Viacom Reports Strong Fourth Quarter And Full Year Results

Viacom  reported financial results for the quarter and fiscal year ended September 30th, 2018.

Statement From BOB Bakish , President and Ceo

“Our strong performance in the fourth quarter capped off a pivotal year for Viacom. We successfully turned around our core business, with dramatic improvements across our networks, at Paramount and in distribution. We also took important steps to evolve Viacom for the future – investing in our portfolio of advanced marketing solutions, digital and experiential offerings and global studio production business. As we head into 2019, we are excited about the company’s evolution and expect to return to topline growth.”

Fiscal Year 2018 Results

$ millions, except per share amounts

Quarter Ended September 30,

Year Ended September 30,

20182017

B/(W)%

20182017

B/(W)%

GAAP
Revenues$3,485$3,3195

%

$12,943$13,263(2

)%

Operating income645705(9

)

2,5702,4893
Net earnings from continuing operations attributable to Viacom386674(43

)

1,688

1,871(10

)

Diluted EPS from continuing operations0.961.67(43

)

4.194.67(10

)

Non-GAAP*
Adjusted operating income$670$57816

%

$2,795$2,7432

%

Adjusted net earnings from continuing operations attributable to Viacom400310291,6591,51110
Adjusted diluted EPS from continuing operations0.990.77294.123.779

* Non-GAAP measures referenced in this release are detailed in the Supplemental Disclosures at the end of this release.

FILMED ENTERTAINMENT

Paramount Pictures continued its momentum in FQ4 with strong growth at the box office and in television production, delivering $241 million in full year adjusted operating income improvement.

Quarterly Financial Results

$ millions

FQ4’18

TotalB/(W)%DomesticB/(W)%InternationalB/(W)%
Revenues$98425%$40026%$58424%
Theatrical337193108

315

229157
Licensing4353148

14

287(2)
Home Entertainment157(17)103(15)54(22)
Ancillary55(10)41314(33)
Adj. Operating Income$38n/m*

* n/m: not meaningful

  • Paramount Pictures has improved YOY adjusted operating income for seven straight quarters, with growth in FQ4 benefitting from the performances of Mission: Impossible – FalloutA Quiet Place and Book Club.
  • Double-digit gains in FQ4 total revenues were driven by a nearly 3X increase in worldwide theatrical revenues and growth in worldwide licensing.
  • Higher worldwide theatrical revenues in FQ4 reflect the strong box office performance of Mission: Impossible – Fallout.
  • The increase in FQ4 worldwide licensing revenues benefited from continued growth at Paramount Television, with notable deliveries, including Maniac.
    • Paramount Television grew revenues +127% YOY to over $400 million in FY18.
  • Lower worldwide home entertainment revenues in FQ4 reflect the number and mix of available titles.
  • The decrease in FQ4 worldwide ancillary revenues reflects lower international revenues, partially offset by domestic growth.

Operational Highlights

  • Mission: Impossible – Fallout was #1 at the global box office in FQ4. It is the most successful film of the franchise, grossing nearly $800 million to date.
  • With a production cost of approximately $20 million, A Quiet Place grossed more than $340 million at the worldwide box office. Released in April, it is the second highest grossing horror film in the U.S. over the past decade.
  • Comedy hit Book Club grossed nearly $75 million worldwide – more than seven times its acquisition cost of $10 million.
  • Paramount Pictures has built a diverse theatrical film slate of 13 titles for FY19 – up from nine in FY18 – that feature big-budget tentpoles, targeted-audience productions and Viacom-branded films.- Upcoming releases include the latest installment of the Transformers franchise, Bumblebee; the BET co-branded film What Men Want; animated feature Wonder Park; a reboot of Stephen King’s horror classic Pet Sematary; and the Elton John biopic Rocketman.
  • Paramount Television delivered nine series to air in FY18, with FQ4 premieres including Tom Clancy’s Jack Ryan on Amazon and Maniac on Netflix.
    • Anticipated to grow revenues +50% in FY19, with 16 series ordered for production:
      • Nine new shows, including The Haunting of Hill House for Netflix, Catch-22 for Hulu and First Wives Club for Paramount Network.
      • Seven returning series, including third seasons of 13 Reasons Why for Netflix and Berlin Station for EPIX, and second seasons of Tom Clancy’s Jack Ryan for Amazon and The Alienist for TNT.

