Viacom Reports First Quarter Results
Company Accelerates Transformation, with Further Progress against Key Strategic Initiatives
International Media Networks Deliver Seven Consecutive Quarters of Year-over-Year Revenue Growth
Completed Tender Offer for
This press release features multimedia. View the full release here: http://www.businesswire.com/news/home/20180208005631/en/
The
"Viacom has also made considerable progress in its push to accelerate
consumption and monetization on next-generation platforms, achieving
substantial growth in worldwide digital advertising revenues, expanding
distribution on fast-growing virtual MVPD and mobile services, and
ramping up resources and talent at
"We remain deeply committed to maintaining strong financial discipline
and delivering returns for our shareholders. In the quarter,
FISCAL YEAR 2018 RESULTS |
|||||||||||
(in millions, except per share amounts) |
Quarter Ended |
B/(W) | |||||||||
2017 | 2016 | 2017 vs. 2016 | |||||||||
GAAP |
|||||||||||
Revenues | $ | 3,073 | $ | 3,324 | (8 | )% | |||||
Operating income | 717 | 706 | 2 | ||||||||
Net earnings from continuing operations attributable to |
535 | 396 | 35 | ||||||||
Diluted EPS from continuing operations | 1.33 | 1.00 | 33 | ||||||||
Non-GAAP* |
|||||||||||
Adjusted operating income | $ | 717 | $ | 748 | (4 | )% | |||||
Adjusted net earnings from continuing operations attributable to
|
413 | 413 | — | ||||||||
Adjusted diluted EPS from continuing operations | 1.03 | 1.04 | (1 | ) | |||||||
* Non-GAAP measures referenced in this release are detailed in the Supplemental Disclosures at the end of this release. |
|||||||||||
Revenues in the first fiscal quarter decreased 8%, or
MEDIA NETWORKS
Media Networks revenues decreased 1% to
Domestic advertising revenues decreased 5% to
Domestic affiliate revenues decreased 8% to
Ancillary revenues grew 5% to
Adjusted operating income for Media Networks decreased 7% to
Performance highlights:
-
Carriage of
Viacom programming returned toSuddenlink . Charter agreement signed in the quarter and full re-penetration on Charter's Select (most highly penetrated) tier achieved as ofFebruary 2018 . -
Viacom Digital Studios launched inNovember 2017 to accelerate production of digital-native content with a goal of doubling digital consumption acrossViacom flagship brands by fiscal year end. -
Viacom International Media Networks continued its strong performance, delivering double-digit revenue and profit gains. VIMN also expanded and diversified its footprint, with the launch of the Paramount+ service in the Nordics, mobile deals inAsia andLatin America and the launch of Spike (free-to-air) inItaly . -
Viacom continues to hold the #1 share of basic cable viewing in all key demos, including Adults 18-49 and Kids 2-11, among others. Worldwide video consumption onViacom sites, mobile apps and connected devices grew 38% year-over-year. -
In
January 2018 , Paramount Network launched in theU.S. to solid early results. Its dynamic 2018 slate features cinematic original series, including Waco, Heathers, American Woman and Yellowstone; fan-favorites Lip Sync Battle, Ink Master and Bar Rescue; all-new Bellator events and a broad portfolio of films. -
MTV grew primetime ratings by 14% and primetime share by 25% year-over-year, becoming the 2nd fastest growing entertainment network in primetime among the 40 largest cable channels. Video consumption across MTV's digital properties increased 101% year-over-year as social video views grew 105%. -
BET achieved a second consecutive quarter of double-digit ratings growth, up 16% year-over-year. The network, which has remained #1 with African Americans 18-49 for 16 straight years, finished the quarter with the two highest rated awards shows on cable: the Hip Hop Awards and the Soul Train Awards. - Nickelodeon remained at #1 with Kids 2-11 and 2-5 for the 10th straight quarter, and continued to expand its off-screen initiatives through SpongeBob SquarePants: The Broadway Musical; strong sales of Paw Patrol toys and other consumer products; and new offerings such as the SlimeZone VR experience.
