Viacom Reports Quarterly Revenues Return to Growth

Viacom Inc. today reported financial results for the first quarter of fiscal 2017 ended December 31, 2016 and provided an update on strategic priorities.

Bob Bakish

Bob Bakish, President and Chief Executive Officer, said, "Today we share a strategy that will enable Viacom to realize the full potential of its premier global portfolio of entertainment brands. Building on our leading domestic and growing international footprint, this strategy will expand the depth and reach of our flagship brands across multiple platforms and around the world, while also providing for more competitive differentiation and increased adaptability for our business overall. There is much work to be done, but we are confident we have the plan and people to take our brands to greater heights and build a bright future for our company.”

“Viacom’s first quarter results reflect improvement in our core businesses, with increases in revenues and operating cash flow, continued strong international performance, including initial contributions from the acquisition of Telefe, and a return to positive growth in affiliate revenues. We are already benefiting from changes made early in the second quarter and seeing green shoots in our strongest businesses, as well as those that are poised for a turnaround. As we implement our strategy across the company, we believe we can drive significant value for shareholders.”

Revenues in the first fiscal quarter were $3.32 billion, an increase of 5%, or $170 million, compared to the previous year. This increase reflects improved theatrical revenues, a return to growth in domestic affiliate revenues, continued strength internationally and ancillary revenue growth. Operating income declined 16% to $706 million, and adjusted operating income declined 11% to $748 million. Reported operating income reflects restructuring costs related to executive severance incurred in the first fiscal quarter. Net earnings attributable to Viacom declined to $396 million, and adjusted net earnings attributable to Viacom declined to $413 million. Diluted earnings per share for the quarter declined to $1.00, and adjusted diluted earnings per share to $1.04.

MEDIA NETWORKS

Media Networks revenues increased 1% to $2.59 billion. Excluding the adverse 2% impact of foreign exchange, worldwide revenues increased 3%, including a 1-percentage point favorable impact from the acquisition of Telefe. Domestic revenues remained flat at $2.06 billion, while international revenues grew 5% to $534 million.

Affiliate revenues improved 2% to $1.14 billion, with domestic and international affiliate revenues increasing 2% to $985 million and 3% to $159 million respectively. The increase in domestic revenues reflects rate increases and the impact of SVOD and other OTT agreements, partially offset by a modest decline in subscribers. The increase in international revenues reflects the impact of rate increases, subscriber growth and new channel launches, as well as SVOD and other OTT agreements. Excluding an unfavorable 9-percentage point foreign exchange impact, international affiliate revenues increased 12%.

Advertising revenues declined 2% to $1.29 billion, as a 1% increase in international advertising revenues was more than offset by a 3% decrease in domestic advertising revenues. The decline in domestic advertising revenues reflects softer ratings at certain networks, but were positively impacted by higher pricing. Excluding a 15-percentage point unfavorable impact of foreign exchange, international advertising revenues increased 16%, driven by the acquisition of Telefe and growth in Europe.

Ancillary Revenues increased 20%, to $151 million in the quarter. Domestic ancillary revenues increased 10%, principally driven by higher home video sales. International ancillary revenues increased 33%, reflecting growth in consumer product revenue.

Media Networks reported adjusted operating income of $987 million, compared to $1.06 billion in the first fiscal quarter of 2016, representing a decline of 7% and reflecting increased programming expenses.

Performance highlights:

• Nickelodeon extended its winning streak in all major kids’ demos (#1 with kids 2-11 and kids 2-5 for six quarters), taking the #1 spot with ages 6-11, its best performance in this demo in five years. Nickelodeon’s performance this quarter was buoyed by the launch of more than 140 new episodes of new and returning series and specials
• MTV closed the quarter with a strong December, showing its first ratings growth since 2014
• At Comedy Central, The Daily Show wrapped the year on a ratings high for Trevor Noah, driven by debate and election coverage. The show was #1 with millennial men for the 5th consecutive quarter and ranked #2 with all millennials for the first quarter

Domestic advertising revenue performance improved 500 basis points versus Q4 2016
International revenues increased 5%, with gains in advertising, affiliate and ancillary revenue

FILMED ENTERTAINMENT

Filmed Entertainment revenues grew 24% to $758 million. The increase was primarily driven by improved theatrical revenues of $192 million, an increase of 104%. Domestic theatrical revenues increased 128% and international theatrical revenues increased 73%. Foreign exchange had a 3-percentage point unfavorable impact on international theatrical revenues.