Paramount Global slashes dividend, forfeits profit

Paramount Global fell more than 28% on Thursday after the company reported earnings and sales that fell short of analysts’ estimates and cut its quarterly dividend.

The stock had its worst day since Viacom and CBS merged in December 2019. Shares closed at $16.40, giving the company a market value of nearly $10.1 billion.

related investment news

The company cut its dividend from 24 cents a share to 5 cents a share to “further enhance our ability to deliver long-term value for our shareholders as we move toward streaming profitability,” CEO Bob Bakish said in a Explanation.

It’s the first time Paramount has reduced its dividend since 2009. Paramount expects annual cash savings of $500 million from the dividend cut. Paramount has a net debt ratio of 6.8 times earnings before depreciation, interest, amortization and taxes. According to market research firm Atlantic Equities, that figure jumps to 8.1 times EBITDA when pension liabilities are included.

Paramount Global’s traditional TV revenue, which includes CBS and its cable networks like MTV, Comedy Central and Nickelodeon, declined 8% to $5.2 billion in the quarter. The company’s motion picture studio division saw revenue decline 6% year over year.

Media companies are struggling to replace traditional TV revenue, as customers cancel each quarter, with streaming revenue as they build direct-to-consumer businesses. Bakish said the company plans to divest non-core assets to boost free cash flow and halt streaming losses by the end of 2024.

This year will mark the peak of losses for Paramount Global’s streaming business, Bakish said.

Streaming revenue from Paramount+ and Pluto TV, the company’s free ad-supported service, grew 39% to $1.5 billion. But direct losses to consumers rose to $511 million from $456 million last year.

Paramount also recognized $1.67 billion in impairments in the first quarter for content removed as a result of Paramount+’s merger with Showtime into a single US streaming platform.

Here are the quarterly results the company reported, compared to analyst estimates, according to Refinitiv:

• Revenue: $7.27 billion versus $7.42 billion expected
• Earnings per share: 9 cents versus 17 cents expected

Paramount Global intends to sell a majority stake in BET later this year. An attempt was made to sell and merge the publishing house Simon & Schuster last year But the deal was blocked by US regulators.

The company has resumed the process of selling Simon & Schuster, Bakish said on the earnings call. Paramount hopes to announce a deal to sell the publisher by the end of the year, Chief Financial Officer Naveen Chopra said on the conference call.

WATCH: Paramount is in good shape with its balance sheet, says SVP of content strategy at Box Office Pro