Earnings Call Transcript - VSNT Q1 2026

Operator, Operator

Greetings. Welcome to Versant Media's First Quarter 2026 Earnings Conference Call. The conference is being recorded. At this time, I'll now turn the conference over to Wylie Collins, Executive Vice President of Investor Relations and Treasury. Thank you. You may begin.

Wylie Collins, Executive Vice President, Investor Relations and Treasury

Thank you, and good morning, everyone. Welcome to Versant Media's First Quarter 2026 Operating and Financial Results Conference Call. Joining us today are Mark Lazarus, Chief Executive Officer; and Anand Kini, Chief Financial Officer and Chief Operating Officer. Also with us are Jordan Fasbender, General Counsel; and Natalie Candela, Vice President of Investor Relations. Before we begin, I'd like to remind you that certain statements made during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a discussion of these risks and uncertainties, please refer to Versant Media's filings with the SEC and today's earnings release. All forward-looking statements are made as of today, May 14, 2026, and we undertake no obligation to update them. In addition, we may refer to certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in today's earnings release and in the materials posted in the Investor Relations section of our website. During today's call, all comparisons to the prior year are against stand-alone adjusted figures, which represent our estimated 2025 results as if Versant were already a separate independent company. With that, I'll turn the call over to Mark.

Mark Lazarus, Chief Executive Officer

Thank you, Wylie, and good morning, everyone. We're off to a strong start to the year with continued progress and growth across key areas of the business, driven by disciplined execution and the strength of our portfolio. As we report our first quarter as an independent company, I want to recognize the truly unique culture and organization that we are building. I am incredibly proud of how our teams are executing with focus, rigor and a shared commitment to performance. The teamwork is evident in the results and in the momentum we're building across the business. This momentum reflects our strategy at work, operating scale, market-leading brands anchored in live sports and news, winning with premium content, expanding audience reach and accelerating the growth of our digital platforms. We hold a leadership position in each of our four large and growing markets: business news and personal finance, political news and opinion, golf and sports, and genre entertainment. Across each, we continue to make meaningful progress against our objectives, deepening engagement and driving new monetization opportunities. Let's talk about the results. At CNBC, we saw exceptional engagement during a period of heightened market volatility. The network delivered its highest-rated quarter in four years, with double-digit year-over-year growth, reinforcing CNBC's role as the destination for business news when it matters most. That strength was on full display in Davos at the World Economic Forum, where CNBC was on the ground covering the most consequential conversations shaping today's global economic agenda with CEOs, policymakers and business leaders. Viewership among key demographics increased more than 50% during the week, resulting in our largest Davos audience in five years. We also continue to expand and build on the strength of our programming with the launch of Morning Call, a new early morning program that begins our Business Day lineup by delivering premarket analysis, insights and global financial developments to set the agenda for the trading day. At MS NOW, the network achieved its most-watched quarter since 2024 with double-digit growth in both total day and prime-time viewership among key demographics. MS NOW reached an average of over 30 million viewers weekly, and our viewers watched an average of nine hours weekly, the second-highest engagement across all cable networks regardless of genre and nearly double the next closest competitor. That scale extends to digital, where the MS NOW website and app delivered the strongest first quarter on record. MS NOW generated more views on YouTube than the three broadcast networks combined from their news divisions. We had over 1.6 billion views across YouTube and TikTok combined year-to-date. Growth also continued in digital publishing and podcasts, with original podcast downloads up more than 60% year-over-year. MS NOW is the network audiences turn to during