Warner Bros Discovery : 2024 Q1 Earnings Release

Q1 2024 Earnings Press Release | May 9, 2024

Warner Bros. Discovery, Inc. Reports First Quarter 2024 Earnings Results

We are pleased with our progress in the first quarter as evidenced by strong results in important KPIs. We delivered meaningful growth in our streaming business with a nice acceleration in ad sales, generating nearly $90 million in positive EBITDA for the quarter. We will soon be rolling out Max to 29 countries across Europe, and the content lineup for Max over the coming year is one of our strongest ever. Warner Bros. Pictures also had a strong start to the year as the first studio to reach $1 billion in both overseas and global box office, and they have a great slate in the works. Importantly, we once again delivered strong free cash flow, even in our seasonally weakest FCF quarter. We continue to make bold moves to transform our company for the future as we position ourselves to take full advantage of the opportunities ahead.

- David Zaslav, President & CEO

Q1 Financial Summary & Operational Highlights

• Q1 total revenues were $9,958 million. Revenues decreased 7% ex-FX(1)(*) compared to the prior year quarter.
• Net loss available to Warner Bros. Discovery, Inc. was $(966) million, and includes $1,879 million of pre-tax acquisition- related amortization of intangibles, content fair value step-up, and restructuring expenses.
• Q1 total Adjusted EBITDA(2)(*) was $2,102 million, a 20% ex-FX decrease compared to the prior year quarter, primarily driven by the success of Hogwarts Legacy in the prior year quarter while Suicide Squad: Kill the Justice League generated significantly lower revenues in the current year quarter.
• Cash provided by operating activities increased to $585 million. Free cash flow(3)(*) increased to $390 million, a $1.3 billion improvement versus the prior year quarter.
• Repaid $1.1 billion of debt during Q1. Ended the quarter with $3.4 billion of cash on hand, $43.2 billion of gross debt(4)(*), and 4.1x net leverage(5)(*).
• • Launched a tender offer today to repurchase outstanding debt(6).
• Global DTC subscribers(7) were 99.6 million at the end of Q1, an increase of 2.0 million subscribers vs. Q4. Global DTC ARPU(8) was $7.83, a 4% ex-FX increase vs. the prior year quarter.
• Successfully launched Max and migrated subscribers to the new platform across Latin America.
• ID's breakout series, Quiet on Set: The Dark Side of Kids TV is the 3rd best series launch-to-date across both Max and HBO Max, behind only The Last of Us and House of the Dragon.
• Dune: Part Two and Godzilla x Kong: The New Empire have grossed over $1.2 billion in global box office. Dune: Part Two is the highest grossing movie of 2024 to date with over $700 million in global box office(9).

Three Months Ended March 31,			2024			2023		% Change
$ in millions						Reported	Ex-FX(*)
Total revenues	$	9,958	$	10,700		(7)%	(7)%
Net loss available to Warner Bros. Discovery, Inc.			(966)			(1,069)		10 %	NM
Adjusted EBITDA(*)			2,102			2,611		(19)%	(20)%
Cash provided by operating activities			585			(631)		NM
Free cash flow(*)			390			(930)		NM

NM - Not meaningful

Numbers presented in the following materials are on a rounded basis using actual amounts. Minor differences in totals and percentages may exist due to rounding

(*) A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.

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Q1 2024 Earnings Press Release | May 9, 2024

Studios Segment

Three Months Ended March 31,			2024			2023		% Change
$ in millions						Reported	Ex-FX(*)
Distribution	$	5	$	3		67 %	67 %
Advertising			4			3		33 %	33 %
Content			2,623			3,027		(13)%	(14)%
Other			189			179		6 %	4 %
Total revenues			2,821			3,212		(12)%	(13)%
Costs of revenues (excluding depreciation &			2,019			1,959		3 %	3 %
amortization)
Selling, general and administrative			618			646		(4)%	(5)%
Adjusted EBITDA		$	184		$	607		(70)%	(70)%

(*) A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.

