Good day, everyone, and welcome to the CBS Corporation Fourth Quarter 2017 Earnings Release Teleconference. Today’s call is being recorded. At this time, I would like to turn the call over to the Executive Vice President of Corporate Finance and Investor Relations, Mr. Adam Townsend. Please go ahead.

Good afternoon, everyone, and welcome to our fourth quarter and full year 2017 earnings call. Joining us for today’s remarks are Leslie Moonves, our Chairman and CEO, and Joe Ianniello, our Chief Operating Officer. Following Les and Joe’s discussion of the Company’s performance, we will open the call up to your questions. Please note that during today’s conference call, the fourth quarter and full year 2017 results for EPS and prior period comparisons will be discussed on an adjusted basis, unless otherwise specified. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. Also note that statements on this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation’s SEC filings. A webcast of this call and the earnings release related to today’s presentation can also be found in the Investors section of our website at cbscorporation.com. Finally, as you know, we’ve put out a statement about two weeks ago announcing establishment of a special committee of independent directors to evaluate a potential combination with Viacom. On this call today, we will not be responding to any questions or comments about that process. With that, it’s my pleasure to turn the call over to Les.

Thank you, Adam, and good afternoon, everyone and thank you for joining us today. I’m extremely pleased to tell you that the CBS Corporation capped off 2017 with a terrific fourth quarter. Revenue was up 11% to $3.9 billion. And EPS was up 8% to $1.20, marking our 32nd consecutive quarter of EPS growth. We had very strong numbers for the year as well. Revenue was up 4% to $13.7 billion. And EPS was up 7% to $4.40, which again is our 8th straight year of EPS growth. These results represent all-time highs in revenue and EPS for both the quarter and for the year. And what’s even more impressive is that we posted these records comping against 2016 when we had the Super Bowl and the most political spending we’ve ever seen. As we head into 2018, our momentum is only accelerated. And we are poised to deliver results that will be by far, the greatest financial performance in our Company’s history. This is because we have better visibility into our future than ever before. Our radio transaction is in rearview mirror. Our newer, fast growing sources of revenue continue to grow at a rapid clip including our direct-to-consumer streaming services which doubled year-over-year. At the same time, we expect solid growth across the board in our base business in 2018. Joe will tell you how the remarkable progress we continue to make will translate into our future results. Trust me, you will not be disappointed. All of the success is the result of our long-term strategy, which is to produce must-have content and monetize it in more and more lucrative ways. We are uniquely positioned to do this because we have the biggest hits and many of the most valuable programming franchises in the business. The strength of…

Thanks, Les, and good afternoon, everyone. CBS finished 2017 with a great quarter and another solid year. In a changing media landscape, our Company stands out, our base business is strong, and we’re growing our sub base and getting paid higher rates per subscriber, thanks to the growing demand from consumers for our new distribution platforms. Plus, we are well ahead of where we expected to be in achieving our strategic and financial goals that we laid out for you from our four growth pillars. As a result, we are headed for a terrific 2018. And I’m going to quantify what that means for investors at the end of my remarks. But first, let me give you some more details about our fourth quarter results. Revenue was up 11% to $3.9 billion. Content licensing and distribution had a terrific quarter and grew 33% with strength both domestically and internationally. On the domestic side, we got a lift from our distribution deals for NCIS: New Orleans, and Madam Secretary. And internationally, we are benefiting from having more content to license as a result of our increased programming investment. Affiliate and subscription fee revenue was up 20% during the quarter. Retrans and reverse comp led the way and was up 31%. And for both the quarter and the year, we doubled our revenue from skinny bundles and our direct-to-consumer services. Going forward, we expect the incremental revenue increases from these two growth initiatives to be even stronger in 2018. Total Company advertising was down 3% from 2016 when we had record political spending at our local media segment. At the network level, advertising was up 4% from Q4 of 2016, helped by Network Ten in Australia which we acquired midway through the quarter, and we also saw a strong advertising growth on…

Thank you. [Operator Instructions] We’ll take our first question from Ben Swinburne with Morgan Stanley.

