Viacom’s rebound is underway as the company today reported fiscal second-quarter revenues of $3.26 billion, up 8% year over year.
The company attributed the rise to gains across all Filmed Entertainment revenue streams, increases in worldwide affiliate revenues, and continued strength in international Media Networks revenues, according to a news release.
“In the second quarter, Viacom delivered continued top-line improvement, with growth in affiliate revenues, international media networks and across every business segment of Paramount Pictures,” said Viacom CEO Bob Bakish in a statement. “Additionally, we executed quickly on our strategic plan, making significant organizational changes to better focus and align Viacom’s brand portfolio and ensure strong leadership, including the appointment of Jim Gianopulos to chart a new course at Paramount.”
Still, Viacom’s operating income decreased 43% to $332 million, a steep decline that the company pegged on restructuring and programming charges of $280 million from new strategic initiatives, including the prioritization of six flagship brands: BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount. Overall, net earnings attributable to Viacom decreased to $121 million.
Despite the declining profit, Viacom earned praise from analysts for cutting costs and refocusing its efforts.
“Overall, near term we believe top line growth opportunity at Viacom will be a function of the low base at Paramount while bottom-line results will largely depend on how much more costs can be taken out,” said Barclays analyst Kannan Venkateshwar in a research note. “In our opinion, Viacom ultimately needs to convince investors that the terminal value of its media business can be higher despite a focus on a smaller base of assets.”
Bakish said that, since the end of its first fiscal quarter, Viacom has completed a hybrid debt offering, redeemed outstanding debt and executed on the sale of noncore assets, including the pending sale of its stake in EPIX.
“There is a lot of work still to do, but we are making important changes at Viacom, taking substantial strides towards revitalizing our portfolio of brands and returning the company to consistent top-line growth,” Bakish said.
Viacom’s media networks revenue remained mostly flat at $2.39 billion (up 1% annually) as a slight decline in domestic revenues was propped up by an 11% annual increase in international revenues. Affiliate revenues grew 2% to $1.16 billion as domestic revenues benefitted from rate increases somewhat offset by declines in subscribers and declines in revenues from SVOD and other OTT agreements. Ad revenues fell 1% to 1.11 billion as domestic ad revenues decreased 4% because of lower impressions.
Operating income for media networks fell 7% to $747 million.
While media networks mostly held steady, filmed entertainment revenues rose a whopping 37% during the quarter, thanks largely in part to big increases in licensing and home entertainment revenues, as well as a huge 149% increase in ancillary revenues due to the sale of a partial copyright interest in certain current-year releases related to a film slate financing arrangement.