Before the markets opened on Nov. 6, ViacomCBS Inc. (VIAC, Financial) reported its earnings results for the third quarter of 2020, which ended on Sept. 30.
The company's top and bottom line both beat analysts' expectations, but declined year over year due to weakness in the content licensing and advertising businesses. In response to the news, ViacomCBS's stock fell more than 6% to about $29.30 throughout the day's trading.
Overview of the quarter
Revenue for the third quarter fell 9% year over year to $6.11 million, while adjusted earnings per share declined 17.3% to 91 cents. Both numbers beat Wall Street's estimates, which had called for around $5.96 billion in revenue and 79 cents in adjusted earnings per share.
It was another high-growth quarter for the company's Streaming segment, which saw domestic subscribers growing 72% year over year to 17.9 million. For financial reporting purposes, ViacomCBS puts Streaming under the affiliate category, which saw 10% revenue growth. Separately, domestic streaming and digital video increased 56% year over year, with streaming revenue as the driver as subscription streaming revenue alone grew 78%.
In TV Entertainment, the company reported that "CBS was once again the most-watched network across Primetime, Daytime and Late Night during the 2019-2020 broadcast year, with the top 3 dramas, 8 of the top 10 comedies and 5 of the top 6 returning new series." It maintains the number one portfolio in terms of cable network viewing. However, revenue declined 7% year over year for the segment due to lower advertising and content licensing.
Content licensing revenue declined 33% year over year due to lower licensing volume. Meanwhile, advertising revenue was down 6% year over year, but improved sequentially compared to declines from recent quarters. The company attributes both these numbers to overall trends caused by the Covid-19 pandemic.
Publishing revenue grew 29% year over year due to higher print and digital book sales.
Theatrical suffered by far the biggest decline, as revenues dropped to a mere $6 million due to continued theater closures compared to $94 million in the same quarter of 2019.
In terms of liquidity, the company had $3.1 billion in cash on hand at the quarter's end, with an additional $3.5 billion in available credit to draw on if needed. Long-term debt stood at $19 billion compared to $18 billion at the same time last year, while total current liabilities were $7 billion compared to last year's $9 billion.
Looking forward
ViacomCBS is in the process of transitioning itself into a global streaming service model. Even as a top cable company, it still faces headwinds from cord-cutting as an increasing percentage of the world switches over exclusively to streaming for their entertainment content.
Building off of Paramount's iconic brand name, the company announced in September that it plans to rebrand its CBS All Access streaming service to Paramount+ in early 2021.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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