Paramount Global

Good day, everyone, and welcome to the CBS Corporation Fourth Quarter 2018 Earnings Release Teleconference. Today's call is being recorded, and at this time, I'd like to turn the call over to Executive Vice President of Investor Relations, Mr. David Bank. Please go ahead, sir.

Thanks, Greg. Good afternoon, everyone, and welcome to our Fourth Quarter 2018 Earnings Call. Joining us with today's remarks are Joe Ionello, our President and Acting CEO of Sean McManus, our Chairman of CBS Sports, and Chris Spade, our Chief Financial Officer. Following Joe, Sean, and Chris's remarks, we'll open up the call to questions. Please note that during today's conference call, results will be discussed on an adjusted basis unless otherwise specified. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. Also, note that statements on this call relating to matters which are not historical facts are forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's SEC files. A webcast of this call and the earnings released related to today's presentation can also be found on the investor relations section of our website at cbscorporation.com. And with that, I'll turn the call over to Joe.

Thanks, David, and good afternoon, everyone. I'm pleased to report that CBS has turned in its best quarter ever in terms of revenue and profits as we increasingly benefit from being ahead of the game with our direct-to-consumer focus. Today, I'm going to give you a number of important updates about that part of our business and outline our direct-to-consumer strategy going forward. Then, as you heard, Joining us today is Sean McManus, the chairman of CBS Sports. With more than 40 years in the sports television business, Sean has developed and nurtured some of the strongest relationships in the entire industry. He will lay out our sports strategy, including our partnership with the NFL, which this past season culminated in CBS's broadcast of Super Bowl 53 just 11 days ago. After Sean, Chris will provide you with additional color about our results and talk about our financial goals. But first, let me frame the numbers for you. As you saw in our release, CBS delivered all-time highs in revenue, operating income, and EPS for both the quarter and the full year. We also crossed $4 billion in quarterly revenue for the very first time. And we have now grown our EPS for nine consecutive years and 36 consecutive quarters. Our track record is clear. We continue to grow CBS's revenue in EPS while positioning the company for an even brighter future. Working with our senior management team and our board of directors, we have developed a long-term growth plan that will benefit shareholders for many years to come. The heart of this plan has always been the same. creating and distributing premium content with mass appeal on a global scale. What's changing is the way people engage with that content, and it's giving us an opportunity for a better business model. This is why a few years ago we began pivoting to direct to consumer. It gives viewers the experience they're looking for while providing better economic terms for us, a great combination indeed. As most of you know, our two primary subscription streaming services are CBS All Access and Showtime. By getting in early, we now have clear evidence that these services are working. And as they continue to scale, we are outperforming our expectations as well as the targets we previously laid out for you. And so today, I'm pleased to tell you We have already achieved 8 million subscribers combined from these services. We originally told you we would hit that mark by the end of 2020. Then last year we accelerated our commitment and said we'd hit that by the end of 2019. Now we are announcing that we have already crossed 8 million subscribers nearly two years ahead of our original schedule. CBS All Access and Showtime are growing so rapidly that we're prepared to increase our future projections as well. Six months ago, we told you that our goal was to achieve 16 million subs from these two services by 2022. Today, we are raising that target to 25 million subs by 2022, more than triple the number we have now. And that doesn't include any subs from our international direct-to-consumer platforms, which represent a significant additional opportunity for us. And it doesn't include our rapidly growing ad-supported direct-to-consumer channels, including CBSN, CBSN Local, CBS Sports HQ, and ET Live, all of which are contributing to make CBS All Access a unique and more robust content offering. In addition to the million subs I just told you about, we have another early mover advantage in direct to consumer. And that is rich data, which gives us valuable intelligence about the subscriber journey. We are hearing loud and clear that in addition to watching our content on demand and outside the home, our subscribers love our premium content and they want more of it. So our focus is squarely on delivering that to them. At All Access, we went from three originals in 2017 to seven originals in 2018. And here in 2019, we'll be adding four more to get us to 11, nearly quadruple the number we had just two years ago. And at Showtime, we'll be expanding our slate of original programming increasing our documentary series, adding premium boxing events, and launching a weekly talk show, Deezes and Mero, for the very first time. In all, Showtime will produce 30% more hours of original programming in 2019 than we did in 2018. That rich data I just mentioned also allows us to drill down and learn more and more about our viewers' preferences. This is very valuable to our content creators and to our advertising clients as well. Owning the customer relationship is critical and we are just beginning to achieve what's possible here. And as we do, it's enhancing the lifetime value of each subscriber who signs up for our services and allowing us for greater efficiency in reacquiring customers who have paused their subscriptions. As we increase the premium content we create, we are deliberately pursuing a two-pronged monetization strategy. First and foremost, we are building our in-house direct-to-consumer services. And second, we are benefiting from the lucrative business of licensing our content to third parties. Selling Star Trek Discovery to Netflix internationally while streaming it exclusively here in the U.S. on all access is emblematic of this strategy and provides for interesting opportunities for us going forward. Along the way, our in-house studios have been amongst the strongest players in the business. We are now creating 76 