LOS ANGELES _ Viacom Inc.'s profit tumbled 27 percent in its fiscal third quarter, but the performance wasn't as dismal as analysts had feared, as the company showed strength in its European operations and a promising start from Paramount's television production arm.
Nonetheless, Viacom's lackluster performance continues to cast a shadow over its embattled chief executive, Philippe Dauman, who is waging a contentious legal campaign against his company's controlling shareholders: the ailing 93-year-old Sumner Redstone and his daughter, Shari Redstone.
An analyst on Viacom's earnings call Thursday asked whether the boardroom battle _ which is playing out in courts in Delaware and Massachusetts _ was hampering Viacom's day-to-day operations.
"Obviously, it is somewhat of a distraction," Dauman acknowledged. "But we are not deterred from pursuing strategic initiatives."
The Redstone family _ through its investment vehicle National Amusements Inc. _ wasted little time Thursday in blasting Viacom management for the company's industry-lagging financial results.
"Viacom's overall performance continues to highlight the need for changes to leadership at the company," National Amusements said in a statement. "In recent years, the company's senior management has overseen a steep erosion of revenue growth, earnings, operating performance, financial capacity and shareholder returns."
The Redstone family, through National Amusements, holds nearly 80 percent of the voting shares in two media companies, Viacom and CBS Corp. In its statement, National Amusements noted that Viacom has witnessed an exodus in creative talent and that the company from 2011 through 2015 spent about $15 billion buying back stock at prices much higher than what shares now trade.
Viacom executives, during Thursday's conference call, disclosed that its Los Angeles-based movie studio, Paramount Pictures, would lose money for the full fiscal year. Paramount stumbled once again in the April to June quarter due to a wimpy showing from its big-budget summer film, "Teenage Mutant Ninja Turtles: Out of the Shadows."
"There is no question the studio has had a rough go at the box office recently," Dauman said, noting that the theatrical performance of "Ninja Turtles" fell short of expectations.
For the quarter ended June 30, Paramount posted an operating loss of $26 million compared to a profit of $48 million in the year-earlier period.
Studio revenue was up 30 percent, which was higher than Wall Street had anticipated, on gains in license fees and worldwide ticket sales. The studio's Paramount Television operation has been gaining traction. And during the current quarter, the film "Star Trek Beyond" has been a bright spot.
Dauman conceded that his effort to sell a 49 percent stake in the movie studio to an outside investor had "slowed down in recent weeks" due to the boardroom turmoil and various lawsuits.
"Probably the biggest impact has been on the ability to move forward rapidly on the Paramount transaction," Dauman told analysts. "That's certainly slowed down."
Sumner Redstone vehemently opposes the plan to unload any portion of his beloved movie studio, and that effort provoked his furor and propelled him to make the moves to oust Dauman, his longtime lieutenant.
Overall, Viacom's profit for its fiscal third quarter totaled $432 million, or $1.09 a share, compared to $591 million, or $1.47 a share, in the previous-year period.
The company's earnings slipped to $1.05 a share compared to $1.47 in the year-earlier period.
Revenue inched up nearly 2 percent to $3.11 billion. Viacom had warned Wall Street in June that the fiscal quarter would be weaker than initially forecast, so analysts were bracing for sluggish results.
Sales were down at Viacom's television networks, which include MTV, Comedy Central, Nickelodeon, VH1 and BET. The TV networks division generated $2.51 billion in revenue, a decline of 3 percent.
Domestic ad sales fell 4 percent due to weak ratings at some key networks, including MTV. Domestic cable TV affiliate fees were down 10 percent. But international advertising revenue was up 13 percent because of growth in Europe.
Viacom's stock held steady Thursday morning, trading at around $44 a share. Shares are down more than 35 percent in the last two years.
Dauman sounded defensive on the call, outlining several initiatives that he has launched during his nearly 10-year tenure in the top job. In recent weeks, there have been negotiations for a settlement that would see Dauman and several other board members step down to resolve the dispute with the Redstones.
However, talks stalled late last week and Viacom received two encouraging court decisions from judges in Massachusetts and Delaware. The decisions to allow the lawsuits to proceed fueled Dauman's hopes that he may cling to power at Viacom.
"We continue to focus on our strategic initiatives and are confident that they will bear significant fruit as we prepare for our next fiscal year," Dauman said. "Paramount will see better days ahead through improved film slate performance, television production and, we hope, a groundbreaking strategic alliance."
Sumner Redstone in May removed Dauman and another long-time associate, George Abrams, from a trust that will one day oversee the Redstone family's controlling shares in CBS and Viacom.
In June, the Redstone family, through National Amusements, demanded that five Viacom board members, including Dauman, be replaced. Those ousters were put on hold while a judge in Delaware determines whether the removals were valid.
"Litigation surrounding the company's board, with a potential messy exit by CEO Philippe Dauman and potentially other senior executives, is likely to cause further turmoil," Cowen & Co. analyst Doug Creutz concluded in a research report.
"While Viacom could emerge from a presumable management coup in better shape, we don't think that is a guaranteed outcome, as there is no guarantee new management will be any more successful facing the increasing challenges brought on by digital video distribution given the company's positioning in the changing TV market," Creutz said.
