ViacomCBS’s Earnings Show Progress, Promising Outlook

ViacomCBS’s earnings report delivered $6.67 billion in revenue. Although the revenue fell 6.0% YoY, it beat the consensus estimate at $6.57 billion.

Ruchi Gupta - Author

May 8 2020, Published 7:30 a.m. ET

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ViacomCBS released its financial results for the first quarter of 2020 on Thursday. The earnings report offered a peek into how COVID-19 has impacted the company’s business. ViacomCBS CEO Bob Bakish used the earnings call to outline a promising vision for investors.

Here are three important takeaways from ViacomCBS’s earnings report. Notably, this is the second report since Viacom and CBS Corporation merged to form the new entity.

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ViacomCBS’s earnings results beat the consensus estimates

The company’s earnings report delivered $6.67 billion in revenue. Although the revenue fell 6.0% YoY (year-over-year), it beat the consensus estimate at $6.57 billion. The company posted an adjusted EPS of $1.13, which beat the consensus estimate at $0.95.

ViacomCBS operates several business segments spanning advertising, film production, digital video streaming, and content licensing. In terms of revenue, the earnings report showed that the star of the quarter was the digital video business. The business includes video subscription sales and video advertising. The revenue in the digital video division rose 51% YoY.

However, the advertising division was disappointing. Companies slashed their marketing budgets amid COVID-19. Twitter (NYSE:TWTR), Facebook (NASDAQ:FB), and Google revealed weaknesses in their advertising businesses amid the pandemic. The revenue fell 19% YoY in ViacomCBS’s advertising division.

Liquidity isn’t a big problem

COVID-19 has hit businesses with unexpected expenses amid weak sales. As a result, many companies face liquidity shortages. In contrast, ViacomCBS successfully raised $2.5 billion in additional cash last month through bond sales to shore up its liquidity.

The company continues to generate ample cash flow despite the pandemic. ViacomCBS’s earnings report showed that the company generated $305 million in free cash flow in the first quarter. Also, the company sold its non-core assets to unlock cash. Currently, the company is working to sell its Black Rock building and publishing unit Simon & Schuster.

ViacomCBS wrapped up the first quarter with $731 million in cash reserve after using some of its bond sale proceeds to repay some of its debt.

Dividend and stock repurchase

Finally, ViacomCBS’s earnings report showed that the company spent $152 million on dividend payments in the first quarter. ViacomCBS spent $58 million on stock repurchases. However, while the company intends to keep paying dividends to shareholders, it has suspended stock repurchases. Stopping stock repurchases will allow the company to focus on strengthening its balance sheet and selling non-core assets.

ViacomCBS stock rose by more than 10% on Thursday and closed at $16.42. At this point, the stock has risen by more than 60% from its pandemic lows. However, the stock still trades at about a 70% discount to its 52-week high of $53.7.


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