(Aug 5): Paramount Skydance Corp posted a surprise surge in second-quarter profits with cost-cutting from its merger last year continuing to pay off.

The parent company of CBS and MTV reported that its overall adjusted earnings before interest, taxes, depreciation and amortization grew 27% to US$1.1 billion (RM4.5 billion) compared to last year, exceeding analysts’ expectations.

Sales climbed 1% to US$6.9 billion, in line with Wall Street’s expectations, with growth in streaming and TV production revenue offsetting a 9% decline from traditional TV channels.

Paramount merged last year with David Ellison’s Skydance Media and has been cutting jobs. The company said it has delivered over US$2.7 billion in annual cost savings associated with that combination and expects to reach its target of US$3 billion. Paramount raised its full-year outlook for adjusted Ebitda to a range of US$3.8 billion to US$3.9 billion, in line with analysts’ estimates.

“All these things we set in motion are beginning to fire,” said chief operating officer Andy Gordon in an interview.

Paramount is now seeking to acquire rival entertainment giant Warner Bros Discovery Inc in a US$110 billion deal that faces opposition including an antitrust lawsuit brought by 12 states that is now set for a March trial. If Paramount does not close its deal with Warner Bros by Sept 30, it will begin accruing a US$650 million quarterly ticking fee to Warner Bros shareholders.

“The timing of this also lands at an awkward moment,” noted Forrester Research Inc analyst Mike Proulx. “Paramount’s earnings show a company with streaming momentum but continued linear TV pressure. Paramount wants to move more of its business toward streaming scale while the lawsuit is rooted in theatrical distribution and basic cable. The longer this drags on, the harder it becomes to rule out concessions.”

Shares were down 1.2% to US$8.28 at 9.33am in New York (9.33pm Malaysia).

In a letter to shareholders detailing the company’s second-quarter results, Ellison, Paramount’s CEO, said that the company fully expects the transaction to close.

“The claims in pending antitrust litigation do not reflect the realities of today’s highly competitive entertainment marketplace,” he wrote.

In its TV media unit, which includes channels like Nickelodeon and Comedy Central, Paramount reported adjusted Ebitda of US$1.1 billion, beating Wall Street’s estimates for US$833 million. Advertising revenue fell 14%.

Streaming TV profits climbed 44% to US$366 million. The Paramount+ service had nearly 82 million subscribers at the end of the quarter, beating analysts’ estimates of 80 million. The subscriber count was buoyed by events like the UFC Freedom 250 fight which took place on the White House South Lawn in June and shows like Dutton Ranch, Paramount+’s most-watched original series debut ever.

The company’s film and TV production arm swung to a US$36 million profit, thanks to higher licensing revenue from programs. Although theatrical revenue declined, Paramount said its film slate performed better than expected, led by the latest installment of the Scary Movie franchise.

Uploaded by Arion Yeow