CBS Corporation reported record revenue of $3.30 billion for the third quarter of 2019, compared to $3.26 billion for the same period last year. Third quarter revenue represents a 1% increase year-over-year. The company also reported that affiliate and subscription free revenue grew by 12% during the quarter, driven by increases in fees from CBS affiliated television stations, retransmission revenues and growth in the companys direct-to-streaming services revenue.

We delivered record third-quarter revenues as we continue to increase our investment in our premium content and direct-to-consumer streaming services, which is the cornerstone of our growth strategy, said Joe Ianniello, CBS Corporation President and Acting CEO, in a news release. During the quarter, our direct-to-consumer revenue from CBS All Access and Showtime OTT grew 39% from last year, driven by a strong slate of original programming.

Our content licensing revenue is also growing as we ramp up production of programming for all of our platforms, including five new hit shows that we just launched on the biggest platform in media, the CBS Television Network, which is

on track to end the season as the most-watched network for the 12th consecutive year, Ianniello added.

Other highlights for the third quarter included:

• Content licensing and distribution revenues increased 1%.
• Advertising revenue decreased 7%, due to record political advertising sales in Q3 2018.
• Operating income was $509, compared to $690 million for the same period last year.
• Adjusted operating income dropped 21% to $581 million from $736 million in the third quarter last year.
• Operating cash flow was $27 million, compared to $137 million for the same period last year.
• Net earnings were $319 million, compared to $488 million in Q3 2018.
• Adjusted net earnings were $356 million, a 24% decrease from $469 million in the third quarter last year.
• Diluted earnings per share were $0.85, compared to $1.29 in Q3 2018.
• Adjusted diluted earnings per share were $0.95 from $1.24 in the prior year period.

In revenues by segment, Entertainment represented the largest portion of total revenue at $2.3 million, compared to Cable Networks at $563 million, Publishing at $217 million, and Local Media at $406 million. In revenues by type, advertising is the largest portion of total revenue at $1.2 billion, affiliate and subscription fees at $1.1 billion, a 22% increase, content licensing and distribution at $939 million and other at $55 million.

In its quarterly earnings report, CBS provided an update on the merger with Viacom. The two companies have received approval from the Securities and Exchange Commission. Once the merger is complete, Viacom will merge into CBS and the name of the combined company will be ViacomCBS Inc. The deal is expected to close by the end of the year.

On the earnings call, Ianniello said the company has done well with its direct-to-consumer streaming services and it is confident they will achieve their goal of 25 million subscribers to CBS All Access and Showtime OTT in 2022.

In summary, for the first nine months of the year, we have achieved record revenue for the CBS Corporation. We believe our disciplined approach to investing in more premium content to grow for the long-term while also maintaining a healthy margin and strong balance sheet is a prudent strategy for future success, Ianniello said. We are positioning CBS and ultimately now ViacomCBS for continued growth across our key revenue streams, in advertising, content licensing, and affiliate and subscription fees and we are set up for particularly strong growth in our biggest revenue opportunity, our direct-to-consumer services.

Insider Take:

CBS is having an outstanding year in terms of revenue, and it is seeing a lot of success with its over-the-top TV streaming services. This is impressive considering that the company is comparing third quarter 2019 totals with third quarter 2018 totals which benefited from big political ad dollars. The company has also bounced back from the scandal brought on by Les Moonves. CBS looks to finish the year strong, and is well positioned to compete against the new streaming services coming online now and into the New Year.