Good day everyone, and welcome to the ViacomCBS Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Executive Vice President of Investor Relations, Mr. Anthony DiClemente. Please go ahead sir.

Good morning everyone. Thank you for taking the time to join us for our fourth quarter and full-year 2019 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Chris Spade, our CFO. Please note that in addition to our press release, we have trending schedules containing supplemental information available on our website. We also have an accompanying slide presentation that you can use in order to follow along with our remarks. I want to refer you to the second slide in the presentation and 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. Today's remarks will focus on adjusted results, reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website. Now, I will turn the call over to Bob.

Good morning, and thank you for joining us for the first Viacom's CBS earnings call. It has been less than three months since we completed our merger, and I'm pleased to say we are making significant progress integrating and transforming Viacom's CBS, as we move quickly to unlock the full power of this now unified company. This includes organizationally, we have built a best-in-class management team and consolidated structure. Operationally, as we have started executing as a combined entity in a meaningful way, including through sales force consolidation, more streamlined groupings of networks, as well as the integration of digital assets and capabilities, and financially where cost synergies are already being realized, and our target is being increased from $500 million to $750 million in annualized run rate, cost savings. Importantly, this progress is not reflected in Q4, which given the timing of our close is a transitional one and overwhelmingly reflects two separate companies executing on separate strategies. Chris will cover our Q4 and full-year results in detail, but let me highlight a few things. First, there are as you would expect a significant set of merger related items that were a headwind for expenses and cash flow. Second, at the operating level from a revenue perspective, certain lines reflect the impact of challenges that will be mitigated in the combined company affiliate is an example here, while others such as ad sales provide insights into the potential of the company to perform more strongly as we extend capabilities across the portfolio. Lastly, our operating results reflect the impact of legacy content investment decisions at some business units. As I will explain in a few minutes, here we are evolving our strategy to significantly improve content ROI and free cash flow. I would now like to discuss our strategic…

Thank you, Bob, and good morning everyone. It is great to be here for our first ViacomCBS earnings call. As you know, our merger was effective December 4th, so our fourth quarter and full-year 2019 results largely reflects with Viacom and CBS would have delivered as separate company. 2020 will express the power of our combination with some of the greatest assets in media and an efficient growth strategy underway. We are strongly equipped to capitalize on our position as a preeminent global content company, and by maximizing free cash flow from our traditional businesses, while prudently investing in our growth areas we will create long-term value for our shareholders and our stakeholders. First, I'm going to outline our reporting segments and key revenue types. Then I will give you more details about our fourth quarter and full-year 2019 results. Finally, I will provide further context about our 2020 guidance and capital allocation strategy. As you can see in our earnings presentation ViacomCBS comprises four business segments, TV entertainment, cable networks, filmed entertainment and publishing. We are also presenting five key revenue types, advertising, affiliate, content licensing, theatrical and publishing and we are providing a breakdown of revenue by type within each of our business segments. In addition, given the increased prominence of our streaming services, we are giving greater visibility into their performance by providing domestic revenue, subscribers and monthly active users for our fast-growing streaming and digital video business. Now let me give you more details about our fourth quarter results. Q4 of 2019 was a transitional quarter. As a result, we had several merger related adjustments. They include $589 million in programming charges, resulting from an evaluation by new management of our content strategies for the now combined company, $268 million in restructuring charges related to our…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator instructions] Thank you. And our first question will be coming from the line of Alexia Quadrani with JP Morgan.

Hi thank you very much. Just two questions. First, looking at your guidance for 2020 that you have provided. I'm curious about how much conviction you have in those numbers, and you have had a little bit of time since the merger closed, and I'm wondering if you feel that this is really a conservative number and you know trying to get a sense if we are at the bottom here for the estimates for 2020. And then I have a follow-up.

Yes, sure. Alexia. This is Bob. We have done a lot of work since the close and we have absolute conviction in our guidance, as Chris articulated in her prepared remarks as we look at 2020, we see specific catalysts as the year unfolds. So yes, we feel very good about our guidance on the top-line, on the earning side and on the adjusted free cash flow side.

And then just a follow-up on your comment about investment spending, content spending in general. You have obviously a lot of assets that you are investing in with CBS All Access, Showtime. You know just really focusing more on Showtime, I guess? How do you balance where are you going to put the content spending or investment spending in? And how are you thinking about Showtime specifically, in terms of what is the right amount of content spends for that service?

