ViacomCBS : 3rd Quarter '21 Earnings Transcript

Corrected Transcript

04-Nov-2021

ViacomCBS, Inc. (VIAC)

Q3 2021 Earnings Call

	Total Pages: 19
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ViacomCBS, Inc. (VIAC)	Corrected Transcript
Q3 2021 Earnings Call	04-Nov-2021

CORPORATE PARTICIPANTS

Anthony DiClemente	Naveen Chopra
Executive Vice President-Investor Relations, ViacomCBS, Inc.	Chief Financial Officer & Executive Vice President, ViacomCBS, Inc.
Robert Marc Bakish
President, Chief Executive Officer & Director, ViacomCBS, Inc.

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OTHER PARTICIPANTS

Brett Feldman	Jessica Reif Ehrlich
Analyst, Goldman Sachs & Co. LLC	Analyst, BofA Securities, Inc.
Michael Morris	Benjamin Swinburne
Analyst, Guggenheim Securities LLC	Analyst, Morgan Stanley & Co. LLC
Alexia S. Quadrani	Douglas Mitchelson
Analyst, JPMorgan Securities LLC	Analyst, Credit Suisse Securities (USA) LLC
Richard Greenfield	Robert Fishman
Analyst, LightShed Partners	Analyst, MoffettNathanson LLC

John C. Hodulik

Analyst, UBS Securities LLC

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MANAGEMENT DISCUSSION SECTION

Operator: Good day, everyone, and welcome to the ViacomCBS Conference Call. Today's call is being recorded.

At this time, I'd like to turn the call over to Executive Vice President of Investor Relations, Mr. Anthony DiClemente. Please go ahead, sir.

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Anthony DiClemente

Executive Vice President-Investor Relations, ViacomCBS, Inc.

Good morning, everyone. Thank you for taking the time to join us for our third quarter 2021 earnings call. Joining us for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO.

Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. We want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC.

Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case, can be found in the Investor Relations section of our website.

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ViacomCBS, Inc. (VIAC)	Corrected Transcript
Q3 2021 Earnings Call	04-Nov-2021

Now, I will turn the call over to Bob.

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Robert Marc Bakish

President, Chief Executive Officer & Director, ViacomCBS, Inc.

Good morning, and thank you for joining us. On today's call, I'll cover two key topics: First, I'll briefly discuss ViacomCBS's third quarter results. Then I'll talk about streaming, where we're executing against a global strategy that leans into our distinct competitive advantages and where our strong momentum shows how we're uniquely positioned for success. Let me start with the company's third quarter results, where we achieved another quarter of strong performance as total company revenue grew 13% year-over-year, reflecting growth across all revenue streams.

In affiliate, revenue grew as we continued to benefit from the expanded distribution of ViacomCBS' renowned brands. We also struck a series of distribution renewals, including with Charter, Cox and just last month, Altice. And despite a tough comparison against political advertising in the prior year quarter, we grew advertising revenue in Q3, benefiting from an improved marketplace.

Turning to streaming. We had another fantastic quarter of growth. The strength and momentum of both Paramount+ and Pluto TV are clearly evident and demonstrate the power of the strategy we laid out at our investor event earlier this year. Overall, quarterly global streaming revenue surpassed $1 billion for the first time, driven by robust growth in both subscription and advertising, including the addition of 4.3 million global streaming subscribers. These strong streaming results reinforce our conviction that our strategy is working and that we're well positioned to capture the significant opportunity in the global streaming ecosystem.

To that end, I want to remind you of three key enablers driving the ViacomCBS strategy, all of which we're seeing in action: First, an incredible breadth and depth of compelling content, which is critical to attracting and retaining consumers globally; second, robust distribution and marketing, which ensures we can build the broadest reach and awareness; and third, a strong and flexible financial engine to enable streaming investment, drive ROI and maximize shareholder value.

First, content. ViacomCBS is uniquely positioned with a vast library and production capabilities across genres, demos and geographies, including world-class studios aligned with broadly recognized brands, which enables us to produce a diversity of compelling and engaging content on a global scale, content that's already fueling Paramount+'s growth. When we introduced Paramount+ 9 months ago, we told you it would be a differentiated product with broad appeal, composed of a full range of content including news, sports, movies, kids and family, unscripted and original dramas. Our consumer data tells us the diversity of content on Paramount+ is a huge attraction and it is served as a key tool for customer acquisition as well as for driving customer satisfaction, thus improving churn.

As evidenced, just look at the third quarter. Starting with kids and family content, which was the top genre on Paramount+ for both acquisition and engagement in the quarter. In fact, over half of our subscribers streamed kids and family content from our globally loved Nickelodeon brand. What's even more impressive is that content consumption was balanced across new originals, and library, both film and television, including enduring franchises like SpongeBob and PAW Patrol and young adult content, such as the new iCarly.

Movies are also proving to be a key attraction to the service. And as we continue to experiment with different lease strategies, we're seeing success across all of them. This quarter, A Quiet Place Part II and PAW Patrol: The Movie were the top 2 titles for acquisition and engagement on Paramount+. And the results were impressive, both

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ViacomCBS, Inc. (VIAC)	Corrected Transcript
Q3 2021 Earnings Call	04-Nov-2021

in theatrical and on Paramount+. And following the global success of PAW Patrol: The Movie, we're thrilled to announce the sequel, which will debut in 2023.

In addition, a new PAW Patrol spin-off series for Nick and Paramount+ is in development. This is ViacomCBS franchise management ratcheting up to the next level. Next week, we have another family film day-and-date theatrical and Paramount+ Premier with Clifford the Big Red Dog, which is tracking very well. And finally, as we told you, we're also creating films exclusively for Paramount+. Just this past weekend, the latest Paranormal Activity: Next of Kin debuted, and we like how this model is working, too.

