Warner Bros. Discovery, Inc.
CEO : Mr. David M. Zaslav
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 245.4% YoY | -223.2% | -1181.6% | 2023-02-23 |
David Zaslav says,
Financial Highlights
- Reported over $3.3 billion of free cash flow in 2022
- Net leverage expected to be below 4x by the end of 2023
- Direct-to-consumer EBITDA losses reduced by $500 million YoY to $200 million in Q4
- 1.1 million net sub adds in Q4
- Close to breakeven segment EBITDA in Q1
Streaming Services
- Combined streaming service set to launch in the US in a few months, followed by Latin America and markets in EMEA and APAC in ’24
- Product to offer compelling content for every member of the household, SVOD and ad-lite tiers, and a significantly enhanced product platform
- HBO Max back on Amazon Prime video channels
- Renewed agreements representing 30% of US affiliate revenues
- Fast content deals with Roku and Tubi, adding hundreds of TV shows and movies to the platforms
Motion Picture and Gaming
- Mike and Pam signed a deal to make multiple Lord of the Rings movies, DC Studios has 5 films and 5 television series in the works
- 4 DC films set to release this year, starting with Shazam in two weeks and followed by The Flash
- Hogwarts Legacy launched, reimagining 1 of the biggest global franchises with more than $850 million in retail sales
- Mortal Combat 12 and Suicide Squad – Kill The Justice League also set for release this year
Linear Ad Sales
- Top priority at the moment with ongoing secular challenges and cyclical headwinds
- Contending with recent share shifts away from portfolio during NFL and College Football season and World Cup
- Kathleen Finch and team revitalizing nets and using exceptional library of film and television content to benefit linear and cable networks
Television Content and HBO
- Warner Bros. Television Group has more than 110 shows currently in production
- HBO Originals, Euphoria, House of the Dragon, White Lotus, and The Last of Us are recent successes averaging as many as 20 million viewers in episode with strong week-over-week growth
- The Last Of Us viewed by 35 million people after just 5 weeks
- HBO is streaming’s new must-see TV with all of its cultural impact and excitement
Gunnar Wiedenfels says,
Efficiency and Cost Savings
- Working on a total potential opportunity of $5 billion over the next few years
- Confident in a path to at least $4 billion of savings largely addressable through 2024
- Realized over $1 billion of synergy through the end of 2022
Financial Priorities
- Delivering against synergy and transformation targets where incremental $2 billion of cost capture in 2023
- Partnering with business leaders to embrace a more rigorous analytical framework for capital allocation decisions
- Evaluating capital allocation opportunities to enhance long-term asset value and growth
- Driving overall efficiency and free cash flow conversion towards the near-term goal of 1/3 to 1/2 conversion of adjusted EBITDA with longer-term upside towards the 60% goal
- Laser-focused on delevering the balance sheet with net leverage comfortably inside of 4x by the end of 2023
Studio Segment Performance
- Performance negatively impacted by lower TV licensing revenues and difficult year-over-year comps
- Lower content expenses, distribution fees, and marketing costs slightly offset revenue headwinds
- 2023 will be a pivotal year for the studio segment with larger and broader release slates
Networks Segment Performance
- Revenue decreased 6%, as global advertising revenues declined 14% and distribution revenues decreased 2%
- Underlying advertising trends, particularly in the U.S., have continued to soften through the fourth quarter
- Successful completion of affiliate renegotiations accounted for more than 30% of U.S. distribution revenues and brought our portfolio together coterminously
D2C Segment Performance
- Delivered a marked improvement across a number of key operational KPIs leading to a healthy sequential improvement to financial performance
- Global core subscribers increased 1.1 million sequentially and 10 million year-on-year, while global ARPU increased modestly to $7.58
- Expect segment EBITDA to be more or less breakeven in Q1 and long-term segment targets of breakeven in the U.S. in 2024 and $1 billion of profitability in 2025 globally
Financial Outlook
- Expect 2023 pro forma adjusted EBITDA to be in the low to mid $11 billion range, representing growth of low to mid-20%
- Expect to convert 1/3 to half of EBITDA into free cash flow with the key determinants and drivers of growth being the magnitude of EBITDA
- Cash cost to achieve synergy and transformation efforts will be around the higher end of the $1 billion to $1.5 billion guide
- Expect the cadence of free cash flow to represent the low point for the year in Q1 given the timing of sports rights payments, timing of content outlays and cash interest payments on a large portion of the acquisition debt
Q & A sessions,
Challenging Advertising Market
- The macro environment for advertising is challenging, and the scatter market is slow
- Digital inventory has softened despite having tremendous breadth with live news, live sports, entertainment, nonfiction
- The company took a position to drive price rather than extra volume in the upfront, which has impacted them compared to others
DC 10-Year Plan
- The DC 10-year plan is one of the biggest value creation opportunities for the company
- The company has an overwhelming advantage in the marketplace with the IP that they own
- The company wants to optimize the DC tentpole products that are critical to driving free cash flow and to nourishing the overall segment
Curation and Content
- The power of content is most significant when people can watch it and have a shared experience
- Curating content so that people can watch it and have a shared experience is a crucial piece of the Warner Bros. Discovery advantage
- The best thing the company has going for them is the hard work they did in the last two years, and they are accelerating forward with exciting times ahead
AVOD Service
- The company wants to super-serve their streaming service, which is a top priority, as well as an AVOD service so that they can reach everyone in every country, everywhere in the world
- They want to run this company to drive free cash flow and the ability to monetize a lot of the content that isn’t critical to subscriber growth
- The company can create a flywheel of their own, where they own the full ecosystem, the subscription, the ad-lite, and the ad-free
Growing from a Challenging Market
- The company is well-positioned to grow despite the challenging advertising market
- The team has been restructured with development-focused doers, who are running the portfolio as one integrated portfolio
- The company is adjusting its time-tested approach to cross-promotion to the larger portfolio and the larger number of assets that they’re promoting and seeing some real opportunity here
No bad stock 