Yes. So as you said it was actually two parts - that makes a three part question. Let me take Showtime and then talk about the general question. Look, over the years Showtime has made strong progress elevating its brand, deepening its original programming lineup, expanding its reach through OTT. That said, it was a working capital headwind for the company in 2019 and the time is right to improve ROI by evolving that programming mix. To be clear, Showtime will continue to be an important home of scripted shows like Billions, Homeland, The L Word, Penny Dreadful and the investments we made in 2019 will clearly pay dividends in 2020. At the same time, Showtime does have traction in other formats shows like [indiscernible] and Circus and we see an opportunity to lean more in this direction. And there are new ViacomCBS assets to bring to table starting with RuPaul and with more to come. Also, Bellator Alignments a natural fit with Showtime combat sports positioning and I believe a compelling value equation opportunity in its own right. And the show BEP plus rebranding that we talked about, we think that is a home run in attracting incremental subs. So it is really a multifaceted approach to improving content ROI here. Beyond that, it is worth noting that there are some market dynamics in 2020, which should be positive for Showtime. As you know, some competitors have lost key distributors. That should help Showtime takes share, particularly in linear. As we mentioned OTT momentum has been picking up, strong sub growth in the past two months and slightly longer-term ViacomCBS broader streaming strategy will be additive to Showtime subs overtime as it introduced to the new consumer funnel. So we are excited about the next leg of journey of…

Thanks Alexia. Operator, we will take our next question.

Your next question is from the line of Jessica Ehrlich with Bank of America Securities.

Thank you. I have two questions. So the first one is on advertising, which you both alluded to as a growth area. So now as Joanne Ross is one of the best, if not the best advertising executives in the business and just can gives us more color on how different is your approach to market with all the networks under one advertising umbrella. As you said, selling across traditional and targeted advertising. Are you confident you can accelerate advertising growth overtime?

Sure. Jessica. Look I'm extremely excited about our domestic ad picture. Let me start by commenting on the market. As you know it remains very strong both in Q4, now in Q1 which scatter premiums in both broadcast and cable with 25% to 35% above upfront. Broadly speaking, the issue remains supply not demand and related to that we are all seeing strong and growing demand for premium digital video. Now if you look more at our performance, particularly in Q4, which I think is helpful to give you insight into where we see this going. Overall domestic ad revenues were flat. Now that is driven in part by the fact that there was not a lot of political ad spend in the fourth quarter versus the fourth quarter of 2018. That was a midterm election year. And of course, we have a little decline in impressions but very strong pricing. But the real thing to look at is domestic cable at 9% growth with Pluto. That is the strategy we have been pursuing over the last year and a half. It is a strategy of combining linear with our advanced marketing solutions. It is really resonating in the market and as promised it is delivering robust growth despite impression headwinds. It is allowing us to dramatically outperform all cable competitors. And it is worth noting that AMS is now almost a fifth of our revenue in the quarter, including with CBS. So this is a real piece of business. Looking forward, it is why we are so excited about our position in the market as ViacomCBS, we are now the clear number one leader. We are number one on every download of linear. And our AMS offering is even larger as we add CBS granted digital video, including CBS All Access, CBSN, which has grown super fast and more, which means our combined linear AMS sell something we know how to bring to market is even more robust. And as you pointed out, Jessica, our ad sales integration is moving very quickly. I'm thrilled with Jo Ann's leadership. John Haley is the COO who knows the advanced ad space. I spent last weekend with the senior team. They are totally pumped and with a bunch of clients and I'm confident we are going to be extremely well received in this next upfront.

Thanks Jessica. Operator, let's take our next question.

Next question is from the line of Michael Morris with Guggenheim Securities.

Thank you. Good morning guys. Two questions. One on streaming and then one on the cable affiliates. First on streaming. Bob you talked about the expanded service and a little bit of a time between now and when that will be available to consumers. Can you just talk about sort of what the hurdles are to having that up? And also, just any sense of urgency in terms of time-to-market given how competitive that space is becoming over the course of the year? And then second on cable affiliates, in the fourth quarter revenue was down about 8%. Can you break down for us a little bit what the drivers were there? There is a number of pieces of Showtime in the legacy Viacom networks. You used to have some content in there, some VOD relationships. Maybe just help us with what the apples-to-apples comparison is? And how to think about those drivers into the New Year. Thanks.

