Versant Media Group, Inc. Class A Q4 FY2025 earnings call

• 2025 was a pivotal year for Versant, completing transition to a stand-alone public company and advancing strategy. Operates in 4 large and growing markets with brands in leadership positions. Reaches average of ~100 million people monthly. Live news, sports, and premium entertainment programming attract large engaged audiences and advertiser demand. - CNBC solidified as #1 global business media brand, launched multiyear partnership with Kalshi and next-generation D2C subscription service for retail investors. MS NOW was most watched network on election night, had double-digit growth in total viewers since rebrand, and will launch new D2C platform. - Golf Channel is #1 golf media outlet, GolfNow had record year, USA Sports expanded in sports. USA delivered #1 scripted cable original premiere and renewed it, broadcast Critics Choice Awards. Fandango to launch new ad-supported streaming service, completed acquisition of INDY Cinema Group and added Free TV Networks. - View revenue mix as critical, target 33% non-pay TV revenue over 3-5 years. Committed to investing in business and returning capital to shareholders, with Board declaring first dividend and $1 billion share repurchase authorization.

Versant operates in 4 markets: business news and personal finance, political news and opinion, golf and athletics participation, and sports and genre entertainment. 2025 total revenue was approximately $6.7 billion, down 5% year-over-year. Linear distribution revenue was $4.1 billion, down 5% year-over-year. Advertising revenue was approximately $1.6 billion, down 9% year-over-year. Platforms revenue, primarily GolfNow and Fandango, increased 4% to approximately $826 million. Content licensing and other revenue was approximately $193 million, down 9% year-over-year. Stand-alone adjusted EBITDA was about $2.2 billion, down 9% year-over-year. An estimated stand-alone free cash flow totaled a healthy $1.5 billion for the year. In Q4, revenue was $1.6 billion, down 7% year-over-year. Stand-alone adjusted EBITDA was $521 million, down 19%. Platforms revenue is expected to return to high single-digit growth in 2026, supported by a stronger box office slate and continued growth at GolfNow, and favorable contributions from the INDY Cinema acquisition.

• 2026 revenue expected between $6.15 billion and $6.4 billion supported by midterm political advertising and new product initiatives. - Adjusted EBITDA expected between $1.85 billion and $2 billion, with quarterly volatility due to sports rights timing. - Depreciation and amortization will remain elevated in 2026 due to amortization of intangibles related to 2011 Comcast acquisition of NBCUniversal, substantially complete by year-end 2026. - Cash tax rate for 2026 expected to be approximately 26%, excluding impact of intangibles. - 2026 CapEx modestly above 2025 levels, increase due to build-out of new Manhattan headquarters and targeted investments. - Free cash flow expected between $1 billion and $1.2 billion in 2026, with modestly lowered conversion in 2025 reflecting working capital timing, onetime cash tax benefits, and incremental CapEx.

Q: Congratulations on your first quarter as a stand-alone public company. First, platforms is obviously a critical part of getting to your revenue diversification goals. Can you talk a little bit about your confidence in achieving that 1/3 of revenue from non-pay TV over the next 3 to 5 years, key new product launches and features that you expect to be the most meaningful in the next couple of years here?

A: Yes, sure, Michael. Thanks. So we're really confident in our platforms business. As we mentioned earlier, though the results for 2025 were a little bit impacted by a slightly softer film slate for the industry. And Anand mentioned, we expect high single-digit revenue growth for 2026, which is consistent with the history that we have with these businesses. When you think about those core businesses, GolfNow and Fandango are established leaders. They're really strong, you'd say, preeminent brands in their respective markets. And they still have a lot of room to grow organically and to grow penetration. GolfNow, for example, represents less than 10% of the total rounds booked and it's very early on in the international expansion trajectory that we've undertaken. We can extend these businesses very easily into adjacent markets. We're launching a free AVOD service as part of Fandango, which will complement the movie ticketing and the home rental business. And we purchased INDY Cinema, which we mentioned, which enables us to offer the industry's best operating software to the same cinema operators who already use our partners in the ticketing business. So there's a lot of -- many more expansion opportunities for Fandango and GolfNow. We'll also launch brand-new platforms associated with our brands. CNBC's D2C is targeted to the retail investor. MS NOW D2C will be offering community insights perspective relevant to that brand. These are big powerful brands. We've got big existing audiences, and we're in a great position for these to be adopted at scale around D2C places we have not really invested before.

Q: And just as a follow-up, could you just provide an update on the SportsEngine strategic review process and the M&A point to support platforms? Just some clarity on kind of tuck-ins versus maybe something more midsized?

