Viacom reported higher revenue but took big charges against earnings as new CEO Bob Bakish began implementing his turnaround plan for the struggling media company.
Net income fell to $121 million, or 30 cents a share, from $303 million, or 76 cents a share a year ago. The results include restructuring and programming charges of $280 million. Adjusted net earnings were up 5%.
Revenues rose 8% to $3.3 billion.
The results exceeded Wall Street forecasts.
Viacom’s media networks reported a 7% decrease in adjusted operating income to $747 million. Higher revenues were offset by advertising and promotion charges and expense related to the acquisition of Telefe.
Media network revenues increased 1% to $2.39 billion. Affiliate revenue rose 2% to $1.16 billion, with domestic affiliate revenues up 1% to $975 million.
Advertising revenues decreased 1% to $1.11 billion. Domestic ad revenues were down 4% because of lower impressions, the company said.
Ancillary revenues were flat at $129 million.
Bakish is looking to boost Viacom’s cable network portfolio by prioritizing six flagship brands: BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount. The company is rebranding Spike to become the Paramount Network in January. The network is being billed as a premium entertainment channel.
Bakish was named CEO after last year’s boardroom drama in which his predecessor Philippe Dauman was ousted by the family of Sumner Redstone, which owns a controlling interest in Viacom.
“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 Bakish.
“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,” Bakish said. “We are working diligently to cement Viacom as a partner of choice in the industry, presenting new and reinvigorated brand strategies for our advertisers, producing creative and flexible new opportunities with our distributors and recommitting ourselves to be the home for the world’s best talent.”
John Janedis, analyst at Jefferies, said the earnings indicated Viacom’s recovery was on track. “The results should provide some relief after yesterday's sell-off,” he said.
Marci Ryvicker of Wells Fargo said Viacom results beat expectations as the Paramount movie operations strengthened and revenue at the TV networks were ahead of projections.
The drop in domestic ad revenues was in line with forecasts, but affiliate revenue was higher than expected, despite a decline in streaming revenue, she said.
Todd Juenger of Sanford Bernstein noted that “the earnings results were confused by two very big charges in the quarter, severance ($156mm) and programming write-off ($106mm). The severance charge supports the bullish theory of cost-out opportunities. The programming write-off, on the other hand, cannot be simply ignored, because that programming needs to be replaced.”