Viacom Q2 Profit Down 60 Percent

Net earnings attributable to Viacom for the second fiscal quarter were $121 million, down 60 percent in a year-on-year comparison.

Revenues for the period were $3.26 billion, an increase of 8 percent, reflecting gains across all filmed entertainment revenue streams, increases in worldwide affiliate revenues, and continued strength in international media networks revenues. Operating income decreased 43 percent to $332 million, and adjusted operating income increased 4 percent to $612 million. The reported operating income reflects restructuring and programming charges of $280 million resulting from the execution of new strategic initiatives, including the prioritization of six flagship brands: BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount.

Media networks revenues were up 1 percent to $2.39 billion. Domestic revenues declined 2 percent to $1.92 billion, while international revenues grew 11 percent to $478 million. Affiliate revenues grew 2 percent to $1.16 billion, with domestic and international affiliate revenues increasing 1 percent to $975 million and 10 percent to $181 million, respectively. Ad revenues decreased 1 percent to $1.11 billion. Worldwide advertising revenues increased 1 percent, excluding a 2-percentage point unfavorable impact from foreign exchange. Domestic advertising revenues decreased 4 percent, driven by higher pricing more than offset by lower impressions. International advertising revenues increased 11 percent. The gains in international advertising were driven by the acquisition of Telefe, which had a 17-percentage point favorable impact, and continued growth in Europe. Ancillary revenues remained flat at $129 million in the quarter. Overall, media networks saw adjusted operating income of $747 million, down 7 percent compared to the second fiscal quarter of 2016. Higher revenues were more than offset by advertising and promotion costs and increased expenses related to the acquisition of Telefe.

Meanwhile, filmed entertainment revenues grew 37 percent to $895 million, reflecting gains in theatrical, licensing, home entertainment and ancillary revenues. Domestic revenues increased 25 percent to $458 million in the quarter, while international revenues increased 51 percent to $437 million. Theatrical revenues gained 10 percent to $238 million, with revenues from current quarter releases up 73 percent compared to releases from the second quarter of fiscal 2016. Notably, xXx: Return of Xander Cage delivered a strong international performance. Licensing revenues increased 45 percent to $347 million in the quarter, largely driven by Paramount Television production. Home-entertainment revenues were up 29 percent to $198 million, and ancillary revenues increased 149 percent to $112 million, primarily driven by the sale of a partial copyright interest in certain current-year releases related to a film slate financing arrangement. Overall, filmed entertainment posted an adjusted operating loss of $66 million, compared to $136 million in the prior-year quarter.

Bob Bakish, the president and CEO of Viacom, said, “In the second quarter, Viacom delivered continued top-line improvement, with growth in affiliate revenues, international media networks and across every business segment of Paramount Pictures. Additionally, we executed quickly on our strategic plan, making significant organizational changes to better focus and align Viacom’s brand portfolio and ensure strong leadership, including the appointment of Jim Gianopulos to chart a new course at Paramount. We are working diligently to cement Viacom as a partner of choice in the industry, presenting new and reinvigorated brand strategies for our advertisers, producing creative and flexible new opportunities with our distributors and recommitting ourselves to be the home for the world’s best talent.

“Viacom also took significant steps forward on our plan to strengthen our balance sheet, improve our leverage profile and enhance liquidity. Since the end of our first fiscal quarter, we completed a successful hybrid debt offering, redeemed outstanding debt and executed on the sale of non-core assets, including the pending sale of our stake in EPIX. There is a lot of work still to do, but we are making important changes at Viacom, taking substantial strides towards revitalizing our portfolio of brands and returning the company to consistent top-line growth.”