UPDATED: 9:00 p.m. ET
CBS Corp. reported an 80% gain in profits during a record-setting first quarter, helped by revenue from streaming rights deals.
Net income was $363 million, or 54 cents a share, up from $202 million, or 29 cents a share, a year ago, exceeding Wall Street forecasts. Operating income was up 47% to $642 million.
Revenues rose 12% to $3.9 billion.
All of those metrics were the highest since CBS became a stand-alone company, as was operating income before depreciation and amortization.
"Our ability to capitalize on the fundamental shifts in our industry has led to the growth of significant new revenue streams and has also allowed us to increase our share of non-advertising revenue. At the same time, we continue to benefit from underlying advertising growth," CBS CEO Les Moonves said in a statement.
"We greatly look forward to building on our leading position when we unveil our new primetime schedule in a couple of weeks. We will then sell that lineup into what we're confident will be a very healthy upfront marketplace, and begin anew the process of monetizing our programming through the burgeoning content value chain," Moonves said.
CBS said its revenue gain was driven by increases in content licensing and distribution revenues, which were up 39% to $1.017 billion. Those increases include digital streaming deals and domestic syndication sales.
During the company's earnings conference call with securities analysts, Moonves noted that 39% of the company's revenue came from steady non-advertising sources during the quarter.
"We broke records in five key financial metrics for the water and I'm confident we will break records for the year as well," he said.
CBS expects its winning streak to extend into 2013. "Here's what we know so far," said CFO Joe Ianniello during the call. "On the advertising side, the strength of this year's upfront will set the stage for 2013, and given our competitive position, we're poised to do very well." He added that CBS also has the 2013 Super Bowl, which will benefit the network and the stations. It also has the AFC Championship Game in primetime and the Grammys.
"You're looking at three major primetime events within a four-week time period in Q1. Plus, our non-advertising revenue streams are expected to increase in 2013," Ianniello said.
Moonves said he's looking forwat to the upfront. "We're extremely eager to sell our new fall lineup in the upfront marketplace in just a few weeks. We led the upfront last year and we guarantee we will lead it again this year, both in value and in CPM," he said.
He said the network didn't plan to change its upfront strategy, even though a soft scatter market hurt CBS in the fourth quarter of 2011. ."If we don't get our right pricing, we're not going to sell [as much commercial inventory in the upfront]. Our intent going in is to sell close to 80%, but only at the right pricing, otherwise, I am more than happy to hold out and the fact that the market wasn't as strong as we would have liked it to have been in the fourth doesn't make us change that whatsoever."
During the first quarter, advertising revenues increased 5% to $2.4 billion, reflecting growth in network primetime and sports advertising, the company said. The timing of the NCAA Men's Basketball Tournament was also a factor.
Affiliate and subscription fee revenues rose 7% to $455 million, with growth at the cable networks and higher retransmission revenues.
Operating income at CBS' Entertainment division rose to $370 million from $230 million a year ago. Advertising revenues were up 8%, but timing on the NCAA Tournament accounted for four percentage points of the gain
CBS' cable network group's income rose to $204 million from $147 million. Revenue rose 15% to $393 million, driven by digital streaming of Showtime original series.
Local broadcasting income fell to $138 million from $143 million. Local broadcasting revenues were $622 million, flat from a year ago. Higher ad spending by automakers offset lower spending from utilities and the service industries. Ad revenues for the TV stations were up 2% and Ianniello said that so far in the second quarter, sales were pacing up in the low single digits.
CBS also is making money by lowering rates on its debt. During the first quarter, CBS issued a new $700 million 10-year note carrying a interest rate of 3.375%. It took the cash it raised and paid off $700 million worth of notes carrying a 6.75% ratings. "The result is a savings of $22 million a year in annual interest expense, a benefit you will begin to see in Q2," Ianniello said.
CBS' financial success appeared to make chairman and controlling shareholder Sumner Redstone giddy.
"We have world-class content that people want to see and we are delivering it in a way they want to see it, and because our content is so good, it commands a premium on every platform. Our content is the best actually," Redstone said during the call.
"I know we have the right strategy in place to propel CBS even beyond where it is today. I know this because we have a management team that proves me right quarter after quarter after quarter," he said.
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