Paramount Skydance Corp Q3 FY2024 earnings call

Key Highlights - DTC Progress: Paramount+ added 3.5 million subscribers in Q3, with revenue up 25% YOY, and is on track for domestic profitability in 2025. Pluto saw record engagement with 5.6 billion viewing hours YTD. - Cost Streamlining: Achieved $500 million in annual run rate cost savings, with 90% of a 15% U.S. workforce reduction executed, expecting remaining by year-end. - Content Success: Paramount+ had strong original series like Lioness and Landman; Showtime featured new series The Agency and return of Dexter: Original Sin; Cable shows like The Challenge and MTV VMAs had strong results; Paramount Pictures had successful film releases. - Distribution/Advertising: Renewed key distribution agreements, Paramount+ ad-supported tier available to Charter customers, digital ad growth strong, and ongoing dispute with Nielsen but hopeful for resolution.

DTC (Direct-to-Consumer): Adjusted OIBDA improved by over $1 billion in the past four quarters, with D2C profitable in Q3. Paramount+ added 3.5 million subscribers, reaching 72 million globally, and revenue grew 25% year-over-year. Pluto had a record year-to-date with 5.6 billion viewing hours, up 5%. Advertising: Total company advertising grew 2%, with D2C advertising up 18% (double-digit sold impressions and higher CPMs), TV Media advertising declined 2% but improved vs prior quarter, and international advertising benefited from prior period revenue recognition. TV Media: Affiliate and subscription revenue declined 1% in Q3. Paramount Pictures: Films like A Quiet Place: Day One, Transformers One, and Smile 2 had strong global box office performances.

Forward-Looking Statements - Advertising: Expect double-digit D2C advertising growth in Q4. TV Media advertising growth in Q4 similar to Q3, with less sports inventory but record political spend. - Subscribers: Paramount+ expected continued growth in Q4 driven by strong originals and CBS fall schedule. - Profitability: On track for Paramount+ domestic profitability in 2025, with D2C profitable for two quarters and aiming for full year domestic profitability in 2025.

• Nielsen Dispute: Ongoing dispute with Nielsen, but partners open to alternative measurement solutions. - International Advertising: Impact of prior period underreported revenue from international sales partner, though Q4 forecast assumes no additional true-ups. - Timing Impacts: Q4 content spending and marketing expense timing may affect free cash flow.

Q: Ben Swinburne asked about DTC partnerships and D2C profitability.

A: Chris McCarthy stated they're proud of Paramount+ success, on track for 2025 domestic profitability, and opportunistic with partnerships; Naveen Chopra said D2C has made progress with subscriber growth, ARPU, and efficiency improvements, expecting domestic profitability in 2025 with international trailing.

Q: Bryan Kraft inquired about international streaming strategy and underreported revenue.

A: Chris McCarthy said they take market-to-market approach to maximize content value; Naveen Chopra noted underreported revenue in Q3 was ~$50 million, Q4 forecast assumes no further true-ups.

Q: Rich Greenfield asked about Nielsen impact and TV Media employee count.

A: George Cheeks said no material ad revenue impact from Nielsen yet, and TV Media has ~6,000+ domestic and ~3,000+ international employees.

Q: Steven Cahall asked about streaming integration and content cost allocation.

A: Chris McCarthy said they're strategic with partnerships, looking to maximize value; Naveen Chopra explained content cost allocation reflects content window value, with more cost moving to streaming as viewership shifts.

Q: Michael Morris asked about DTC trends and 4Q impact.

A: Naveen Chopra said Charter partnership contributed to sub growth, Q4 has restructuring benefit, political spend, but higher content expenses; over performance in Q3 expected to flow through to full year.

Q: Michael Ng followed up on DTC efficiencies and programming charges.

A: Naveen Chopra said DTC benefited from marketing efficiencies due to diverse subscriber channels, and programming charges have amortization benefits for future periods.