Earnings Transcript for PARAP - Q1 Fiscal Year 2023

Operator: Good morning. My name is Nadia, and I’ll be the conference operator today. At this time, I would like to welcome everyone to the Paramount Global’s Q1 2023 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] At this time, I would now like to turn the call over to Kristin Southey, Paramount Global’s EVP, Investor Relations. Kristin, you may now begin your conference call.

Kristin Southey: Good morning, everyone. Thank you for taking the time to join us for our first quarter 2023 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our Web site. Before we start this morning, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case, can be found in the Investor Relations section of our Web site. Now, I will turn the call over to Bob.

Bob Bakish: Good morning, everyone. Thank you for joining us. Today, my remarks will cover Q1 highlights, as well as some perspective on the balance of the year, but let me start with the big picture. The media landscape is evolving, and we are executing on our plan to transform Paramount with it. We are leveraging our traditional media base, both financially and operationally, to invest in, build, and scale, [as to have] (ph) streaming networks for the 21st century. With the robust content engine at the core, all-in service are delivering long-term value to our shareholders. We are also navigating a challenging and uncertain macroeconomic environment. And you see the impact of that in our financials, as the combination of peak streaming investment intersects with cyclical ad softness. All of this makes us even more focused on making the necessary decisions to return the company to earnings growth and positive free cash flow in 2024. And to that end, we continue to hone our cost structure, align resources with growth areas, and divest non-core assets, because at the fundamental level, our strategy is working, and our momentum is strong. We are producing popular content, adding subscribers, increasing engagement, growing streaming revenue, and progressing towards key business objectives. As we do that, we see several things that encourage us. First, we are seeing signs of stabilization in the ad market, but perhaps more importantly, we are seeing the unquestionable and growing value of our content platforms to both the consumer and business community as exemplified by growing usage, as well as a broadening range of deals and partnerships. Paramount is transforming. We are confident in the company’s execution, and shareholder value creation remains our top priority. With that, let’s dive in. I’ll begin with a look at our popular content, the foundation of Paramount and the engine that’s powered our company for decades, and today that engine is stronger than ever. It’s this content that underpins our DTC momentum, where revenue grew 39% year-over-year to an annual run rate of more than $6 billion. And this quarter, we reached two big global milestones for our flagship streaming services. Paramount+ grew to 60 million total subscribers, adding 4.1 million subs, while Pluto TV hit 80 million monthly active users. Importantly, both are resonating globally, not just in the U.S. Paramount+ saw a 65% year-over-year revenue increase, while total global viewing hours across Paramount+ and Pluto TV increased over 50% year-over-year and over 20% sequentially, and viewers don’t just subscribe to Paramount+ or watch Pluto TV because of a single hit. They come for our broad bold slate of content, the film franchises they crave, the news they rely on, and the TV series and sporting events they are obsessed with. In the quarter, we saw Paramount+ subscriber growth driven by newly released originals like Tulsa King, Mayor of Kingstown, 1923, and Teen Wolf

