Good afternoon. My name is Krista and I'll be your conference operator today. I would like to welcome everyone to Paramount's first quarter 2026 earnings conference call. At this time, all lines have been muted to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, please press star one again. I would now like to turn the call over to Kevin Crichton, Paramount's EVP of Corporate Finance and Investor Relations. You may now begin your conference call.

Good afternoon and thank you for taking the time to join us for the Paramount Q1 2026 earnings call. I'm Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer David Ellison, our Chief Financial Officer Dennis Janelli, and our Chief Strategy and Operating Officer Andy Gordon. As a reminder, we will be making forward looking statements today that involve risks and uncertainties. Our remarks will also include non-GAAP financial measures. Reconciliations of these measures can be found in our earnings letter or in our trending schedules which contain supplemental information. These can be found on our investor relations website.

I'll now turn it over to David Ellison for a few brief remarks before we take analyst questions. Thanks Kevin and good afternoon everyone. As you've seen in our first quarter results and most recent shareholder letter, we're off to a strong start in our first full year as Paramount Skydance. The the progress we've made in just nine months is a testament to the amazing team we've assembled that has worked tirelessly and with great conviction to deliver on all areas of our business. We are executing deliberately against our priorities and seeing tangible results, attracting top creative talent, nearly doubling our film slate, delivering shows audiences love and green lighting dozens of new and returning series while achieving our financial goals. At the same time, we are transforming how we operate, unifying platforms, data and workflows and embedding advanced technology to drive efficiency, better serve our partners and elevate the overall consumer experience across the business. We are getting things done and it's translating into real momentum. As a storytelling company, our top priority is and always will be delivering great films and television series from the world's leading creators that resonate with broad global audiences. Recent highlights include Scream 7, which became the highest grossing installment in the franchise's 30 year history, Landman, now the most watched series in Paramount Plus history and the continued strength of CBS, which has 13 of the top 20 primetime series, including all four of the top new series, an achievement no broadcast network has matched since the early 1990s on streaming and sports engagement remains strong with more than 10 million households watching over 100 million hours of UFC programming on Paramount Plus and CBS Sports delivering the most watched final round of the Masters in over a decade. These are just a few examples of the progress and growth taking place company wide. As I mentioned, we are also making meaningful strides improving our products to deliver more dynamic personalized experiences and superior monetization. New features such as enhanced mobile experiences, short form video and more advanced recommendations are helping us to better serve consumers. We're also leveraging AI powered capabilities across the businesses including our Agentic Data Warehouse and Precision Plus our targeted and optimization platform, to move faster and operate with greater effectiveness and support of our advertising partners. While there is still significant work ahead, we remain confident in our strategy and the trajectory we are on. Finally, we continue to make steady progress towards completing the Warner Bros. Discovery transaction, which we believe will accelerate our transformation, strengthen our competitive position and enhance our ability to help shape the next era of entertainment. To date we have satisfied our US HSR obligations and there are no statutory impediments remaining and we continue to advance through European and other international regulatory approvals, several of which have already been secured. Earlier in April, we announced a broad syndication of the PIPE equity commitments to strategic investors, underscoring continued investor confidence, secured $10 billion in permanent financing and syndicated the remaining $49 billion of our bridge to a group of leading banks and institutional lenders. Additionally, on April 23, WBD shareholders voted to approve the transaction. We're pleased with the momentum and will continue to take the necessary steps to bring this deal to completion. At every stage we remain guided by our strong conviction that the combination of these two iconic companies and their extraordinary teams will create a leading global media and entertainment company powered by storytelling and accelerated by technology that strengthens competition, better, serves the creative community and delivers even more compelling stories to audiences worldwide. We're excited for all that's ahead and look forward to the opportunities it will create. And with that, I'll turn it back over to Kevin for your questions.