the most important moments in politics. With the 2026 midterm elections approaching, MS NOW will continue to deliver premium programming with differentiated analysis. In Golf, Golf Channel continued to build on its leadership position as the number-one golf media outlet, driven by strong early season engagement. The PGA Tour is off to an exceptional start with the Golf Channel drawing its largest audience for the Players Championship in two decades. That momentum continued more recently at the Masters, where Golf Channel reached 13.5 million unique viewers during the week, reinforcing its role as the primary destination not only for live golf, but also for news, interviews and post-round analysis. We are extending that leadership beyond pay TV through our Platforms business. GolfNow delivered broad growth across tee time bookings and payments. GolfPass, boosted by our partnership with Rory McIlroy in the first quarter, reached the highest number of subscribers ever. In just a moment, I'll talk about the Platforms business. But as it relates to golf, this is a clear example of how we are integrating content, commerce and consumer engagement within a single ecosystem. Turning to sports and genre entertainment, in the first quarter we delivered the largest Olympic audience in USA Network history with the Milan-Cortina Olympics, which aired across USA Network and CNBC, reaching approximately three-quarters of U.S. pay TV households and securing the number-one rank among sports and entertainment cable networks. In addition, we are building on our momentum in women's sports. Our first season of League One Volleyball on USA Network was a breakout success, highlighted by the most-watched match in league history. We are also proud to have just kicked off our inaugural WNBA season this past Sunday with our opening game and the doubleheader just last night. Beyond live sports, we are driving value from our deep content library. The licensing of Keeping Up With the Kardashians and other iconic entertainment titles to third-party platforms underscores the enduring demand for our content and our ability to monetize it across the evolving distribution landscape. In addition, our entertainment brands continued to perform throughout the quarter. E! Live from the Red Carpet drove strong audience engagement around major events, including the Oscars, the Grammys and the Critics Choice Awards. The Critics Choice Awards aired as a simulcast on E! and USA Network, doubling viewership compared to the prior year. And finally, in Platforms, we delivered high single-digit growth in the quarter, continuing to build a scalable revenue stream beyond pay TV while expanding the reach and distribution of our iconic brands. Our performance reflects disciplined execution and progress in scaling these businesses, which remains a foremost strategic priority. Platform growth in the quarter was driven by GolfNow and Fandango, with Fandango1, formerly INDY Cinema, expanding Fandango's value proposition for cinema operators. An important component of our platform strategy is to build on CNBC's position as the leading source for business news and expand our audience relationships through deeper and broader coverage. As part of this strategy, we acquired StockStory, an AI-driven platform that enhances our ability to deliver real-time actionable investment intelligence and supports the next phase of CNBC's direct-to-consumer product development. We're building on this momentum with other new platform initiatives as well, including the previously announced MS NOW direct-to-consumer offering and Fandango AVOD service, both on track to launch later this year. These initiatives and strategies underscore that we are actively managing through pay TV secular changes. We are focused not only on continuing to improve the content and reach of our leading brands but also on aggressively expanding beyond TV through direct-to-consumer initiatives. Our strong balance sheet enables us to both return capital to shareholders and invest in these growth opportunities. That includes acquisitions such as INDY Cinema for Fandango, StockStory for CNBC and Free TV Networks, which expand our platform capabilities and accelerate our evolution. As I just mentioned, we remain committed to returning capital to shareholders through dividends and share repurchases, including this morning's announcement of an accelerated share repurchase transaction as we enter the second quarter. With that, I'll turn it over to Anand and we'll walk through the financials.