-
Comedy Central delivered a year-over-year increase in audience share for the third straight quarter, with South Park maintaining its lead as the #1 primetime original comedy on cable for the fifth year in a row. Finishing January as the #1 entertainment cable network among millennial men, TV's top brand in comedy also announced the June return of Clusterfest toSan Francisco after a strong 2017 debut. -
VH1 ,TV Land and CMT each closed out the quarter with growth in ratings and share.VH1 achieved its 10th straight quarter of year-over-year ratings improvement, whileTV Land and CMT recorded their highest-performing first quarters in three years.
FILMED ENTERTAINMENT
Performance highlights:
- Studio leadership continued to execute on its turnaround strategy to stabilize costs and strengthen its bottom line, improving year-over-year adjusted operating income by 28% in the quarter.
-
In
November 2017 , Paramount Pictures concluded two key production agreements with Hasbro and Skydance Media. The studio also signed a production pact with The Fast and the Furious producer Neal H. Moritz. -
Paramount Pictures continues to ramp up its production slate with
upcoming tentpoles (e.g., Mission: Impossible, Top Gun:
Maverick, World War Z 2), branded films from
Paramount Players (e.g., What Men Want, Dora the Explorer) and Paramount Animation (e.g., SpongeBob The Movie), and SEGA's Sonic the Hedgehog. -
Paramount Television continued its success, recently announcing a
limited series adaptation of Catch-22 for Hulu, co-directed,
produced by and starring
George Clooney , as well as a revival ofMark Burnett's boxing series The Contender forEPIX . InJanuary 2018 , The Alienist premiered as cable's #1 new drama series this season in Live +3, reaching over 13 million viewers on TNT. This year will also feature the third seasons of Shooter onUSA Network andBerlin Station onEPIX , as well as the return of Netflix's 13 Reasons Why and the premiere ofTom Clancy's Jack Ryan on Amazon.
BALANCE SHEET AND LIQUIDITY
In the quarter, the Company continued to execute on its plan to
strengthen its balance sheet, reduce leverage and enhance liquidity,
redeeming over
The Company's cash balance was
About
For more information about
Cautionary Statement Concerning Forward-Looking Statements
This news release contains both historical and forward-looking
statements. All statements that are not statements of historical fact
are, or may be deemed to be, forward-looking statements. Forward-looking
statements reflect our current expectations concerning future results,
objectives, plans and goals, and involve known and unknown risks,
uncertainties and other factors that are difficult to predict and which
may cause future results, performance or achievements to differ. These
risks, uncertainties and other factors include, among others: the public
acceptance of our brands, programs, motion pictures and other
entertainment content on the various platforms on which they are
distributed; technological developments, alternative content offerings
and their effects in our markets and on consumer behavior; the potential
for loss of carriage or other reduction in the distribution of our
content; significant changes in our senior leadership and the ability of
our strategic initiatives to achieve their operating objectives; various
uncertainties and risks related to a potential combination with CBS
Corporation, including that an agreement may or may not be reached or
may take an uncertain amount of time, and that the effect of any
potential transaction on
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
||||||||
Quarter Ended |
||||||||
(in millions, except per share amounts) | 2017 | 2016 | ||||||
Revenues | $ | 3,073 | $ | 3,324 | ||||
Expenses: | ||||||||
Operating | 1,563 | 1,819 | ||||||
Selling, general and administrative | 740 | 701 | ||||||
Depreciation and amortization | 53 | 56 | ||||||
Restructuring | — | 42 | ||||||
Total expenses | 2,356 | 2,618 | ||||||
Operating income | 717 | 706 | ||||||
Interest expense, net | (147 | ) | (156 | ) | ||||
Equity in net earnings of investee companies | 1 | 13 | ||||||
Gain/(loss) on extinguishment of debt | 25 | (6 | ) | |||||
