Entertainment conglomerate Paramount Global (PARA) announced its second quarter earnings on Monday after the market close, surpassing expectations as the company rebounded from advertising challenges and increased streaming losses.
Paramount Second Quarters Earnings
In the second quarter, Paramount reported a direct-to-consumer loss of $424 million, marking an improvement from the $445 million loss in the same period last year and the $511 million loss in the previous quarter. The company reiterated its stance that streaming losses are projected to peak this year, having totaled $1.82 billion in 2022.
Following the announcement, the company’s shares experienced a surge of up to 7% in after-hours trading, driven by the narrower streaming loss. As of now, Paramount stocks are priced at 16.09 USD, reflecting a gain of 0.46 USD (2.94%) today.
Despite these gains, Paramount continued to face difficulties in the television advertising market. Linear ad revenue witnessed a decline of 10% year-over-year, a larger decrease than the anticipated 8% drop. However, this decline was a slight improvement compared to the 11% decrease reported in the first quarter. Company management remains optimistic, indicating that improvements in the ad market are anticipated during the latter half of the year.
Of notable significance, Paramount unveiled its sale of Simon & Schuster to investment firm KKR. This transaction, valued at $1.62 billion, follows the collapse of the publishing giant’s previous sale to Penguin Random House late last year.
Paramount reported second-quarter revenue of $7.62 billion, surpassing analyst estimates of $7.43 billion. Nonetheless, this figure reflects a decrease in comparison to the $7.8 billion revenue recorded in the same period the prior year. The company also reported an operating loss of $250 million, in stark contrast to the $819 million profits registered in Q2 2022. Adjusted earnings also outperformed projections for the quarter, reaching $0.10 per share. However, this remains a decrease from the $0.64 per share reported a year ago.
Looking forward, Paramount has laid out its plans for a return to positive free cash flow and earnings growth by 2024. The company’s strategic moves to achieve this include recent price hikes for its streaming tiers subsequent to the integration of Showtime with Paramount+, organizational layoffs, business restructurings, and a dividend reduction in the previous quarter, which initially led to a nearly 30% drop in share value.
Paramount+ & Second Quarter Earnings
Paramount introduced its flagship offering, Paramount+ with Showtime, on June 27 at a subscription cost of $11.99 per month. This offering, positioned as the company’s “cornerstone” service, is available alongside the ad-supported Paramount+ Essential plan and the free ad-supported service Pluto TV.
While the merger of the two streaming services prompted a content impairment charge of $1.67 billion in the first quarter, Paramount anticipates future annual expense savings of $700 million as a result of the integration. However, this integration did impact subscriber net additions, resulting in the addition of only 700,000 Paramount+ subscribers during the second quarter, in contrast to the 3.7 million added in Q2 2022.
Paramount Global’s second quarter earnings demonstrate a resilient effort to recover from streaming losses and advertising headwinds, setting the stage for a transformational journey towards renewed growth and profitability in the coming years.