Paramount Skydance Corporation

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's Q3 2025 earnings conference call. At this time, all lines have been muted to prevent any background noise. After the speakers are marked, there'll be a Q&A 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 send yourself to one question. At this time, I would now like to turn the call over to Kevin Creighton, Paramount's EVP of Investor Relations. You may now begin your conference call.

Good afternoon, and thank you for taking the time to join us for the Paramount Third Quarter 2025 earnings call. I'm Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison, our President, Jeff Schell, our Interim Chief Financial Officer, Andy Warren, and our Chief Strategy and Operating Officer, Andy Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainty. Our remarks will also include non-GAAP financial measures, and reconciliations of these measures can be found in our earnings letter or in our trending schedules, which contain supplemental information. These can be found on our Investor Relations website. I'll now turn it over to David for a few brief remarks before we take analyst questions.

Good afternoon. Before we get to Q&A, I'd like to take a moment, since this is our first earnings call, to share some thoughts on what we've accomplished so far and where we're heading. We launched the new Paramount just 96 days ago. And as we approach the 100-day mark, we're encouraged by the meaningful progress we've made in a relatively short time. We moved quickly, laid a strong foundation for what's ahead, and there's a real sense of energy and purpose across the company. Our goal in bringing these two companies together was simple, to honor Paramount's incredible legacy of storytelling, while taking the necessary steps to transform it for the future. The combination unites an extraordinary and diverse collection of entertainment assets, spanning film, television, animation, interactive games, news, and sports, supported by a rich library of celebrated and award-winning content. This powerful portfolio gives us the tools to achieve scale and succeed in today's fiercely competitive media landscape. And we intend to build on this strong foundation, investing the necessary resources and talent to ensure our company is not only well positioned to compete, but to lead in the industry. Our vision is to transform Paramount into the global home of world-class storytelling, powered by one of entertainment's most storied studios, the leading broadcast network, and a scaled global streaming platform that delivers much-watched programming to audiences everywhere. Achieving this vision requires reimagining how we operate, driving greater efficiency, unlocking new opportunities for creativity, and positioning the company for sustainable, long-term growth. With this in mind, on day one, we identified our North Star priorities, the areas where we see the greatest opportunity to drive meaningful progress. They are, first, investing in our growth businesses, anchored by our creative engines and exceptional storytelling. Second, scaling our direct-to-consumer business globally. And third, driving efficiency enterprise-wide with a focus on long-term free cash flow generation. Over the past three months, as part of a thorough review of our assets and organization, we've taken early but significant steps towards advancing these priorities by making key leadership hires, pursuing high-impact partnerships, expanding our world-class roster of creative talent, reigniting performance across our studios, maximizing the value of our highly profitable CVS portfolio, and driving efficiencies across the organization, all while staying true to our mission as a creative company. Storytelling is and always will be the heart and soul of everything we do. Every effort serves a single purpose, to bring the best stories to the broadest possible audience. Thanks to our actions to date, we are now well positioned to align resources with strategic priorities and invest boldly in areas with the greatest long-term potential. Just prior to this call, we issued a letter to shareholders outlining our third and fourth quarter results and expectations, which we encourage you to review. The letter details our 2026 guidance, including total revenue of $30 billion, driven by strong growth in D2C revenue and global profitability, as well as adjusted OEBDA of $3.5 billion. Additionally, we have increased our run rate efficiency target from 2 billion to at least 3 billion. Building on these financial and operational priorities, we're also taking decisive steps to streamline studio operations and elevate performance, particularly at Paramount Pictures. In the near term, this includes adjustments to our film slate. Our plan is to grow theatrical output, targeting at least 15 movies per year over the next few years, beginning in 2026. While this rebuilding will take time, we are confident that our creative direction and business strategy will deliver the quality films that will enable us to engage and expand audiences worldwide. More broadly, over the next year, we plan to make incremental programming investments in excess of $1.5 billion across both theatrical and direct-to-consumer platforms. These investments are designed to expand our pipeline of premium films, television, sports, news, and gaming content for global audiences. We've clearly demonstrated this commitment through a series of major creative partnerships and long-term deals, from South Park and the UFC to the Duffer Brothers, James Mangold, and our landmark collaboration with Activision to bring Call of Duty to life on the big screen and much more. Our top priority is our direct-to-consumer business. where we are focused on rapidly and efficiently scaling subscribers engagement, revenue, and profitability. Since 2023, Paramount Plus has achieved the largest U.S. subscription growth among all major streamers, excluding bundles, and we aim to aggressively build on that momentum. In Q3, we added 1.4 million new subscribers for a total of 79 million. We are committed to scaling our subscriber base and are pursuing a more balanced year-round programming strategy to drive higher engagement. As we know, this is the single greatest factor in subscriber growth and loyalty. Over the past 12 months, Paramount Plus is ranked as one of the top three most sought after sources of preferred content among major streaming services. We believe we can do even better, and we are fully committed to doing what it takes to become consumers' top choice for great storytelling. Finally, Our goal is to accelerate innovation by making technology a core competency of our company. Competitors from Silicon Valley have quickly expanded into media and broader forms of entertainment. And if we want to remain competitive long term, we must strengthen our technology and do what it takes to position ourselves as the industry's most technologically capable media company. Again, I want to stress that technology at Paramount is not and never will be a replacement for human creativity. Rather, it serves as a powerful multiplier, enhancing performance, elevating the consumer experience, and equipping our creative teams with the tools that will enable them to tell even better stories more efficiently and effectively. We're excited about several innovation initiatives already underway, and we'll be sharing more details soon. While we're still in the early stages, as I mentioned, this is only day 96, we're energized by the progress we've made and the clear path ahead, and we look forward to answering your questions.