Other items, net | (3 | ) | 9 | |||||
Earnings from continuing operations before provision for income taxes | 593 | 566 | ||||||
Provision for income taxes | (42 | ) | (158 | ) | ||||
Net earnings from continuing operations | 551 | 408 | ||||||
Discontinued operations, net of tax | 2 | — | ||||||
Net earnings ( |
553 | 408 | ||||||
Net earnings attributable to noncontrolling interests | (16 | ) | (12 | ) | ||||
Net earnings attributable to |
$ | 537 | $ | 396 | ||||
Amounts attributable to |
||||||||
Net earnings from continuing operations | $ | 535 | $ | 396 | ||||
Discontinued operations, net of tax | 2 | — | ||||||
Net earnings attributable to |
$ | 537 | $ | 396 | ||||
Basic earnings per share attributable to |
||||||||
Continuing operations | $ | 1.33 | $ | 1.00 | ||||
Discontinued operations | — | — | ||||||
Net earnings | $ | 1.33 | $ | 1.00 | ||||
Diluted earnings per share attributable to |
||||||||
Continuing operations | $ | 1.33 | $ | 1.00 | ||||
Discontinued operations | — | — | ||||||
Net earnings | $ | 1.33 | $ | 1.00 | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 402.5 | 397.0 | ||||||
Diluted | 402.6 | 397.9 | ||||||
Dividends declared per share of Class A and Class B common stock | $ | 0.20 | $ | 0.20 | ||||
CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||||
(in millions, except par value) |
2017 |
2017 |
||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 394 | $ | 1,389 | ||||
Receivables, net | 3,125 | 2,970 | ||||||
Inventory, net | 959 | 919 | ||||||
Prepaid and other assets | 527 | 523 | ||||||
Total current assets | 5,005 | 5,801 | ||||||
Property and equipment, net | 936 | 978 | ||||||
Inventory, net | 3,978 | 3,982 | ||||||
|
11,660 | 11,665 | ||||||
Intangibles, net | 305 | 313 | ||||||
Other assets | 947 | 959 | ||||||
Total assets | $ | 22,831 | $ | 23,698 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 351 | $ | 431 | ||||
Accrued expenses | 654 | 869 | ||||||
Participants' share and residuals | 800 | 825 | ||||||
Program obligations | 698 | 712 | ||||||
Deferred revenue | 421 | 463 | ||||||
Current portion of debt | 120 | 19 | ||||||
Other liabilities | 494 | 434 | ||||||
Total current liabilities | 3,538 | 3,753 | ||||||
Noncurrent portion of debt | 10,069 | 11,100 | ||||||
Participants' share and residuals | 339 | 384 | ||||||
Program obligations | 485 | 477 | ||||||
Deferred tax liabilities, net | 235 | 294 | ||||||
Other liabilities | 1,285 | 1,323 | ||||||
Redeemable noncontrolling interest | 249 | 248 | ||||||
Commitments and contingencies | ||||||||
|
||||||||
Class A common stock, par value |
— | — | ||||||
Class B common stock, par value |
— | — | ||||||
Additional paid-in capital | 10,129 | 10,119 | ||||||
|
(20,585 | ) | (20,590 | ) | ||||
Retained earnings | 17,582 | 17,124 | ||||||
Accumulated other comprehensive loss | (576 | ) | (618 | ) | ||||
Total |
6,550 | 6,035 | ||||||
Noncontrolling interests | 81 | 84 | ||||||
Total equity | 6,631 | 6,119 | ||||||
Total liabilities and equity | $ | 22,831 | $ | 23,698 | ||||
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(Unaudited) |
||||||||
Quarter Ended |
||||||||
(in millions) | 2017 | 2016 | ||||||
OPERATING ACTIVITIES | ||||||||
Net earnings ( |
$ | 553 | $ | 408 | ||||
Discontinued operations, net of tax | (2 | ) | — | |||||
Net earnings from continuing operations | 551 | 408 | ||||||
Reconciling items: | ||||||||
Depreciation and amortization | 53 | 56 | ||||||
Feature film and program amortization | 1,047 | 1,089 | ||||||
Equity-based compensation | 14 | 23 | ||||||
Equity in net earnings and distributions from investee companies | 4 | 13 | ||||||
Deferred income taxes | (91 | ) | (63 | ) | ||||
Operating assets and liabilities, net of acquisitions: | ||||||||
Receivables | (93 | ) | (323 | ) | ||||
Production and programming | (1,191 | ) | (1,020 | ) | ||||
Accounts payable and other current liabilities | (232 | ) | (45 | ) | ||||
Other, net | (50 | ) | 21 | |||||
Net cash provided by operating activities | 12 | 159 | ||||||
INVESTING ACTIVITIES | ||||||||
Acquisitions and investments, net | (2 | ) | (343 | ) | ||||
Capital expenditures | (28 | ) | (52 | ) | ||||