Thank you. I have one for Les and then a follow-up for Joe. Les, obviously, you’ve been a big fan, so to speak, of the NFL, over the years. But, Thursday Night Football went another direction this year. How do you think about that process? What do you do with the savings you’re going to generate from not retaining that Thursday Night right? And there is certainly some concern in the market that that could impact your retransmission fees. I think your prepared remarks tell us your view on that. And maybe you could just spend a minute on why you’re so confident that it’s not a factor.

Yes. Well, first of all, we love football, we like it better on Sundays than on Thursday. Economically, it’s considerably better for us to do that. Very frankly, Ben, Sunday affects the retrans and the reverse, Thursday doesn’t, since we only had single year availability. So, literally, it didn’t have anything to do with that negotiation. As I said, we love it, we know the economics, we carried Thursday night for four year, we have exclusively for two. The reason it didn’t affect the retrans, it was not exclusive on Thursday night. So, it didn’t help any stations our own or otherwise because you can get it on the NFL network or on Amazon. So, we know the economics really well of doing that. In addition, may I add, our Thursday night wins with our regular programming, we have Big Bang, Young Sheldon, which sort of kill it. So, we’re looking forward to taking that money and reinvesting it in regular programming and moving on from there.

Great. And then, Joe, I think if you look at the full year, licensing and distribution was up almost 8%, I think it’s the highest growth rate since maybe 2013. I think, another concern in the market is the syndication business is sort of dead. Maybe you could just talk about the drivers of licensing and distribution for the year. How did international do, domestic, digital, what’s making that business start to grow faster than expected?

Look, as we said, we’re producing 65 shows when just a few years ago we were producing about half of that. We certainly expect -- our pipeline is growing for shows we have not licensed yet. So, the expectation certainly for us is a healthy marketplace is going bear fruit for us. And so, both domestic and international for us in 2017 had healthy years. Obviously, we sold Madam Secretary as well as NCIS: New Orleans. We have not sold Scorpion yet. So, we have some real beach front properties still yet to come. And our international team sells obviously some CW product as well as All Access product. So, those 65 shows have a lot of value in rest of world. And they need those -- that content for their business model. So, obviously, we made that a growth pillar of international content licensing. We’re executing ahead of plan on that. So, we said we were going to have a good year in content licensing and we delivered.

We’ll go next to Jessica Reif with Bank of America Merrill Lynch.

Thanks. Two questions, one on OTT. Obviously, 5 million subs is incredibly impressive. What do you think is driver? Is it Amazon-driven? And can you talk about churn? And what are the pros and cons of Amazon distributing for you? Do you lose the direct-to-consumer, do you lose that information? And then on the content -- sorry?

Go ahead, Jessica.

Okay. And then, the increase in content has been the biggest driver of value for the Company over the many years since Les has come to CBS. You said you doubled production. Are there any limitations from here on how much more you can scale up without losing quality and focus?

Let me -- I’ll answer the second one. First of all, CBS is almost 24 years. So, it’s been going on a while. And the answer to your question is...

I remember when you came.

Right. I know, I was a young man then. The amount of content, the sky is the limit. As more and more people come in to the marketplace, the Netflix, the Amazons, the Hulus, the Apples, we’re supplying to all of them. We have the capability, we have the producers, we have the executive team. The fact that we’ve doubled in just a few short years, we’re ready to go and we get -- that’s what excites us, doing more and more premium content.

And Jessica, on your -- the OTT question, obviously, we’re ahead of plan with the 5 million. So, we’re very pleased with that. It’s broken out almost evenly between the two services. And CBS All Access really just launched on Amazon in January. So, it’s not a big part of their base yet, it’s much more significant at Showtime. They are fantastic marketers and show they are able to drive sub growth which is terrific. We see lower churn with those sort of services because the consumers are used to that proposition. So, that’s really good. And we do get the data on all of our shows and stuff. So, we feel -- and the economics are obviously favorable. So, it’s really just a win-win for this new distribution model. But, it’s really being driven by the consumer.