Anand Kini, Chief Financial Officer and Chief Operating Officer

Thanks, Mark, and good morning, everyone. I'll begin by reviewing our first quarter 2026 results, then discuss key performance drivers and finally touch upon our outlook for the remainder of the year. As Mark mentioned, our first quarter performance reflects a strong start to the year with disciplined execution, driving robust profitability, healthy margins, significant free cash flow generation and continued momentum in Platforms revenue. Total revenue for the quarter was approximately $1.69 billion, a 1% decrease from the prior year quarter. This performance reflects the expected continued pressure on pay TV, impacting linear distribution and advertising revenues. This was partially offset by significant growth in Platforms, which, as we've mentioned, is a top strategic priority for Versant. Linear distribution revenue was $1.01 billion, a decline of 7% year-over-year, driven by continued cord-cutting trends partially offset by contractual rate increases. This decline is consistent with the prior year trajectory. Advertising revenue was $368 million, down 5% year-over-year, a significant improvement from last year's Q1 decline of 12%, reflecting the power of our portfolio, particularly in our news businesses, where we successfully monetized strong ratings and robust advertiser demand. Platforms revenue was $192 million, up 9%, with strong results at both GolfNow and Fandango. Mark mentioned the breadth of GolfNow's growth and it's a similar story with Fandango, with robust performance in ticketing and home entertainment within the cinema business now known as Fandango1, also fully integrated and contributing to our success. Content licensing and other revenue was $121 million, a significant increase compared to the $57 million in the prior year, and was favorably impacted by the licensing of select titles in our content library, including Keeping Up With the Kardashians, which we announced in January. A reminder that the value of licensing transactions is generally recognized immediately when the content is delivered. As a result, content licensing and other revenue can vary significantly quarter-to-quarter and year-over-year. In the first quarter, adjusted EBITDA was $704 million, reflecting our continued focus on operating efficiency and increasing 5% versus the prior year. Margins remained well above 30%. Programming and production costs were $519 million in the first quarter, down 5% year-over-year as we continue to deliver the premium content our audiences love efficiently. As a reminder, these costs have some degree of seasonality with higher costs in the second half of the year driven by sports rights timing. Other cost of revenue increased 11% in the first quarter due to our continued investment in Platforms, including costs associated with onboarding Fandango1. Total cost of revenue was $638 million, down 3% compared to last year. SG&A costs of $346 million represented a decrease of 9%. We remain focused on operating with a lean organization and modernizing our technology infrastructure, driving efficiency and productivity. We expect a modest go-forward increase in SG&A costs to support our growth initiatives, including the ongoing development of our direct-to-consumer offerings. Free cash flow totaled $558 million in the quarter, reflecting strong cash generation and timing-related items, including accounts receivable collections and payable processing, which we expect to normalize as the year progresses. Capital expenditures were relatively light in the first quarter and are expected, consistent with our prior commentary, to increase modestly over the remainder of the year, largely driven by the build-out of our Manhattan facility and targeted investments in our Platforms and other growth businesses. Our Board has declared a quarterly cash dividend of $0.375 per share. And as Mark mentioned, in the first quarter we repurchased $100 million of Class A shares under the $1 billion authorization approved last quarter. And this morning, we have announced a $100 million accelerated share repurchase agreement, which we expect to complete in the second quarter. Liquidity remains strong with a total cash balance of $1.2 billion at quarter end, supported by healthy free cash flow generation as well as the timing-related items discussed earlier, which we expect to normalize in the second quarter. Our capital allocation priorities remain consistent: investing to evolve our business model and generate growth, returning capital to shareholders and maintaining a strong balance sheet. We mentioned previously our decision to explore strategic alternatives for SportsEngine and sold most of the business on May 1. Our focus will always be to maximize long-term value through disciplined capital allocation, and this sale, along with the growth investments we've mentioned, underscores that commitment. As we look ahead to the rest of the year, we continue to expect $6.15 billion to $6.4 billion in revenue, adjusted EBITDA of $1.85 billion to $2.0 billion and free cash flow of $1.0 billion to $1.2 billion. We expect quarterly fluctuations driven by content licensing, working capital and higher programming costs in the second half, particularly in the fourth quarter. These dynamics are reflected in our full-year outlook and are consistent with 2025. As mentioned, content licensing revenue can vary across quarters, and we expect higher programming costs driven by sports rights timing relative to both Q1 and last year in the second half and particularly Q4. With respect to free cash flow for the remainder of 2026, we also expect continued variability due to working capital timing differences. And with that, I will turn it over to the operator for Q&A.

Operator, Operator

Our first question is from the line of Michael Ng with Goldman Sachs.

Michael Ng, Analyst, Goldman Sachs

I have two, one on advertising and one on skinny bundles. First, on advertising, it was a little bit better than expected in the quarter. Can you just talk a little bit about how much of the performance was driven by growth initiatives gaining traction versus the strong new cycle across CNBC and MS NOW? Was there any halo effect on USA from the Winter Olympics? I'm just trying to understand the sustainability of the outperformance in ads. And then on skinny bundles, could you talk a little bit about whether you're seeing a wider range of performance across your network portfolio? Said differently, are MS NOW and CNBC outperforming the rest of your networks, given their inclusion in the news-inclusive plans?

Mark Lazarus, Chief Executive Officer

Thanks, Michael. On advertising, the marketplace has been strong. The portfolio of news and sports, along with a lot of our live entertainment, has been resilient. Our partnership with NBCUniversal representing us in the market has proven fruitful for both parties, and we believe that this is sustainable. There was not a big halo effect from the Olympics. The Olympics were wonderful and great for us, but as a reminder, NBC buys the time from us, so we did not benefit directly from advertising growth due to the Olympics. Our portfolio of live content is what advertisers are seeking, and we have good indicators going forward. On the skinny bundle side, we're well positioned and are included in the appropriate bundles. We're in sports and news bundles with our content. The portfolio is diverse and has networks that are prepared and built to work with the distribution marketplace in this new tiered, bundled world.

Anand Kini, Chief Financial Officer and Chief Operating Officer

Mike, just to add to what Mark said. On the advertising side, the organic presence of our businesses drove the trajectory improvement. We do have some new initiatives like Free TV Networks, but that was not the primary reason for the performance improvement. It was based on the organic businesses and their health and the factors Mark mentioned. And then, to reiterate Mark's point on skinny bundles, we look at it from a total revenue perspective. As you saw, linear distribution revenue is a focus for us, and we manage the business to maximize that across the portfolio. That approach shows up in our results and is how we'll continue to manage the business.

Operator, Operator

The next question is from the line of Brent Penter with Raymond James.