Yeah, sure. No, no, absolutely. So what I would say in terms of early learnings is really our ability to execute and move quickly in regards to the transformation. We're on track, as we discussed previously, to really consolidate our three streaming services into one unified platform by really the middle of this year. Those learnings are going to be crucial as we get into basically the transaction with WBD. I think if you look at our ability to execute on our cost saves and efficiencies, we've had great learnings there and I think we've been delivering on what we said we were going to do regarding plan. So I do believe that what we've been executing at Paramount will be a good kind of accelerant in learning for everything we're doing. WBD getting more specific into that. As Kevin said, we're going to kind of stay a little bit away from the transaction today given we're obviously still in the middle of the process. I'll turn it over to Andy if there's anything you want to add to that. Yeah, I would just say what we're learning also is as we integrate BET plus Pluto and Paramount into one tech stack, it's going to accelerate our ability to do the same when we close WBD and in particular when you see the consumer product that comes out this summer, I think you'll be pretty pleased about how they all function together and create a better experience both for the free consumers on the fast channel business of Pluto, but also on the paid subscription businesses of Paramount both ad-supported and ad-free. So we're pretty excited about what we're doing and look to dive into more specifics on in terms of what we're seeing on the platforms we're operating. As we said, we remain on track for convergence. That obviously has significant benefits across personalizations and recommendations. You know, on the front end, we're modernizing the consumer facing technology to create more dynamic personalized experiences. As of April, you're able to see obviously short form video Clips, servicing trailers, sports highlights and library content in a curated, more personalized feed. We're working on enhanced personalization across discovery including AI driven artwork. We're also focusing on building other mobile optimized experience like live stats for live sports. All of these are really designed to deepen engagement across the platform for Pluto. Basically this summer Pluto is going to get the most significant update really since the inception of the platform. Other areas you're really seeing us really utilize technology is across our tech and product org. Approximately 80% of our engineering organization is using code assisted technology which is driving meaningful production gains and really cutting approval times by more than in half. So again it's really accelerating how we work across the business and these investments all support our long term D2C growth and are foundational to where we're taking the business. And again, these are all great learnings that will prepare us for the transaction at the end of the third quarter. The only thing I'd add around AI transformation is we're spinning up pods to go after AI based workflows in the back office. So think finance, HR operational functions and we're really enabling both on the Paramount side and we think this sets us up for the combination people to go after AI based workflows and efficiency in the back office and we see that's going to be a real benefit and so we're doing that today with the teams that David talked about and that will set us up well in the future as well. Yeah, just one more thing to add is on Oracle Fusion, our ERP system, we made a major milestone in the first quarter with the remainder of that transformation to the Oracle Fusion system for Paramount standalone by early 27. So again that puts us in a much better spot as part of the closing of Warner Bros. Discovery as well.

Krista. Next question please. Your next question comes from the line of Jessica Reif Uhrlich with Bank of America securities. Please go ahead. Thank you. With WBD, you will undoubtedly have some of the best industry assets and of course library or libraries plural. But you really do need to integrate and execute. So I guess any changes in how you're thinking about allocating capital or management attention as you integrate for the second time or are about to integrate for the second time in two years. And then one specific question. You really do seem committed to having 30 films once you combine, maybe you could talk about it just seems like such a daunting task given the marketing and distribution needs. And maybe I'm the only person on this Call that might remember this, but in the early Disney days with Michael Eisner and Jeffrey Katzenberg, they tried this and it was just too much. So I'm just wondering how you're thinking about 30 movies and why that many? Like, what will it do to elevate Paramount, Skydance, and whatever the new company will be called?