Naveen Chopra: Thank you, Bob. Good morning, everyone. Our Q1 results reflect a combination of strong momentum from Paramount content, investment in our DTC business and the continued impact of macro headwinds. Today I'm going to cover three things. First, I'll provide additional color on a few elements of our Q1 results. Second, I will talk about optimizing our capital allocation. And third, I'll discuss our expectations for earnings and free cash flow improvement in the back-half of this year and into 2024. In Q1, we delivered total company revenue of $7.3 billion and adjusted OIBDA of $548 million. Our press release includes a comprehensive review of key financial and operational results for the quarter. I'm going to focus my comments here on four specific areas, affiliate and subscription revenue, advertising, our filmed entertainment results, and cash flow. Affiliate and subscription revenue growth accelerated to 12% this quarter, continued evidence that the ecosystem shift from paid TV to streaming yields material growth for our business. Notably, we saw improving trends in both linear and streaming. On the linear side, TV media affiliate revenue declined 1% year-over-year, an improvement versus Q4. And in streaming, DTC subscription revenue was up 50% year-over-year, Paramount+ subscription revenue saw even stronger growth driven by subscriber additions, an increase in ARPU and improvements in domestic churn. Looking ahead, we expect healthy levels of year-over-year affiliate and subscription revenue growth to continue over the next several quarters, aided in part by the integration of Showtime and Paramount+. From a subscriber perspective, we expect net ads in Q2 will be seasonally soft ahead of the release of key content titles and marketing initiatives aligned with the rollout of the integrated service, which will occur throughout Q3 and Q4. Now let's turn to advertising. The global ad market continued to experience weakness in Q1, resulting in a 7% decline in total advertising revenue. This consisted of 15% growth in DTC advertising, and an 11% decline in TV media advertising. The decline in TV media was impacted by international markets and fewer NFL games than in the prior-year. However, we are seeing signs of market stabilization. Within the domestic ad market, sports remains an area of strength, we also saw improvement in key buying categories including pharmaceuticals, food and beverage, travel and auto. Though categories like insurance, web services and big tech remain relatively weak. With respect to Q2, we expect the year-over-year trends in TV media advertising to be slightly favorable to what we reported in Q1. And in DTC advertising, we expect continued acceleration. Related to digital advertising, Pluto TV hit a new milestone in Q1, reaching 80 million MAUs. We're proud of this milestone and we expect global MAU growth to continue. However, the key driver of Pluto's future revenue growth will be the strong engagement trends we're seeing. In fact, total viewing hours on Pluto increased 35% in Q1 after growing nearly 20% in 2022. Going forward, we'll provide updates on engagement rather than reporting quarterly MAUs as we believe this is more indicative of Pluto's revenue growth opportunity. Moving on to Film Entertainment, revenue and OIBDA were down versus the prior year, due in part to the timing and performance of the film slate. In terms of timing, Dungeons & Dragons

Operator: Thank you. [Operator Instructions] Our first question today goes to Michael Morris of Guggenheim. Michael, please go ahead. Your line is open.

Michael Morris: Thank you, guys. Good morning. Bob, firstly I’ll ask you on Direct-to-Consumer. You had strong subscriber and subscription revenue growth at Paramount+. As you look forward this year, can you expand a little bit more on the balance of subscriber growth and pricing power that you expect to drive that continued subscription revenue growth from here? And then, I apologize I have to ask you the second though on Naveen, I need to ask you why now was the time to reduce the dividend so significantly? So, based on your comments overall, it seems that the level of investment that you are going through is consistent with the plan had all along, and that dividend level is such an important outward signal of your sustained confidence. So, I am hoping you can dig in a little bit more and help us specifically with what drove that change now? Thank you, guys.

Bob Bakish: Sure, Mike. Let me start, and then I’ll pass it to Naveen for a little more of DTC and then the dividend piece. So, look, we’re thrilled with the momentum we continue to see for Paramount+. We talked about the 60 million subscriber milestone in the quarter, and we do look to grow both on a subscriber side and very importantly revenue side, as we continue in the year and beyond, and that goes along the associated path to profitability. Focusing on Paramount+ growth in the back-half of the year, look, it starts with content. At the end of the day, [some news said] (ph) content is king. It is what people come to an immediate service for, including Paramount+. And you saw the success of our slate in the first quarter. And we feel really good about it for the balance of the year. And again, it’s entertainment, which is a great driver of subscriber additions and engagement. It’s news, which is more of an engagement vehicle. And it’s sports, which has been great for us on both. As the year tracks out, the second quarter for terms of subscriber addition is probably seasonally a little softer. And then, we pick it up in the back-half of the year again. Part of that is in the U.S., the combination of Paramount+ with Showtime. We think that has clearly added to the Paramount+ sub base. And then - but part of it is just the content slate writ large. Add to that the revenue side of this -- oh, before I get to revenue, I want to also talk about the marketing. As you know, we continue to expand our partnership approach, including with Paramount+. The Walmart One is working very well for us. We are about to line up Delta. That’s going to be interesting as well. So, we are doing a bunch of stuff on the marketing side to add to it. And then, go to revenue. ARPU, as you know, we are effectuating a price increase as we move forward in the summer. We feel really great about that. So, the levers are in place to continue to drive Paramount+ subscribers, revenue, and ultimately continue down this path to profitability. Naveen?

