News

Viacom Reports Second Quarter Results

  • Delivered Year-over-Year Growth in Reported and Adjusted Diluted
    Earnings Per Share
  • Sequentially Improved Domestic Advertising Revenue Growth, Driven
    by Acceleration in Advanced Marketing Solutions
  • Delivered Ninth Straight Quarter of Year-over-Year Improvement in
    Paramount Adjusted Operating Income
  • Saw Early Momentum in Pluto TV Integration, with Monthly Active
    Users Growing to Approximately 16 Million in April
  • Achieved Significant Distribution Gains, with Renewed and Expanded
    AT&T Agreement, Carriage on Charter and fuboTV OTT Packages, and
    Content Deal with T-Mobile

NEW YORK–(BUSINESS WIRE)–Viacom Inc. (NASDAQ: VIAB, VIA) today reported financial results for the
quarter ended March 31st, 2019.


STATEMENT FROM BOB BAKISH, PRESIDENT & CEO

This quarter we executed strongly on our strategic priorities and made
significant progress in advancing our evolution. We grew viewership
share at our flagship networks, accelerated our Advanced Marketing
Solutions and continued our momentum at Paramount Pictures. We also
achieved important milestones in expanding our distribution across
traditional, digital and mobile platforms, while dramatically improving
our audience reach through the integration of Pluto TV. As the media
landscape continues to segment across price points, we’re confident in
our strategy, strong results and the opportunities ahead as we continue
to position Viacom for the future.”

         

FISCAL YEAR 2019 RESULTS
$ millions, except per share
amounts

     
Quarter Ended March 31 Six Months Ended March 31
2019   2018   B/(W) %

FX
IMPACT %

CONSTANT
CURRENCY
BASIS †

2019   2018   B/(W)%

FX
IMPACT %

CONSTANT
CURRENCY
BASIS †

GAAP                                                            
Revenues $ 2,958 $ 3,148 (6) % (2) % (4) % $ 6,048 $ 6,221 (3) % (3) % %
 
Operating income 573 456 26 1,175 1,174
 
Net earnings from continuing operations attributable to Viacom 363 256 42 681 791 (14)
 
Diluted EPS from continuing operations 0.9 0.64 41 1.69 1.96 (14)
 
Non-GAAP†                                                            
Adjusted operating income $ 637 $ 641 (1) % % (1) % $ 1,387 $ 1,359 2 % (1) % 3 %
 
Adjusted net earnings from continuing operations attributable to
Viacom
383 371 3 (1) 4 836 784 7 (2) 9
 
Adjusted diluted EPS from continuing operations 0.95 0.92 3 3 2.07 1.95 6 (2) 8
 
† Non-GAAP measures referenced in this release are detailed in the
Supplemental Disclosures at the end of this release.
 

FILMED ENTERTAINMENT

Paramount Pictures delivered its ninth straight quarter of improved
year-over-year adjusted operating income, largely driven by gains at the
global box office and monetization of library IP.

 

QUARTERLY FINANCIAL RESULTS
$ millions

                         

FQ2’19

      TOTAL     B/(W)%       DOMESTIC     B/(W)%     INTERNATIONAL     B/(W)%
Revenues $ 730 (1 ) % $ 353 (7 ) %

 

$

377

4 %
 
Theatrical 172 244 66 144 106 361
 
Home Entertainment 154 (6 ) 104 3 50 (19 )
 
Licensing 315 (34 ) 124 (43 ) 191 (27 )
 
Ancillary 89 75 59 74 30 76
 
Expenses 701 4
 

Adjusted OI

$

29

222

%

 
All figures are presented on a reported segment basis as impact from
foreign exchange is not material.
 
  • Adjusted OI increased by $20 million YOY.
  • Total revenue declined 1%, as strong growth in theatrical and
    ancillary revenues was offset by lower licensing revenues.
  • Theatrical revenue more than tripled, driven by strong carryover
    performance and current quarter releases.

    • Paramount has delivered three consecutive quarters of
      year-over-year growth in worldwide theatrical revenue.
  • Licensing revenue was primarily impacted by the timing of TV
    production availabilities and comparisons to last year’s
    direct-to-SVOD release of certain films.
  • Growth in worldwide ancillary revenue was primarily driven by a new
    music rights licensing agreement.