Yeah, sure. Thanks, Jessica. Before we jump in, just want to be clear. We've had a couple of questions on wbd. Now we want to focus most of the call on our results for the quarter and the outlook for the business. But with that, I'll go ahead and kick it over to David. Yeah, no, Jessica, I really appreciate the question. So, look, zooming out to 30,000ft. We really view our pending acquisition, Warner Brothers Discovery, as a powerful accelerant to our strategy. Right. It expands reach and enhances our ability to create the world's most compelling stories and experiences. And it positions us really well to build a next generation media and technology company. And if you look at that, across basically kind of three core pillars on the production side will become the premier destination for the industry's leading creative voices. We are firmly committed to 30 theatrical films per year. If you look at the schedule, we have 15 films on the calendar to release this year, up from 8 last year. So we've come close to basically doubling the output of our film studio at Paramount. If you look at the great job that the team at WBD has done, they have 15 films on the release calendar for this year. So the two companies are actually making 30 films to date, which I think is important to note and accelerating. And under those studios will be some of the most beloved franchises of all times, including Harry Potter, Top Gun, Star Trek, Looney Tunes, Game of Thrones, Yellowstone. We really do think it's an incredibly exciting and powerful creative content engine. By bringing these two businesses together, we really do build a scaled DTC competitor and it accelerates our goals. There it gives you over 200 million DTC subscribers across more than 100 companies, or, sorry, 100 countries, which really does basically position us well to compete with the leading streaming services in the space and across our linear businesses. You know, it's a presence in over 200 countries, a portfolio of cable and free to air networks such as cbs, cnn, tbs, tnt, Food Network, all of which we think positions us really well across every single vertical in the business. And as we've talked about in regards to operational efficiencies, we're pleased with the way we've been executing at Paramount and believe we'll be able to deliver on exactly what we said we're going to do at Warner Bros. Discovery. So from a strategic standpoint, we could not be more excited about the transaction. We are also on track to get this done by September of this year. So those are all the reasons that we're excited and have a high degree of confidence around our ability to execute. And with that in the most respectful way, we really have to kind of stay away at this point in time from stuff on WBD and really focus on the company that we're operating today.

Your next question comes from the line of Robert Fishman with Moffitt Nathanson. Please go ahead. Hi, good afternoon. Is the current plan to allocate more of your overall company programming budget towards the higher quality content like NFL, UFC obviously and these blockbuster Paramount movies, or do you prefer to spread your budget out to more of a volume based approach going forward? And then on a related note, just following up on the first question, after launching those short videos and clips in Paramount plus, is the ultimate goal to better compete with YouTube and TikTok for those short form ad dollars or is it just to drive more engagement and extend the premium ad dollars that you're already getting from your networks? Thank you.

Yeah, so look, I'll take the first half and then Andy and Dennis if you guys want to obviously jump in the back end around monetization. So look, I'll say kind of a core thematic for us has always been quality is the best business plan. You know, really making sure you aim high and you don't stop working until you get there. And in the competitive landscape that we find ourselves in today, we think that's essential from a creative standpoint. And, you know, and that's a philosophy that we're going to continue to deploy across our, you know, film and television studios as well as our streaming services. CBS across the sports side has really focused, we think, quite well on big events that matter. Delivering a record setting NFL season. We just delivered one of the most successful obviously Masters finals. So we do think that emphasis on quality and aiming high in terms of a storytelling standpoint is really critical. But at the same point in time we've also increased our investment in content. This year, as we said, we've doubled the output roughly of the film studio and in the DTC space, we've effectively come close to doubling the output in terms of our original series that we've obviously greenlit since we've been at the company. And so we do believe that we can maintain that quality bar while scaling and we think that's essential towards accomplishing our growth goals. Dennis, anything you want to dive, I'd turn it over to you around monetization. Yeah, I mean, I think you should think about the content portfolio across our segments. Right. So in TV media, the CBS team has been executing to execute with a balanced portfolio of both the NFL and other sports as well as a really solid primetime lineup. Then you've seen them there with 13 of the top 20 shows in primetime overall. On D2C, we very much are building, we've talked about this. This is a multi year journey to build a portfolio that drives growth and engagement. And you're seeing that start to come through. In Q1, our parent plus revenue was up 17% through a combination of both delivery on price increase as well as our healthy underlying growth in the business from subscribers. We added nearly 2 million subscribers in the quarter on an underlying basis. And then David talked about in the studio, we will continue to see the studio rebuild. In Q1, our overall studio revenue was up 11%, a combination of both the delivery on films like Scream as well as continuing to build our third party TV studio. And we'll continue to monitor the content performance. We're spending a lot of time internally around building out appropriate content, ROI analysis, making sure that every investment is underwritten with the appropriate level of rigor. And you're going to continue to see us do that as we build a portfolio and then Robert, look on clips. We obviously know where people want to watch our content. Typically it's on more than one screen. If it's not two, it's kind of three. And so the ability to have a vertical short form product that we can then deepen engagement across our user base, keep people more involved and want to spend more time with our content is critical to our future. So this is just the beginning. I would view it as a beta test, but I would say right now we're seeing high engagement of people looking at clips and then coming into our various forms of content, whether it be news, sports or entertainment. And so we're pretty excited about sort of what that means for the future. And the last thing I would say is you look at how fast the team has been able to roll out these level of innovations. There is incredible momentum building across the company as we basically take a test and learn fast iteration approach. And we're really pleased with the early metrics. But again, it's early innings right now.