Q1 2024 Highlights

• Studios revenues decreased 13% ex-FX to $2,821 million compared to the prior year quarter.
• • Content revenue decreased 14% ex-FX.
  • • Games revenue declined significantly due to the success of Hogwarts Legacy in the prior year quarter, while this year's Q1 release of Suicide Squad: Kill the Justice League generated significantly lower revenues.
    • TV revenue declined meaningfully as production delays resulting from the WGA and SAG-AFTRA strikes led to fewer episodes delivered during Q1 of this year, as well as the timing of content availabilities and licensing deals.
    • Theatrical revenue increased significantly due to Dune: Part Two, and higher carryover from 4Q23 titles vs. 4Q22 titles.
    • Home Entertainment revenue grew materially due to Wonka and Aquaman and the Lost Kingdom.
• Studios operating expenses increased 1% ex-FX to $2,637 million compared to the prior year quarter.
• • Costs of revenues increased 3% ex-FX, primarily driven by higher theatrical content expense and an impairment of Suicide Squad: Kill the Justice League, partially offset by lower TV content expense due to fewer episodes delivered.
  • SG&A decreased 5% ex-FX due to lower games marketing expense and lower bad debt expense, partially offset by higher theatrical marketing expense.
• Studios Adjusted EBITDA decreased 70% ex-FX to $184 million compared to the prior year quarter.

Dune: Part Two	Godzilla x Kong: The New Empire
Legendary & Warner Bros.	Legendary & Warner Bros.

Dune: Part Two: © 2024 Legendary and WBEI

Godzilla x Kong: The New Empire: © 2024 WBEI and Legendary GODZILLA TM & © Toho Co., Ltd.

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Q1 2024 Earnings Press Release | May 9, 2024

Networks Segment

Three Months Ended March 31,			2024			2023		% Change
$ in millions						Reported	Ex-FX(*)
Distribution	$	2,797	$	2,995		(7)%	(6)%
Advertising			1,987			2,237		(11)%	(11)%
Content			264			245		8 %	8 %
Other			77			104		(26)%	(29)%
Total revenues			5,125			5,581		(8)%	(8)%
Costs of revenues (excluding depreciation &			2,372			2,594		(9)%	(8)%
amortization)
Selling, general and administrative			634			694		(9)%	(8)%
Adjusted EBITDA		$	2,119		$	2,293		(8)%	(8)%

(*) A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.

Q1 2024 Highlights

• Networks revenues decreased 8% ex-FX to $5,125 million compared to the prior year quarter. The AT&T SportsNet exit negatively impacted the growth rate by approximately 200 bps(10)(*).
• • Distribution revenue decreased 6% ex-FX, or 3% ex-FX excluding the impact from the AT&T SportsNet exit. The decline in distribution revenue, excluding the AT&T SportsNet exit, was primarily driven by declines in U.S. pay-TV subscribers, partially offset by increases in U.S. contractual affiliate rates and inflationary impacts in Argentina.
  • Advertising revenue decreased 11% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks, as well as the soft linear advertising market in the U.S. and Latin America. The decline was, in part, offset by growth in EMEA. The AT&T SportsNet exit was a modest headwind to advertising revenue.
  • Content revenue increased 8% ex-FX, primarily driven by higher inter-segment content licensing to DTC.
• Networks operating expenses decreased 8% ex-FX to $3,006 million compared to the prior year quarter. The AT&T SportsNet exit favorably impacted the growth rate by approximately 300 bps(11)(*).
• • Costs of revenues decreased 8% ex-FX, primarily driven by the AT&T SportsNet exit, the allocation of U.S. sports costs to DTC, as well as lower general entertainment content expense. These benefits were partially offset by the timing of domestic sports rights expense, unfavorable inflationary impacts in Argentina, and higher election expenses. The AT&T SportsNet exit favorably impacted the growth rate by approximately 300 bps.
  • SG&A decreased 8% ex-FX, primarily driven by lower overhead expenses.
• Networks Adjusted EBITDA decreased 8% ex-FX to $2,119 million compared to the prior year quarter.

