ViacomCBS Eyes Cost Savings as Virus Crisis Could Have "Material" Impact

Bob Bakish

ViacomCBS CEO Bob Bakish

It withdrew its 2020 financial guidance, mentioning postponed film releases, canceled sports events and production delays, but also "increased viewership across its broadcast and cable properties."

ViacomCBS, led by CEO Bob Bakish, said Friday that the new coronavirus pandemic could have a "material" impact on its results, withdrew its 2020 financial guidance and said it was planning "cost savings initiatives" to offset some of the expected revenue losses. 

"Global concerns about the coronavirus disease 2019 have impacted the macroeconomic environment, as well as ViacomCBS Inc.’s business," ViacomCBS said in an early morning statement. "While ViacomCBS has experienced production delays, the company has seen increased viewership across its broadcast and cable properties, and is utilizing its deep library of content to mitigate in part the impact of those delays."

The overall impact, including from "the postponement of theatrical releases domestically and internationally, cancellation or rescheduling of sports events for which the company had broadcast rights, and production delays in television and filmed entertainment programming, could be material to the company’s operating results, cash flows and financial position," ViacomCBS concluded. "The magnitude of the impacts will depend on the duration and extent of the COVID-19 pandemic and the impact of federal, state, local and foreign governmental actions and consumer behavior in response to the pandemic and such governmental actions. Due to the evolving and uncertain nature of this situation, we are not able to estimate the full extent of the negative impact on ViacomCBS’ operating results, cash flows and financial position — including advertising and filmed entertainment revenues — particularly over the near to medium term."

The company added that it was "also working proactively to offset a portion of anticipated revenue losses through cost-savings initiatives," but didn't detail the potential amount of savings or what measures were planned. A representative declined to comment further. Analysts have said that entertainment companies would likely look at delaying non-essential investments, possible layoffs and freezing dividends and stock buybacks to preserve cash amid the crisis.

ViacomCBS on Friday, meanwhile, reaffirmed its expectation to achieve $750 million in cost synergies over the next three years from the December recombination of Viacom and CBS Corp., as well as its target to reach approximately 16 million domestic streaming subscribers in pay and approximately 30 million monthly active users on Pluto TV at the end of 2020. 

Discussing its liquidity, ViacomCBS said it has access to a $3.5 billion revolving credit facility and had $632 million of cash on its balance sheet as of the end of 2019. "As of March 26, 2020, the company has not drawn on its revolving credit facility and has approximately $932 million of short-term indebtedness, including $732 million of commercial paper outstanding and $200 million of short-term bank borrowings," it said, adding it has upcoming debt maturities worth $300 million in February 2021 and $500 million in March 2021.

ViacomCBS is the latest entertainment industry company to comment on the fallout from the virus crisis.

On March 24, cable giant and NBCUniversal and Sky owner said that the coronavirus pandemic could have a "material adverse impact" on its financials, but said it was difficult to quantify it at this stage.

On March 20, WarnerMedia owner AT&T said it was canceling planned stock buybacks, including an accelerated share repurchase agreement with Morgan Stanley to buy back $4 billion of its stock, to maintain financial flexibility. "The impacts of the pandemic could be material, but due to the evolving nature of this situation, we are not able at this time to estimate the impact on our financial or operational results," the telecom giant said.

A day earlier, the Walt Disney Co. had said that, "the impact of the novel coronavirus ... and measures to prevent its spread are affecting our businesses in a number of ways," including "ad sales impacts." Disney highlighted that the impact of the virus on its revenue and earnings was difficult to predict amid the fluid situation and its impact across various businesses, saying the financial fallout would hinge on the size of disruptions and how long they last, along with "governmental regulations that might be imposed in response to the pandemic."

On March 23, U.K. TV giant ITV said it would pull its dividend and make other cost savings, including in program spending, amid the coronavirus pandemic, which it said has had an "increasing" impact on its advertising revenue. It said the moves would help boost its cash reserves by more than 300 million pounds ($350 million).