ViacomCBS on Friday reported mostly better-than-expected third-quarter financials, including a 6 percent drop in advertising revenue, a clear improvement over the 27 percent decline in the second quarter.
In the latest three-month period affected by the coronavirus pandemic, the company’s film unit profit dropped though compared with the year-ago period as the theatrical business was hit by the coronavirus pandemic.
In the company’s TV Entertainment arm, which includes the CBS network, advertising revenue declined 1 percent after a second-quarter decrease of 27 percent. Cable networks unit ad revenue fell 11 percent after a 26 percent decline in the second quarter.
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The company, created in December via the recombination of Viacom and CBS Corp., also reported continued growth in its streaming business. As part of its second-quarter earnings update, the company had raised its U.S. paid streaming subscriber target for the end of 2020 to 18 million from 16 million.
As of Sept. 30, the company had nearly reached that goal, with domestic subscribers rising to 17.9 million, up 72 percent over the year-ago period, and Pluto TV’s domestic users reaching 28.4 million, up 57 percent. Streaming and digital revenue reached $636 million, up 56 percent from the third quarter of 2019.
The company said that its planned rebrand of the CBS All Access streaming service as Paramount+ was on track for early 2021.
ViacomCBS, led by CEO Bob Bakish, had previously said that the biggest advertising hit was expected in the second quarter, with trends improving from there, while streaming momentum was strong early in the virus crisis.
The company’s third-quarter financials exceeded Wall Street estimates on several fronts.
Bakish in the earnings report lauded the progress made by the company as it nears the one-year anniversary of the merger that created it. “As we near the first anniversary of the ViacomCBS merger, I’m thrilled about the way our organization has come together to realize the power of the combination and seize our unique global opportunity in streaming,” he said. “Our company’s transformation is ahead of schedule, and we are incredibly excited by the opportunities ahead.”
ViacomCBS has since the recombination rejigged its operations and executive teams. This summer, it raised its 2020 merger synergy target to $300 million from $250 million, and its three-year run-rate cost savings target to $800 million from $750 million. Bakish previously also highlighted that the pandemic means there was potential for cost reductions beyond that, with the firm looking for “continued cost and operating opportunities that will create both immediate and lasting benefits.”
ViacomCBS’ third-quarter revenue fell 9 percent to $6.1 billion, with earnings from continuing operations down 2 percent to $612 million. On an adjusted basis, quarterly earnings fell 18 percent to $561 million, or earnings per share of 91 cents.
Film unit revenue decreased 31 percent, “reflecting the decline in licensing and theatrical revenue.” The latter was “immaterial in the quarter due to the closure or reduction in capacity of movie theaters in response to COVID-19,” the company said. Adjusted operating income before depreciation and amortization (OIBDA) in the film segment fell 18 percent due to the decline in revenue, partially offset by lower distribution costs from fewer theatrical releases in the quarter.
Cable networks revenue declined 7 percent “due to lower advertising and content licensing revenue, partially offset by 4 percent growth in affiliate revenue. That gain was driven by “growth in subscription streaming revenue, expanded carriage with YouTube TV and contractual rate increases, partially offset by linear subscriber declines. Adjusted OIBDA in the cable networks unit grew 3 percent as the decrease in revenue was more than offset by lower costs from the airing of fewer original programs “and the benefit of cost savings, including from restructuring activities.”
TV Entertainment unit revenue fell 4 percent due to lower content licensing revenue, partially offset by growth in reverse compensation and retransmission fees, as well as subscription streaming revenue. Adjusted OIBDA in the unit declined 26 percent driven by the lower revenue.