Operational Highlights

  • Paramount continued its global box office momentum in the fiscal
    second quarter, driven by Bumblebee and What Men Want.
  • Pet Sematary, released in FQ3 and adapted from Stephen King’s
    horror novel, performed well in theaters.
  • Paramount’s film slate for the remainder of fiscal 2019 includes:

    • Rocketman, the highly anticipated biographical musical film
      about Elton John – debuting in the U.S. in May.
    • Dora and the Lost City of Gold, a live action film based on
      Nickelodeon’s Dora the Explorer franchise – scheduled for
      release in August.
  • Paramount Television’s momentum continued, with 22 shows ordered to or
    in production.

    • Delivered critically acclaimed Boomerang to BET in the
      quarter, with a second season announced in April.
    • Producing a third season of Tom Clancy’s Jack Ryan for
      Amazon, as well as a second season of The Haunting of Hill
      House
      for Netflix.

MEDIA NETWORKS

Viacom Media Networks achieved meaningful distribution on new and
existing platforms, while growing Advanced Marketing Solutions and
viewership share across flagship networks.

 

QUARTERLY FINANCIAL RESULTS
$ millions

                                         

FQ2’19

      TOTAL     B/(W)%    

FX
IMPACT
%

   

CONSTANT
CURRENCY
BASIS†

    DOMESTIC     B/(W)%     INTERNATIONAL     B/(W)%    

FX
IMPACT
%

   

CONSTANT
CURRENCY
BASIS†

Revenues $ 2,267 (7) % (2) % (5) % $ 1,824 (2) % $ 443 (22) % (9) % (13) %
 
Advertising 1,033 (7) (4) (3) 820 (2) 213 (19) (13) (6)
 
Affiliate 1,139 (6) (2) (4) 936 (2) 203 (19) (6) (13)
 
Consumer Products, Recreation & Live Events* 95 (18) (1) (17) 68 3 27 (46) (2) (44)
 
Expenses 1,585 8 3 5
 
Adjusted OI $ 682 (3) % 1 % (4) %
 
* Beginning Q1 2019, Media Networks revenue components previously
reported as Ancillary were renamed to Consumer Products, Recreation
and Live Events. Furthermore, certain components previously reported
as Ancillary were reclassified to Affiliate. Prior period amounts
have been recast to conform to the current presentation.
† Non-GAAP measures referenced in this release are detailed in the
Supplemental Disclosures at the end of this release.
 
  • Domestic advertising revenue growth rate improved for the second
    quarter, driven by accelerating growth in Advanced Marketing Solutions
    (AMS).

    • AMS revenue increased 76% in the quarter compared to 54% in the
      fiscal first quarter, benefiting from the Pluto TV integration.
    • This year’s late Easter timing had a 1% unfavorable impact on the
      domestic ad sales growth rate.
  • Domestic affiliate revenue declined due to SVOD library licensing,
    which was halted while finalizing Pluto TV’s content strategy.
    Contractual rate increases were largely offset by subscriber declines.
  • International revenue was impacted by foreign exchange, macroeconomic
    headwinds in the U.K. and the timing of SVOD.
  • The decrease in revenue from consumer products, recreation and live
    events resulted from softness in certain consumer product franchises
    internationally.
  • Adjusted OI declined 3%, reflecting lower revenue, partially offset by
    the timing and mix of original program launches, and cost
    transformation savings.

Operational Highlights

  • Viacom maintained the #1 share of basic cable viewing with key
    domestic audiences in the quarter, including the 2-49, 2-11, 12-17,
    18-34 and African American demos.
  • In Live+SD viewing, Viacom flagships grew share by 2% YOY.

    • Comedy Central delivered its eighth consecutive quarter of share
      growth – up 12% YOY.
    • MTV was the fastest growing network in primetime among the top 30
      broadcast and cable networks, and increased share for the eighth
      straight quarter – up 5% YOY.
    • Paramount Network earned its second consecutive quarter of share
      growth – up 3% YOY.
  • Viacom had more top 10 and top 30 original cable series in the quarter
    than any other cable family among key demos.
  • Internationally, Channel 5 delivered its third consecutive quarter of
    growth in viewership share, while Telefe maintained its #1 position
    and grew share for the fourth straight quarter.
  • Viacom Digital Studios (VDS) continued to grow digital consumption in
    the quarter, with original programming and content from flagship
    brands.

