Market Overview

CBS Corporation Reports Third Quarter 2019 Results

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NEW YORK, Nov. 12, 2019 /PRNewswire/ -- CBS Corporation (NYSE:CBS) today reported results for the third quarter of 2019, including an all-time high in the third quarter for revenues.

"We delivered record third-quarter revenues as we continue to increase our investment in our premium content and direct-to-consumer streaming services, which is the cornerstone of our growth strategy," said Joe Ianniello, President and Acting Chief Executive Officer, CBS Corporation. "During the quarter, our direct-to-consumer revenue from CBS All Access and Showtime OTT grew 39% from last year, driven by a strong slate of original programming. Meanwhile, retrans, reverse comp and virtual MVPD revenues grew 18%, and our total affiliate and subscription fees grew 12%, representing more than a third of our overall revenue in Q3. Our content licensing revenue is also growing as we ramp up production of programming for all of our platforms, including five new hit shows that we just launched on the biggest platform in media, the CBS Television Network, which is on track to end the season as the most-watched network for the 12th consecutive year. Our base business also remains strong, with solid underlying network advertising growth of 2% during the quarter. In addition, here in the fourth quarter we have a terrific programming schedule at Showtime, including returning favorites Shameless and Ray Donovan, along with a number of exciting new series, such as The L Word: Generation Q. So we are building great momentum as we near our merger with Viacom and head into 2020."

Third Quarter 2019 Results

Revenues for the third quarter of 2019 grew 1% to $3.30 billion from $3.26 billion for the same prior-year period. Affiliate and subscription fee revenues were up 12%, driven by increases in fees from CBS Television Network affiliated stations and retransmission revenues, as well as growth from the Company's direct-to-consumer streaming services. Content licensing and distribution revenues were up 1%, mainly as a result of higher sales of series produced for third parties. Advertising revenues decreased 7% from the third quarter of 2018, when the Company had record political advertising sales fueled by the 2018 midterm elections.

Operating income for the third quarter of 2019 was $501 million compared with $690 million for the same prior-year period and included costs incurred during the third quarter in connection with the pending merger with Viacom Inc. ("Viacom"). Adjusted operating income decreased 21% to $581 million from $736 million for the same prior-year period as a result of an increased investment in content, including a higher number of series produced for multiple platforms, as well as the Company's direct-to-consumer streaming services.

Net earnings for the third quarter of 2019 was $319 million compared with $488 million for the third quarter of 2018. Adjusted net earnings decreased 24% to $356 million from $469 million for the third quarter of 2018. These decreases were driven by the lower operating income, which was partially offset by a lower effective income tax rate in 2019.

Diluted Earnings Per Share ("EPS") for the third quarter of 2019 was $.85 compared with $1.29 for the same quarter in 2018. Adjusted diluted EPS decreased 23% to $.95 from $1.24 for the same prior-year period.

Cash Flow

For the third quarter of 2019, operating cash flow was $27 million compared with $137 million for the third quarter of 2018. For the first nine months of 2019, operating cash flow was $341 million compared with $1.18 billion for the same period in 2018. Free cash flow was an outflow of $7 million for the third quarter of 2019 compared with an inflow of $97 million for the same prior-year period, and for the first nine months of the year, free cash flow was $247 million in 2019 compared with $1.08 billion for 2018. The decreases for the nine-month period were mainly driven by an increased investment in content and a non-recurring income tax payment in 2019.

Details of the discrete items excluded from financial results and reconciliations of adjusted results and free cash flow to their most directly comparable GAAP financial measures are included at the end of this earnings release.

Consolidated and Segment Results (dollars in millions)

The tables below present the Company's revenues by segment and type; segment operating income (loss); and depreciation and amortization by segment for the three and nine months ended September 30, 2019, and 2018.


Three Months Ended


Nine Months Ended


September 30,


September 30,

Revenues by Segment

2019


2018


2019


2018

Entertainment

$

2,286



$

2,190



$

8,203



$

7,345


Cable Networks

563



529



1,677



1,653


Publishing

217



240



599



607


Local Media

406



434



1,286



1,269


Corporate/Eliminations

(177)



(130)



(494)



(384)


Total Revenues

$

3,295



$

3,263



$

11,271



$

10,490







Three Months Ended


Nine Months Ended


September 30,


September 30,

Revenues by Type

2019


2018


2019


2018

Advertising

$

1,177



$

1,263



$

4,645



$

4,323


Content licensing and distribution

939



933



3,126



3,024


Affiliate and subscription fees

1,124



1,008


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