CBS Corporation (NYSE: CBS.A and CBS) reports that its direct-to-consumer platforms, CBS All Access and Showtime Now, continue to see subscription growth quarter after quarter and year after year. President and Acting CEO Joe Ianniello said they are one of the company’s long-term strategies for driving growth in a February 14 earnings report. In fact, because of CBS’s success with these direct-to-consumer streaming platforms, the company is raising its target for domestic subscribers from 16 million to 25 million by 2022.

“CBS delivered our best-ever quarterly and full year results as we continue to position our Company for even stronger long-term growth. Our strategy of creating more of the premium content that audiences want and making it available across new and traditional platforms continues to pay off, driving quarterly increases in subscribers at CBS and Showtime, both consecutively and year over year,” said Ianniello.

“In addition, we are generating significant momentum with our direct-to-consumer platforms, which provide a great return on investment and represent one of our most powerful long-term growth drivers. In fact, we have now reached 8 million direct-to-consumer subscribers between CBS All Access and Showtime, nearly two years ahead of our original schedule,” Ianniello added.

On the February 14 earnings call, transcribed by Seeking Alpha, Ianniello expanded on how the company plans to leverage its success with subscriptions.

“Owning the customer relationship is critical and we are just beginning to achieve what’s possible here and as we do it’s enhancing the lifetime value of each subscriber who signed up for our services and allowing us for greater efficiency in reacquiring customers who have paused their subscriptions. As we increase the premium content we create, we are deliberately pursuing a two-pronged monetization strategy,” Ianniello explained.

“First and foremost, we are building our in-house direct-to-consumer services. And second, we are benefiting from the lucrative business of licensing our content to third parties. Selling Star Trek: Discovery to Netflix internationally, while streaming it exclusively here in the U.S. on All Access is emblematic of this strategy and provides for interesting opportunities for us going forward,” added Ianniello.

Other highlights from the quarter include:

• Q4 revenue was $4.02 billion, a 3 percent increase year-over-year, and a record for the company – this was the first time CBS had earned more than $4.0 billion in a quarter.
• Advertising revenue grew 7 percent, primarily from political advertising from the 2018 midterm elections.
• Affiliated and subscription free revenues increased 11 percent, driven by 53 percent growth in direct-to-consumer streaming services and increases in transmission revenue, fees from CBS affiliates and revenue from virtual MVPDs.
• Content licensing and distribution revenue dropped 11 percent.
• Operating income dropped 10 percent to $647 million, including costs for “restructuring and other corporate matters.”
• Net earnings from continuing operations were $561 million, compared to $40 million Q4 2017.
• Adjusted net earnings from continuing earnings were $565 million, a 24 percent increase year-over-year.
• Adjusted diluted earnings per share were $1.50, a 25 percent increase year-over-year.
• The company repurchased 2.1 million shares for $100 million during the fourth quarter.

Revenue by type for the fourth quarter breaks down as follows:

• Advertising = $1.87 billion (46.5 percent)
• Content and licensing = $1.06 billion (26.3 percent)
• Affiliate and subscription fees = $1.03 billion (25.5 percent)
• Other = $68 million (1.7 percent)

Other highlights from the full year 2018 include:

• Full year revenue was $14.51 billion, a 6 percent increase year-over-year.
• Advertising revenue grew 8 percent, due to political advertising from the 2018 midterms and Network 10, which CBS acquired in Q4 2017. Advertising revenue was offset by the loss of revenue from NCAA games and Thursday Night Football games which CBS broadcast in 2017, but not in 2018.
• Content and licensing distribution revenue grew 3 percent.
• Affiliate and subscription fees increased 7 percent, driven by 62 percent growth in direct-to-consumer streaming services, retransmission revenue, fees from CBS affiliates and revenue from virtual MVPDs.
• Operating income was $2.77 billion, a 3 percent decrease year-over-year.
• Net earnings from continuing operations were $1.96 billion, a 50 percent increase year-over-year.
• Adjusted net earnings from continuing operations were $1.96 billion, a 16 percent increase year-over-year.
• Adjusted diluted earnings per share were $5.19, an 18 percent increase year-over-year.
• CBS repurchased 11.5 million shares for $600 million during 2018.

According to Seeking Alpha, CBS missed their earnings per share estimate by $0.03 and their revenue target by $110 million. Despite the record-breaking financials and solid earnings report, investors were not strongly swayed one way or another.

On February 13, the day before the earnings report, CBS stock was valued at $48.43 per share. On February 14, CBS stock was valued at $49.10 and it finished February 15 at $50.64 per share. While holding steady, this is down from CBS stock value of $56.25 per share on February 20, 2018. CBS stock has taken a hit, in terms of reputation and stock value due, in part, to the bad publicity surrounding the departure of former president and CEO Les Moonves following sexual harassment allegations.

Insider Take:

CBS is doing a lot of things right, but we’ll focus on their direct-to-consumer streaming subscription businesses. CBS has done an outstanding job growing their subscriber base through CBS All Access and Showtime Now, and they’ve found another avenue for revenue by licensing Star Trek: Discovery to Netflix’s internationally customers while streaming it exclusively here in the U.S. creates demand.

It has also done so while maintaining an affordable price point and two subscription plans. CBS All Access’s limited commercials plan is only $5.99 a month and their commercial-free plan is only $9.99, following a one-week trial. The commercial-free plan even allows subscribers to download videos and play offline. With record revenue and solid strategies in place, we anticipate CBS will have a strong year, with continue growth from its streaming subscription services.