Sure. Let me take the first one. And then Chris will take the second one. So look on streaming again. We are very excited about our strategy. We believe this combination of free, broad pay and premium pay is where the market will go. And the fact that we have products in two of them, which is free and premium and very quickly we will get in the market with the third. Really, the middle one, we think makes a lot of sense. In terms of what we need to do, the reason we are so excited about this is it is not vaporware. We are filling from a position of strength. As we said, we have about $1.6 billion in domestic streaming and digital ad revenue in 2019, that is up 60% from 2018. We have MAU's at the end of 2019, at $22 million, actually more than $22 million, and over $11 million domestic subs in pay. So that is a real foundation and we are taking that and we are building on the experience we already have. We have benefit in terms of lessons learned in subscriber acquisition, insurance management. We understand what gets consumed in free and pay cause we have been looking at it for awhile. We are not launching something new, your question on tech. We are working off of proven platforms and models and we know how to work with partners both in the traditional and OTT space. So when we look at our plan for 2020 in our guidance, 30 million MAU's for Pluto domestically and approximately $16 million subs for U.S. pay offering with streaming digital revenue growing 35% to 40%. We feel very good about that. And again, we are in the market today and you are going to see us get deeper into them as the year goes on. So make no mistake. ViacomCBS would be very much in this game.

Hi Mike, it is Chris. Thanks for the question. So relative to the performance for cable affiliate revenue, Q4 we did see some Pay TV headwinds and we saw legacy Viacom rate resets. Looking ahead for 2020, we are going to market with our combined cable and broadcast portfolio. We are seeing strong streaming performance and especially in Q1 we have Homeland and we have Star Trek the card out there. We also have new re-trans and reverse comp fields coming up later this year, that we feel very good about 2020 and we also have the headwinds that we expect and the market expects to happen in our 2020 guidance.

Okay. Thanks Mike. Operator, let's take our next question please.

Sure. Our next question is from the line of Ben Swinburne with Morgan Stanley.

Thanks good morning. Bob can you - if you just sort of step back, help us think about the programming costs growth of the content, investment appetite the company has over a longer period of time. And I'm asking, I can't tell, but I think last year the combined companies cash spend on programming looks to be up, I don't know, 15% to 20% something like that. I'm not sure if that is exactly right, but it was up a lot. I know you are talking about reallocating, reprioritizing, maximizing content ROI, but can you just help us understand, if you look at the entire company over a multiyear period, what is the right level of investment growth you think the business needs to achieve your goals? So I think that would help the market understand sort of where the longer term cash flow opportunity is in the business?

Yes. So, thanks. So our strategy is about taking advantage of this now larger portfolio of assets to improve content, ROI and ensure that we are investing against growth opportunities and maximizing share and margins in more mature businesses. You see that split in terms of linear television where as I said, our Comcast content spend is essentially flat 2019, but through grouping of networks, through shifting of mixes, we are going to get more effectiveness out of that. And again, we have a proven team that is getting more responsibility in that space. So, I feel very good about that. At the same time, we are prioritizing investments in places where there is clear growth that is in streaming, that is in a Paramount this year as we continue to ramp the slate a bit and in the third-party studio business, which is a significant business with growth, essentially risk-free, and long-term asset value. So, that is how we are looking at it overall and it is the combination particularly managing the mature businesses much more tightly that allows us for much more modest cash content, expense growth, as on a going forward basis, certainly 2019 to 2020, and then onwards than you have seen in the last couple of years. So that is how we are thinking about it. Again, I look at the combined asset base of this Company. We have more than enough resource base to work with and we are absolutely going to get more out of it.

Okay. Thank you very much.

Operator, we will take our next question.

Our next question, our next question is from the line of Michael Nathanson with MoffettNathanson.

Thanks. I have to one similar bench question, which is at CBS legacy is a big source of pride about the number of original shows they make every year, you know it is about 94 shows last quarter. That is a doubling from like five years ago. And I wonder, you know now you are one company, is there a different financial lens you are bringing to it, because you don't see the benefit of all that expense growth in the CBS P&L. So I wonder now that you are in from outside, what are you doing differently financially to assess the ROI of that massive increase in spending of CBS?