We’ll go next to Michael Morris with Guggenheim Partners.

Good afternoon, guys. Two questions. First, can you help us size the Network Ten contribution and how to think of it for the coming year? Is it -- is straightforward just kind of doubling the 4% advertising lift in the quarter at entertainment. And assuming that carries forward, are there other revenue streams to think about and is it profitable? And then, second, the investors have been focused on digital platforms ramping up their show production, but lately there has been a lot of press around executives and show running talent moving or making commitments to some of these platforms. And, Les, could you comment on how important these individuals are to your process, whether this is a shift in the competitive dynamic and how that impacts your business? Thanks.

Mike, I’ll take the first part. Network Ten, look, we grew 11% in the quarter; without Network Ten, we would have still grown double digits. So, I think it’s -- all the advertising right now is coming from advertising for Network Ten. So, as we look forward into ‘18, what I would say, it’s dilutive to our margin because again obviously, we are investing in there and there is a ramp that’s coming in the profitability. So, stay tuned for that. So, again, it’s not a significant deal, obviously, on a $13.7 billion revenue base, we’re talking hundreds of millions of dollar in that magnitude. So that will give you some -- that will size it for you.

Regarding the creators, as I said I’ve been this doing this a long time. And previously, there was very little competition. And then it would expand to cable and people would start going to HBO. Look, Ryan Murphy is an extraordinary talent, one of the greatest creators out there. They offered him hundreds of millions of dollars. He had to take it. But then you look a Chuck Lorre. Chuck Lorre has three shows on CBS and he also has a couple of shows over on Netflix. So, we have a lot of talent. There is a lot of room. The landscape does change. But, we find new talent and we also continue to be in business with the best talent. So, Netflix is another competitor and as well as the supplier. So, it doesn’t concern me.

We will go next to Alexia Quadrani with JP Morgan.

Thank you. Just a couple of questions. You mentioned earlier licensing of The Good Fight, I think through Amazon to some global markets. I guess, how do you balance licensing your content like this outside of United States versus maybe your plan to actually moves CBS All Access into those markets directly? And then, my second question is just sort of on the same train of thought, kind of any thoughts of possibly sort of preselling The Twilight Zone internationally and help continue to fund the show.

Let me start and Joe jump in later. Obviously, let’s go back to Star Trek, which was as expensive of a production as we have ever done. We were just launching All Access. We got a huge amount of money from Netflix for the international rights, and it made it very viable for All Access and continue to do that. As we look out into the marketplace and as we expand CBS All Access internationally, there is the possibility you would sell it to Netflix or Amazon with carveouts or where CBS has their own over-the-top servers. When you look at Twilight Zone, once again, another huge, huge property with incredible creative auspices there. We haven’t yet decided on what to do, needless to say, Netflix is calling, Amazon is calling and we’re getting closer. We will look at it. My guess is we will make a huge international sale, because by the time Twilight Zone goes on the air, we won’t be in that many territories but we will leave room open to do it later on. So, on each case, we look at what the marketplace is, what’s available, and how we’re planning. But more and more of it will come to us and less and less we will go to them. But right now, economically, it’s very good to be selling to Netflix and Amazon.

We will go next to Bryan Kraft with Deutsche Bank.

I wanted to ask you a question on measurement and ratings. I know, you’ve made some real progress this year using TCR and measuring out the 35 days. Can you talk about where you think Nielsen’s ability to measure on all screens is at this point? And do you think TCR is the answer to closing that gap? And lastly, how much upside do you think there is next season to the GRPs you’ll have available to sell as a result of the expanded measurement currency with TCR and also out of home? Thanks.

