Paramount Global

Hello everyone, the Paramount Global's Q4 2023 earnings conference call will begin in one minute's time to allow all participants to get connected. If you would like to ask a question, please press star followed by one on your telephone keypad. Good afternoon. My name is Nadia and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount Global's Q4 2023 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, 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 of your 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 Jamie Morris, Paramount Global's EVP Investor Relations. You may now begin your conference call.

Good afternoon, everyone. Thank you for taking the time to join us for our fourth quarter 2023 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. Before we start this afternoon, 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 trending schedules, which contain supplemental information and in each case can be found in the investor relations section of our website. Now I will return the call over to Bob.

Good afternoon, everyone, and thank you for joining us. There's no question that 2023 was a dynamic and in many ways challenging year in our industry. We saw two labor strikes, a tough macroeconomic environment, and continued evolution in the media industry. But we stayed focused on a disciplined execution aligned with our strategy, adapting as needed. In doing so, we positioned Paramount Global to deliver significant growth in total company earnings and growth in free cash flow in 2024. On today's call, I'd like to spend a few minutes speaking to our 23 accomplishments, Then I'll provide more color on our 24 priorities before handing it over to Naveen for a deeper dive on the financials. With that, let's start with 23, a year where our content clearly continued to deliver, driving every platform. In fact, Paramount had the number one show on all of television and the number one broadcast network for the 22-23 season, not to mention five number one debuts at the domestic box office. And very importantly, we continued to scale streaming with Paramount Plus and Pluto TV. Subscribers and MAUs grew nicely. In 2023, audiences spent nearly 40% more hours on our streaming platforms compared to 2022, which, when combined with our mid-year Paramount Plus domestic price increase, delivered 37% D2C revenue growth. The disciplined execution of our strategy including the integration of Showtime into Paramount Plus, led to a reduction in full-year D2C losses and meant we hit peak streaming losses in 2022, a year ahead of schedule, with further significant improvement expected in 2024. Discipline to execution has been a theme across the entire company to deliver both impact and efficiency, and that obviously extends to managing our cost base as we continue to streamline the organization. That brings me to the year ahead, where we're focused on returning the company to sustainable, profitable growth in 2024 and beyond. And know that, regardless of current market sentiment, we're convinced that the value of our assets today, combined with the execution of our strategy as we move forward, represents a significant value creation opportunity. And we are dedicated to unlocking that value. To do so, we will focus on three key priorities. First, we will continue to lean into content with the biggest impact. Second, we're laser focused on driving the direct consumer profitability. And third, we'll continue to unlock synergies across the company. Naveen and I will unpack these further. Let's start at the core, our content. As we say, popular is paramount. We create hits that the whole household, country, and whole world love to watch. and that our partners need. That's the heart of our business. And in doing so, we've proven we can prioritize efficiency while still achieving viewership and revenue goals. As we've discussed in previous quarters, we continue to sharpen our ability to maximize our return on content investment, which informs how we approach our content, programming, and windowing. As we move into 2024, we're focused on producing content more efficiently and magnifying the impact of our slate. And let me give you some examples to illustrate this. In the film segment, we're improving ROI by lowering the average cost per title. This by balancing high budget tentpoles with more modest cost titles, like Mean Girls and Bob Marley One Love, improving the financial return on the overall slate. And we're off to an excellent start on this. In TV media, at CBS, we have an increasingly efficient and targeted development process. We've prioritized lower-cost formats, like unscripted and those shot abroad, while maintaining our strength in franchises. NCIS, one of the world's most-watched shows and one that has been licensed in over 200 markets worldwide, is a great example of this. The latest iteration, NCIS Sydney, was produced in Australia at a much more efficient price point and was the most watched new show this season on any network in the US until February's debut of Tracker, also on CBS. And we are excited to announce today that the NCIS franchise will expand further with the first original for Paramount Plus US expected later this year. By the way, you will see us leaning even further into offshore production for our global franchises, including the upcoming London installment of Billions, the new Ray Donovan origin story with the Donovans, as well as new series like The Department from George Clooney. This benefits both TV media and D2C. Finally, we're focused on magnifying the impact of our content, including through our combination of best-in-class sports and entertainment here in the U.S. Look no further than Super Bowl 58, a blockbuster event, one that capped off a record-breaking NFL season. The game broke almost every record imaginable. Most-watched telecast in television history. Most-streamed Super Bowl ever. The first alternate telecast with Nickelodeon and a new high-water mark for gross ad sales. The Super Bowl is the clear benchmark of the power of sports. But for us, it is more than that, because we know that Paramount Plus subscribers who come into the service for live sports will ultimately spend nearly 90% of their viewing hours on non-sports content. Think about that as