Paramount Global

Good morning. My name is Nadia and I'll be the conference operator today. At this time, I would like to welcome everyone to the Paramount Global's Q4 2022 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speeches and marks, there'll be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. In order to get as many questions as possible, we ask that you please limit yourself to one question. At this time, I would like to turn the call over to Anthony DeClemente, Paramount Global's EVP, Investor Relations. You may now begin your conference call.

Good morning, everyone. Thank you for taking the time to join us for our fourth quarter 2022 earnings call. Joining me for today's discussion are Bob Backish, 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. Before we start this morning, I want to 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. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our training schedules, which contain supplemental information, and in each case can be found in the investor relations section of our website. And now I will turn the call over to Bob.

Good morning, everyone, and thank you for joining us. Today, I'm excited to provide our perspective on Paramount's performance as we closed out 2022. and I'll give you a preview of where we're driving in 2023 and beyond. Let me begin by noting that almost one year ago, we announced that ViacomCBS would become Paramount, reflecting our determination to streamline operations and become a single, integrated company. We've increasingly worked together as one Paramount with one vision, to make popular content, to make that content popular, and to drive long-term value for our shareholders. And our one Paramount has had one approach, a multi-platform strategy that leverages our existing business, our distinct content strategy, and our expansive relationships to evolve successfully through an industry-wide transformation. That approach is delivering, and as we'll describe, made 2022 a milestone year for Paramount, with incredible momentum across our content and platforms. As planned, 2022 was also an investment year in our streaming business. Those investments, coupled with a challenging economic environment, including softness in the ad market, impacted earnings and cash flow. But it only sharpened our focus on delivering bottom line growth once we passed peak streaming investment this year. I'm incredibly proud of our progress, hitting and in most cases exceeding the key streaming metrics we set out to achieve. The differentiated strategy we committed to is working and we're going to continue to execute on our plan. As we move into 2023, we see a year of continued content and platform momentum ahead of us. A year of further scaling streaming as we hit the peak investment point. A year where we further harness the power of one Paramount, including, importantly, with our Paramount Plus Showtime integration. And a year where we look to the ad market to turn as we get to the back half. Importantly, the execution of our 2023 plan will set the stage for a return to significant earnings growth in 2024 and a return to positive free cash flow. Let me get into this a bit more, first looking back at 2022 and then looking ahead to 2023. In 2022, our content engine definitively proved itself at the highest level. Think the year's biggest domestic film, Top Gun Maverick, and five other number ones in the theaters. the number one show on television, Yellowstone, and its expanding universe. Mass-market broadcast hits like FBI, NCIS, and Fire Country, and popular Paramount Plus originals like Tulsa King, 1923, and Criminal Minds Evolution. We know our audiences, which enables us to efficiently manage content spend across platforms. To that end, we focused on developing, expanding, and exploiting the premium content franchises fans love. An approach we'll lean into more and more. The results are powerful. Our world-class content engine has driven the biggest subscriber additions in paid streaming since launch, including an industry-leading 9.9 million new Paramount Plus subscribers in Q4. It led to continued leadership in free ad-supported streaming television. with 6.5 million new monthly active users of Pluto TV in Q4, as Pluto TV grew not just in the U.S., but globally. In 2022, our content engine also drove huge success at the U.S. box office, with six Paramount Pictures films opening at number one, and the strongest performance in broadcast, fueling CBS's 14-year streak as the number one network. When you combine that with our capable performance, It's why Paramount regained the crown as the most watched media family on linear TV in Q4. And important to note that our content engine, combined with our disciplined execution and tight expense management, also enabled continued stability of TV media earnings in Q4, despite ongoing ad revenue headwinds. 2022 was also an important year of expansion. where we gained important streaming footholds in international markets, including launches in the UK, Ireland, Italy, France, Germany, the Nordics, Canada, and South Korea, and where we created new and expanded partnerships with the likes of Walmart, Delta, Sky, Canal Plus, Chorus, Amazon, Roku, and others to rapidly become a streaming partner of choice in the transforming media landscape globally. Looking back at 2022, our differentiated strategy is clearly working and our execution is strong. So let's talk about 2023. 2023 will be another year of content momentum. Our 23 film straight is strong and driven by some of our most popular franchises, including Scream, Mission Impossible, Transformers, and Paw Patrol. And CBS's momentum is only getting stronger. The network is on the verge of achieving number one status for the 15th straight broadcast year. And we see great stability in the schedule with very few slots to fill and thus limited and very focused pilot activity, which is also good for our economics. On Paramount+, you will see all this plus more great Paramount Plus originals. Sure, Criminal Minds, Tulsa King, 1923, and all your other favorites will return. Add to that great new series like Fatal Attraction with Lizzie Kaplan and Joshua Jackson, Rabbit Hole with Kiefer Sutherland, and Lioness with Nicole Kidman and Morgan Freeman. 