Brent Penter, Analyst, Raymond James

First one for me. On MS NOW and Fandango, digital and AVOD strategies, I appreciate the color launching later this year. Are there any more details you can give at this point on what the go-to-market or maybe pricing strategies will look like for each? And then can you help us size the investment this year to bring both to market?

Mark Lazarus, Chief Executive Officer

Thanks, Brent. We haven't settled on pricing yet. MS NOW will be a direct-to-consumer, subscriber-based service centered around content that MS NOW's reporters, contributors and anchors create. It will also build out community features and broader voices, some of whom are not on our air today. Fandango AVOD will be free with advertising. We'll be able to serve content and targeted advertising based on the data and information we have from current Fandango users in ticketing and home entertainment. Again, Fandango AVOD will be a free, ad-supported service.

Anand Kini, Chief Financial Officer and Chief Operating Officer

On the investment, it's not substantial. We benefit from leveraging existing infrastructure. For example, we have a well-established Fandango infrastructure to support video playback, and on MS NOW we have existing streaming services and video playback at CNBC. There will be some bespoke user design investment, but we have a strong base. Much of the investment is marketing and driving awareness to the product for consumers. That is embedded in our outlook; you will see SG&A tick up modestly to support those plans and a little on the CapEx side for the New York facility build-out and to support them. But from a dollars perspective, it's not substantial.

Brent Penter, Analyst, Raymond James

Okay. That's helpful. And then on the accelerated buyback, what drove the decision to do that and why now? With $800 million of authorization pro forma for that, can you give any color on what will drive your decisions around the pacing of the remaining buyback?

Anand Kini, Chief Financial Officer and Chief Operating Officer

Sure. A couple of things. The buyback activity, including the ASR for Q2 and the $100 million repurchase in Q1 plus the $0.375 dividend, exemplify our capital allocation approach, which has three prongs: maintain a strong balance sheet, invest in growth to evolve the business, and return capital to shareholders. We believe we are uniquely positioned to do all three. The ASR underscores our confidence in the business and our commitment to that capital allocation approach. We do not view these decisions as static; we make them in the context of the market environment and opportunities we see to add value. That's our approach going forward.

Brent Penter, Analyst, Raymond James

Okay. And then final question for me. Could you just size the benefit from Keeping Up With the Kardashians? And what's the time frame on that licensing deal?

Anand Kini, Chief Financial Officer and Chief Operating Officer

Sure. On sizing, it was a driver of the increase in Content Licensing and Other revenue this quarter and exemplifies the value of our library. Content licensing is one of the levers in our multifaceted business model alongside ad sales and linear distribution. This quarter's revenue was driven by Keeping Up With the Kardashians, and we have other programming, including true crime and unscripted content, that we will sell in the future. The timing of these transactions causes variability in content licensing revenue; we recognize the revenue when the content is delivered. This particular deal is a multiyear licensing agreement.

Mark Lazarus, Chief Executive Officer

I'll just add that we have a robust library of titles that are part of the current structure, and as we continue to create new original content, those will also be monetizable. Shows we are creating now have already attracted interest from third parties about licensing opportunities.

Operator, Operator

The next question is from the line of David Karnovsky with JPMorgan.

David Karnovsky, Analyst, JPMorgan

Maybe just following up on the prior question. Is there any way to help frame residual cost, either for Kardashians or just how to think about your library content generally to help us better understand flow-through to EBITDA or cash flow when you do move some of this programming? And then on SportsEngine, maybe this detail will be in the queue, but is there anything you can say on terms of the sale or just the revenue and EBITDA impact?

Anand Kini, Chief Financial Officer and Chief Operating Officer

Sure. On residual cost, virtually all of our content sales are profitable; we generate good margins from content licensing. Margins vary deal by deal depending on individual talent or specific factors associated with a show, but generally these are profitable transactions. The best guide I can give is that it was a driver of the increase in content licensing and other revenue this quarter, and those incremental revenues are profitable. On SportsEngine, we sold most of the business on May 1. It was an attractive outcome for shareholders and a way to maximize the value of that asset. From a materiality perspective, it is not expected to materially change our revenue or EBITDA trajectory or our guidance. Financially, we are pleased with the outcome, but it does not change how we run the business going forward.

Operator, Operator

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

Rich Greenfield, Analyst, LightShed Partners

When I look at companies like Disney and Fox, they talked about how their D2C strategy is lessening the declines they're seeing in the linear business. I know you can't get into details on pricing and the exact strategy for the MS NOW launch, but how should we judge success? Will success be lessening the declines on the linear business? What are the ways you think about understanding the success and progress of that D2C strategy? And then on cord shaving, Disney warned about the impact of skinny bundles on their non-sports assets. With DIRECTV and YouTube TV getting more aggressive with sports bundles, are most subscribers taking sports and news bundles? Given your portfolio, where are consumers gravitating as skinny bundles play out?

