Paramount Global

Good day, everyone, and welcome to the ViacomCBS third quarter 2020 earnings conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Executive Vice President of Investor Relations, Mr. Anthony DiClemente. Please go ahead, sir.

Good morning, everyone. Thank you for taking the time to be with us for our third quarter 2020 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO, and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. We also have a slide presentation for you to follow along with our remarks. I want to refer you to the second slide in the presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Today's remarks will focus on adjusted results. Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website. Now I will turn the call over to Bob.

Good morning, and thank you for joining us today. On today's call, I'll cover three key topics. First, how we've unlocked the power of a combined ViacomCBS in the years since we've merged. Second, how our third quarter results demonstrate the company's building momentum. And third, how we're focused on achieving growth in the short and long term by aggressively leaning into streaming. I'll then hand it over to Naveen Chopra, who I'm pleased to welcome to his first earnings call as ViacomCBS's CFO. Naveen will give you his early perspective on the company, as well as a detailed financial commentary on Q3. Following that, we'll take your questions. Okay, so first off, it's been almost a year since the ViacomCBS merger closed, and I'm thrilled with the way our organization has come together to create value from the combined asset base. In fact, despite the challenges presented by the world around us, our company's transformation is ahead of schedule, and we've moved quickly to realize the power of the ViacomCBS combination. By establishing a best-in-class management team, including, most recently, through the creation of a new consolidated streaming organization, by accelerating our strategy and execution across pay and free streaming, driving growth in subscribers, monthly active users, and revenue. We're also unlocking more value in distribution by expanding our footprint through cross-company renewals and new deals, and simultaneously strengthening our positioning in advertising, by bringing to bear the power of our combined portfolio and capabilities, all while improving operational efficiency and exceeding the cost synergies we promised when we announced the transaction. We've accomplished a lot in a short amount of time, and we're just getting going. Second, let me turn to the quarter's financial and operating results. Viacom CDS's Q3 reflects the continuation and acceleration of a strategy that is clearly working, even as we navigate through the pandemic. To that end, importantly, during the quarter, we saw improving top-line trends across affiliate, advertising, and domestic streaming and digital video revenue. In affiliate, revenue grew 10% in the quarter, marking a significant improvement versus Q2. This improvement was fueled by strong growth in subscription streaming revenue as well as higher reverse comp and retransmission fees. It was also fueled by a return to growth in domestic cable affiliate revenue, which saw a 10 percentage point improvement in growth rate versus Q2. Advertising revenue also improved dramatically versus what we saw in Q2, with the rate of decline slowing to 6%. Improvements were seen across the board in broadcast, cable, sports, national, local, digital, and international. And the scatter market was robust, with strong activity across key categories. Speaking of categories, we've also seen certain COVID-impacted industries like auto and retail gradually return, which reflects improvement in the economy and the significant value our portfolio brings to advertisers to drive their own business recovery. Importantly, as we look forward, the return of CBS's stable fall schedule is upon us, with several scripted series already on air and more premiere dates coming up. Add to that the NFL, the SEC, and the Masters. Our content position is strong. This dynamic, paired with a successful upfront and the hot political category, should provide further benefit in the fourth quarter. Overall, we're encouraged by what we're seeing, and big picture advertising is certainly moving in the right direction. The commercial momentum of ViacomCBS is clear, and it is underpinned by the durable strength of our brands and IP. CDS was once again the most watched network across primetime, daytime, and late night during the 2019-2020 broadcast years. We maintained our leadership in key demos as the number one cable portfolio for share of viewing, and we owned more top 30 cable networks than any other media family. Internationally, our linear share of viewing increased for a third consecutive quarter. And for the second quarter in a row, Tubular Labs ranked ViacomCBS the number one media and entertainment company in social, reinforcing the popularity and relevance of our brands and IP in the digital space. The strength of ViacomCVS's foundation in content, franchise IP, and audience reach is an important competitive advantage, including as a growth accelerant for our streaming business, where we had another great quarter. To that end, ViacomCVS grew domestic streaming and digital video revenue by 56% in Q3, up from 25% in Q2. reflecting the real momentum in usage and monetization in our pay and free streaming products, something we're aggressively leaning into. Let me unpack this a bit. In pay, we ended the quarter with 17.9 million domestic subscribers, up 72% year-on-year, which basically puts us just under the raised year-end guidance we issued last quarter, where we took it up from 16 to 18 million subs. And both CBS All Access and Showtime OTT each had robust consumption growth and sign-ups. Starting with All Access, the service benefited from strong demand for sports like UASA and the NFL, originals like Star Trek Lower Decks, and CBS network content like Big Brother and Love Island, as well as from the 3,500 library episodes added from Nickelodeon, BET, Comedy Central, MTV, and Smithsonian. plus the almost 200 films from Paramount that we added in late July as part of our preview launch. CBS All Access is now in the early stages of benefiting from the power of the combined company, and there's much more to come. More on that in a bit. And Showtime OTT had a strong quarter as well, driven