CBS Credits Digital Initiatives and Subscriptions for Record Q3 Revenue
Digital initiatives, including streaming subscription services, grew 79 percent in the third quarter.
Despite the abrupt departure of CBS chairman, president and CEO Leslie Moonves, CBS Corporation (NYSE: CBS.A and CBS) reported record revenues and earnings in the third quarter of 2018. CBS had record revenue of $3.26 billion, a 3 percent increase over the same period last year. The company credits its record revenue, in part, to 79 percent growth in its digital initiatives, including its streaming video subscription services CBS All Access and Showtime, and retransmission revenue and fees from CBS Television Network affiliates.
“CBS continues to deliver for our shareholders and execute our long-term growth strategy,” said Joe Ianniello, CBS president and acting CEO, in a November 1 news release. “We turned in our best third quarter ever in revenue and EPS, and we remain on track to achieve our 2018 outlook, with revenue growth in the high-single digits and EPS growth in the high teens. At CBS and Showtime, our must-have programming is driving subscriber increases across all platforms, especially on our own direct-to-consumer streaming services, leading to a new record in total subscribers.”
Ianniello said the company recently launched ET Live and has future launches planned including 10 All Access in Australia and CBSN New York. In 2019, CBS will broadcast the Super Bowl and Final Four tournament which will retain existing viewers and potentially attract new ones.
“Overall, we are confident that our strategy of growing CBS' leadership position as a global multi-platform premium content company will lead to even greater creative and financial heights in the years to come,” added Ianniello.
Other highlights from the third quarter include:
- Advertising revenue was $1.26 billion, up 14 percent, including revenue from Network 10, a Q4 2017 acquisition.
- Content licensing and distribution revenues were up 8 percent year-over-year.
- Operating income for the quarter was $690 million, a 5 percent decrease “relating to corporate matters.”
- Adjusted operating income was $736 million, an increase of 1 percent year-over-year.
- Operating cash flow from continuing operations was $134 million, compared to $26 million in Q3 2017.
- Net earnings for the quarter were $488 million, a 17 percent increase year-over-year.
- Adjusted net earnings from continuing operations were $469 million, an 11 percent increase year-over-year.
- Diluted earnings per share from continuing operations were $1.29, a 25 percent increase year-over-year.
- Adjusted diluted earnings per share were $1.24, a 12 percent increase year-over-year.
- At the end of the quarter, CBS had $182 million in cash and cash equivalents.
Moonves was asked to step down in September due to allegations of sexual misconduct. Interestingly, CBS does not address Moonves’ departure directly in their third quarter financial news release. However, the financials show a charge of $131 million in “corporate/eliminations” which may include compensation to Moonves. In the segment revenue descriptions, the company says corporate expenses dropped from $70 million to $64 million due to “lower executive compensation costs.”
In a September 9 news release, CBS said Moonves and CBS would donate $20 million to one or more organizations supporting the #MeToo movement and equality for women in the workplace. Moonves’ donation was to be deducted from his severance pay, if there is any, after an investigation is completed. According to CNBC, if the investigation comes back in Moonves’ favor, he could get paid $120 million in severance pay. The results of the investigation and the board’s report on those findings is anticipated y the end of January. Ianniello is the acting CEO for CBS, as the company does an executive search to replace Moonves.
After the earnings were released on November 1, CBS common stock was valued at $58.49. As of 4:02 p.m. EST on November 5, CBS stock was valued at $57.30. This is roughly flat from where CBS stock stood a year ago – $56.96 on November 7, 2017.
Despite the serious allegations against Moonves, CBS does not seem to be suffering financially. In fact, with record revenue and adjusted earnings last quarter, the company is on pace to finish the year strong. From a subscription standpoint, CBS is seeing great success with its streaming subscription products. According to BroadcastingCable.com, the four-year-old CBS All Access has 2.5 million subscribers, with targets of 4 million in 2019 and 8 million in 2022.