Mark Lazarus, Chief Executive Officer

Sure, Rich. On the cord shaving and skinny bundle question, we are seeing a set of consumers who are looking for sports and news. Four of our seven linear businesses fall into those areas and tiers, and we are participating in that. On the entertainment side, we see a fair amount of stability and we still have a large and robust subscriber base. We are being creative and flexible with how we distribute. For example, Oxygen, while it remains fairly priced to MVPDs, has some availability over-the-air as a multicast network, which is a creative way to expand distribution without damaging our MVPD relationships. As MVPD tiers change, we'll be flexible, working with partners to make our content available through multiple channels. On MS NOW and direct-to-consumer, our goal is to continue to build scale and expand our audiences. Yes, we hope that brings a large base of subscribers, and we'll gauge success by how revenues look across our various distribution forms. We want to grow revenue diversification within each vertical, as we have done in golf by adding StockStory, INDY Cinema and Free TV Networks. MS NOW is the MS NOW version of growing revenue diversification in that important vertical.

Rich Greenfield, Analyst, LightShed Partners

So it goes well beyond subscription in your mind, but you do think it should lessen subscription declines if successful?

Mark Lazarus, Chief Executive Officer

Yes, very much so. We want to build audience pathways across platforms and create a circular way to move audience between various platforms for our content. That's a key element of the strategy.

Operator, Operator

The next question is from the line of Sean Diffley with Morgan Stanley.

Sean Diffley, Analyst, Morgan Stanley

I had two on capital allocation follow-up and then a sports rights question. On capital allocation, you can buy back stock and do M&A. Can you walk us through how you assess the attractiveness of each and where your strategic focus is from an M&A standpoint? How would you describe the valuation backdrop? And second, on sports rights, some competitors are very focused on the NFL. Do you see the potential for smaller rights to free up, and which sports should we be focused on?

Mark Lazarus, Chief Executive Officer

We'll talk about the framework for M&A. We're looking in a variety of areas and, while I can't be too specific, we're adding to our verticals as we've already done, and we'll be disciplined. We're interested in opportunities that help us diversify revenue streams and fit a vertical strategy rather than a horizontal one across the linear landscape. On the NFL and sports rights, competitors are working through their next cycle of contracts, and that will put pressure on companies that retain or grow NFL expense, which may make them reassess other content. We'll selectively look at contracts as they come up—baseball, hockey, soccer, Premier League and others are in different cycles. Since our spin, we've extended our USGA contract, extended our PGA of America Ryder Cup contract, expanded our WNBA relationship, completed our first season of League One women's volleyball, and we have other opportunities to build our sports portfolio judiciously with our capital.

Anand Kini, Chief Financial Officer and Chief Operating Officer

To go back to capital allocation and M&A, share repurchase and M&A are two prongs, and the third prong is maintaining a healthy balance sheet. We execute all three concurrently and view them as important. We think we're in an advantaged position to do it all. Our Q1 results demonstrate a resilient, strong business model. We'll pursue inorganic opportunities only if they meet a high threshold, fit within our markets and strategies, and add clear value. Otherwise, we like the hand we have and will continue to grow organically where there is significant room to do so, as our Platforms revenue growth shows.

Operator, Operator

The last question is from the line of David Joyce with Seaport Research Partners.

David Joyce, Analyst, Seaport Research Partners

Anecdotally, it seems like you've been self-promoting Fandango, GolfNow and GolfPass more. What's the engagement and subscription growth been like year-over-year? Where do you see your share going in a few years? And secondly, some of your peers have been starting to work on vertical video. Is this possibly part of your strategy and what would be involved in that?

Mark Lazarus, Chief Executive Officer

Thank you for noticing. We have been utilizing our airtime to promote Fandango, GolfNow and Rotten Tomatoes, and those promotions are yielding results. The 9% growth in Platforms revenue reflects the power of our linear promotion helping grow those transactional businesses. They are largely transaction-driven rather than subscription-based, and our ability to promote them on air helps drive that growth. We'll continue to leverage our portfolio to promote these services. On vertical video, we are investigating it and working with a couple of partners. We just launched a new Golf Channel app that is built for vertical video, and we'll continue to pursue that approach in other areas and genres as appropriate.

Operator, Operator

This now concludes our question-and-answer session and will also conclude today's conference. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.