    • Video views grew 69% YOY to 6.4B and more than doubled watch time
      YOY with nearly 10B minutes viewed.
    • Comedy Central delivered its best quarter ever for digital video
      streams and watch time – up 40% and 71% YOY, respectively.
  • Studio production continued to expand globally.

    • Awesomeness’ PEN15 premiered on Hulu to outstanding
      reviews, with a second season announced in May.
    • Awesomeness produced the recently released Netflix film, The
      Perfect Date
      , and upcoming Netflix series, Trinkets.
    • Viacom International Studios continued to grow its global
      footprint, with new production centers in Madrid and Manchester
      announced in April.

SPOTLIGHT ON DISTRIBUTION & PLUTO TV

Viacom advanced its distribution across traditional and virtual
MVPDs, mobile and direct-to-consumer; expanded product line with Pluto
TV acquisition.

In March, Viacom reached a new long-term deal with AT&T:

  • Includes broad carriage of Viacom brands on DirecTV and U-Verse.
  • Viacom has renewed or extended the vast majority of its subscriber
    base.

Expanded carriage on vMVPDs:

  • Gained carriage on AT&T’s DirecTV Now Plus and Max offerings.
  • Added to fuboTV’s live TV streaming service and Charter Spectrum TV
    Essentials.

Growing momentum in mobile:

  • Announced a significant content distribution agreement as the
    cornerstone of T-Mobile’s forthcoming mobile video service.
  • Added MTV, Nick and TV Land to AT&T Watch.
  • Viacom International Media Networks (VIMN) launched MTV Play on U.K.
    mobile provider EE and Paramount+, a cross-brand streaming video
    service, on Telia in Finland.

    • VIMN now has 22 mobile-only content deals with 18 operators in 30+
      countries.

Broadened SVOD and direct-to-consumer distribution:

  • Nickelodeon’s Noggin crossed 2.5M subscribers globally.
  • Noggin, Nick Hits, Comedy Central Now and MTV Hits will be offered as
    Apple TV Channels in the all-new Apple TV App for iPhone, iPad and
    Apple TV later this month, on Samsung this spring and on Mac this fall.
  • In April, Paramount+ signed its first Latin American partnership with
    NET in Brazil and Claro video in the rest of Latin America, including
    on mobile.

Accelerated growth in free streaming TV with Pluto TV:

  • At the end of April, monthly active users grew to approximately 16
    million, up 31% since December 2018.
  • Announced several new distribution and content deals:

    • Comcast recently announced the inclusion of Pluto TV in its
      Xfinity Flex service, and Pluto TV will be coming to Xfinity X1
      soon.
    • Grew roster of 150+ content partners with recent additions of CNN,
      BBC and Major League Soccer.
  • Viacom launched 14 library channels on Pluto TV, broadening the
    content offering to kids, women and African Americans.

    • Launching Pluto Latino, its U.S. Hispanic channels, in July.
  • International plans include launches in Latin America and Switzerland,
    and expansion in the U.K., Germany and Austria.

BALANCE SHEET AND LIQUIDITY

Viacom continued its focus on de-levering the balance sheet and
delivered improvements in free cash flow.

  • At March 31, 2019, gross debt outstanding was $8.96 billion. Adjusted
    gross debt was $8.31 billion.
  • For the six months ended March 31, 2019, net cash provided by
    operating activities increased $420 million to $719 million.
  • For the six months ended March 31, 2019, free cash flow increased $407
    million to $642 million.

About Viacom

Viacom creates entertainment experiences that drive conversation and
culture around the world. Through television, film, digital media, live
events, merchandise and solutions, our brands connect with diverse,
young and young at heart audiences in more than 180 countries.

For more information about Viacom and its businesses, visit
www.viacom.com. Viacom may also use social media channels to communicate
with its investors and the public about the company, its brands and
other matters, and those communications could be deemed to be material
information. Investors and others are encouraged to review posts on
Viacom’s Twitter feed (twitter.com/viacom),
Facebook page (facebook.com/viacom)
and LinkedIn profile (linkedin.com/company/viacom).

