Paramount Global (PARA) will report second quarter earnings after the bell on Monday as the company continues to battle advertising headwinds, escalating streaming losses, and negative free cash flow.
The difficult TV ad market, which has hit legacy media companies across the industry, will likely pressure results in the second quarter with linear ad revenue projected to have dropped 8% in the quarter after dropping 11% year over year in Q1.
Management has maintained that the second half of the year will see improvements in the ad market.
Widening streaming losses will also be a concern after Paramount reported a direct-to-consumer loss of $511 million in the first quarter compared with a loss of $456 million in the prior-year period.
Paramount has projected over $2 billion of streaming losses this year with free cash flow at negative $400 million in the second quarter. Free cash flow came in at negative $554 million in the first quarter versus the prior-year period's $243 million.
The company has guided to a return to positive free cash flow and earnings growth in 2024. That should be aided by the recent price hikes of its streaming tiers following the integration of Showtime with Paramount+, layoffs, business restructurings, and a dividend cut that initially sent shares plummeting nearly 30%.
Here is what Wall Street expects from Paramount's second quarter results, as compiled by Bloomberg:
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Revenue: $7.43 billion versus $7.78 billion in Q2 2022
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Adj. earnings per share (EPS): $0.00 versus $0.64 in Q2 2022
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Paramount+ subscriber net additions: 1.14 million versus 3.7 million in Q2 2022
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Global Pluto monthly active users (MAUs): 83 million versus 69.6 million in Q2 2022
Paramount launched its Paramount+ with Showtime offering on June 27 at a price point of $11.99 a month. The new offering, which the company described as its "cornerstone" service, is available alongside the ad-supported Paramount+ Essential plan and the free ad-supported service Pluto TV.
As a result of the merger of the two streaming services, the company took a content impairment charge of $1.67 billion in Q1 but said it expects $700 million in future annual expense savings.
Still, the integration could hurt subscriber net additions in the near term. Paramount+ reported global subscribers of 60 million in its fiscal first quarter.
M&A still top of mind amid financial struggles
Despite the company's financial pressures, its strong slate of assets suggests more M&A activity to come as the macro environment continues to improve.
Paramount has long been viewed as a potential acquisition target due to its small size relative to competitors. The company boasts a current market cap of about $10 billion, compared to Disney's (DIS) $157 billion and Netflix's (NFLX) $196 billion.
Paramount CEO Bob Bakish hinted more media M&A was on the horizon while speaking at a UBS media conference late last year.
"Consolidation has been the rule in business for a long time, certainly been the rule in media," he said at the time. "So, it’s hard for me to bet on anything other than consolidation will happen in the future."
In February, shortly following the announcement that Paramount would be folding Showtime into Paramount+, The Wall Street Journal revealed the company had turned down a more than $3 billion offer from executive David Nevins to buy Showtime.
Nevins's proposal was one of many offers the company had received for Showtime over the past several years, the Journal said. The network, which is home to popular shows like "Billions" and "Yellowjackets," was said to be a key driver in unlocking value for the media giant.
In addition to the Showtime offer, the company has tip-toed around recent reports of a potential sale of the company's BET Media Group, which includes cable channels BET and VH1, after producer Tyler Perry and media mogul Byron Allen reportedly expressed interest in purchasing a majority stake.
The company said in its first quarter results that it has restarted the sale process for Simon & Schuster after the publishing giant's sale to Penguin Random House collapsed late last year.
The sale process is expected to conclude in the coming weeks, according to The New York Times.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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