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Paramount (PARA) - 2024 Q3 - Quarterly Report
PARAParamount (PARA)2024-11-08 14:53
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Revenue Performance - Paramount's Q3 2024 revenue decreased by 6% to 6.73billion,drivenbylowertheatricalreleasesandlicensingrevenues,partiallyoffsetbygrowthinstreamingservicesledbyParamount+[154][155]−FortheninemonthsendedSeptember30,2024,revenuedecreasedby46.73 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 6,731million,comparedto6,731 million, compared to 7,133 million in the same period in 2023[176] - Total revenues for Q3 2024 decreased by 6% to 6.731billion,withTVMediarevenuesdown66.731 billion, with TV Media revenues down 6% to 4.298 billion and Direct-to-Consumer revenues up 10% to 1.860billion[220]−TotalrevenuesfortheninemonthsendedSeptember30,2024decreasedby41.860 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 13.800billion[223]OperatingIncomeandAdjustedOIBDA−Q32024operatingincomedeclinedby4613.800 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 858million,reflectingimprovedstreamingserviceperformance[154][157]−Thenine−monthoperatinglosswidenedto858 million, reflecting improved streaming service performance[154][157] - The nine-month operating loss widened to 5.40 billion in 2024, compared to 855millionin2023,duetosignificantprogrammingandimpairmentcharges[159][161]−AdjustedOIBDAfortheninemonthsincreasedby45855 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 337million,comparedto337 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 858million,upfrom858 million, up from 716 million in the same period in 2023[167] - Adjusted OIBDA for Q3 2024 increased by 20% to 858million,drivenbya858 million, driven by a 287 million improvement in Direct-to-Consumer Adjusted OIBDA[222] - Nine-month Adjusted OIBDA increased by 45% to 2.712billion,drivenbyan2.712 billion, driven by an 842 million improvement, with Direct-to-Consumer Adjusted OIBDA improving by 962million[223]−AdjustedOIBDAimprovedby962 million[223] - Adjusted OIBDA improved by 287 million to 49millionforthethreemonthsendedSeptember30,2024,reflectingrevenuegrowthandlowermarketingandcontentcosts[245]−AdjustedOIBDAimprovedby49 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 4millioninQ32024,comparedtonetearningsof4 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,comparedto(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 1,112million,comparedto1,112 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 4millionforthethreemonthsendedSeptember30,2024,comparedtonetearningsof4 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 858million,reflectingimprovedstreamingserviceperformance[154][157]−Direct−to−Consumerrevenuesgrew10858 million, reflecting improved streaming service performance[154][157] - Direct-to-Consumer revenues grew 10% to 1.860 billion, with subscription revenues up 7% to 1.343billionandadvertisingrevenuesup181.343 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 290million(25290 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 1.239billion(401.239 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 2,174millioninthethreemonthsendedSeptember30,2024,comparedto2,174 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 7.521billionfortheninemonthsendedSeptember30,2024,drivenbygrowthfromParamount+andPlutoTV,higherpoliticaladvertisingrevenue,andadjustmentsfrompriorperiodunderreporting[178]−TVMediaadvertisingrevenuesforQ32024decreasedby27.521 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 1.33billionandinternationaladvertisingup241.33 billion and international advertising up 24% to 339 million[227] Theatrical and Licensing Revenues - Theatrical revenues decreased by 71% to 108millioninthethreemonthsendedSeptember30,2024,comparedto108 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 399millionfortheninemonthsendedSeptember30,2024,duetofewerandlesssuccessfulreleasescomparedtothepreviousyear[183]−Licensingandotherrevenuesdecreasedby9399 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 1,361millioninthesameperiodin2023[176]−Licensingandotherrevenuesdecreasedby221,361 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 760million,reflectinglowerlicensingvolumeinthesecondarymarket[229]AffiliateandSubscriptionRevenues−Affiliateandsubscriptionrevenuesdecreasedby1760 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 