Paramount Global (PARA) reported quarterly results before the bell on Thursday that missed expectations on both the top and bottom lines as the company continues to battle advertising headwinds and greater losses within its streaming division.
The company reported a direct-to-consumer loss of $511 million in the first quarter compared with a loss of $456 million in the prior year period.
"Looking ahead, we are focused on continuing to drive market-leading streaming growth while navigating a dynamic macroeconomic environment," Paramount CEO Bob Bakish said in the earnings release, praising Paramount+ and Pluto TV for reaching milestones of 60 million subscribers and 80 million MAUs, respectively. The company also updated its dividend policy, cutting its quarterly cash dividend to $0.05 per share from $0.24 a share.
"The updated dividend policy we have announced today will further enhance our ability to deliver long-term value for our shareholders as we move toward streaming profitability," Bakish said, adding on the earnings call the company is committed to enacting more cost-saving measures like divesting non-core assets.
The company said it has restarted the sale process for Simon & Schuster after the publishing giant's sale to Penguin Random House collapsed late last year.
Paramount shares saw losses accelerate into the close as investors digested the report. The stock finished Thursday's trading day down roughly 28%.
Here are Paramount's first-quarter results compared to Wall Street's consensus estimates, as compiled by Bloomberg:
Revenue: $7.27 billion versus $7.43 billion expected
Adj. earnings per share (EPS): $0.09 versus $0.14 expected
Paramount+ subscriber net additions: 4.1 million versus 3 million expected
Global Pluto monthly active users (MAUs): 80 million versus 82 million expected
Paramount recently announced it would merge its Paramount+ and Showtime streaming services into one product to take on larger competitors. It also unveiled a restructuring plan that combines Showtime with MTV Entertainment Studios. The company is eyeing greater integration between its cable television and streaming offerings amid escalating cord-cutting trends.
Paramount continued to lean on its franchises to drive streaming service subscriptions, with spinoffs for popular series like "Yellowstone," "Dexter" and "Billions" currently in the works amid the Showtime/Paramount+ rebrand.
As a result of the merger of the two streaming services, the company previously said it'd be taking a content impairment charge between $1.3 billion to $1.5 billion in the first quarter, but said it expects $700 million in future annual expense savings.
That, coupled with previously announced price hikes of its streaming tiers, should help lift revenues and ease pressures on the bottom line, with the company guiding a return to positive free cash flow and earnings growth in 2024. Free cash flow came in at negative $554 million in the first quarter versus the prior year period's $243 million.
Despite solid subscriber growth, ad softness continued to hammer the media giant's bottom line as macroeconomic challenges, coupled with a lack of political advertising and fewer NFL games, sent ad revenue plummeting.
Advertising within the company's TV media unit fell 11% year-over-year in Q1 after falling 7% in the fourth quarter. Management has maintained the second half of the year will see improvements in the ad market.
'Always looking' to unlock shareholder value
The company has tip-toed around recent reports of a potential sale of the company's BET Media Group, which includes cable channels BET and VH1, after producer Tyler Perry and media mogul Byron Allen reportedly expressed interest in purchasing a majority stake.
Paramount also turned down a $3 billion-plus offer for Showtime from former executive David Nevins, according to The Wall Street Journal.
Paramount CFO Naveen Chopra weighed in on the sales rumors in an interview with Yahoo Finance Live in March: "There's been speculation around BET. We don't comment on M&A speculation. ...But I will say that, in general, we are always looking at different ways to create value for our shareholders."
"To the extent that there are ways to do that — by buying assets, by selling assets, by restructuring assets — we look at all of those very carefully," he said.
Paramount has long been rumored as a potential acquisition target due to its small size relative to competitors. The media giant boasts a current market cap of just about $15 billion, which pales in comparison to Disney's (DIS) $183 billion and Netflix's (NFLX) $142 billion.
"Consolidation has been the rule in business for a long time, certainly been the rule in media," Paramount CEO Bob Bakish revealed during a UBS media conference late last year. "So, it's hard for me to bet on anything other than consolidation [happening] in the future."
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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