Paramount Skydance Financial Model

• Total assets: Approximately $50 billion to $55 billion (pre-WBD merger).
• Key asset categories: Inventory (which includes capitalised film and television costs) is the most critical asset, alongside Goodwill and Intangible Assets.
• Goodwill & intangibles as % of total assets: Roughly 35% to 40%, reflecting the legacy ViacomCBS merger and the recent Skydance transaction.
• Working capital profile:
• Days Sales Outstanding (DSO): 60 to 75 days.
• Days Inventory Outstanding (DIO): Not traditionally calculated via DIO; content inventory is amortised over individual film/show ultimate revenue curves.
• Days Payable Outstanding (DPO): 90 to 110 days.
• Net working capital as % of revenue: Typically negative.
• Is working capital positive or negative? Negative NWC is a structural advantage, as the company funds content creation through extended payables and collects subscription cash upfront.
• PP&E: Represents studio lots, broadcast equipment, and office space; useful lives range from 3 to 40 years; maintenance capex is minimal compared to content spend.
• Right-of-use assets / operating leases: Material, representing roughly $1.5 billion to $2 billion for global office and production space.

• Capex as % of revenue: 1.5% to 2.5% (excluding content spend).
• Maintenance capex vs. growth capex: 80% maintenance (broadcast equipment, facility upkeep) and 20% growth (streaming technology infrastructure).
• Major capex programmes underway or planned: Consolidation of global real estate footprint post-Skydance merger.
• Capitalised software / development costs if material: Material for the Paramount+ platform, amortised over 3 to 5 years.
• M&A pattern: Transformational consolidator; acquired Skydance in 2025 and announced the acquisition of Warner Bros. Discovery in 2026.
• Typical acquisition multiple paid: The Skydance deal valued the combined entity at approximately $28 billion, while the WBD bid was valued at over $100 billion, typically representing 8x to 10x forward OIBDA.

• Total debt and net debt: Approximately $14 billion total debt and $12 billion net debt (pre-WBD merger).
• Debt/EBITDA ratio: Currently elevated at roughly 5.0x to 6.0x Adjusted OIBDA; target is below 3.5x.
• Credit rating: Downgraded to high-yield (junk) status by S&P in early 2024, prompting aggressive deleveraging efforts.
• Key debt instruments: Senior unsecured notes, a revolving credit facility, and term loans.
• Maturity profile: Significant maturity walls in 2027 and 2028 requiring refinancing or cash paydowns.
• Interest rate profile: Predominantly fixed-rate bonds, with a weighted average cost of debt around 5.5% to 6.5%.
• Covenants: The revolving credit facility contains a maximum consolidated total leverage ratio covenant.
• Share repurchase programme: Suspended to prioritise debt reduction and fund M&A.
• Dividend policy: The dividend was drastically cut in 2023 to $0.05 per share quarterly to preserve cash; current yield is negligible.

• Operating cash flow conversion: Highly volatile; OCF is driven by the timing of cash content spend versus non-cash content amortisation.
• Free cash flow margin: 2% to 5%, historically constrained by peak streaming investments but inflecting upwards.
• Major non-cash items that bridge net income to OCF: Content amortisation, depreciation, stock-based compensation, and impairment charges.
• Working capital cash flow impact: Deferred revenue from streaming subscriptions provides a positive working capital benefit during growth phases.
• Capex intensity: Low traditional capex intensity, but extremely high "content capex" intensity.
• Cash tax rate vs. GAAP effective tax rate: Cash taxes are typically lower than the GAAP rate due to accelerated tax amortisation of film costs.

1. Assumptions: Hardcoded drivers for macroeconomic factors, segment growth rates, margins, and WBD pro-forma integration targets.
2. Scenarios: Base, Bull, and Bear cases toggling standalone PSKY performance versus the consolidated Warner-Paramount entity.
3. Revenue_Build: Detailed build for TV Media (Advertising, Affiliate, Licensing), DTC (Subscriptions, Advertising), and Studios (Theatrical, Home Entertainment, Licensing).
4. Content_Schedule: Roll-forward of capitalised film and television costs, tracking cash spend additions and amortisation expense deductions.
5. Income_Statement: GAAP consolidated statement of operations with a reconciliation to Adjusted OIBDA by segment.
6. Balance_Sheet: Standard asset, liability, and equity line items mirroring the 10-K, with specific lines for Programming Inventory and Deferred Revenue.
7. Cash_Flow: Indirect method starting from Net Income, explicitly breaking out cash payments for programming and amortisation of programming.
8. Debt_Schedule: Tranche-by-tranche breakdown of senior notes, calculating interest expense and tracking maturity walls.
9. DCF: Unlevered free cash flow calculation, WACC build, and terminal value using the perpetuity growth method.