Great, thanks. Robert. Your next question comes from the line of Rich Greenfield with lightshed Partners. Please go ahead. Hi thanks for taking the question, David. You've got very large D2C ambitions. If I go back to your original manifesto letter that you wrote when the transaction closed, I'm curious as you think about your engagement goals for Paramount plus in 2026 and 2027, given sort of the size of the investments you've made since taking control, I guess how should we think about how fast you think you can move the goalpost on engagement and how does the tech or UI tech stack rebuild this summer play into that engagement change or the step function you're hoping in engagement and then just quickly on the same sort of the same topic. But Paramount plus has used channel stores pretty aggressively since its launch, even going back to the CBS All Access days. What is your view on channel stores and should you be using them or should you not long term? Rich, Great question. To kind of look, to summarize basically the first part, it's a combination of increased content investments and increased tech investments. When you look at it right like it really is, to achieve our goals that we're working towards in streaming, we need to invest in obviously more content on platform. I think if you take a look at what's Obviously coming in 2026, we have new seasons of the agency, Star Trek, Lioness, Mobland, Tulsa King, we have Dutton Ranch obviously coming this summer, Frisco's King from Taylor Sheridan. On sports, you're seeing us obviously continue to invest. UFC is obviously year round. We have the NFL March Madness, UEFA Champions League, a new partnership with the wnba and we've also greenlit a significant amount of new series from third party studios such as Discretion with Nicole Kidman and Elle Fanning, 912 with Jeremy Strong and Fear not with Anne Hathaway. So we do need to invest obviously more in content which you're seeing us doing across the platform. We also have to invest significantly in terms of the tech piece of our product. And what I would say is we are on track to basically accomplish convergence by the middle of this year. You will see significant improvements on the platform once we roll that out. But that really is, in our view, getting to the starting line of all the work that we need to get done to really reach to be what we would define as best in class. And we are hiring against that goal. When you look at the resources that we're putting into engineering talent and AI talent to really put us in a position to compete with the leaders in the industry and it's that combination of art and technology working hand to hand together that drive growth, that drive Engagement and all of the key metrics that are required to building a truly scaled business. The pending transaction serves as an accelerant towards that goal. So I think if you then go to the channel's question, that really is on a case by case basis, we evaluate all partnerships really looking for win wins across the board. And that's really going to be the philosophy that we continue going forward. And so there's nothing further we can comment on that at this time, other than we will continue to look for what we think positions us and our partners to be able to win side by side along one another.

