I feel kind of like the contestant on "Let's Make a Deal" who turns down the $100 bill offered by Wayne Brady in favor of the unknown, only to end up disappointed.
Regular readers know that after withdrawing most of my original investment in ViacomCBS (VIAC) that I hung in there for quite a while now. No, I am not down on my investment. I might be if time spent and opportunity cost are factored in, especially after last night, but I'm not down nominally.
Oh, there it goes. OK. Now, I am down small. Hard to be up (or down) very much when a stock trades sideways for nine or 10 months.
For its fourth quarter, ViacomCBS posted adjusted earnings per share of $0.26. This number prints down from $1.04 a year ago and rather badly missed consensus of $0.45. Revenue generation amounted to an even $8 billion, which easily beat the street, and was also good enough for year-over-year growth of 16.4%. Adjusted OIBDA (Operating Income Before Depreciation and Amortization) fell 73% to $147million from $549 million in the year-ago period, while ViacomCBS also generated $2.3 billion in net proceeds from the sales of CBS Studio Center and the Black Rock headquarters.
Within the data, quarterly global streaming revenue increased 48% year over year to $1.3 billion, driven by paid subscriptions and advertising. The company added a record 9.4 million global streaming subscribers, led by Paramount+, to reach more than 56 million subscribers in the quarter, thus achieving 84% year-over-year growth in streaming subscription revenue. Pluto TV added 10 million global monthly active users to reach over 64 million, growing revenue 45% year over year.
The End of the Beginning
ViacomCBS announced as part of its investor event the rebranding of the company as Paramount Global in an obvious nod to where it is going, focusing on content generation and streaming services. Just as obviously, the rebranding moves focus away from where it has been.
The CBS and Viacom brands that will be removed from the corporate name of the company are reminiscent of the eras of broadcast and cable television. They also remind investors of past legal squabbles. The company will now pursue new stock symbols -- PARA for the Class B shares, and PARAA for the Class A shares.
Revenue by Type
--Advertising: Up 1% to $2.63 billion, reflecting improved pricing offset by lower linear impressions.
--Affiliate: Up 2% to $2.11billion, reflecting expanded distribution and rate increases offsetting subscriber declines.
--Streaming: Up 48% to $1.32 billion, with subscription revenues up 84% and streaming advertising up 26%.
--Theatrical: $39 million, up from $4 million one year ago.
--Licensing & Other: Up 45% to $1.9 billion.
The company's net cash position has more than doubled over the past year to $6.3 billion, while long-term debt has been paid down to $17.7 billion. Not great? Improved. All encompassing, current assets are up to $16.6 billion as current liabilities are up to $9.4 billion, for a healthy current ratio of 1.76. Total assets of $58.6 billion easily outweigh total liabilities less equity of $35.7 billion without an inappropriate reliance upon goodwill. In short, I would like to see a higher cash balance, but I am old-fashioned and cash is moving in the right direction. The company also has untapped access to $3.5 billion of additional liquidity in the form of a revolving credit facility as need be. This balance sheet is healthy.
Now for a little ugliness: Book value is a very healthy $31.84 per share. However, tangible book value prints with a minus sign in front of it. We don't love that. Nor do we love negative free cash flow. There is work to do.
The company will move toward three new reporting segments from here. These will be...
--TV Media, which will be CBS TV, ViacomCBS Networks International, Showtime, Nickelodeon, MTV Entertainment Group, BET and Paramount TV Studios.
--Direct to Consumer, which comprises Paramount+, Showtime OTT, Pluto TV, Noggin and BET+.
--Filmed Entertainment, which I think is self-explanatory.
My thoughts on this: ViacomCBS is now targeting 100 million streaming subscribers by 2024, up from the previously laid out goal of 65 million to 75 million, while upping DTC (direct to consumer) revenue to $9 billion by 2024 from prior guidance of $6 billion. This is something like what we see with Disney (DIS) . The plan appears to be to fund what needs to grow even at a loss by subsidizing that growth with what appears to be an ebbing but still highly profitable business, cable television.
On the Way...
For the kids... more Paw Patrol, more SpongeBob, more Teenage Mutant Ninja Turtles, more Blue's Clues, and more Baby Shark.
For the adults... more Star Trek, More Halo, more Billions, more NCIS, more Transformers.
In addition, Paramount+ and Showtime OTT will be combined into a single streaming offering that starts at $12 per month (ad-supported) and goes as high as $15 (ad-free). Users will be able to upgrade their subscription on the Paramount+ app. It reads as if both will also remain stand-alone offerings as well.
I think ViacomCBS is going the right way in terms of reorganization as well as in content creation. The show "1883" is probably one of the best shows in the history of streaming. That said, there is no way to avoid the increased margin pressure that this company is likely to face in the near to intermediate future,
I will probably add some down here if the shares are still trading at a discount when my article is public, but the idea is to trade my way out of this name. I have given VIAC enough time. I am out of patience as an investor. As a customer, I really do love the product. I will be back.
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