Yes, thanks. So when you look at the CBS studio as an example, there is really two components of it. There is product it is making for its owned and operated network. In that case CBS and the product it is making a for third-party clients, which were a range of different clients. The expense growth and cash obviously covers both. As we look at it on the CBS network side, I think it is worth noting that in Q4 and continuing number one, most watched network in prime, five of the top 10 programs, five of the top six freshmen series. So the network continues to perform strongly. That I was with Kevin last week and we were talking about CBS and they are actually spending less on pilots this year, because they feel very good about where the network is and therefore are able to be more prudent. At the same time, whether it is the CBS studio or the Paramount studio, we continue to have ramping demand in that third-party studio production business. Yes, that consumed some cash certainly in 2019, there is a bit of a cash headwind in 2020, but I want to reiterate it is a difference business, it is fundamentally profitable, it is low risk and we do build long-term asset value. So on a cash basis, we are continuing to invest a bit in that, but it is really a separate business. So but rest assured in general, we are looking at everything. We talked about Showtime, we are looking at CBS, we are doing a lot of work on the linear cable side. And as we are doing all that, we see a lot of opportunity in the streaming side and we are focused on improving content ROI and getting more out of this asset. And that is what we will deliver in 2020.

Also, Michael I Just wanted to supplement that, if you look at the TV entertainment segment, our new segment, which is largely the CBS branded businesses, we did grow high single-digits for the full-year 2018 to 2019, 8%, which is a strong performance. So from the standpoint of it, as we think about the CBS businesses going forward under the umbrella of the combined company now we will just even be further able to monetize our programming investments.

Okay. And then one Bob international, you mentioned Pluto and the expansion, but what are you thinking about broadening out the subscription based businesses internationally? And when we have decisions?

Sure. Look, streaming is clearly a global priority and our global operating footprint, which includes linear reach, content ownership, on the ground resources and relationships are unquestionably a valuable go-to-market advantage. We are today in the early stages of entering international streaming on the free side, Pluto is already launched and growing rapidly in UK, Germany, Austria and Switzerland. Earlier this month, we announced that Pluto will launch in Latin America, Spanish speaking Latin America at the end of March, Brazil later. And we will offer 80 channels in Latin America by year-end. Likewise, Noggin is also up in Latin America and we just announced that Apple is launching it in 40 international markets. CBS All Access is already in Canada and Australia and we have a Paramount plus service streaming in parts of Europe and Latin America where it has both TV and film. So we are early days, but we are absolutely working the international space and we will update you as that plays out later in the year.

Thanks, Michael. Operator, next question.

The next question is from the line of Rich Greenfield with LightShed Partners.

Hey guys. Thanks for taking the questions. I got a couple of questions and a couple of follow-ups. First your peers are have been doing some uneconomic deals. If you look at what ESPN just did with SEC and UFC. Wondering as you think about kind of the NFL negotiation that will play out this year, sort of are you prepared to do something that is "uneconomic"? Two on Nickelodeon, I think your ratings were down somewhere around 20% last year and it looked like it got a lot worse in Q4 and into early 2020 since the launch of Disney Plus. Just wondering kind of what could you tell us about kind of your plans for the Nickelodeon network? And that sort of ties into the [Charlie Ervin] (Ph) question, which is, DISH was pretty clear yesterday and their call that if your ratings are down sharply, they are going to look for reductions in rate or they are going to simply drop programming, which they have been doing at an increasing rate. Just wondering kind of how you think about the negotiation with DISH, which I think is coming up pretty shortly? And then Chris, I think on the question that somebody asked about cable affiliates being down 8%, you kind of talked about what was in the press release, but could you give some clarity of like what were subs down? What was the rate reset? Just adding some actual numbers to the decline would be helpful. I think that is what the follow-up was trying to ask.

Lot in there Rich, but alright, let's do this quick. So the NFL, the NFL and CBS are longstanding partners as a combined company by ViacomCBS is even better positioned to deliver value to that franchise. You know the NFL values are broadcast reach and high quality production and you know that the combined company adds young adult reach, both for linear and streaming as well as international capabilities, both of which are key to NFL development. And that is important to the league. We are going to do some stuff around the NFL in the months ahead as we prep for Super Bowl 55 leveraging our platform. That is obviously a February 21 event. And to be clear, as a combined company, we absolutely have the financial resources to get a deal done and we do believe it is important to the company and I feel good about getting a deal done. When it gets done? I don't know. We will see. That is really more of the NFL call on timing. With respect to Nickelodeon, if I look at our domestic cable portfolio. Overall, we actually have a pretty solid audience performance, 13 of our networks grew share in Q4 including Comedy, BET, Paramount Networks, Smithsonian. Actually we see sequential improvement Q1 to-date the whole portfolio is up about 4%. Nickelodeon continues to be a work in progress, it is far in a way number one in the space, but that is also why - and we do feel good about the slate of shows coming, but we have pivoted to a multi-platform variance of Nickelodeon, as part of building that brand for the future. That combines, what we are doing in the linear network, what we are doing in our call it over the top space, what…

And then Chris.