Naveen Chopra: Yes. Thanks, Bob. And Mike, I’ll just add a few things on the DTC point and then address your question on the dividend. As Bob said, on DTC, this is a combination of subscriber growth as well as ARPU growth. Bob talked about a number of the drivers on those. I would just add, particularly with respect to ARPU, we continue to see growth there both from a favorable mix shift in terms of tiers, channels, geography. We’re also seeing some good trends from an ad ARPU growth perspective. So, that’s going to continue to contribute to growth going forward. And it benefits from nice growth that we are seeing in terms of engagement, hours per sub, and the like. And then, the pricing piece, which Bob mentioned, and I think is really worth reiterating, all the pieces are in place for us to, I think, successfully raise pricing without a significant impact on churn and growth. The value proposition for P+ both relative to other streaming services and traditional pay television remains incredibly strong. And as I said, engagement on the service is only getting deeper. So, we’re very encouraged by what we can do there. And we are going to be taking really just the first step this year. I think there also future opportunities to grow price down the road, both domestically and internationally. So, that’s DTC. And then, with respect to your question on the dividend, look, I think the capital allocation policy, the changes we made to our capital allocation policy are totally appropriate for a company that has both the compelling growth opportunity we see today, but operating in the current macro environment, there is no debate that our streaming momentum has obviously continued to build. But the reality is the macro environment has not gotten less complex. So, it’s prudent really for all companies to optimize their balance sheet for flexibility. And that’s exactly what we are doing by reducing the quarterly dividend to $0.05. That does translate to significant cash savings. Roughly, $500 million annually as mentioned while still returning some capital to shareholders. And two, one of the elements of your question, I would emphasize that the reduction in the dividend does not mean that we intend to spend more than previously planned on streaming. You should really think of this as the cash benefit of reducing the dividend, along with other initiatives like non-core asset sales and continued cost management, is intended to help delever our balance sheet, which is generally a smart thing to do in an uncertain macro environment. And is also a key ingredient in creating long-term shareholder value which is, of course, the primary goal that we have.

Kristin Southey: Okay. Operator, we can take the next question.

Operator: Thank you. The next question goes to Brett Feldman of Goldman Sachs. Brett, please go ahead. Your line is open.

Brett Feldman: Yes. I think you have taken the question. Naveen, you expressed a great deal of confidence that you’ll continue to see significant cash generation at the TV media segment for a number of years. I think we all appreciate the rate dynamic that you highlighted in terms of the opportunity to continue to get good rate out of the affiliate fee, but if you could go little deeper into the P&L and talk about some of the opportunities to drive OpEx efficiencies in the business. We get a lot of questions about the flexibility to contain non-sports-related content cost. And then, there are any other operating cost within the P&L you think you can make headway against as you sort of grapple with the core cutting environment? Thank you.

Naveen Chopra: Yes, sure, Brett. Thanks for the question. And as you said that the top line dynamics are important here as well, because even though the traditional ecosystem is obviously evolving, the financial impact for us is somewhat mitigated, given the combination of rate increases in both linear advertising side and linear affiliate revenues, which offset some of that ecosystem shift. We saw that in Q1, where linear affiliate revenue declines were just 1%, which is much lower than what you see in terms of declines in the pay-TV sub base overall. But with respect to the cost base, which you specifically asked about, there are numerous levers that we continue to exercise. That includes variety of opportunities on programming, things like continuing to evolve the mix of genres, transitioning some of our programming to lower cost formats, moving more production offshore where factor costs are significantly lower, and we are even doing things like adopting AI for content localization, which by the way, produces some really high-quality results that's very, very compelling economics. So, lots to do on the programming side. Beyond programming, we are taking a highly disciplined approach to headcount and continuing to find efficiencies there. And also, evolving marketing budgets where it makes sense and where we can do so efficiently. Then we are also doing some things around licensing, which is little more revenue-related, but we do see opportunity to expand our licensing business in, call it, non-core international marketplace. So, the way I think about it, it's really the combination of our ability to mitigate some of the ecosystem declines on the top line, while also exercising a lot of these levers on the cost side, the combination of which means that TV media OIBDA will continue to be a source of significant earnings in cash flow going forward.