The only thing I'd say, Rich, it's a good question on engagement, but you're going to see us just focus on making sure it's like high quality, high calorie engagement. If you look at the UFC viewers, they're averaging 15 years younger, they're staying on the platform longer. What we're doing on Pluto, we are switching to VOD. So these are VODs up 60% per user. So these are higher quality engagement metrics. This helps us as we think about monetization, right. As we think through the year, as we continue to invest in our ads, monetization fill rates were up in Paramount plus and in Pluto. And so your point is valid on engagement, but we're also sort of taking it a step further, making sure it's high quality, high calorie engagement. Your next question comes from the line of Steven Cahal with Wells Fargo. Please go ahead. Thank you. Couple questions on DTC. Paramount Plus I think grew around 17% in the quarter. Strong for sure. I know it slowed just a little bit the last couple of quarters. Even with the addition of ufc. I don't think the hard bundles had a big impact on that, but maybe it did. I think your guidance has revenue growth kind of second half weighted. So just wondering if there's a good way for us to think about the underlying drivers of growth at Paramount plus and how we think about it maybe accelerating towards the back half of the year. And then just to follow up on dtc, ebitda, I think there was a content expense benefit in the quarter on programming amortization, maybe a change in accounting from Skydance. Can you just help us understand how that impacts the business going forward in terms of adjusted EBITDA and and if there's any comparability we need to be aware of for the segment. Thank you. Yes, Steve, this is Dennis. Let me sort of work through this. So maybe it's helpful. Overall context for the quarter on EBITDA for the quarter on ebitda, we came in at the high end on revenue beat on adjusted ebitda. In general, expenses were a bit lighter than we had planned for. This is primarily around slower pacing of hiring. And to your point, some of the shift in timing of content, we generally view overall expenses for the year will be on track with our expectations. This including D2C. So we're just going to balance some of the content timing. What you'll see on D2C in terms of EBITDA, we will see some margin hit in D2C just based on when the slate launches in Q3 and Q4. We should plan for that as we think about overall empowerment. Plus we feel really good about the trajectory. As we talked about, Powerman plus was up 17% year on year, driven by 14% increase in ARPU. That was a mix of both the price increase in January as well as our continued improvement in the underlying subscriber base in the mix there. So on the quarter we were up 700k subscribers. Underneath that we added 2 million underlying subscribers and we exited a little over a million of international hard bundles. I think for context for everybody, those hard bundles, the average ARPU is less than $1. So these are really uneconomic, uneconomic subscribers. And so what will continue to drive the business throughout the rest of the year is we will continue to see healthy growth on underlying subscribers, especially as our content slate fills in throughout the year. And we will continue to see our improvement in ad monetization. Great. And then content benefit. You want to just quickly. Yeah, we had just on the content expense benefit. I mean, I think we talked through the timing for some of the phasing for the quarter. We do have some benefit from the Skydance transaction that flows through this year. It steps down next year. So we won't get into any specifics, but there is some benefit and we recasted financials so you kind of see that. You'll see that in the recast. And we'll call out if there's any material, if there's anything material each quarter. Your next question comes from the line of Michael Ng with Goldman Sachs. Please go ahead. Michael, your line is open. Your next question. Yes, your next question comes from the line of Peter Cipino with Wolff Research. Please go ahead. Good afternoon. I wondered if you could talk about the programming cost environment generally. You and others in the industry seem very focused on investing targeted but increasingly aggressive ways. And I'm wondering if you're seeing that in the unit cost of programming and then a question on ad sales. You all have rethought so many aspects of the business and I wonder now, having owned the assets for almost a year, if you have any fresh ideas about the way in which Paramount's selling advertising, especially in the DTC space. Thank you. I'll jump in real quick. Peter, on programming costs and then Dave, why don't you take how we're thinking about transforming ad sales? Yeah. Peter, on programming generally, we find we're able to work through the green light process and be competitive. I think what you're seeing, I would say you can see it flow through number one, what the team is doing in TV media, especially in cbs. They're managing the linear declines and doing that through rightsizing our programming. At the same time hitting creatively with the performance of the slate. And so we feel we see that team executing really well. And then across the studio, we're not seeing any impact on budgets or overall creative costs. Nothing. Generally we're seeing in terms of trends, we'd call out. Yeah, I agree. Yeah. And then look, when you're talking about advertising and particularly ad tech, I mean we talked about this on our previous earnings call where the advertising business is a big focus for us and a big area of opportunity that we identified early on and we're actively working to obviously improve our ads business. We're retooling our go to market. You know, we're consolidating our national sales organizations into a single client centric structure under unified leadership. We brought in, you know, new talent from, I would say digital leading platforms like Amazon, Google, Hulu, Roku, et cetera. You know, we're making platform investments and working through carriers investment. On the ad tech side we have Precision plus, which is our AI powered ad product that combines first party and third party data. You know, that's generating positive early market feedback and driving performance efficiency gains above benchmarks. You know, you're also seeing us basically obviously on the, you know, we have a format innovation pod that's driving new ad experiences including streaming fixed units, sports D and scaling for ufc. And you know, we're also using AI driven QA which has also been really impactful. So you know, what I would say is that is overall an area that we identified as a real opportunity for us. We are making all of the adjustments and we're really pleased with the, I'd say early results that we're seeing. We also just completed, you know, our first up front feedback has been incredibly positive. So I'd say, you know, underlying momentum is really good. There's work to do, but we're excited about how fast the teams are accelerating.