MEDIA NETWORKS

Viacom Media Networks returned domestic affiliate revenues and total adjusted operating income to growth in FQ4, strengthened audience share and accelerated initiatives in content production, digital consumption and ad solutions.

Quarterly Financial Results

$ millions

FQ4’18

TotalB/(W)%DomesticB/(W)%InternationalB/(W)%FX B/(W)%
Revenues$2,520(1)%$1,966

%$554(7)%(8)%
Affiliate1,1924972

3

22010(6)
Advertising1,147(6)896(4

)

251(13)(10)
Ancillary181982983(21)(5)
Adj. Operating Income$7082%

  • Worldwide affiliate growth in FQ4 partially offset lower worldwide advertising revenues. Domestic revenues held flat, while the impact of foreign exchange drove lower international revenues.
  • Worldwide affiliate revenues in FQ4 were driven by domestic growth and double-digit international gains.
    • Domestic affiliate revenues delivered +1,100 bps of sequential improvement in growth rate in the year.
  • Advanced Marketing Solutions (AMS) revenues – including those from Vantage – grew +32% YOY in FQ4, partially offsetting the decrease in linear domestic ad revenues, while the unfavorable impact of foreign exchange drove lower international ad revenues.
  • Live events and consumer products drove double-digit growth in FQ4 domestic ancillary revenues, offsetting lower international revenues.
  • Adjusted OI returned to growth in FQ4, benefiting from lower programming expenses and cost transformation savings.

Operational Highlights

  • Viacom held the #1 share of U.S. basic cable viewing across key audiences in FQ4, including viewers 2-49, 2-11, 12-17, 18-34 and 18-49, with particular strength at MTV, BET and Comedy Central.
    • Viacom brands in FQ4 had six of the 10 highest-rated original cable series among Adults 18-34, including season two of MTV’s Jersey Shore: Family Vacation – the most-watched unscripted show on cable in the demo.
  • Internationally, Channel 5 returned to audience share growth in FQ4, while Telefe achieved 10 months of ratings leadership as of October.
  • Viacom more than doubled YOY global social video views in FQ4, jumping from #24 to #10 in Tubular media industry rankings. Viacom doubled its YouTube subscribers in FY18 with launches of dedicated channels for hit franchises including MTV’s Wild ‘N Out.
  • AMS continued to scale, generating more than $300 million in full-year revenues, and doubling its contribution from 5% of total domestic advertising revenues in FY16 to 10% in FY18. Vantage had its best quarter ever in FQ4, with revenues up 75% YOY.
  • Viacom continued to build its studio production business to create content for third parties globally. Recent wins include:
    • The August release of Awesomeness’ To All the Boys I’ve Loved Before – one of Netflix’s most-watched original films ever.
    • Nickelodeon’s partnership with Netflix on a live-action series of Avatar: The Last Airbender, with production starting in 2019.
    • The launch of MTV Studios, which announced a three-season deal with Facebook Watch in October to reimagine MTV’s The Real World for global audiences.
    • The growth of Viacom International Studios (VIS), driven by production partnerships with Amazon, Cablevisión, Fox Network Group Latin America, Netflix and Telemundo. Through VIS, Viacom is now a leading global producer of original Spanish-language content, with more than 700 hours delivered in FY18.

BALANCE SHEET AND LIQUIDITY

Progress in operating performance combined with de-levering actions strengthened the balance sheet and drove improvements across key metrics in the full year.

  • At September 30, 2018, total debt outstanding was $10.08 billion, a reduction of over $1 billion during the year and approximately $3 billion since we announced our strategy to de-lever in February 2017. Total adjusted gross debt was $9.43 billion.
  • Cash balance grew by $168 million to approximately $1.6 billion for the full year.
  • Net cash provided by operating activities increased $150 million, or 9%, to $1.82 billion for the full year.
  • Free cash flow grew $167 million, or 11%, to $1.64 billion, and operating free cash flow grew $134 million, or 9%, to $1.64 billion for the full year.
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