] - Risks related to the Transactions include delays, litigation, and challenges in realizing synergies[325] - Negative effects on stock price due to the announcement or consummation of the Transactions[325] - Forward-looking statements are made as of the report date and are subject to change[325]