So clearly, movies are a hit for Paramount+, and they'll continue to be because Paramount+ is only one of a handful of streaming services in the world that can draw from an established and legendary movie studio like Paramount Pictures to provide it with a steady supply of world-class films.

And then there's live sports. This quarter, we welcomed back the highly anticipated return of the NFL and soccer, including UEFA, and the fans came back in droves. Look across it, and you'll find that 1/3 of all active domestic Paramount+ subscribers watch sports. And importantly, we're engaging with our sports fans after the game too, building out the content slates of those genres that we know sports fans love from our long history with broadcast and cable. This is critical to maximizing our ROI on sports. And our Paramount+ content line-up is only getting stronger.

The fourth quarter will see our biggest scripted original line-up yet. First up, from Yellowstone creator and hit maker, Taylor Sheridan, is Mayor of Kingstown starring Jeremy Renner. Next is the Yellowstone prequel 1883, staring Tim McGraw and Faith Hill. We'll launch both of these shows behind the most popular show on cable television, Yellowstone, introducing them to a weekly audience of over 7 million viewers to drive awareness and anticipation among the loyal fan base before they move exclusively to Paramount+. These are amazing series and will no doubt be fan favorites when released.

And on November 25, Kyle, Stan, Kenny and Cartman will make their highly anticipated debut on Paramount+ as we exclusively premiere the first of our South Park made for streaming movies titled South Park: Post COVID. And the second exclusive South Park made for streaming movie will stream in December.

Moving from content to the second key enabler of our streaming success, which is leveraging ViacomCBS's robust distribution and marketing capabilities to build the broadest reach and awareness. We are benefiting from our broadcast, cable and social reach, driving consumers to Paramount+, which is both an efficient and effective way to promote our new and existing series, movies and events in streaming. Of course, that includes running spots and leveraging the social followings of our franchises and talent, but it's much more than that. I already mentioned what we're doing with Taylor shows. We just moved SEAL Team exclusively to Paramount+ after 4 episodes ran on CBS. We moved EVIL earlier in the year, and we're doing similar things outside the US as well.

In terms of streaming distribution, you'll see us continue to scale both new and traditional platforms. For example, we just announced a broad distribution agreement with T-Mobile to bring Paramount+ Essential to the carrier's large customer base across the US. Suffice to say, we're thrilled to have T-Mobile welcome more fans to Paramount+'s diverse and compelling content slate.

But streaming is not just about the US. I really see our international footprint as a key accelerant for the company to unlock the very significant opportunity in streaming outside United States. Here, we're rapidly making great strides. Last week, we launched Pluto TV in Italy, continuing its international expansion. This week, we announced an agreement to acquire a majority stake in Fox TeleColombia and Estudios TeleMexico, which, when

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ViacomCBS, Inc. (VIAC)	Corrected Transcript
Q3 2021 Earnings Call	04-Nov-2021

combined with our existing assets, including Chilevisión and Telefe, solidifies ViacomCBS as one of the largest Spanish language content creators in the world.

On our last call in August, we announced a strategic partnership with Sky to launch Paramount+ in key Western European countries next year, including the UK, Germany and Italy, putting us on track to achieve 45 markets by the end of 2022. We have since announced SkyShowtime, a joint venture with Comcast, which will include premium and original content from both companies. Launching in 2022, SkyShowtime will reach an additional 20 European territories covering 90 million homes.

The third enabler that positions us to win in streaming is our strong and flexible financial engine. Here, there are a number of elements to highlight. It starts with a streaming financial model based on multiple revenue streams, which enables us to monetize content, both through advertising and subscription. Multi-revenue stream businesses have attractive characteristics when it comes to size and diversification. Multiple revenue streams made the cable network business extremely attractive. They will do the same for streaming, and the total addressable market for streaming is even larger.

Let me put our streaming ad business in context for you. As the leading free ad-supported streaming TV service on the market, Pluto TV is winning in both scale and engagement, and it will be a $1 billion revenue business this year. Add to that global expansion and significant upside from our ad-supported version of Paramount+, and you have a long runway of streaming advertising growth ahead.

And then there's subscription. This is already a huge market. And while it's still early inning for us, our ViacomCBS business is well ahead of our long-term growth plan, and we like what we see ahead. Our financial strength and flexibility is also reinforced by our ability to leverage our streaming content investment across geographies and platforms. Global is obviously important for content ROI, and we are a global company, both as a content maker and as a network and streaming operator.

Lastly, the combination of the strong cash flow of our legacy business, our aggressive approach to noncore asset dispositions and our capital raise earlier in the year has allowed us to build a substantial incremental capital base to invest in streaming. As we said we would, we began deploying that capital in the third quarter to accelerate our streaming growth. These investments have attractive returns and result in more original series and movies for streaming. As I mentioned earlier, we have a great content pipeline for Q4 and anticipate it will have a positive effect on our subscriber growth, which will be larger than in Q3. This will also be the case for Pluto MAUs in Q4. And as a reminder, we're also deploying this capital to drive our international expansion.

Finally, I'm excited to tell you we will hold an investor event early next year to provide an update on our streaming business, including showcasing our content to come and providing more transparency around our plans and progress.

With that, I'll hand it over to Naveen to share additional financial and operational highlights.

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Naveen Chopra

Chief Financial Officer & Executive Vice President, ViacomCBS, Inc.

Thank you, Bob, and good morning, everyone. Our third quarter results were highlighted by continued growth in streaming, where we had another solid quarter of subscriber additions. Streaming revenue grew 62% year-over- year with solid growth in both the subscription and advertising components of our streaming business. Q3 also benefited from growth in traditional advertising, affiliate revenue and content licensing.

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