CBS 3Q Local Media Revenue Climbs 9.3%

CBS Corp. on Thursday reported results for the third quarter of 2018, including revenue for its Local Media segment of $434 million, up 9.3% from $397 million in the same quarter a year ago.

The Local Media segment includes the CBS Television Stations and CBS Local Digital Media. The increase was driven by growth in retransmission revenues and higher advertising revenues, reflecting increased political advertising sales associated with the U.S. midterm elections.

Local Media operating income of $124 million for the third quarter of 2018 increased 17% from $106 million for the same prior-year period, as a result of the higher revenues.

The company’s Entertainment segment — which includes the CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, Network 10, CBS Interactive and CBS Films — had revenues of $2.15 billion for the third quarter of 2018 increased 19% from $1.82 billion for the third quarter of 2017.

Advertising revenues increased 16% from the same prior-year period, reflecting the acquisition of Network 10 in the fourth quarter of 2017. Network advertising was comparable with the same prior-year period. Affiliate and subscription fees grew 32%, driven by higher station affiliation fees and revenues from digital initiatives, including CBS All Access and virtual MVPDs. Content licensing and distribution revenues increased 16%, reflecting higher international licensing as well as additional series produced for third-parties. Entertainment revenues also benefited from the impact of the adoption of a new revenue recognition standard in 2018.

Entertainment operating income of $377 million for the third quarter of 2018 increased 8% from $350 million for the same prior-year period, reflecting the higher revenues, which were partially offset by an increased investment in content and digital initiatives.

The company as a whole reported revenues for the third quarter increased 3% to $3.26 billion from $3.17 billion for the same prior-year period, led by 79% growth from digital initiatives, including the company’s owned streaming subscription services, and strong gains in retransmission revenues and fees from CBS Television Network affiliated stations.

Advertising revenues for the third quarter of 2018 were up 14%, including revenues of Network 10, which the Company acquired in the fourth quarter of 2017, and higher political advertising sales. Content licensing and distribution revenues were up 8% for the quarter. These increases were partially offset by Showtime Networks’ distribution of the Floyd Mayweather/Conor McGregor pay-per-view boxing event, which took place in the third quarter of 2017.

Operating income for the third quarter of 2018 decreased 5% to $690 million from $729 million for the same prior-year period, as a result of costs relating to corporate matters. Adjusted operating income increased 1% to $736 million from $729 million for the same prior-year period, reflecting the revenue growth, which was offset by increased investment in content, including a higher number of series produced, and the expansion of the company’s digital initiatives.

Net earnings from continuing operations for the third quarter of 2018 increased 17% to $488 million from $418 million for the same quarter last year. Adjusted net earnings from continuing operations increased 11% to $469 million from $421 million for the third quarter of 2017. The increase was primarily from a lower effective income tax rate in 2018 compared with the prior year, as a result of the enactment of new federal tax legislation in December 2017.

Diluted EPS from continuing operations for the third quarter of 2018 increased 25% to $1.29 from $1.03 for the same quarter in 2017. Adjusted diluted EPS increased 12% to $1.24 from $1.11 as a result of higher adjusted net earnings and lower weighted average shares outstanding.

“CBS continues to deliver for our shareholders and execute our long-term growth strategy,” said Joe Ianniello, CBS president and acting CEO. “We turned in our best third quarter ever in revenue and EPS, and we remain on track to achieve our 2018 outlook, with revenue growth in the high-single digits and EPS growth in the high teens. At CBS and Showtime, our must-have programming is driving subscriber increases across all platforms, especially on our own direct-to-consumer streaming services, leading to a new record in total subscribers.

“We are also significantly expanding our suite of over-the-top services through the recent launch of ET Live and the pending launches of 10 All Access in Australia and CBSN New York, with more international and local outlets on the way. Meanwhile, we’ve just taken another key step in refilling our content pipeline with a new, strong primetime schedule on the CBS Television Network, where we have ownership in five of our six new shows.

“And at Showtime, we continue to enhance our year-round content slate by adding key programming in entertainment, documentaries, and sports, where we have become the clear industry leader in boxing.

“Up ahead, 2019 looks to be another outstanding year, with the Super Bowl and Final Four back on CBS, strong gains in retrans and reverse comp, and continued growth in our direct-to-consumer streaming services, which are on track to reach a combined eight million subs, a year ahead of our original projections.

“Overall, we are confident that our strategy of growing CBS’s leadership position as a global multi-platform premium content company will lead to even greater creative and financial heights in the years to come.”