Thank you for the follow-up. So for the cable affiliates, the additional thing I will point out is that, what we saw happen in Q4 for cable affiliate trends was similar to what the industry experienced. The other thing I will point out in general that as we look at Viacom and CBS is two separate companies and unifying to ViacomCBS, the pay TV landscape has been a headwind. But when we look at how our quarters will build, Q4 we had a tough quarter, as we head into Q1 and we think through Q2 our momentum will build. So Q1 we are going to see some more of the affiliate headwinds we have experienced. We also will have some timing of licensing considerations and we do, as I alluded to earlier, I have some big shows in Q1 like Star Trek Cards and Homeland that are strongly performing for streaming and Q1. But then as we go towards Q2, we will have the licensing delivery of South Park and momentum will build from there. So again, we will see the full power of ViacomCBS in 2020 and beyond. And I hark in back to Alexia's question that we have strong conviction in the guidance. All of this is contemplated in the guidance and we will see momentum build as we go into 2020 and beyond.

Thanks, Rich. Operator, let's take our next question please.

Next question comes from the line of John Hodulik with UBS.

Great, thank you. Just a couple of follow-up to those questions. First I guess for Chris and maybe you just answered it, but the 2020 guidance contemplated an inflection in that U.S. cable affiliate trends. And if so, does it include any new carriage from the virtual distributors? And Any updates there you can provide? And then maybe for Bob, you talked about modest increases in expenses as you launch the new broader D2C platform. I mean, obviously you guys are starting from a different place, but, there has been some real dilution that comes with these types of launches. Any additional color on the size or maybe the categories of spending you might have there? Thanks.

Thanks John. It is Chris. So for 2020 guidance, we do assume similar to the industry the headwinds continuing, but from the standpoint of our guidance, we are expecting momentum to continue. So relative to what we are seeing back to your [VMDPT] (Ph) question, those deals don't come up until later in the year. So the effect on 2020 will not be that big. It would really be an impact to 2021. And we feel very good about our positioning as we go to look at renewing those deals.

Let me add that and then hop to your streaming questions. So look, if you look at the U.S. affiliate landscape, there is no question that ViacomCBS is among, if not the most important supplier to linear. Remember we are number one on every demographic in linear. We have must see content in news, in sports, in entertainment. And we have a model that gets deals done including having a range of partnership leverage, whether that is in advanced ad sales, doing more and more working with them in the broadband space, we started that with Pluto, Comcast just did that with All Access sets up box too. So we have a lot to work with there. There may be winners and losers in the space, but we feel good about taking share and getting deals done. And again, you will see that track out in year we have already had a positive experience with one very large MVPD, who is not a walk in the park and negotiate with. Onto streaming. Two things I would say in relation to your question. One is remember we are in this business today both in free and in the various pay segments we have been putting original content. You look at what All Access did with the Card. So it is not like we are ramping from nowhere. In fact, we are building momentum. And in particularly as we do that and this is definitely from the Pluto side, remember, Pluto is very capital efficient. That is essentially a rev share model, not a invest in content and build it out. So as we launch in places like Latin America, you don't have this big working capital headwind. You have a model that scales with the business. So, I'm very excited about our streaming plan. The financials are absolutely built into the guidance and the incremental capital is modest certainly by standards of what some other folks are doing.

Okay thanks.

And with that, we are kind of running a little over. So I want to thank you for your questions. In closing, we couldn't be more excited about the road ahead, one where we will continue to unlock the power of this incredible combination, capitalizing on our position is one of the largest content producers and providers in the world. We believe becoming the most important partner in the media ecosystem, creating valuable new businesses. We have the assets, we have the plan, we have the team, we will execute and we will deliver for you. As we do know that we are 100% focused on shareholder value creation, we are committed to providing the transparency and disclosure you need to understand and track the value we are creating. And before I sign off, I also want to thank the employees of ViacomCBS who have brought this company together in under three months and who will power our exciting future. And thanks to all of you for joining today. Thank you for your support. We look forward to talking to you soon.

Thank you everyone. That concludes our earnings call.

Thank you. You may now disconnect your lines at this time. Thank you for your participation.