Paramount gains as finance chief highlights content optimization (NASDAQ:PARA)

Paramount Global rose Wednesday — (NASDAQ:PARA) +3.6%, (NASDAQ:PARAA) +1.4% — alongside a conference appearance where the company elaborated on its plan to navigate current shifts in the media landscape.

Speaking at a Morgan Stanley conference, Chief Financial Officer Naveen Chopra reiterated three key initiatives the company is pursuing as it maximizes legacy earnings while pivoting to future streaming profits.

“It starts with maximizing the value of our content … You know, we feel very proud of our content portfolio. We think we punch above our weight,” Chopra said, noting the company is looking to extract the most it can of every content dollar.

“It’s about that right volume of originals, programmed at the right cadence and programmed intelligently so you know how to link people from one asset to the next,” Chopra said. “When you put it together, we see a business where cash content spend can grow at, call it low single digits … the combination of getting those efficiencies across linear and streaming is really what allows us to do that.”

Second is driving toward direct-to-consumer profitability, with Paramount+ targeted for profits domestically in 2025.

On the third key initiative — unlocking synergies — “We’ve done a variety of things there,” including a layoff in Q1, but also with a target on top-line synergy: “finding ways to use our asset portfolios to either unlock more growth or find more expense opportunities.”

Where do free cash flow generation and deleveraging rank among company priorities? “High,” Chopra said. “The simple answer … It’s the reason we paid down a billion dollars of debt in Q4 and it’s the reason that we continue to look at creative opportunities to divest or otherwise monetize noncore assets.”

The company expects to grow free cash flow again in 2024, he said, despite some unwind from production impacted by the actors and writers strikes.

Chopra largely brushed off the now-persistent question of strategic actions, including a potential company sale: “From management’s perspective, we are focused on execution, and we believe that continued execution of our plan will unlock value … To the extent that there are other alternatives, we’ll be diligent about exploring them.”

Creative bundling plays a role going forward, Chopra said, pointing to the notable Disney-Charter deal promoting Disney+ to cable customers.

“It’s actually quite similar to the hard bundles that we have embraced outside of the United States, where we bundled Paramount+ with hotels and services in several different markets. Those have been quite successful for us,” pointing to quick expansion of the subscriber base at a low cost per sub, with lower churn.

Average revenue per user is a focus for Paramount, Chopra said, reiterating expectations that global ARPU will grow more than 20%. Domestically that comes in part through recent price increases, though there’s been nice engagement on advertising: “Ad ARPUs … have grown double digits every single year.”