Kristin Southey: Operator?

Operator: Thank you. The next question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead. Your line is open.

Ben Swinburne: Thank you. Good morning. Maybe for Naveen, just on the content spending front, you talked about the dividends saving the company a lot of money, but obviously cash content spending is your biggest cash outflow. Can you give us any guidance on how you see cash content spending over time? That seems like another big lever, could that decline? And then just back on the dividend timing, I hear you on the macro, but do you guys are also talking about the ad market getting better? You just mentioned your affiliate revenues improving. The ad markets have been weak for a while. Were there other catalysts that the board and the management team looked at that determine this was the right time to cut the dividend in this magnitude, because a lot of these headwinds I think have been around for some time now, I just wanted to see if you had any more to add? Thanks a lot.

Naveen Chopra: Yes, look, I think I will go in the reverse order there, Ben. With respect to dividends, I just said it really is about providing as much financial flexibility as possible and finding ways to create the most value for our shareholders. And I think having a strong balance sheet is helpful to that. And the macro environment is something that we are cautious of as we think about what the balance sheet should look like. So, that is very much the motivation there. With respect to your question on content spend over time, I would say a few things, number one, really since we launched Paramount+ we have had a strategy which is very focused on being as efficient as possible in how we deploy cash related to content for building out streaming. If you remember, we embrace the concept of sharing content across platforms to reduce cost and maximize our ally. We lean very heavily into franchises, which are fundamentally more cost-efficient. We never abandoned third-party licensing, and we took a very capital efficient approach to international expansion. Now, we are always looking for ways to be even more efficient that content spend. That's one of the reasons that we decided to integrate Showtime and Paramount+, which as we said last quarter, means more than 700 million of future expense savings, not all of which is content. And I think I also noted that the time that does mean DTC content expansion 2024 should actually be less than what we originally indicated. And we are not stopping there. We are pushing even harder to unlock additional savings. That means even bigger focus on franchises, and some of the things I referenced earlier, genre mix, formats, order size, looking at the special effect budget, international development et cetera. And I think the combination of those things means we will likely find even more efficiencies in content spend across both linear and streaming than what we have assumed today.

Kristin Southey: Operator, we can take the next question.

Operator: Thank you. The next question goes to Jessica Reif Ehrlich of Bank of America Securities. Jessica, please go ahead. Your line is open.

Jessica Reif Ehrlich: Thank you. Maybe moving over to advertising, you have taken a different approach this year. Can you give us your current upfront expectations, given the macro and secular challenges, and maybe talk about like a ward for linear? And then, on the writers strike, how prepared do you think you're, and will it potentially reduce care spend at least in the near-term?

Bob Bakish: Yes, sure, Jessica. I will take both of those. Let me do the writers strike first. It's a little bit shorter. Starting with, writers are an essential part of creating content that our audiences enjoy really across platform, and we hope we can come to a resolution that works for everyone fairly quickly, but it's also fair to say there is a pretty big gap today, and it's really a multifaceted ask. So, obviously we've been planning to this. We do have many levers to pull, and that will allow us to manage through the strike even if it's for an extended duration. In terms of those levers, we have a lot in the can, so to speak, content in the can. So, with the exceptional things like Late-Night, consumers really won't notice anything for a while. Add to that, a broad range of reality and unscripted where we are definitely a leader, as well as sports, and that's not affected. And so, look, we can do more in those areas if necessary, and again, we have a leadership position overall. Plus, we have offshore production, which we have been moving to leverage prehistoric anyway, as part of our broader strategy, and Naveen touched on that. Plus, finally one of the largest libraries in media features television series, multiple demographics, et cetera, which we can pull from to fill the schedules. So, we are well-positioned to navigate that, and by the way, in case, because I'm sure you're wondering in terms of financial impact, it really ultimately depends on duration of the strike, but at this point we think it's probably slightly dilutive to revenue, flat on OIBDA, and accretive to your question to cash. But again, ultimately really a function of how long it lasts. Over to the ad side, when you said we're doing something differently, you're referring to our upfront events, which I will come to, big picture retail grade about our proposition to advertisers in their agencies, I've been associated with it for a long time, and frankly I think it's strong as it's ever been, given our differentiated platform portfolio, industry-leading creative integration, advertising a lot on alternate measurement, and of course, a popular content, including sports, and by the way, we have the next Super Bowl, so that's August. We did realign our sales force in terms of doing something differently. Also we realigned it. So, now it's easier to do business with us, particularly if you are agency holding company, where you now have a dedicated team serving you that's knowledgeable about your business, and again, can give you turnkey access. With respect to the upfront, we did a couple of things differently this year. In fact, we just wrapped nine upfront events in a new format that really strong resonated with our clients in the room. They liked it. It's targeting specific buyer groups. It was more intimate. It was really quality two-way conversation, and that contracts kind of with the old model of one big presentation event and then a huge party after not really effective anymore for the day. By the way we did it earlier, that's clearly better. And for us, it's one of those rare move that's more effective based on the feedback we got, and more efficient because in aggregate it costs significantly less in the old model. So, we feel great about that. And again, we are in the very early stages of the upfront. I'm not going to comment on what's going on; price, volume, et cetera, because at the end of the day, it's an active negotiation, and it doesn't make sense to get into it live on the call. So, that's it. I will say, by the way, without getting into it, we definitely have a plan here, we are executing against that plan. And I do believe that when the dust settles, we will clearly demonstrate the power of Paramount in the ad space, so feeling good about it going in.