Cautionary Statement Concerning Forward-Looking Statements

This news release contains both historical and forward-looking
statements. All statements that are not statements of historical fact
are, or may be deemed to be, forward-looking statements. Forward-looking
statements reflect our current expectations concerning future results,
objectives, plans and goals, and involve known and unknown risks,
uncertainties and other factors that are difficult to predict and which
may cause future results, performance or achievements to differ. These
risks, uncertainties and other factors include, among others:
technological developments, alternative content offerings and their
effects in our markets and on consumer behavior; competition for
content, audiences, advertising and distribution in a swiftly
consolidating industry; the public acceptance of our brands, programs,
films and other entertainment content on the various platforms on which
they are distributed; the impact on our advertising revenues of declines
in linear television viewing, deficiencies in audience measurement and
advertising market conditions; the potential for loss of carriage or
other reduction in the distribution of our content; evolving
cybersecurity and similar risks; the failure, destruction or breach of
our critical satellites or facilities; content theft; increased costs
for programming, films and other rights; the loss of key talent;
domestic and global political, economic and/or regulatory factors
affecting our businesses generally; volatility in capital markets or a
decrease in our debt ratings; a potential inability to realize the
anticipated goals underlying our ongoing investments in new businesses,
products, services and technologies; fluctuations in our results due to
the timing, mix, number and availability of our films and other
programming; potential conflicts of interest arising from our ownership
structure with a controlling stockholder; and other factors described in
our news releases and filings with the Securities and Exchange
Commission, including but not limited to our 2018 Annual Report on Form
10-K and reports on Form 10-Q and Form 8-K. The forward-looking
statements included in this document are made only as of the date of
this document, and we do not have any obligation to publicly update any
forward-looking statements to reflect subsequent events or
circumstances. If applicable, reconciliations for any non-GAAP financial
information contained in this news release are included in this news
release or available on our website at ir.viacom.com.

 

VIACOM INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

   

Quarter Ended
March 31,

 

Six Months Ended
March 31,

(in millions, except per share amounts) 2019   2018 2019   2018
 
Revenues $ 2,958 $ 3,148 $ 6,048 $ 6,221
Expenses:
Operating 1,524 1,681 3,207 3,244
Selling, general and administrative 743 771 1,427 1,510
Depreciation and amortization 54 55 104 108
Restructuring and related costs 24 185 95 185
Legal settlement 40     40    
Total expenses 2,385 2,692 4,873 5,047
Operating income 573 456 1,175 1,174
Interest expense, net (118 ) (143 ) (245 ) (290 )
Equity in net earnings of investee companies 2 1 3
Gain/(loss) on marketable securities 38 (8 )
Gain on extinguishment of debt 18 25
Other items, net (5 ) (28 ) (12 ) (32 )
Earnings from continuing operations before provision for income taxes 488 287 929 880
Provision for income taxes (120 ) (23 ) (230 ) (65 )
Net earnings from continuing operations 368 264 699 815
Discontinued operations, net of tax 13   10   16   12  
Net earnings (Viacom and noncontrolling interests) 381 274 715 827
Net earnings attributable to noncontrolling interests (5 ) (8 ) (18 ) (24 )
Net earnings attributable to Viacom $ 376   $ 266   $ 697   $ 803  
Amounts attributable to Viacom:
Net earnings from continuing operations $ 363 $ 256 $ 681 $ 791
Discontinued operations, net of tax 13   10   16   12  
Net earnings attributable to Viacom $ 376   $ 266   $ 697   $ 803  
Basic earnings per share attributable to Viacom:
Continuing operations $ 0.90 $ 0.64 $ 1.69 $ 1.97
Discontinued operations 0.03   0.02   0.04   0.03  
Net earnings $ 0.93   $ 0.66   $ 1.73   $ 2.00  
Diluted earnings per share attributable to Viacom:
Continuing operations $ 0.90 $ 0.64 $ 1.69 $ 1.96
Discontinued operations 0.03   0.02   0.04   0.03  
Net earnings $ 0.93   $ 0.66   $ 1.73   $ 1.99  
Weighted average number of common shares outstanding:
Basic 403.3 402.6 403.2 402.5
Diluted 403.7 402.9 403.6 402.7
                           