I could just add in terms of the results. So as David said, we feel pretty good about the building momentum in terms of ad performance. Q1 overall ads declined 3% but improved versus Q4. And we saw the DTC business, the ads business part of ddc, return to growth. So as we think about the rest of the year, our expectation is the overall ad business in total for the company will return to growth in the back half of this year. This will be driven by DTC accelerating and more than offsetting the declines in TV media.

We have time for one more question, and that question comes from Michael Morris with Guggenheim Securities. Please go ahead. Thank you. Good afternoon. Two things. One, I'm hoping you could share a little bit more detail on UFC and how that's been performing in the first several months. Now that I think you've had about 10 events there. Curious how it's performing and also how it benefits the business more broadly, whether there are more things to come over the course of the year as you use that property. Second in the letter, you note at the studio several titles that you have in production that will be released on Netflix and on Prime Video. I'd love to hear why it's important for the studio to be selling content to services that are also competitors for both engagement and subscriptions.

Thank you. Yeah, of course. So I'll start with the UFC piece. And look, we could not be more pleased with our seven year UFC partnership. It really has exceeded our expectations across the board. A couple of key performance metrics. You know, more than 10 million households have watched UFC programming on Paramount. Plus with over 100 million hours of UFC content viewed to contextualize, average UFC viewership across our platform is more than 15 times the average pay per view event over the past two years. In addition to that, new UFC subscribers are on average 15 year youngers than the average P viewer. And these subscribers are coming in for UFC and then engaging with our broader offering around with series like South Park. So we're really seeing that subscriber engage with other content on the platform. They're spending more time. I think it's also important to kind of note the highlight of some of the events that we obviously housed on cbs. When you look at the main fight cards across UFC 326 and 327, those average 2.8 million viewers. For context, that viewership is nearly 50% higher than ABC's NBA primetime game on the same night so the UFC content really is performing for us. We've also seen advertising demand exceed expectations and that was a meaningful contributor to us in terms of our Q1 advertising. And so we're really excited about the way the UFC partnership is performing. And again, we're just, you know, we're under a year into the seven year journey, but we are very excited about how it is driving the business. And then I believe just I want to make sure I fully clarify the second part of the question is you're asking around why we're obviously continuing to sell to third parties. And look, I'll break that up into a couple of places. One, when it comes to content licensing, we do not believe in a one size fits all approach to that. We actually think that is an incredibly meaningful part of our business and intend for that to continue. There are certain series and shows that you'll want to keep exclusively on your owned and operated platform, but there are other series that absolutely make sense to sell to third parties. And I think one of the things that is surprising is some of those series, when they actually come back to your owned and operated platforms, will actually increase in viewership. So you really can't take a one size fits all approach to this problem. Really has to be evaluated on a case by case basis. I think also when you look into original series on the studio side, we are in the business of being the number one home for the most talented artists in the world. And when it comes to take a showrunner for example, it's really critical to be in a position to where you are offering that particular piece of talent that you're working with the most opportunities to get their show made. And we think it is power from a platform perspective to say we can sell into our owned and operated, but if for any reason it doesn't make sense for owned and operated, we can also sell into third parties. We own those shows, they generate revenue for us and it also makes you a much more desirable place from a talent perspective. So again, we really do evaluate all of these things on a case by case basis and do not take a one size fits all approach. That served us really well and we plan on that to continue for the foreseeable future.

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