1. TV Media Affiliate Revenue = Prior Year TV Media Affiliate Revenue x (1 - Cord Cutting Decline Rate) x (1 + Contractual Rate Escalator)
2. DTC Subscription Revenue = Average Paramount+ Subscribers x Monthly ARPU x 12
3. DTC Advertising Revenue = Paramount+ Ad-Tier Subscribers x Ad Impressions per User x Cost Per Mille
4. Studio Theatrical Revenue = Number of Major Releases x Average Global Box Office x Studio Rental Share Percentage
5. Content Amortisation Expense = Beginning Content Inventory + Cash Content Spend - Ending Content Inventory
6. Segment Adjusted OIBDA = Segment Revenue - Segment Operating Expenses (excluding D&A and restructuring)
7. Consolidated Adjusted OIBDA = Sum of Segment Adjusted OIBDA - Corporate Overhead
8. Interest Expense = Average Balance of Debt Tranches x Weighted Average Interest Rate
9. Free Cash Flow = Operating Cash Flow - Capital Expenditures (note: cash content spend is already captured in OCF)
10. Net Debt = Total Short-Term Debt + Total Long-Term Debt - Cash and Cash Equivalents

The Assumptions and Scenarios sheets feed directly into the Revenue_Build and Content_Schedule. The Revenue_Build populates the top line of the Income_Statement. The Content_Schedule is critical; it feeds Content Amortisation into the Income_Statement and Cash Content Spend into the Cash_Flow sheet. The Income_Statement generates Net Income, which anchors the Cash_Flow sheet. The Cash_Flow sheet determines the ending cash balance, which feeds the Balance_Sheet. The Debt_Schedule relies on cash flow available for debt service from the Cash_Flow sheet to calculate mandatory or optional paydowns, which in turn calculates Interest Expense for the Income_Statement, creating a circular reference that must be managed with an iterative calculation toggle.

• Revenues, Assets, and positive margins are entered and displayed as positive numbers.
• Expenses, Liabilities, and Equity are entered as positive numbers in their respective schedules but subtracted in aggregation formulas (e.g., Gross Profit = Revenue - COGS).
• On the Cash Flow statement, cash inflows are positive and cash outflows (including capital expenditures and cash content spend) are negative.

• Failing to distinguish between cash content spend (an OCF outflow) and content amortisation (a non-cash income statement expense); mixing these up will destroy the cash flow profile.
• Ignoring the stub period for the August 2025 Skydance merger; historical data prior to Q3 2025 does not reflect the combined entity.
• Overestimating TV Media cash flows by failing to model the accelerating rate of linear cord-cutting.
• Miscalculating the deferred revenue release schedule for annual Paramount+ subscriptions, which distorts quarterly working capital.
• Excluding stock-based compensation from operating expenses to calculate "Adjusted OIBDA" without adjusting the DCF to treat SBC as a real economic cost.
• Failing to build a pro-forma toggle for the March 2026 Warner Bros. Discovery acquisition, rendering the standalone model obsolete for future forecasting.
• Overlooking the massive restructuring charges recorded in 2024 and 2025; these must be normalised to understand baseline profitability.
• Mismodelling the debt maturity wall in 2027; the model must force a refinancing assumption or a massive cash draw.

• Total Assets must equal Total Liabilities plus Equity in every forecasted period.
• Consolidated Adjusted OIBDA margin should remain in the 8% to 12% range based on historical performance; flag if it exceeds 15% without WBD synergies.
• Cash content spend should roughly equal or slightly exceed content amortisation in a steady state; flag if amortisation exceeds cash spend by more than 10% for consecutive years.
• Debt/Adjusted OIBDA must be tracked; flag if the ratio exceeds 5.5x, as this breaches rating agency downgrade thresholds.
• Free Cash Flow conversion (FCF / Adjusted OIBDA) should be positive; flag if it turns negative outside of a major M&A integration year.
• TV Media revenue growth must be negative; flag if the model projects positive linear TV growth.
• Effective tax rate should be between 20% and 25%; flag if it drops below statutory minimums without a defined tax shield.

• Filings: SEC EDGAR for Paramount Global (PARA) historical 10-Ks and the S-4 registration statement filed for the Skydance merger.
• Key peers for benchmarking: The Walt Disney Company (DIS), Netflix (NFLX), Comcast Corporation (CMCSA), and Warner Bros. Discovery (WBD).
• Industry data sources: Nielsen for linear television ratings and viewership data; Antenna for streaming subscriber additions and churn rates; Box Office Mojo for theatrical release performance.
• Consensus estimates source: Bloomberg Terminal or FactSet for consensus OIBDA and subscriber estimates.

• Paramount Global SEC Filings (10-K, 10-Q, 8-K) via SEC EDGAR.
• Paramount Global Investor Relations: Skydance Merger Announcement and S-4 Prospectus.
• TradingView: Paramount Skydance Corporation (PSKY) market data and financial summaries.
• Robinhood: PSKY stock price quotes and market capitalisation data.
• Associated Press: "Paramount and Skydance close their $8 billion merger" (August 2025).
• FinancialContent: "The Consolidation Renaissance: A Retrospective on the $170 Billion Warner-Paramount Union" (March 2026).