a nine times sports multiplier. That's the power of an integrated sports and entertainment strategy, which is why we use the Super Bowl, one of the world's biggest stages, to showcase a whole range of our content with highly engaged fans, including launching the new CBS schedule, and promoting our upcoming film slate. The results speak for themselves, with Bob Marley One Love recently crossing an incredible 120 million worldwide after only 12 days at the box office. And viewership for the CBS slate got off to a turbocharged start, with audiences jumping 32% over last year on the network and 83% on streaming. Magnifying content extends well beyond the Super Bowl. and leverages our entire ecosystem. Like how we use CBS to drive new audiences to Yellowstone. Or we brought 1883, a Paramount Plus original, to new audiences on linear cable as a second window. Among other things, making 1883 the most watched new series on cable last year. And looking ahead, we're excited to add the first season of Tulsa King to the CBS slate. Ahead of its season two premiere on Paramount Plus, in the third quarter. So that's where we are and where we're going with our content. And that brings me to our second related priority, driving to D2C profitability. Here, we have already made meaningful progress. In 2020, our D2C revenue was $1.8 billion. In 2023, that number is $6.7 billion. Scaled revenue matters. And as I've said, we passed peak streaming losses a year ahead of schedule. Perhaps more important, I'm pleased to say that we now expect Paramount Plus to reach domestic profitability in 2025, a significant and exciting milestone in the company's transformation. While Levine will get into more detail, I want to preview the two parts of the story, domestic and international. Domestically, increases in engagement, reduction in churn, and continued ad monetization, as well as the flow-through impact of last year's subscription price increase, will continue to drive revenue growth, all of which will be done on a more efficient slate. Add to that the benefits of the Showtime Paramount Plus integration, all driving meaningful D2C earnings improvement as we continue to gain operating leverage in the model. Internationally, it's become unquestionably clear that Hollywood hits are the biggest draw for our audiences and partners around the world, which means there's a clear opportunity to lean into our CBS slate, Paramount Plus originals, and Paramount Films while slowing spend on local content and associated marketing. Though the specific execution of this will vary by individual market, as one size does not fit all. Of course, we also recognize that sustainable growth requires the continued transformation of our cost base, which leads me to our third priority, unlocking synergies across Paramount. There is a lot of collective power behind Paramount Global, and we're unlocking that by aligning our assets to increase impact and drive greater efficiencies. On the efficiencies front, we'll continue streamlining the business to transform our cost base. which Naveen will discuss in more detail shortly. At the same time, we're excited about the potential to unlock more impact from this company across content, marketing, partnerships, and more. And speaking of partnerships, advertising is a great example of where we're working to capture the power of one paramount. Yes, the ad market was challenging in 23 and still isn't exactly where we want it to be. but we're encouraged by some signs of stabilization, including healthy scatter premiums. At the market level, many people are talking about increased supply and competition in the digital ad space. But what's not being discussed enough is the opportunity to grow the demand side of the equation, which is a big focus of ours. In addition to our focus on tapping into small and medium business budgets, something that historically was not accessible at the national TV level, We're now excited about being able to go toe-to-toe in bringing retail media to connected TV, where we can incorporate purchase data from large-scale retailers to target and measure the impact of media investment on business outcomes. This is fundamentally reshaping the marketing landscape, drawing budgets to connected TV previously reserved for other formats, like those associated with consumer and trade promotion, as well as social media. because CTV is not just the top of the funnel awareness generator like its linear predecessor. It is also a one-to-one vehicle that can deliver the full funnel to the living room, expanding the use case and addressable market for Paramount advertising. We're testing these capabilities with Paramount Plus and Pluto. In fact, we're now partnering with Walmart Connect to bring the power of their data to streaming. and the early results show this combination significantly enhances ad effectiveness. We're excited about the potential of the opportunity, and more importantly, clients are too. And stepping back, I'd note that we love our multifaceted partnership with Walmart, a partnership that continues to evolve and grow, including by adding Paramount Plus subscribers and improving viewer engagement through our Walmart Plus relationship. In closing, These three priorities, maximizing our content, driving the D2C profitability, and unlocking paramount synergies, give us a clear roadmap. They balance revenue growth and cost management, all while demonstrating the power and efficiency of our content engine. And speaking of that content engine, I can't help but highlight the incredible momentum we have as we kick off 2024. That includes the Golden Globes up over 50%, The Grammys, with their largest audience since 2020. A Super Bowl that was record-breaking on every level. The hugely successful debut of the new CBS slate, where multi-platform viewership across broadcast and streaming soared double digits. The return of Jon Stewart to The Daily Show, which is driving ratings, revenue, streams, and the cultural conversation. And our two-for-two start at the domestic box office. with both Mean Girls and Bob Marley opening number one, significantly exceeding box office expectations, and both soon to be hits on Paramount+. All of that in just the last eight weeks. With that, I'll hand it over to Naveen. Thank you.