by the trifecta of original programming, including The Chi, Billions, The Final Season of Homeland, all of which drove strong adoption and engagement. Our momentum in paid streaming is driven by the combination of compelling content and ubiquitous distribution. On the distribution side, the latest example is the all-access and Showtime streaming bundle we recently began offering through Apple TV+, which follows our recent Amazon renewal. We have a lot going on here. and the combination of compelling content and ubiquitous distribution is clearly working. As evidenced by ViacomCBS subscription streaming revenue growth accelerating to 78% in Q3 from Q2's 52%. On the free side, Pluto TV continues to build on its position as the number one fast free ad-supported streaming television service in the United States. In the quarter, Pluto TV's domestic MAUs grew 57% to 28.4 million and globally grew to nearly 36 million MAUs. On top of that, Pluto's ad monetization has been growing rapidly, and the trend line is compelling. Consider this. After logging its first $1 million ad sales day in 2019, it took Pluto 10 months to log its first $2 million ad sales day but it just took one month after that for Pluto TV to achieve its first $3 million day. While this shouldn't be interpreted as a daily run rate, we are seeing revenue inflection at Pluto TV in a most positive way. The trajectory is extremely exciting, and we remain confident that Pluto will meet or exceed its $30 million domestic MAU target by year-end, bolstered by the fact that we continue to add even more high-quality content to the market-leading service. In fact, in the U.S., Pluto now has well over 100,000 hours of compelling content available to consumers. We recently added nine ViacomCBS channels, including Star Trek, Bellator, CBSN Dallas, and CSI. And, of course, we continue to add a broad range of compelling third-party content, As an example, in October, Narcos began streaming on Pluto TV, marking the first time the series will be widely available to U.S. streaming viewers without a Netflix subscription. We also ramped up Pluto TV's distribution across multiple devices and services, including new distribution agreements with LG and Sony PlayStation, extending Pluto TV reach to well over 100 million additional devices worldwide. What's even more exciting is we're on an official launch partner of the highly anticipated PlayStation 5 console debuting in mid-November. Outside the U.S., Pluto TV is expanding rapidly and seeing strong adoption as well, especially in Latin America. And last month, we launched Pluto TV in Spain with 40 thematic and uniquely curated channels across multiple genres. In fact, during the first week of launch in Spain, Pluto TV was the number one downloaded app for Android devices. Looking ahead, we plan to bring new local versions of Pluto TV to other priority markets, including Brazil this year and France and Italy in 2021. Importantly, these are all markets where ViacomCBS has strong local operations, including a large pipeline of local language content in place and ready to go. The world is quickly embracing fast, which is why Pluto TV's leadership and growth is a key component of our streaming strategy. And remember, as we progressively build out a linked ecosystem, Pluto will also serve as a gateway to and funnel for our pay services. So there was a lot to be excited about for ViacomCBS in Q3 in the streaming space. And I'm even more excited about where we're going. Here, I want to touch on a few items. First, consistent with our strategy to maximize our position and assets across both pay and free, in mid-October, we announced the creation of a new consolidated streaming organization. Tom Ryan, the co-founder and CEO of Pluto TV, has assumed the role of President and CEO ViacomCVS Streaming, overseeing Paramount Plus and Pluto TV. In this expanded role, Tom will drive our strategic execution globally as we create a progressively integrated streaming ecosystem across pay and free. Tom's entrepreneurial drive, deep knowledge and over-the-top, his focus on the consumer experience, and demonstrated ability to work effectively across our company make him ideally suited to lead this next leg of our streaming journey. A second item I want to touch on is Paramount+, which is on track to debut in early 2021. As you know, Paramount Plus will combine live sports, breaking news, and a mountain of entertainment, including exclusive original content, plus a diverse and deep library of shows and movies, spanning all programming genres from ViacomCBS's leading brands in one unified service. Here, despite the challenges of COVID, our original programming plans continue to advance. And we will have a deep roster of original series that leans heavily on our franchises, including The Offer, a scripted limited series that will tell the incredible story behind the making of The Godfather, one of Paramount Pictures' most iconic franchises. A new edition of Behind the Music, a truly iconic music series. Real Criminal Minds, a true crime docu-series spinning out of CBS's Criminal Minds. Camp Coral, a new original children's series from Nickelodeon's SpongeBob SquarePants, which we will release after the new SpongeBob movie, Sponge on the Run, and will be exclusive to Paramount+. And we also have new original content, including Lioness, a new series from the creator of Yellowstone. We will, of course, have more original programming to announce as we get closer to launch. As we get into 21, we see substantial incremental growth ahead. Our preview launch at the end of July served as a proof of concept. And that gives us the confidence to lean into streaming even more. We're executing a plan which will bring more content, more marketing, and more distribution to the table. Paramount+, with its live sports, breaking news, and mountain of entertainment, together with Pluto TV in the free space and Showtime OTT in premium, will take ViacomCBS streaming to a whole new level. This is certainly an exciting time for our company. and I'm so glad that Naveen Chopra has joined us for the next leg of our journey. Since early August, he's truly hit the ground running. He's brought a fresh and valuable perspective to ViacomCBS, especially as we gear up for our launch of Paramount Plus early next year. With that, I'll hand it over to Naveen to provide his thoughts as well as additional financial detail on the quarter. Naveen?