Proceeds received from asset sales | 23 | — | ||||||
Proceeds received from grantor trusts | 2 | 46 | ||||||
Net cash used in investing activities | (5 | ) | (349 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Borrowings | — | 1,285 | ||||||
Debt repayments | (1,000 | ) | (900 | ) | ||||
Commercial paper | 100 | — | ||||||
Dividends paid | (80 | ) | (79 | ) | ||||
Other, net | (22 | ) | (14 | ) | ||||
Net cash provided by/(used in) financing activities | (1,002 | ) | 292 | |||||
Effect of exchange rate changes on cash and cash equivalents | — | (38 | ) | |||||
Net change in cash and cash equivalents | (995 | ) | 64 | |||||
Cash and cash equivalents at beginning of period | 1,389 | 379 | ||||||
Cash and cash equivalents at end of period | $ | 394 | $ | 443 | ||||
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
The following tables reconcile our results for the quarters ended
(in millions, except per share amounts) | ||||||||||||||||||||
Quarter Ended |
||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings
Attributable to |
Diluted EPS |
||||||||||||||||
Reported results (GAAP) | $ | 717 | $ | 593 | $ | 42 | $ | 535 | $ | 1.33 | ||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||
Gain on extinguishment of debt (2) | — | (25 | ) | (6 | ) | (19 | ) | (0.05 | ) | |||||||||||
Discrete tax benefit (3) | — | — | 103 | (103 | ) | (0.25 | ) | |||||||||||||
Adjusted results (Non-GAAP) | $ | 717 | $ | 568 | $ | 139 | $ | 413 | $ | 1.03 | ||||||||||
Quarter Ended |
||||||||||||||||||||
Operating |
Earnings from |
Provision for |
Net Earnings |
Diluted EPS |
||||||||||||||||
Reported results (GAAP) | $ | 706 | $ | 566 | $ | 158 | $ | 396 | $ | 1.00 | ||||||||||
Factors Affecting Comparability: | ||||||||||||||||||||
Restructuring (4) | 42 | 42 | 14 | 28 | 0.07 | |||||||||||||||
Loss on extinguishment of debt (5) | — | 6 | 2 | 4 | 0.01 | |||||||||||||||
Discrete tax benefit (6) | — | — | 15 | (15 | ) | (0.04 | ) | |||||||||||||
Adjusted results (Non-GAAP) | $ | 748 | $ | 614 | $ | 189 | $ | 413 | $ | 1.04 | ||||||||||
(1) The tax impact has been calculated by applying the tax rates applicable to the adjustments presented.
(2) We redeemed senior notes and debentures totaling
(3) The net discrete tax benefit in the quarter ended
(4) We recognized a pre-tax restructuring charge of
(5) We redeemed senior notes totaling
(6) The net discrete tax benefit in the quarter ended
The following table includes a reconciliation of net cash provided by operating activities (GAAP) to free cash flow and operating free cash flow (non-GAAP). We define free cash flow as net cash provided by operating activities minus capital expenditures, as applicable. We define operating free cash flow as free cash flow, excluding the impact of the cash premium on the extinguishment of debt, as applicable. Free cash flow and operating free cash flow are non-GAAP measures. Management believes the use of these measures provides investors with an important perspective on, in the case of free cash flow, our liquidity, including our ability to service debt and make investments in our businesses, and, in the case of operating free cash flow, our liquidity from ongoing activities.
Reconciliation of net cash provided by operating activities
to free cash flow and operating free cash flow (in millions) |
Quarter Ended |
Better/
(Worse) |
||||||||||
2017 | 2016 | $ | ||||||||||
Net cash provided by operating activities (GAAP) | $ | 12 | $ | 159 | $ | (147 | ) | |||||
Capital expenditures | (28 | ) | (52 | ) | 24 | |||||||
Free cash flow (Non-GAAP) | (16 | ) | 107 | (123 | ) | |||||||
Debt retirement premium | — | 6 | (6 | ) | ||||||||
Operating free cash flow (Non-GAAP) | $ | (16 | ) | $ | 113 | $ | (129 | ) | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20180208005631/en/
Press:
Vice President, Corporate Communications and Corporate
Affairs
jeremy.zweig@viacom.com
or
Senior Manager, Corporate Communications
alex.rindler@viacom.com
Investors:
Senior Vice President, Investor Relations
james.bombassei@viacom.com
or
Vice President, Investor Relations
kareem.chin@viacom.com
Source:
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