Skydance’s highly anticipated third quarter results were released today, its first quarterly report since the Warner Bros. acquisition. Discovery for $81 billion on October 6. The figures show a net profit of $73 billion on revenue of around $7 billion for Paramount Skydance alone. Since the merger was only finalized in the current fourth quarter, most of the figures will not be consolidated with WBD until the next earnings release.
Paramount+ revenue grew 21%, its fastest quarterly growth this year, with ARPU up about 14%. Studio revenue increased 23% and TV media achieved an adjusted EBITDA margin of 34%.
The numbers, comments from co-CEOs David Ellison and Ynon Kreiz, and the call set for 5 p.m. ET today will constitute Wall Street’s longest look at the powerhouse that controls two major Hollywood studios, streaming platforms and a giant linear TV portfolio. Skydance outlined key goals and strengths it envisions for the combined company: at least $6 billion in synergies within three years; reduce the net leverage ratio to 3x by the end of 2029 and achieve investment grade credit; and launching a bundle of HBO Max and Paramount+ in early 2027.
At Paramount Skydance, third-quarter DTC revenue increased 11% year over year to $2.5 billion, driven by a 21% acceleration at Paramount+. DTC’s profit was $225 million.
Studio revenue increased 23% to $1.5 billion, reflecting a strong quarter for secondary market licensing and content produced for third parties. The profit was $129 million. Offering a bit of color here with a caveat, the co-CEOs said they “expect Warner Bros.’ fourth-quarter film slate to underperform.”
“As we onboard companies, we apply the playbook we ran at Paramount: test earlier, tailor our marketing and launch strategy to the size of each opportunity, enriched with real-time market data, and strengthen the list we greenlight. »
Paramount Pictures will double its production to reach 15 releases in 2026. In the last quarter, PAW Patrol: The Dino Moviegrossed over $160 million worldwide, and David Ayer’s Heart of the Beast starring Brad Pitt, grossed more than $180 million worldwide.
The releases from Paramount Pictures and Warner Bros. Pictures include The Cat in the Hatwhich opened its doors last Friday. Ebenezerwith Johnny Depp, coming this weekend, and Son-in-law on November 25, with Paramount international distribution. Dune: Part Three comes out on December 18. The Angry Birds 3 movie arrives on December 23, followed by Christmas Day M. Not relevantthe first theatrical release as part of Skydance Sports’ partnership with the NFL.
TV media revenues fell 7% to $3 billion. Advertising revenue fell 8% year-over-year, and affiliate revenue fell 5% year-over-year, consistent with the continued erosion of pay-TV subscribers. The sector’s profit amounted to $1 billion.
The company said it expects to generate combined annual revenue of $70 billion. It also starts with a debt of more than $80 billion. Some Wall Street investors worry that leverage could be crippling. Others are more optimistic but note little margin for error.
“They haven’t done much to define the strategy. How do we integrate WBD? What does this business look like?” asked Rich Greenfield of Lightshed Parters on CNBC.
Questions asked by him and others over the past month include: How do you protect linear networks? Are executives ready to fight as they embark on tough negotiations with distributors? How will they reduce the debt? Are they ready to sell assets? Can they creatively reduce their leverage? What’s coming in terms of transaction-related impairments, restructuring and transaction costs? What about NFL risk. The opt-out is scheduled for 2029, but there is technically a control provision change in 2027 that the League could trigger.
Leverage and integration risks are high, Doug Creutz, an analyst at TD Cowen, said in a recent note.
“The strategic argument for owning Skydance here is the scale of content, and on that measure the combination is unmatched,” says StoneX’s Daniel Turnos, more optimistically. “We also don’t think they will default, which is the biggest fear today.”
Skydance committed to releasing 30 films a year, increasing to 32 films, over a five-year settlement period with state attorneys general who had sued to block the merger. It’s targeting $30 billion in combined content spending, has the most diverse film and television library of any studio, the industry’s largest film output and more than 200 million streaming subscribers, it noted.
Since closing the deal on October 6, the company has been building out its management team and announcing a major shake-up of the cards with high-level appointments, new teams within the sprawling media empire and surprising ousters – including those of James Gunn and Peter Safran from DC Studios announced earlier today.
In a letter to shareholders containing these figures today, Ellison and Kreiz promised that: “Growing our business and repaying debt are our top priorities, and we firmly believe we can achieve both simultaneously. We plan to reduce net debt to 3.0x by the end of 2029, achieving investment grade credit metrics within approximately three years of closing. To achieve this, we plan to increase our annual free cash flow to more than $10 billion dollars in 2030. synergies are expected to amount to approximately $1.5 billion to $2 billion in 2027 and approximately $4 billion throughout our transformation, of which 60% to 70% will impact 2027 and 2028, and have been considered in our financial and leverage outlook.
“Until we reach our debt target, we will use excess cash, beyond our reinvestment in the business and our current dividend, to pay down debt,” they said, adding: “We have come together to build something bigger, bolder and better, with the stories, technology and scale to win. We will move quickly over the coming months and share more with investors, partners and consumers at a investor day in the first half of 2027. There is still much to do, but our vision is clear, and we are committed to our operational objectives and financial commitments. We are confident in our plan, excited about what lies ahead and are just getting started.
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