A - Kristin Southey: Okay. Operator?

Operator: Thank you. The next question goes to Rich Greenfield of LightShed Partners. Rich, please go ahead. Your line is open.

Rich Greenfield: Thanks for taking the question. I got a couple, I mean first on Paramount+, you're growing subs that are pretty healthy clip leveraging a bunch of the structural deals that you've done with partners. But I'm sort of wondering about through the engagement side of Paramount+, it looks like ad revenue is still relatively small on a personal basis, somewhat sub $2 versus your peers that are upwards of $9 or $10. And I assume that's engagement driven. And I'm just sort of wondering as advertising becomes a bigger part of Paramount+, what are you doing marketing spend or content production wise meaning more to drive overall time spent per user per day on Paramount+, I'd love to get your sense there. And then just sort of following-up on something that Bob and Naveen, you were talking about before in terms of headcount, or the cost side of the equation. I think you ended last year with like 24,000 employees, I'm just wondering is sort of you look at sort of the pressure on the cable network, media network, CBS, MTV, et cetera. What's the right, how much lower can that go without really eating into sort of the core strength like an employee count get cut in half over the next five years? Like how much smaller can the employee count get? How do you think about reducing headcount going forward? Thanks.

Bob Bakish: Naveen, why don't you start with the ad placement DTC?

Naveen Chopra: Yes, sure. So, Rich, as it relates to your question on engagement and ad monetization, short answer is we're very bullish about the opportunity to grow at ARPU on P+. That opportunity really begins with engagement. And we've seen really strong momentum there. In fact, if you look at our Q1 results, the viewing hours per sub actually grew double-digits, both sequentially, and year-over-year. And I expect we'll see further growth and engagement. As the content slate continues to expand as awareness continues to grow and frankly, as we get even better at optimizing the programming strategy, recommendations, and the like, I think there's a really interesting data point that is relevant there, in the form of customers who use the current Showtime P+ bundle, those customers spend about 20% more time on the service, and they watched 40% more titles than the folks in standalone Paramount+. So, there's clearly significant opportunity for us to continue to grow engagement, which means significant opportunity for ad monetization, particularly when the ad market improves. So, quite frankly, even the current trajectory is encouraging. I think domestic ad ARPU similar to engagement was up double-digits this quarter on both a sequential and a year-over-year basis. So, big value creation opportunity there.

