Paramount Global ( PARA ) on Thursday reported a profit within its streaming division for the first time while its linear TV business reported a sharper slowdown than expected as the company took a nearly $6 billion write-down on the value of its cable business.
On a conference call, the company also announced plans to lay off 15% of its US workforce. The layoffs will take place "in the coming weeks and will largely be completed by the end of the year," according to management.
The results come as Paramount prepares for its expected merger with Skydance Media , set to be completed in the third quarter of 2025.
In the second quarter, Paramount reported operating income for its direct-to-consumer (DTC) segment of $26 million, a $450 million improvement from the prior year period. The company reported a loss for this segment of $286 million in the first quarter.
"Our strong performance in Q2 demonstrates that we are delivering on our strategic priorities," co-CEOs George Cheeks, Chris McCarthy, and Brian Robbins said in the release.
"We will continue to aggressively execute on our strategic plan, which focuses on transforming streaming to accelerate profitability, streamlining our organization — including at least $500 million in annualized cost savings — and improving the balance sheet by growing free cash flow and optimizing our asset mix."
Shares moved about 5% higher in after-hours trading as investors digested the results. Coming into the report, Paramount stock was down roughly 30% this year.
Overall, the company reported Q2 adjusted earnings of $0.54 per share, above the $0.13 analysts polled by Bloomberg had expected and higher than the $0.10 Paramount reported in the same quarter last year.
Revenue came in at $6.81 billion, missing consensus expectations for $7.24 billion and an 11% decline compared to the $7.62 billion reported in the year-ago period. Linear advertising revenue declined by double digits in the quarter, falling 11% year over year compared to the 10% drop analysts had expected.
Linear ad revenue enjoyed a 14% rebound in Q1 as a result of record Super Bowl ad sales , but the second quarter highlighted the challenges legacy media companies have faced amid greater cord-cutting trends.
Similar to legacy media competitor Warner Bros. Discovery , the company took a $5.98 billion goodwill impairment charge related to its cable networks.
Paramount CFO Naveen Chopra said the charge comes after the company "assessed the relevant factors that could impact the fair value of our reporting units, including the estimated total company market value indicated by the Skydance transactions and recent indicators in the linear affiliate marketplace."
Despite turning a profit in its streaming segment, Paramount+ shed 2.8 million in the quarter to 68 million, "principally reflecting the planned exit from a hard bungle agreement in South Korea." But global average revenue per user, or ARPU, expanded by 26% year over year in the quarter. That helped boost revenue at Paramount+ by 46% compared to the prior year.
In the six months ending June 30, the streaming division is still operating at a loss of $260 million but the company reiterated previous guidance that it remains on track to reach domestic profitability for Paramount+ in 2025.
On the earnings call, the company said there's opportunity for more strategic partnerships and possible joint ventures among competing streaming platforms in order to drive greater scale.
Meanwhile, revenue in the film division faced its own double-digit decline, falling 18% as the company blamed the miss on "timing of releases in the quarter" and tough comparisons to last year's "Transformers: Rise of the Beasts."
Skydance takeover on horizon
Thursday's results come as Skydance's pending takeover of the company remains on the horizon.
Skydance, which will be valued at $4.75 billion following the all-stock deal's completion, said it would inject $6 billion in cash into Paramount, with $1.5 billion going directly into its debt-ridden balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, who was ousted last year over an "inappropriate relationship" with a female employee, will serve as president.
Last month, the new leadership team laid out their strategic vision for Paramount . This includes $2 billion in cost cuts with $500 million already underway. Thursday's layoff announcement highlighted these efforts.
"We love the creative engine of this company. But obviously, a big chunk of the company is in the linear world and we know linear is challenged and declining," Shell said at the time "I think a lot of us in the business know we've got to run these businesses in a different way as they decline."
Alexandra Canal @allie_canal , LinkedIn,