original series, up 17% from just a year ago, and we have several high new profile projects that we're licensing to premium streaming services. These include Swagger, from NBA star Kevin Durant and Imagine Entertainment, which we're producing for Apple, and it includes Diary of a Female President that we're producing with Gina Rodriguez, star of Jane the Virgin, for Disney+. By the way, the first project from an outside studio to be picked up by Disney's upcoming streaming service. But as I mentioned, our primary focus is to create premium content for our own key brands. At All Access, we kicked off 2019 in a big way with Season 2 premiere of Star Trek Discovery. Next month, The Good Fight returns. And on April 1st, Oscar winner Jordan Peele will take us to another dimension with the highly anticipated premiere of The Twilight Zone. Later this year, we'll add a true crime drama called Interrogation. and a dark comedy called Why Women Kill from Mark Cherry, the creator of Desperate Housewives, which stars Lucy Liu. And we'll end 2019 by coming full circle with the launch of a new Star Trek series starring Sir Patrick Stewart as legendary Captain Jean-Luc Picard. At Showtime, we continue to benefit from our strategy of giving audiences a full slate of must-have content staggered throughout the year. In 2018, we had four of the top six hour-long scripted shows on premium cable, and we finished the year with an all-time high of 27 million subs. We also launched our highest-rated limited series ever in the fourth quarter with Escape at Dannemora, which earned Patricia Arquette Best Actress Awards from the Golden Globes, Critics' Choice, and SAV. The momentum continues here for Showtime in Q1. Last month, Showtime set a new weekly streaming record with the return of Shameless and Smilt, and the premiere of our new series, Black Monday, starring Don Cheadle. Ahead in 2019, we'll be launching two new series that are already getting a lot of buzz. The Loudest Voice in the Room, starring Oscar winner Russell Crowe as Roger Ailes, and City on a Hill, a drama starring Kevin Bacon that's produced by Ben Affleck and Matt Damon. As we continue to invest in original programming for CBS All Access and Showtime, we are extremely fortunate to also have the most watched platform in all of media, the CBS Television Network. Not only is CBS number one yet again, but we also have five of the top ten series on television, including the number one series, Big Bang Theory, and the number one drama, NCIS. And as importantly, we have five of the top ten new shows, including four that we have ownership in, FBI, God Friended Me, Magnum P.I., and The Neighborhood. Come May, we are confident that we will win this season for the 11th consecutive year. And we expect to be number one with or without the Super Bowl. We're also attracting viewers across platforms with our live event programming. Sean will tell you more about that on the sports side. And in entertainment, on Sunday, the Grammys delivered 20 million viewers to the CBS television network and a 24% increase in unique viewers and double-digit growth in time spent on CBS All Access. Once again, all of this success is driven by our must have premium content. We're also number one in late night where season to date, the Late Show with Stephen Colbert is number one across all key demos and his margin of victory has grown to 1.3 million viewers on average per night, his largest yet. As part of those 76 series I just mentioned, Stephen Colbert and James Corden continue to create compelling content outside their own shows, including Colbert's Our Cartoon President on Showtime and Corden's Drop the Mic on TBS, both of which have been picked up for additional seasons. At CBS News, we are very proud to have Susan Zirinsky take the reins to build on the legacy of this great organization. No broadcast news producer is more highly respected and admired than Susan, and she has already taken a number of key steps forward, including the appointment of Bill Owens as executive producer of 60 Minutes, which in its 51st season is yet again a consistent top 10 show. In local media, 2018 was a record year for political spending. And as I mentioned, we have also begun to roll out our local direct to consumer streaming services, starting with CBSN New York, which launched during the quarter. We'll be expanding to other major markets in 2019, beginning with Los Angeles. Just like we achieve a whole new revenue source for our stations with retransmission consent fees, we believe building local major market direct to consumer streaming services will help grow this business for many years to come. Turning to publishing, Simon & Schuster delivered 206 New York Times bestsellers in 2018, up 6% from the prior year. This is also a business that is taking advantage of the changes in consumer habits. More than 4,000 titles are now available in digital audio, where our revenue has grown 20% from last year. Across our company, we continue to demonstrate consistent and sustainable growth by doing what we do best, creating premium content. And now more than ever, investment in content is our best and highest use of our cash and provides the best return for our shareholders. Content investment drives revenue growth opportunities in retrans and in reverse comp, and in virtual MVPDs, and in global licensing, and in advertising. And it's especially powerful for driving growth at our direct-to-consumer platforms. So from CBS News to CBSN and CBSN Local, from CBS Sports to CBS Sports HQ, from Entertainment Tonight to ET Live, from CBS to CBS All Access, and from traditional Showtime To show time over the top, our direct-to-consumer services are our future. Where others are just announcing their ambitions, we are hitting our stride, poised to take significant leaps ahead. And that's because we offer live, on-demand programming across news, sports, and entertainment nationally, locally, and internationally. This gives CBS a unique value proposition that will continue to resonate with consumers as their viewing habits continue to change. Lastly, I want to say how proud I am of the thousands of CBS employees who kept their focus during this challenging year and worked so hard to achieve the record results you see here today. As you heard, we're very excited about our growth strategy and we feel very good about our future as a global multi-platform premium content company. We couldn't do this without our greatest asset of all, our people. With that, I'd like to hand the call off to one of those key people, Sean McManus. Take it away, Sean.