Bob Bakish: Yes, and going to your question about the cost side, clearly start with it's something we are very focused on as an umbrella point, if you look and you could think Rich when we started this conversation seven years ago, at the time on the cable networks side, we had probably five fully built out groups organizationally programming each set of networks. Fast forward to today, through consolidation, call it economics, we now have one kind of master cable networks group here in the U.S. And I'm going to come back to the international side in a second. And they're running all the networks with a slight exception, and we're in the middle of effectuating the latest step on that which is the Showtime consolidation into effectively the U.S. cable group. And so, there's all kinds of economic savings there. And we continue to ask the question of how can we extract more from operating a set of networks as a portfolio managed in a single group and that goes to organization, that goes to how we use content, that goes to cross promo, et cetera. And again, we've seen significant benefit along the way. And we think there is further road to go. And right now we're just in the middle of integrating Showtime. And if you look at, for example, what we did with Your Honor, most recently, we launched that show on the back of this second season on the back of what we call the Yellowstone Launchpad on Paramount network. That probably would, that was much easier to do as we integrated the structure into one than it was previously. And those are the kinds of things we'll continue to model mine. As you look outside the U.S. and the International, there's two things you should know, again, going to the cost. One is we've now globalized management of those networks. So, Chris's team is ultimately thinking about how can we run that whole portfolio more efficiently and effectively. And related to that, we are going from a place where you have country specific feeds to in a way it's back to the future. It's shared feeds with local opt outs and multiple language tracks, which has all kinds of efficiencies. So, there is I'm not going to get into what the specific headcount could be. But rest assured, that is something we are very focused on and we will continue to extract benefits as we go forward.

Kristin Southey: Okay. Operator, we can take the next question.

Operator: Thank you. The next question goes to Robert Fishman of MoffettNathanson. Robert, please go ahead. Your line is open.

Robert Fishman: Hi, good morning. I got one for Bob and one related one for Naveen. First Bob, can you give us your latest thoughts on keeping your key IP exclusive to your own platforms instead of selling it off to third-parties, and specifically, maybe speak to selling the SpongeBob spinoff movie to Netflix, whether we should interpret that as like a shift away from keeping content exclusive to Paramount+? And then for Naveen, how much does licensing content to third-parties, or the international licensing, you called out earlier help in terms of getting back to that free cashflow positive next year?

Bob Bakish: Yes, sure, Robert. So, look there's been fundamentally no change to our views on content licensing. In general, we believe in a balanced strategy with two key components, keeping our franchise content for our owned and operated platforms on a first window basis. We think that's a real strategic advantage, it certainly drives subscribers. And you've seen that to great effect with Paramount+, but at the same time, and we used to be an outlier here, other people are pivoting back to the rationality of the approach, we do believe in monetizing content, mostly library content on a co-exclusive or non-exclusive basis with third-parties because the fact is it generates incremental revenues, incremental margins, incremental franchise impressions, which are good for that, and doesn't really adversely affect subscriber acquisition on the O&O side. Yes, we do things from time to time, particularly in international markets with a franchise remember, Paramount+ isn't fully penetrated yet on a global basis. It's very much. We're nine in the top 10 streaming markets. But the world is a pretty big place, as you know. So, content licensing can be very important on a rest of world basis. But the main thing is we haven't changed our point of view on licensing. We believe in this dual model of core IP and franchises to drive O&O particularly streaming, combined with a broader licensing strategy. And we continue to evaluate opportunities against that, that framework including we believe there are some broader licensing opportunities that have financial upside, but that's licensing. Naveen?

Naveen Chopra: Yes. So, Rob, with respect to sort of the financial impact of that, particularly the international component. Obviously, we're not going to give you any specific numbers there, though, I'd say a few things. Number one, that business is a high margin business, and so it can be a nice contributor. It's largely about licensing stuff that has already been produced for other channels. So, unlike the original production business, which is a little lower margin, this one can be a nice contributor. And I suspect it'll grow over time. More importantly, there are multiple drivers for earnings and free cash flow growth in '24. And I think it's important to remember what those are and the potential that they have. We talked about them last quarter, and they continue to apply. We were expecting to see significant growth in Paramount+ subscribers and ARPU, i.e. revenue growth. We are tracking nicely in terms of the integration of Showtime and Paramount+, which unlocks both top line benefit as well as significant savings in content and other places. That does mean you will see slowing growth in streaming content spend, as well as marketing efficiencies that we get through content leverage, more utilization and promotional inventory et cetera. So, those are the big drivers into '24, and we remain confident in what will deliver them.