Look, we took a stab at quantifying this for you guys in 2016 in Investor Day with that consumption that’s occurring outside our monetization window. So, it started in a live rating and went to a C3 rating and now C7. And as Les just gave you an example from the Young Sheldon case, there is still significant consumption coming outside of that. And so, we’re reliant on a third-party measurement system. We hear Nielsen is making certainly investments in their technology to capture all of this. But, obviously, we’re anxious in making sure we’re able to do that. Because it’s a lost opportunity. So, the good news is the consumption is there and there is real upside I mean, you can do it by percentages, but it’s double digit percentages are now kind of watching it on their own time. And that’s an opportunity. And we have to make sure we’ve delivered that for advertisers and we have to measure that and get paid for that, but we are delivering that today. So, that’s why we made it a pillar and that’s why we reorganized the sales, our sales team and so we are laser focused on that.

If I could just ask one follow-up, and I don’t know if you know this off the top of your head. But, what would the ratings look like if all of the consumption were actually being measured right now? I mean, how different would those primetime ratings look?

Yes. Bryan, we actually said that also in our day. We took the top 15 shows now and looked back 15 years, and the ratings are actually up. So, a lot is said with CPMs, you guys look at CPMs and you look at the ratings, we are delivering more than the overnight rating states. Advertisers know that, we know that, everybody knows that. And so, our internal data, we try to -- we published that and we said we didn’t want to look at one show. We said, let’s look at the top 15 shows and aggregate that audience and compare that. And it made sense, because there are so many different ways to watch it on different time schedules before it was in that one hour window, you either watched it or didn’t watch it. Now, it’s always available to you. So, it shouldn’t be that foreign of a concept to say consumption is actually up. You have to have the right content obviously and being to CBS network number one in 14 of last 15 years that certainly gives us a premium advantage.

We’ll go next to Doug Creutz with Cowen & Company.

Hey, thanks. You talked about how happy you are with how CBS, the news direct-to-consumer product is doing. I wondered if you could talk a little bit about the economics there, how meaningful a contributor can that be in your plans for the new DTC products you are offering? And then, secondarily, just a quick one, on the high teens EPS growth, you mentioned, is that off to fully adjusted for 4.40 number, is that off to continuing up to 4.19 number? Thanks.

Yes. Doug, it’s Joe. Yes, it’s off 4.40 number, so just to be clear on that. And on CBSN, look, it’s contributing, I would put it in the tens of millions right now in terms of profitability, Doug. But we’re focused on really growing that and we want to take that internationally. We want to make the content offering more robust. We’re really building that getting the loyalty to the audience and then what we are seeing is it’s now available inside of All Access. We want the people to convert up to our paying service in All Access. That’s why we’re doing it with sports and entertainment news as well, based on the success we’ve seen with CBSN.

We’ll go next to David Miller with Loop Capital.

Yes. Hey, guys. Les, couple for you. Thanks for the breakout or actually thanks for the aggregate sub number on the OTT product’s 5 million subs. Could you just size that up between Showtime and All Access? My guess is that maybe 55% to 60% of that 5 million is All Access. But, if you’re willing to provide any granularity that would be great. And then, also, I think -- correct me if I’m wrong, I think, 33 out of 100 Senate seats are up for election this year. There has been some news reports out suggesting that political spending this year could actually outpace 2016. Do you agree with that? And any other commentary surrounding that would be helpful.

Number one, the OTT services, they are sort of neck and neck. And it’s really -- it’s pretty 50-50 right now, which we’re really pleased about. And they’ve gone their own ways and they offer different things and the fact that they are that both doing exceptionally well is a big boom for us. Look, we’re anticipating a very big political year. Obviously there is lot of seats that are up, there is a lot of issues on the table, there is lot of ranker in the market place, and we expect that there will be a lot of money spent. So, whether it beats 2016, we’re optimistic that it will.

We will go next to Laura Martin with Needham & Company.

Hi, there, maybe a couple. Strategically, Les, do you see your position in OTT as a complement to your linear channel over OTT, which is sort of how Disney is positioning their new sports service or do you see them as sort of substitute from a consumer point of view, which is how I think of All Access? And then, [indiscernible] and scatter, I’m fascinated by the 40% higher rate. And one of the things we’re seeing in Priceline and Expedia which do $5 billion each year in search engine marketing is they are pulling money out of that Google Search Engine and they are putting it on TV. And I’m wondering if you guys already seeing that in your marketplace that’s helping the scatter number?

