Viacom Quarterly Earnings, U.S. Ad Revenue Drops

Viacom CEO Philippe Dauman

The entertainment conglomerate, led by CEO Philippe Dauman, saw domestic ad revenue fall less than many on Wall Street had expected though and touted improving ratings at some networks.

Viacom, led by CEO Philippe Dauman, on Thursday reported its fiscal fourth-quarter and full-year financials, with U.S. advertising revenue in the quarter down 7 percent amid ongoing ratings challenges at MTV and Comedy Central.

Ratings at other Viacom networks, such as Nickelodeon and VH1, have been improving though, and the overall U.S. ad decline was down from a 9 percent drop in the previous quarter, It was also less pronounced than many analysts had expected, namely 8 percent or more.‎

Quarterly film unit results came in lower than in the strong year-ago period, which had been boosted by Transformers: Age of Extinction.

Viacom's quarterly net earnings from continuing operations of $884 million for the latest quarter compared with $732 million in the year-ago period, up 21 percent, helped by a one-time European tax benefit related to the company's acquisition of U.K. broadcaster Channel 5. Adjusted for that special gain, net earnings from continuing operations came in at $614 million, down 16 percent from $729 million in the year-ago period. The company posted adjusted earnings per share of $1.54, compared with $1.71 in the same quarter last year.

Revenue declined 5 percent to $3.79 billion. Excluding an unfavorable 3 percent impact of foreign exchange, revenue dropped 2 percent. Wall Street had, on average, expected quarterly earnings of $1.55 per share on revenue of $3.88 billion.

Film unit revenue declined 24 percent to $1.03 billion, "driven by the mix of this quarter's releases compared to the prior-year quarter, which included the strong performance of Transformers: Age of Extinction," the company said. "Overall, theatrical revenues declined 20 percent to $447 million. Home entertainment revenues declined 54 percent." Some analysts had lowered their film unit forecast for the quarter due to what one called the "disappointing box-office performance" of Terminator Genisys.

Media networks unit revenue grew 5 percent to $2.79 billion amid growth in affiliate fees and international advertising, partially offset by declines in U.S. advertising. Domestic and worldwide affiliate revenues increased 15 percent and 10 percent, respectively. Worldwide ad revenue dropped 1 percent, "reflecting the domestic decline partially offset by a 45 percent increase in international advertising revenues, driven by growth in Europe, primarily by Channel 5."

Guggenheim analyst Michael Morris had said in his earnings preview: "Ratings at the Nickelodeon and VH1 channels have improved, with a number of positive weeks in September. Spike and TV Land ratings are declining at a slower rate, while MTV and Comedy Central remain the most challenged." He had forecast domestic advertising revenue to be down 9 percent.

Viacom executive chairman Sumner Redstone said: "Viacom continues to create some of the most compelling and entertaining content in the world. I am confident that Viacom's leadership team will continue to lead through our industry's period of transition and succeed well into the future."

Said Dauman: "Viacom's fourth-quarter and year-end results are indicative of our progress in key areas, including recent ratings improvement and renewals of important distribution agreements. Our strategy of increasing and accelerating investment in original content and expanding our profitable international footprint are among the major factors driving this success, which we believe will continue in 2016 and beyond. We are making great progress in tackling industry-wide inefficiencies in audience measurement, while expanding our audience reach with landmark distribution agreements."

Added Dauman: "Viacom's family of media networks are the most-watched by highly coveted younger audiences, and we are building engagement on all platforms, leading to first-of-their-kind marketing opportunities with our advertising partners. Our investment in content continues to grow, supporting an unprecedented amount of quality original programming and a more robust slate of films. In addition, in fiscal 2015 we launched 21 channels overseas — including six in India — fueling the fastest international growth in our history."

Viacom also touted some full-year financial records. It posted adjusted earnings per share for the year of $5.44, an all-time high for the company. And media networks revenue rose to a full-year record of $10.49 billion.

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