A: Sure. I'll start with SportsEngine. So as we discussed, we're evaluating kind of value-maximizing alternatives for that business. So just to be very clear, we see a lot of consolidation in youth sports market-wide. So we think it's the right time for this review, but we haven't made a decision yet. We -- just to be very clear, we like SportsEngine. It's been a very good business for us. It is a very good business. And so we're only going to pursue opportunities that genuinely maximize value for the long term. Broadly on M&A, we will consider, obviously, all opportunities that add value. I think INDY Cinema is a very good example of a tuck-in, as you called it. And we think there very well may be more. I mean, for example, GolfNow, we built GolfNow over time. It was really a roll-up of a lot of independent operators. You can kind of consider that in some ways a tuck-in type as well. So definitely, we'll look at those. Could there be something bigger? Sure. But I think the key point is our thresholds here are very high. As part of our capital allocation, M&A is one area, but the brand fit, the ability to drive value right away and the synergies are something that we obviously consider very carefully. And so it has to kind of satisfy all those thresholds and make sure it delivers premium returns, and we will continue to be very disciplined in pursuing that.

Q: First one for me. Good to see the shareholder return plans in the buyback authorization. What's your philosophy going to be on buybacks? Do you plan on being pretty opportunistic? Or should we expect them to be pretty regular? And is there a 10b5-1 program in place already?

A: Yes. At this point, we're going to be opportunistic. We're going to be thinking through the total capital allocation program sort of holistically, and we'll handle it that way.

Q: And then realize it's very early into your journey as a stand-alone company and majority of your renewals are beyond '26 and '27, but can you just update us on your confidence on the affiliate fee trajectory and what you might be hearing from distribution partners at this point?

A: Well, we were able to execute a bunch of deals last year when we were long announced as a stand-alone company, and we were able to do that on terms that work for us and work for the distribution partners. We have a few deals up later on in this year, and we anticipate being able to have very productive and similar discussions with them at that time. Our live portfolio of news and sports we think plays into what people are still looking to watch on linear television, and that's a big part of our asset play.

Q: The Warner Bros. Discovery process, obviously kind of moving into the next phase now. Watching from the sidelines, what have you all learned from this process in terms of the industry in terms of some of your competitors in terms of valuations? What does all this mean for Versant?

A: Well, we have our plan to go as an independent company. We有 a strong set of assets. We're very focused on our vertical markets. And the wider view was it was interesting because the assets from Warner Bros. were interesting to a couple of people in a couple of different ways, and we look at that as being reinforcing of the value of our company.

Q: A couple of questions about the way your brands go to market. First, I wondered if you could talk about the size of the audience that you're reaching in linear pay TV. We obviously can see ratings data on individual shows, but I wonder how many households are engaging with your news and sports content every month and with enough frequency to be important to your negotiations with pay TV distributors. And the background of that question is we just hear in our conversations with clients and enormous preoccupation with the possibility that you all might have -- I mean it might someday lose a distributor. And then a second go-to-market question relates to your brand's DTC opportunity. Could you talk about your economics streaming CNBC and MS NOW direct-to-consumer and whether someday a partnership with a third-party streamer with a massive audience might be interesting?

A: So on the audience engagement, we have big brands that are well known and ubiquitously known to the marketplace. We reach around, as we stated earlier, 100 million people each and every month with our brands. If you look at some of them individually, MS NOW has doubled its audience in prime time in the last 10 years. We're reaching over 1 million people on average, 1.2 million people on average in prime time on MS NOW each and every day. So that's massive scale. And those people are watching with huge engagement, they're watching roughly 8 to 9 hours a week, which is the second highest engagement across the entire media TV landscape. CNBC similarly has a large loyal following in the financial sector and with retail investors, and you'll see that as we talk about the D2C and eventually launch that in the future. Across our sports, Premier League, WWE, NASCAR, WNBA, the Olympics was -- we were reaching 2 million, 3 million, 4 million people at a time with USA Network over the last few weeks. So we have scale, and we do it by both on individual networks and the accumulation of the total audience across our portfolio. On the D2C programs on the economic profile, we feel very confident that we already have an infrastructure. So the build-out of these is not a massive capital -- not massively capital intensive. We're creating product suites that will appeal for CNBC to the retail investor and the MS NOW to that highly engaged audience.

