ViacomCBS stock has returned about 5% including dividends this year.
Tiffany Hagler-Geard/Bloomberg
ViacomCBS reported a mostly as-expected second quarter on Thursday morning, with a post-pandemic rebound in cable and broadcast TV advertising and distribution revenues. The company’s streaming services continued to show rapid growth, adding millions of subscribers and nearly doubling revenue year over year.
But the strong quarter across both legacy and future-looking businesses likely won’t be enough to win over skeptics who doubt the company’s ability to compete in streaming over the long term.
ViacomCBS stock (ticker: VIAC) was about flat in premarket trading on Thursday, versus S&P 500 pointing to a 0.2% rise at the open.
ViacomCBS reported $1.50 in second-quarter earnings per share, up 205% year over year, versus Wall Street analysts’ average estimates of 98 cents a share. Adjusted earnings per share were down 20% to 97 cents, which excludes a tax benefit, a gain on a sale, and other non-recurring income and costs. Without those items, the company’s earnings beat wasn’t as pronounced—analysts had been expecting 96 cents in adjusted earnings per share on average.
ViacomCBS’ second-quarter revenue came in at $6.6 billion, up 8% from a year earlier and about $75 million more than consensus. Adjusted Oibda—short for operating income before depreciation and amortization, ViacomCBS management’s preferred profit measure—was down 25% year over year at $1.2 billion, but higher than the $1.1 billion consensus. Net income was $995 million, ahead of the $627 million consensus and more than double the year-ago period.
A rebound in advertising revenues relative to the pandemic-depressed second quarter of 2020 plus continued growth in ViacomCBS’ streaming business were behind the year-over-year growth. The company’s non-streaming advertising sales were up 24%, to $2.1 billion, while affiliate revenue—the fees that distributors like cable companies pay monthly to include ViacomCBS’ channels like CBS, Comedy Central, MTV, and Nickelodeon in their bundles—were up 9%, also to $2.1 billion.
Streaming was the standout performer in the quarter: ViacomCBS said it added 6.5 million streaming subscribers—versus 4.1 million consensus—to end the second quarter with more than 42 million globally on Paramount+ and Showtime. The services added about 6 million subscribers in the first quarter. The company’s streaming subscription revenue was up 82%, to $481 million, in the latest quarter, accounting for about 15% of total revenue.
Pluto TV, ViacomCBS’ ad-supported free streaming service, saw more than 52 million monthly active users last quarter, up by about 2 million over the previous quarter and a little below analysts’ average forecast. That follows growth of 6 million in the first quarter. Pluto-specific revenues were up 169%, and CEO Bob Bakish said on Thursday’s earnings call that he expects the service to have more than $1 billion in revenue this year. ViacomCBS’ total streaming advertising revenue—which includes an ad-supported tier of Paramount+—was up 102% last quarter to $502 million.
Total streaming-related revenues were $983 million, up 92% year over year. That’s fast growth and what investors want to see from a legacy media company transitioning its business model to keep up with changing consumer preferences.
Still, there was plenty in ViacomCBS’ report to temper enthusiasm.
For starters, the economy is reopening and people have more in-person entertainment options than they have had for the past year. That’s a headwind to overall streaming industry growth: Less time sitting on couches with nothing to do means less demand for Paramount+, Netflix (NFLX), or Walt Disney’s (DIS) Disney+.
Secondly, ViacomCBS is pouring money into new shows and movies for its streaming services to keep those subscribers coming. The 25% year-over-year decline in Oibda last quarter despite an 8% rise in revenues reflected that higher content investment. ViacomCBS won’t get much credit from investors for its gains in legacy advertising and affiliate revenues if it’s plowing that cash back into money-losing streaming. The company’s free cash flow was negative $25 million last quarter. And the year-over-year comparisons for those legacy cable and broadcast TV businesses will get tougher in the coming quarters, so momentum there might not last long.
The streaming wars aren’t a winner-takes-all game. Consumers have shown that they’ll subscribe to multiple services at once. But Paramount+ and Pluto are small fish in a pond with deep-pocketed behemoths like Netflix, Disney, and soon a combined WarnerMedia and Discovery (DISCA). ViacomCBS is off to a strong start, but long-term success in streaming as an independent company is still far from assured.
Going forward, Paramount+ is set to launch in more international markets, including Australia and New Zealand this month and several European countries including the U.K., Italy, and Germany next year. And the NFL football season is around the corner. That means more viewers and advertising sales for CBS and potentially more subscribers for Paramount+, which will show some games each week.
ViacomCBS stock has returned about 5% including dividends in 2021, versus an 18% return for the S&P 500. Disney stock is down about 5% and Discovery has lost 6%.
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