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International TV Growth, Paramount Gains Power Viacom Q2 Earnings

Viacom delivered solid earnings growth in its fiscal second quarter, driven by gains at its international TV unit and a return to modest profitability at Paramount Pictures.

Viacom delivered adjusted earnings per share of 92 cents, well past the consensus estimate of Wall Street analysts, which came in at around 80 cents per share.

Viacom reported revenue for the quarter ended March 31 at $3.14 billion, down 3% from the year-ago quarter. Adjusted operating income was up 5% to $641 million, as international gains were enough to offset softness in domestic advertising and affiliate fee revenue at Viacom Media Networks. Viacom also took a write-down of $185 million in the quarter as a result of an operational overhaul of support functions in its Media Networks unit that is designed to cut costs through “new sourcing and procurement policies, real estate consolidation and technology enhancements.”

Viacom CEO Bob Bakish hailed the results as a sign that the turnaround of the company is well under way. The fiscal Q2 results come as Viacom and its corporate cousin, CBS Corp., are tussling over the terms of a potential all-stock merger urged by controlling shareholder National Amusements.

“Viacom continued to accelerate progress against its strategic priorities, delivering improvements across key metrics in the quarter. Our flagship brands increased audience share among important demos for the fourth consecutive quarter, and we saw sequential improvements in domestic advertising and affiliate revenue performance,” Bakish said. “Internationally, Viacom continued its winning streak, achieving double-digit revenue and profit gains in the quarter while expanding its global footprint through new channel launches and innovative mobile distribution deals across Europe and Asia. Our cost transformation initiatives are well under way; we anticipate more than $100 million in cost savings in fiscal 2018, and now expect over $300 million in run-rate savings in fiscal 2019 and beyond.”

The quarter marked the end of a string of heavy losses for Paramount Pictures as the studio delivered $9 million in adjusted operating income, compared to a loss of $66 million in the year-ago quarter. Revenue was down 17% to $741 million.

The new management regime that took over last year is on a roll this month with the box office success of horror pic “A Quiet Place.” But for the fiscal second quarter, the improvements at Paramount came largely from the lack of releases in the quarter amid the transition of the leadership team and the film release slate. Paramount Television’s growing slate, notably the TNT drama “The Alienist,” and the decision to sell “The Cloverfield Paradox” to Netflix rather than mount a traditional theatrical release fueled a 37% gain in licensing revenue at the studio, which came in at $477 million.

At media networks, revenue inched up 1% to $2.43 billion while adjusted operating income slid 5% to $706 million, reflecting higher expenses as Viacom’s core cablers invest more in programming and marketing. Domestic revenue for the unit was down 3% to $1.86 billion; international revenue spiked 18% to $566 million. Domestic ad revenue eased 3% to $841 million while affiliate revenue dipped 4% to $934 million.

On the international side, affiliate revenue grew 23% to $222 million.

Viacom reported that it has shaved a little more than $1 billion off of its debt load during the last six months, with total debt now standing at $10.08 billion.

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