ViacomCBS Q1 Sales, Profit Dip On Lower Ad Revenue But Numbers Top Expectations, Stock Pops

ViacomCBS Thursday reported declines in revenue and profit for three months ended in March but its numbers beat expectations sending the stock up close to 20% in early trade. It can really use the pop. As of yesterday’s close, the shares were down about 65% year to date.

The company said revenue for its full quarter as a merged company dipped 6% to $6.7 billion. Diluted EPS from continuing operations fell to $0.82 a share from $3.15. Net income dropped 74% to $508 million from $1.9 billion. Last year included a tax benefit of $549 million.

Advertising revenue declined 19% year-over-year to $2.5 billion. The company said the hit came from sports and ad sales would have increased 2% if not for a 21-percentage point drop from tough comps against CBS’ broadcasts of Super Bowl LIII and the NCAA Tournament in the prior year quarter.

A strong point was domestic streaming and digital video revenue – including streaming subscription and digital video advertising revenue – which grew to $471 million, up 51% year-over-year. Domestic streaming subscribers surpassed 13.5 million up 50% year-over-year.

With more consumers at home in April, ViacomCBS streaming platforms had their best month ever with accelerated subscriber growth and consumption, reinforcing consumer demand for its content. CBS All Access and Showtime OTT sign-ups, daily average streams and minutes watched all rose substantially, versus the prior month.

Live TV and originals like Star Trek: Discovery, Star Trek: Picard, The Good Fight and Survivor drove consumption records in April on CBS All Access, with total streams and minutes watched up significantly. Showtime OTT had a record month in terms of time watched and total streams. Streaming of original series including Homeland and Penny Dreadful: City of Angels, and movies jumped, respectively, by 0% and 110%.

CBS All Access and Showtime OTT are seeing strong account activation and consistent paid subscription conversion rates, the company said.

In key financial metrics prized by Wall Street, the company said operating cash flow of $356 million and free cash flow of $305 million showed significant sequential improvement from  the fourth quarter.

“ViacomCBS delivered solid results in our first full quarter, including sequential improvement on key financial metrics, as well as clear operating momentum. In the wake of the COVID-19 pandemic, we also took decisive action to fortify our balance sheet, protect our employees and help communities in need. And through new creative strategies and production models, we continue to deliver must-watch content that big audiences love,” said CEO Bob Bakish. “Importantly, we are just beginning to tap into the potential of our combined assets, and our growing scale, audience reach and earnings power will become even more apparent as the market rebounds and we put the power of our portfolio behind our streaming strategy. I thank ViacomCBS employees around the world for their adaptive creativity and continued focus on serving our audiences, commercial partners and shareholders amid these unprecedented circumstances.”

The company said affiliate revenue was about flat (up 1%) as growth in station affiliation and retransmission fees, as well as subscription streaming revenue offset declines in pay-TV subscribers.

Content licensing revenue grew 9%, fueled by growth in original studio production for third parties. Paramount Television Studios, CBS Television Studios and Cable Networks’ studios all benefited from strong content deliveries during the quarter.

Theatrical revenue declined 3% as strong results from Sonic the Hedgehog were more than offset by prior year quarter revenues, which included carryover performance from Bumblebee.

Publishing revenue rose 4%, driven by higher sales of electronic and digital audio books. The company said its looking to sell publisher Simon & Schuster but the process is on hold during the pandemic.

Executives will discuss the quarter and current financials at a conference call at 8:30 ET.