 
 

VIACOM INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in millions, except par value)    

March 31,
2019

 

September 30,
2018

 
ASSETS
Current assets:
Cash and cash equivalents $ 486 $ 1,557
Receivables, net 3,088 3,141
Inventory, net 855 896
Prepaid and other assets 571   482  
Total current assets 5,000 6,076
Property and equipment, net 895 919
Inventory, net 3,919 3,848
Goodwill 11,888 11,609
Intangibles, net 341 313
Other assets 1,050   1,018  
Total assets $ 23,093   $ 23,783  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 394 $ 433
Accrued expenses 772 848
Participants’ share and residuals 729 719
Program obligations 732 662
Deferred revenue 464 398
Current portion of debt 322 567
Other liabilities 459   427  
Total current liabilities 3,872 4,054
Noncurrent portion of debt 8,637 9,515
Participants’ share and residuals 415 523
Program obligations 380 498
Deferred tax liabilities, net 319 296
Other liabilities 1,192 1,186
Redeemable noncontrolling interest 253 246
Commitments and contingencies
Viacom stockholders’ equity:
Class A common stock, par value $0.001, 375.0 authorized; 49.4 and
49.4 outstanding, respectively
Class B common stock, par value $0.001, 5,000.0 authorized; 353.9
and 353.7 outstanding, respectively
Additional paid-in capital 10,161 10,145
Treasury stock, 392.8 and 393.1 common shares held in treasury,
respectively
(20,554 ) (20,562 )
Retained earnings 19,197 18,561
Accumulated other comprehensive loss (828 ) (737 )
Total Viacom stockholders’ equity 7,976 7,407
Noncontrolling interests 49   58  
Total equity 8,025   7,465  
Total liabilities and equity $ 23,093   $ 23,783  
                   
 
 

VIACOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
   

Six Months Ended
March 31,

(in millions) 2019   2018
OPERATING ACTIVITIES
Net earnings (Viacom and noncontrolling interests) $ 715 $ 827
Discontinued operations, net of tax (16 ) (12 )
Net earnings from continuing operations 699 815
Reconciling items:
Depreciation and amortization 104 108
Feature film and program amortization 2,086 2,245
Equity-based compensation 26 35
Deferred income taxes 22 (11 )
Loss on marketable securities 8
Operating assets and liabilities, net of acquisitions:
Receivables 110 (56 )
Production and programming (2,155 ) (2,376 )
Accounts payable and other current liabilities (188 ) (467 )
Other, net 7   6  
Net cash provided by operating activities 719   299  
 
INVESTING ACTIVITIES
Acquisitions and investments, net (391 ) (71 )
Capital expenditures (77 ) (64 )
Proceeds received from asset sales 5 44
Grantor trust proceeds 3   4  
Net cash used in investing activities (460 ) (87 )
 
FINANCING ACTIVITIES
Debt repayments (1,100 ) (1,000 )
Dividends paid (161 ) (161 )
Exercise of stock options 2
Other, net (65 ) (53 )
Net cash used in financing activities (1,326 ) (1,212 )
Effect of exchange rate changes on cash and cash equivalents (4 ) 28  
Net change in cash and cash equivalents (1,071 ) (972 )
Cash and cash equivalents at beginning of period 1,557   1,389  
Cash and cash equivalents at end of period $ 486   $ 417  
                   
 

SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL MEASURES

We utilize certain financial measures that are not in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”), including consolidated adjusted operating income, adjusted
earnings from continuing operations before provision for income taxes,
adjusted provision for income taxes, adjusted net earnings from
continuing operations attributable to Viacom and adjusted diluted
earnings per share (“EPS”) from continuing operations, to evaluate our
actual operating performance and for planning and forecasting of future
periods.

We also utilize free cash flow, which is a non-GAAP financial measure,
because we believe the use of this measure provides investors with an
important perspective on our liquidity, including our ability to service
debt and make investments in our business.