Laura, let me deal with the first. I do view it as complementary. Obviously, the things that are diving our OTT product right now are catch-up on our network shows, on the main network shows. And then, obviously, as we add more and more original content, that becomes a bigger driver. Obviously Star Trek had a great effect as will The Good Fight. When Twilight Zone comes on, it’s that. But, I think the good news, it also has a lot of the library. So, I do view them as working together as we go forward. More and more people are going to be watching the shows in different ways. And as we’ve always said, you can get your CBS on a traditional MVPD, you can get it on a skinny bundle or you can get it now on All Access and each one of them pays us more. So, we look at it all working together.

And Laura on your scatter pricing, we’re seeing broad-based strength. So, we’re seeing dollars come back from -- if they are circulating in digital. I think there will always be some digital components but we’re also seeing it tech and telecom, in other areas where we’re seeing big budgets coming to television advertising. So, that’s positive. Maybe tax reform has something to do with that as well. But, we’re positioned nicely.

So, we will go next to James Goss with Barrington Research.

I would like to dig in a little bit more on the introduction of direct-to-consumer internationally. I was wondering if you could discuss the process and pacing of that and maybe frame out any of the economic expectations and subscriber expectations. And I’m also wondering somewhat to what Les was talking earlier, if there is any conflict with your international series syndication sales that makes that a little trickier to pull off?

Jim, it’s Joe. Look, we’re going through the process and just how we did that in the United States. So, that’s why we’re going kind of Canada first, close to us, English language, we know what rights they have and stuff like that. So, we’ve built the tech stack to really scale that infrastructure. So, we’re going to be cautious to make sure we learn lessons along the way. We look at where Netflix is and see their sub growth and so we have some envy there. And so that’s going to be -- we are going to set our sights there, and those who will be our expectations. Obviously, we’re spending money to do that. So we’re pre-revenue right now. But, we think it’s the best ROI because we’ve seen the success CBS All Access has, Showtime OTT as well as CBSN domestically. So, we know we’re on to something. So, we’re going to be deliberate in the approach. And as far as the conflict, each country, the rights are sold differently. So, obviously, we never violate any of those contracts. But, we’re going to be strategic in the roll out and how we do this. So, each country’s offering maybe a little differently. But, long-term, the goal is to have a global direct-to-consumer offering with original product in there, live content, library. It’s going to be a compelling offering for the consumer.

Okay. Thanks. And one other thing, to the extent that you have these other opportunities bubbling up internationally as well as domestically, do you think that take some of the pressure off of always needing the expensive sports programming and award show emphasis and things of that nature that have tended to pressure costs in the past?

We love our sports, we love our Grammy awards, we love being a full service network. You probably should talk to Fox. They’re going a different way.

That question will come from Marci Ryvicker with Wells Fargo.

Thanks. Two questions. Joe, local is pacing up low single digits, I assume that includes political. So, can you talk about maybe the pace excluding political? And then, related to that, are you feeling any impact from the Olympics, so perhaps the pace would be even higher in a more normalized environment? And then, secondly, on the cost cutting side, you talked about $50 million run rate benefit. What segment will that be in and is there anything else to cut or may that $50 million moves higher over time?

Marci, we always look for efficiencies throughout the organization. So, I think we’ve demonstrated that we’re pretty cost disciplined. The $50 million is really split amongst the four segments we have, the largest being the entertainment segment. So, I would spread that and again disproportionally on the entertainment segment. As far as local, political in Q1 is very small. As you know, this is all back half, Q3, mostly actually Q4. Over 50% of the dollars are spent in the month of October. So, it’s not really driving that low single digit growth that we talked about. And obviously, the Olympics take some money out of the marketplace for two weeks in February, but we had a very strong January. And again, we expect to hit our guidance.

Great. Thank you, Marci, and thanks, everyone, for joining us. This concludes today’s call. Thanks a lot.

And again, this does conclude today’s conference. We thank you for your participation. You may now disconnect.