Q: Two questions. First one is on advertising. So in addition to your existing business, which obviously has a big advertising component, your new businesses, whether direct-to-consumer or free TV or dependent, at least in part on advertising. So could you give us a little bit of color on the current market and talk through some of the levers that you can control to maybe improve the advertising trajectory in the current year, whether pricing or sell-through, cross-platform packaging, measurement, et cetera, data, so that would be great if you can give some real color. And then secondly, second completely different topic, but on sports, with the larger media companies facing what's likely a very expensive NFL renewal, does this open the door for you to buy what would be considered secondary or tertiary sports, but growing sports, whether like women's sports or upcoming sports and maybe bigger picture, I mean, sports is obviously a focus. How do you think that your sports strategy will evolve?

A: So why don't I take the second one first. And yes, as the NFL comes to market and we'll discuss new arrangements with some of the other media companies, we believe that there will be and some -- one of our competitors actually said a rebalancing of the sports portfolios. We believe that there will be a rebalancing of the sports portfolios and that, that will leave opportunity for us who have a heritage in sports, who have strong sports properties and legacy to begin with, but we also have broad reach. And with USA Network in particular, it's as broad a reach vehicle as any other cable television asset and/or pay television asset. And we believe that there will be opportunity for us to get involved in properties that we might not have otherwise gotten involved with. We're open to conversations. We're having ongoing conversations. We've built out our own production unit, and we are prepared for the sports landscape to be shifting, and we will be in the middle of that. We will be disciplined, but we'll be in the middle of that. As it relates to advertising, I'll start out. I mean, I think we're still -- for the next 2 years, NBCUniversal is representing us. That has been a very strong and proven go-to-market strategy, not just for us, but for them to have the scale of our assets and their assets under one umbrella. That's the way we've done it for the last 15 years, and it's been a very successful model. We will continue that at least for the next 2 years, and then they will -- they and we will decide on the right future strategy for our ad sales and theirs. We are moving some of our advertising outside of pay TV, and你 mentioned DTC and free TV networks. That allows us to reach other marketers. It allows us to be involved more in the programmatic sales and to more of -- the more technology-driven sales with Fandango, with GolfNow, we have a lot of data and information about our customers and we'll to use that to target advertising in the free TV and the digital spaces.

Q: I just had a follow-up on linear distribution. I think we're all aware of the secular challenge across -- challenges across the industry, along with more skinny and genre-based packages coming to market. But as you go into your future negotiations, do you see any offsets to some of these industry-wide headwinds when it comes to pricing, for example at networks like MS NOW, which seems quite underpriced in terms of affiliate fees per subscribers compared to its cable network peers or cable news network peers. And is there anything more specifically you can share on expectations for linear distribution revenue growth in 2026 specifically?

A: Well, on the broader question, I mean, sure, we all believe all of our networks are underpriced, but thank you for recognizing that. We -- listen, news and sports have been the predominant focus on the new packaging. We are fortunate or we are strategic in having both of those sets of assets. We have 2 news networks and 2 networks that are sports with Golf Channel and USA Network. So we're in all of those packages, and that has been very helpful for us in retaining our distribution and our revenues. I think those kind of packages will continue. And Anand kind of talked about it a little earlier on the D2C side. We're a new stand-alone company. We don't have as many competing constituencies as we had in the larger company. So we will be as flexible and creative as we can be while making sure we retain the value that we are able -- that we think our networks deserve and that the audiences have shown that they deserve.

Q: A couple of clarifications and other questions. On the affiliate fees, are you starting to negotiate your carriage on your own as they expire? Or was there a complete separation already versus the Comcast and Universal -- NBCUniversal deals? And then secondly, on your various other platform companies, do you anticipate providing trends on the data of the users or subscription numbers. Just wondering what we could look for in terms of some more data points and trends there?

A: So on the distribution question, yes, we have our own distribution negotiation team, and we are handling all of those deals on a going-forward basis ourselves. We're already in -- we have an established group of people that came to us some from Comcast, from NBCU, some from outside and have strong relationships across the industry, and we're out there in the marketplace, building upon those relationships.

Q: Okay. I appreciate that. And one final question, actually. On the Fandango AVOD service that you're going to be launching, what's the anticipated library availability there? Is there anything that you have exclusive? Or what are the kind of the windowing availabilities that are going to be on there?

A: Yes. It will be a combination of content we own, content we license. As part of our linear deals, we have licensed content from a lot of different studios, in particular, Universal and where we will be able to use part of our windows that we -- that were met for the linear networks to run on our -- on the new AVOD service. So the combination of those and then other third-party deals.

Q: Our final question today comes from the line of Doug Creutz with TD Cowen. Thank you. Ladies and gentlemen, this will conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.