Key Takeaways From Viacom’s Q2 Earnings

Viacom (NYSE:VIA) announced better-than-expected Q2 results on May 4, as both its earnings per share and revenue came in ahead of expectations. However, the company’s stock declined more than 6%, as a big cable provider shuffled five networks (MTV, VH1, Spike, BET, and Comedy Central) to its most expensive programming tier.

Viacom’s total revenue increased 8% year-over-year (y-o-y) to $3.2 billion, due to growth in both the Media Networks and Filmed Entertainment segments. The company’s top line growth was driven by a 2% increase in affiliate revenue and strength in the company’s international operations in Media Networks, along with a stronger film slate at Paramount studio. However, the company’s operating income declined 43% y-o-y to $332 million, due to increased programming expenses at the networks and marketing costs at Paramount. Viacom also posted adjusted earnings of 79 cents per share, which grew 12% y-o-y.

Media Networks Grows On Higher Affiliate Revenues

In the first quarter, Viacom’s media networks saw a 1% y-o-y revenue growth to $2.4 billion, due to a 2% y-o-y increase in affiliate revenues, partially offset by a 1% y-o-y decline in the segment’s advertising revenues. However, Media Networks adjusted operating income declined 7% y-o-y due to investment in programming and employee costs.

At the domestic front, Media Networks witnessed 1% y-o-y growth in affiliate revenues, driven by rate increases and the impact of SVOD and OTT agreements, partially offset by a decline in pay TV subscribers. While at the international front, the segment’s international affiliate revenues increased 10% y-o-y on the back of the impact of rate increases, subscriber growth, new channel launches, as well as higher revenues from SVOD and OTT arrangements.

Solid Studio Performance in Q2

Viacom’s Filmed Entertainment revenues in the first quarter were up 37% y-o-y, principally due to a strong 45% y-o-y increase in its licensing revenues. The company’s theatrical revenues grew to $238 million due to the first quarter box-office releases, including xXx: Return of Xander Cage, Rings, and Ghost in the Shell. However, the segment also generated an adjusted operating loss of $66 million in the quarter, due to higher print and advertising costs related to the theatrical releases.

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