Kristin Southey: Operator, we can take another question.

Operator: Thank you. The next question goes to Doug Mitchelson of Credit Suisse. Doug, please go ahead. Your line is open.

Doug Mitchelson: Thanks so much for taking the question. So, I'm curious, are there other assets that you're considering selling beyond Simon & Schuster, just sort of unclear from the preamble, if you are thinking more broadly there? And then, Naveen, on the positive free cash flow 2024, I was just hoping you could outline the bridge, and you kind of mentioned further on DTC, is it simple as flowing through EBITDA growth, or are there other drivers of free cash flow beyond operating growth? Thank you so much.

Bob Bakish: Yes, I will speak to the asset sales, and throw to Naveen. We are always looking for ways to maximize shareholder value. That might involve divesting, acquiring or potential partnering on an asset, and by the way, we have done all three of those things. So, we look at everything. As I indicated in my remarks, we are now back in the market with Simon & Schuster. We feel very good about the value creation opportunity there, given both its operating performance, which is substantially superior to what it was when we bought it to the market before, and frankly, the level of buyer interest, there is lot of interest. So, we feel good about that. And depending on who the ultimate buyer ends up being, we see a type of buyer really; we see a pack potentially closing that deal this year. I'm not going to comment on any other speculative -- there is a bunch of speculation out there, transaction is what we might do, all those again to reinforce we're always looking for ways to maximize shareholder value. Naveen?

Naveen Chopra: Yes. And Doug, with respect to your question on free cash flow, I think I just took it through some of the sort of operational levers, if you will, that will drive the business into '24. If you think about it through more of just a pure financial end, yes, OIBDA improvement is a big contributor to the improvements that we expect to see in free cash flow, but there are also benefits from a working capital perspective. We talked about this dynamic, where over the last few years as we have ramped up in streaming, you saw significant growth in sort of cash content spend. And then it takes a little while for the expense side of that to -- the P&L side of that to show up, because of the nature of amortization. What you will see going into '24 and beyond is actually that the cash content growth really starts to slow very significantly. And you start to get a place where the rate of growth in cash content and P&L expense will start to converge. But there is going to be real benefits from a working capital perspective over the next couple of years, because of those dynamics.

Kristin Southey: Okay. Operator, we can take our last question.

Operator: Thank you. Our final question goes to Phil Cusick of JPMorgan. Phil, please go ahead. Your line is open.

Phil Cusick: Hi, thank you for getting me in. I heard the comment around lower content cost in '24 from DTC. How should we think about your '24 goals around revenue and subscribers given the Showtime integration? And then, maybe Naveen, you have not talked about this before, but how is retail churn trending in the Paramount+ base growth overall, and does the cohorts mature? Thank you.

Naveen Chopra: Yes, thanks, Phil. So, first with respect to '24 goals, we talked about this a little bit on our last call, we've continued to be very bullish about DTC growth overall. There are some puts and takes in terms of what's going on in terms of the ad market, but we are, I would say, ahead of our plans with respect to Paramount+ growth subs revenue et cetera. I noted that with respect to content expense, the integration of Showtime and Paramount+, we think does puts in a position where we'll actually be spending less in 2024 than we originally indicated. So, I think in general, we continue to be very excited about the trajectory of the DTC business relative to our plan. Regarding the question on retail churn characteristics, I think the short answer is churn continues to improve. We saw that in Q1, and it's been pretty consistent theme as we see really nice improvements in engagement, the content portfolio continues to expand, we get more partnerships in place, all of those things are beneficial from a churn perspective, and that's definitely one of the key ingredients that's going to drive revenue growth going forward. So, we like what we are seeing there.

Bob Bakish: Yes. And with that, in closing, look, I want to emphasize that we have momentum, and importantly, we have conviction. So, we are going to focus on driving market-leading streaming growth, while navigating this dynamic macroeconomic environment, and know that the decisions we're making will position us well for our pack of streaming profitability, significant earnings growth, and a return to positive free cash flow in 2024. So, we are laser-focused. Thank you everyone. We appreciate your support, and be well, we will talk to you soon.

Operator: Thank you. This now concludes today’s call. Thank you so much for joining. You may now disconnect your lines.