In addition, because foreign currency headwinds can be significant and
unpredictable and are outside of our control, we provide certain
financial information on a constant currency basis, excluding the impact
of currency fluctuations, in order to provide a clearer view of our
operating performance. This information compares results between periods
as if exchange rates had remained constant period-over-period. We
calculate this information by converting current-period local currency
results using prior-year period average foreign currency exchange rates.

We believe that each of these adjusted measures provides relevant and
useful information for investors because they clarify our actual
operating performance, make it easier to compare our results with those
of other companies, facilitate period-to-period comparisons of our
business performance and allow investors to review performance in the
same way as our management. Since these are not measures of performance
calculated in accordance with GAAP, they should not be considered in
isolation of, or as a substitute for, operating income, earnings from
continuing operations before provision for income taxes, provision for
income taxes, net earnings from continuing operations attributable to
Viacom, diluted EPS from continuing operations and net cash provided by
operating activities as indicators of operating performance and they may
not be comparable to similarly titled measures employed by other
companies.

The following tables reconcile our results of operations reported in
accordance with GAAP for the quarters and six months ended March 31,
2019 and 2018 to adjusted results that exclude the impact of certain
items identified as affecting comparability (non-GAAP).

 
(in millions, except per share amounts)
    Quarter Ended
March 31, 2019

Operating
Income

 

Earnings from
Continuing
Operations
Before
Provision

for Income Taxes

 

Provision for
Income Taxes (1)

 

Net Earnings
from Continuing
Operations
Attributable
to

Viacom

 

Diluted EPS
from Continuing
Operations

Reported results (GAAP) $ 573 $ 488 $ 120 $ 363 $ 0.90
Factors Affecting Comparability:
Restructuring and related costs (2) 24 24 6 18 0.04
Legal settlement (3) 40 40 9 31 0.08
Gain on marketable securities (4)   (38 ) (9 ) (29 ) (0.07 )
Adjusted results (Non-GAAP) $ 637   $ 514   $ 126   $ 383   $ 0.95  
 
 
 
(in millions, except per share amounts)
   

Six Months Ended
March 31, 2019

Operating
Income

 

Earnings from
Continuing
Operations
Before
Provision

for Income Taxes

 

Provision for
Income Taxes (1)

 

Net Earnings
from Continuing
Operations
Attributable
to

Viacom

 

Diluted EPS
from Continuing
Operations

Reported results (GAAP) $ 1,175 $ 929 $ 230 $ 681 $ 1.69
Factors Affecting Comparability:

Restructuring, related costs and
programming charges (2)

172 172 40 132 0.32
Legal settlement (3) 40 40 9 31 0.08
Gain on extinguishment of debt (5) (18 ) (4 ) (14 ) (0.03 )
Loss on marketable securities (4)   8   2   6   0.01  
Adjusted results (Non-GAAP) $ 1,387   $ 1,131   $ 277   $ 836   $ 2.07  
                                           
 
 
(in millions, except per share amounts)
   

Quarter Ended
March 31, 2018

Operating
Income

 

Earnings from
Continuing
Operations
Before
Provision

for Income Taxes

 

Provision for
Income Taxes (1)

 

Net Earnings
from Continuing
Operations

Attributable to
Viacom

 

Diluted EPS
from Continuing
Operations

Reported results (GAAP) $ 456 $ 287 $ 23 $ 256 $ 0.64
Factors Affecting Comparability:
Restructuring and related costs (2) 185 185 44 141 0.35
Gain on asset sale (6) (16 ) (16 ) (0.04 )
Investment impairment (7) 46 10 36 0.09
Discrete tax benefit (8)     46   (46 ) (0.12 )
Adjusted results (Non-GAAP) $ 641   $ 502   $ 123   $ 371   $ 0.92  
                                           
 

Contacts

Press:
Justin Dini
Senior
Vice President, Corporate Communications
(212) 846-2724
justin.dini@viacom.com

Justin
Blaber

Senior Director, Corporate Communications
(212)
846-3139
justin.blaber@viacom.com

Pranita
Sookai

Director, Corporate Communications
(212) 846-7553
pranita.sookai@viacom.com

Investors:
James
Bombassei

Senior Vice President, Investor Relations and
Treasurer
(212) 258-6377
james.bombassei@viacom.com

Jaime
Morris

Vice President, Investor Relations
(212) 846-5237
jaime.morris@viacom.com

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