3,262millioninthesameperiodin2023[176]−Affiliateandsubscriptionrevenuesincreasedby23,262 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 1.872billion,primarilyduetolinearsubscriberdeclinesandtheabsenceofpay−per−viewboxingevents[228]ContentCostsandOperatingExpenses−Totaloperatingexpensesdecreasedby71.872 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 10.539billionfortheninemonthsendedSeptember30,2024,reflectinglowertheatricalandlicensingcosts,partiallyoffsetbySuperBowlLVIIIbroadcastcosts[189]−Selling,general,andadministrativeexpensesdecreasedby910.539 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 5.98billionfortheCableNetworksreportingunitinthesecondquarterof2024[198]−Restructuringandtransaction−relatedcoststotaled5.98 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 1.12billioninthefirstquarterof2024,primarilyforcontentimpairmentanddevelopmentcostwrite−offs[192]−Thecompanyrecordedseverancechargesof1.12 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 288millionrecordedinthethirdquarter,primarilyduetostrategicworkforcechangesandtheexitoftheformerCEO[201]InvestmentsandTransactions−Paramountenteredintoa288 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 4.5billionallocatedforcash−stockelectionsand4.5 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 15.00pershareandwarrantsfor200millionsharesat15.00 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 4millionfromthesaleofaninvestmentinthefirstquarterof2024,comparedtoagainof4 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 14.62billionwithaweightedaverageinterestrateof5.1714.62 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 209millionforthethreemonthsendedSeptember30,2024,comparedto209 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 14.62billion,slightlyupfrom14.62 billion, slightly up from 14.60 billion at December 31, 2023, with senior debt at 12.99billionandjuniordebtat12.99 billion and junior debt at 1.63 billion[280] - The company has a 3.50billionrevolvingcreditfacilitymaturinginJanuary2027,withnoborrowingsoutstandingasofSeptember30,2024[285]−ThemaximumConsolidatedTotalLeverageRatiowas5.75xforthequarterendedSeptember30,2024,andissettodecreaseto4.5xbyMarch31,2026[286]−Outstandinglettersofcreditandsuretybondstotaled3.50 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 464millionissuedundera464 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 342millionfortheninemonthsendedSeptember30,2024,reflectinganeffectiveincometaxrateof5.6342 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 77millioninthesameperiodin2023[210]CashFlowandDividends−Operatingcashflowfromcontinuingoperationsincreasedduetolowerspendingoncontent,compensation,andmarketing,withpaymentsof77 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 288millionin2023forrestructuringandtransformationinitiatives[272]−Netcashflowusedforinvestingactivitiesfromcontinuingoperationswas288 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 341millionin2023,withcapitalexpendituresof341 million in 2023, with capital expenditures of 151 million in 2024 and 213millionin2023[274]−Netcashflowusedforfinancingactivitieswas213 million in 2023[274] - Net cash flow used for financing activities was 298 million in 2024, a significant decrease from 744millionin2023,drivenbylowerdebtrepaymentsandcommonstockdividends[275]−Totalcommonstockdividendsdeclaredwere744 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 228millionin2023,withdividendspercommonshareat228 million in 2023, with dividends per common share at 0.15 in 2024 compared to 0.34in2023[278]GoodwillandIntangibleAssets−ThecompanyperformedaninterimgoodwillimpairmenttestinQ22024,assessingfairvalueusingdiscountedcashflow,tradedvalues,andtransactionvaluesofcomparablebusinesses[296]−CableNetworksreportingunitrecordedagoodwillimpairmentchargeof0.34 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 5.16billionasofJune30,2024[300]−Paramount+reportingunit′sfairvalueexceededitscarryingvalueby55.16 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 1.26billionasofJune30,2024[303]−FCClicensesimpairmenttestsresultedina1.26 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 104millionchargeforfivemarketsinQ32024,reducingthecarryingvalueto104 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 67millionand67 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 54millionin2023and54 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]