Paramount Global reported mixed results for its second quarter of 2023 on Monday after reporting a net loss from continuing operations of $299 million, or a diluted loss of 59 cents per share, on revenue of $7.6 billion. On an adjusted basis, Paramount reported earnings of 10 cents per share.
Analysts surveyed by Zacks Investment Research were expecting a loss of 1 cent per share on revenue of $7.43 billion.
Paramount’s direct-to-consumer division, which includes Paramount+ and Pluto, a free, ad-supported streaming service, saw revenue of $1.7 billion, up 40% year over year. Paramount+ subscribers increased by 700,000 in the quarter to 61 million. The division’s loss narrowed to $424 million.
In June, the company officially rolled out its integration of Paramount+ and Showtime, which is expected to generate $700 million of expense savings for the company. The move was accompanied by price increases on some streaming tiers. Paramount recorded $697 million in programming charges in connection with the combination.
Revenue from the company’s TV Media segment was nearly flat at $5.2 billion, including $1.94 billion in advertising revenue, $2.01 billion in affiliate and subscription revenue and $1.2 billion in licensing and other revenue. Higher licensing revenue offset lower advertising revenue.
Bakish noted that CBS-produced content accounted for over $600 million of licensing revenue in the second quarter. Additionally, over the past 18 months, the top 20 engagement drivers on Paramount+ also drove hundreds of millions of dollars in incremental third-party licensing revenue.
Filmed Entertainment revenue dropped 39% year over year to $831 million. The year-ago period included box office from “Top Gun: Maverick.” Licensing revenue remained steady at $589 million, while theatrical revenue dropped 70% to $231 million. Advertising revenue in the segment fell 8% year over year to $11 million.
Despite the company’s best laid plans, Bakish admitted that Paramount “anticipate[s] continued delays in production for the duration of the strike.” Paramount, which recorded free cash flow of a loss of $210 million in the second quarter with “modest impact from the strikes,” expects FCF in the back half of 2023 to be “significantly higher than previously expected.”
Separately, Paramount announced it had entered an agreement to sell its Simon & Schuster book publishing unit to the private equity firm KKR for $1.62 billion in cash on Monday. The company expects the transaction to yield approximately $1.3 billion in net proceeds resulting in a roughly 0.5x improvement in net leverage. Proceeds from the sale will be used to help pay down Paramount’s debt.
Looking ahead, executives expect subscriber growth at Paramount+ to be higher in the back half of 2023 than the first half.
“The quarterly cadence of net adds will reflect the timing of our content slate and the rollout timing of Paramount Plus with Showtime with our third party distribution partners,” chief financial officer Naveen Chopra told analysts during the company’s earnings call. “Q3 net adds will reflect the loss of just over 1 million subscribers relating to the restructuring of a unique legacy Latin American hard bundle deal, which will have an immaterial impact on revenue.”
Executives also expect peak DTC investment in 2023 with “significant growth in consolidated earnings in 2024.”
Paramount shares climbed as much as 7% in after-hours trading on Monday before falling back to a 4% gain.