2023 will also be an important year with respect to advertising, where we are looking forward to an improvement in the market in the back half of the year. The ad market, as we know, has been sickly tough. And like our peers, we felt its impact in 2022. But our portfolio puts us in an excellent position to build on the early stabilization we're seeing. And we are seeing early signs of stabilization in advertising. The sports marketplace continues to be active across the NFL, PGA, and NCAA. We like what we're seeing in travel and pharma. And recent activity in auto is encouraging. More importantly, because we bring together broadcast, free, and pay ad-supported streaming on a turnkey basis, Paramount is positioned to strongly benefit as the market improves. 2023 will also be an important year in the multi-year evolution of streaming as a business. We are now at the point where we are getting to scale, with streaming generating over $5.5 billion in annual revenue on a run rate basis as we exit Q4. Since day one, we have executed against a plan to build a profitable streaming business, one that achieves TV media-like margins. To get there necessitates an investment phase. And now, in 2023, entering the third year of Paramount Plus in the marketplace, we are at peak investment. And I'd note again that the recent macro headwinds have only sharpened our execution and the discipline with which we are managing this investment. As in 2022, the combination of streaming investment and the current state of the ad market will impact earnings and cash flow in 23. But we have the scale and flexibility to support it. And importantly, we see losses narrowing significantly in 2024, resulting in meaningful total company earnings growth and a return to positive free cash flow. As you think about our streaming path to profitability, it's important to understand three distinct drivers, D2C revenue growth, content spending, and operational efficiencies. Let me tackle each in turn. First, we'll continue to drive D2C revenue growth. Subscriptions are important, and the number of subscribers will continue to grow in 23. But the real focus is revenue. Revenue at scale is critical to building a profitable streaming business. Across the globe, we will pursue this first and foremost by leveraging our compelling content. We'll also drive revenue growth with price increases. We all know streaming represents incredible value for consumers, and the Paramount Plus offering is far from the industry price leader. We are on the value end of the pricing spectrum. And so, in 2023, we will raise price, both for Paramount Plus Premium and Essential, both in the U.S. and select international markets. Naveen will get into this a bit more. Growth in advertising will also benefit D2C ARPU. And finally, we see partnerships as another level for revenue growth, including new relationships with Delta, 3, and Orange, among others. Second, we will drive towards profitability by continuing to efficiently manage our content spend. By far, our biggest lever to manage spending is to focus on franchises. The higher levels of consumer awareness and built-in fan bases associated with this IP drive strong subscriber acquisition volume, lower acquisition costs, lower churn, and extend LTVs. Put simply, franchises give the people what they want. We see this with Paramount Films. with CBS Series, with the Taylor Sheridan Universe, with Nick's Kids product, and more. And while we will, of course, continue to take selective swings on new IP, there's no question that franchises are a powerful advantage. We'll also manage spending by continuing to lean into our multi-platform advantage. This increases the size of our total addressable market, gives us access to broader revenue streams, and maximizes our return on content investments. You see us doing this with Paramount Films crossing theatrical and streaming, which are among the most efficient on a cost-per-start basis. You see us doing this with the CBS slate, where we expose product to a wider audience, including, importantly, a streaming audience that is nearly 20 years younger than our broadcast audience. As an aside, I point out that CBS original cross-platform content is performing at a level comparable to Netflix, In Q4, U.S. viewers spent 370 billion minutes consuming CBS content alone on both linear and digital. That's virtually the same amount of time as viewers spent with Netflix's substantially larger entire slate of originals. You also see us doing this more broadly across our multi-platform ecosystem, as we have done with the Taylor Sheridan universe. To give you a sense of the power of this approach at the consumer level, in just a three-month span, From early November to late January, more than 58 million Taylor Sheridan fans around the world watched over 32 billion minutes of the Taylorverse on both streaming and linear on-hour platforms. The third way we drive to profitability is through a continued focus on operational efficiencies and portfolio optimization. As I've mentioned, our transformation as one paramount is ongoing, with recent initiatives around studios, global operations, and ad sales. In the journey to become one Paramount, our next step is to integrate Paramount Plus with Showtime. As you know, later this year, both our premium streaming tier on Paramount Plus and the Showtime linear network will become Paramount Plus with Showtime in the United States. This move makes Paramount Plus the definitive multi-platform service in the streaming space, where Showtime will contribute its distinctive content with more from the franchises you love. As Naveen will discuss in more detail, economically, the benefits include both revenue and cost. On the revenue side, the integrated product will be more engaging for consumers, supporting price increases and associated ARPU gains. We also expect that the integrated product will lower churn, something we've already seen with our bundles. On the cost side, there are multiple benefits, which include tech, organization, marketing, and, of course, content. put it all together, and it is accretive to the streaming path to profitability, and it also helps ensure a stable transition of our TV media business, which remains a big revenue and earnings driver. Stepping back from the particulars, let me just say how incredibly proud I am of what our team has worked together to accomplish in 2022, and I'm even more excited about what's to come in 2023. With that, let me turn it to Naveen to break down the financials in more detail. Naveen?