Tournament of Champions	Che Tempo Che Fa	Quiet on Set: The Dark Side of Kids TV
Food Network	Nove	ID

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Q1 2024 Earnings Press Release | May 9, 2024

Direct-to-Consumer Segment

Three Months Ended March 31,			2024			2023		% Change
$ in millions						Reported	Ex-FX(*)
Distribution	$	2,185	$	2,165		1 %	1 %
Advertising			175			103		70 %	70 %
Content			99			185		(46)%	(46)%
Other			1			2		(50)%	(50)%
Total revenues			2,460			2,455		- %	- %
Costs of revenues (excluding depreciation &			1,895			1,815		4 %	5 %
amortization)
Selling, general and administrative			479			590		(19)%	(19)%
Adjusted EBITDA		$	86		$	50		72 %	59 %

(*) A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.

Q1 2024 Highlights

• Total DTC subscribers(7) were 99.6 million, an increase of 2.0 million global subscribers vs. Q4. Global DTC ARPU(8) was $7.83, a 4% ex-FX increase from the prior year quarter.
• DTC revenues increased modestly to $2,460 million compared to the prior year quarter.
• • Distribution revenue increased 1% ex-FX, primarily driven by the prior year price increases in the U.S. and Latin America, and International subscriber growth, partially offset by lower subscribers in the U.S. largely resulting from continued linear wholesale subscriber declines.
  • Advertising revenue increased 70% ex-FX, primarily driven by higher engagement on Max in the U.S., which in part was due to the launch of B/R Sports on Max in October 2023, and ad-lite subscriber growth.
  • Content revenue decreased 46%, primarily driven by lower volume of third-party international licensing deals.
• DTC operating expenses decreased 1% ex-FX to $2,374 million compared to the prior year quarter.
• • Costs of revenues increased 5% ex-FX, primarily driven by the allocation of U.S. sports costs, partially offset by lower non-sports content expense and lower content licensing costs.
  • SG&A decreased 19% ex-FX, primarily driven by lower personnel and overhead expenses.
• DTC Adjusted EBITDA was $86 million, a $36 million year-over-year improvement.

DTC Subscribers

In millions, except ARPU			Q1 2024			Q4 2023			Q1 2023
Domestic	ARPU(8)	$	11.72	$	11.65	$	10.82
	Total subscribers(7)			52.7			52.0			55.3
International	Total subscribers(7)			46.9			45.6			43.2
	ARPU(8)	$	3.75	$	3.88	$	3.68
Total DTC subscribers(7)			99.6			97.7			98.5
Global ARPU(8)	$	7.83	$	7.94	$	7.54

Note: Domestic includes the U.S. and Canada. Subscriber counts in the above table are rounded and minor differences in totals may exist. Refer to page 14 for more information.

True Detective: Night Country	Curb Your Enthusiasm
HBO	HBO

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Q1 2024 Earnings Press Release | May 9, 2024

Corporate

Three Months Ended March 31,			2024			2023		% Change
$ in millions						Reported	Ex-FX(*)
Adjusted EBITDA		$	(346)		$	(355)		3 %	2 %

• 1. A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.
• Corporate Adjusted EBITDA loss improved $9 million, primarily driven by lower personnel and technology-related expenses, partially offset by higher securitization expense.

Inter-segment Eliminations

Three Months Ended March 31,			2024			2023
$ in millions
Inter-segment revenue eliminations	$	(449)	$	(548)
Inter-segment expense eliminations			(508)			(564)
Adjusted EBITDA		$	59		$	16

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Q1 2024 Earnings Press Release | May 9, 2024

Leverage & Liquidity

Q1 2024 Leverage Highlights

• Ended Q1 with $3.4 billion of cash on hand, $43.2 billion of gross debt(*), and 4.1x net leverage(*).
• In Q1 2024, the Company repaid $1.1 billion of debt.
• • Launched a tender offer today to repurchase outstanding debt(6).
• As of March 31, 2024, the average duration of the Company's outstanding debt was 15.0 years with an average cost of 4.6%.
• The Company maintains an undrawn $6.0 billion revolving credit facility.

Free Cash Flow

Three Months Ended March 31,

$ in millions			2024			2023		% Change
Cash provided by (used in) operating activities	$	585	$	(631)		NM
Purchases of property and equipment			(195)			(299)	35 %
Free cash flow(*)		$	390		$	(930)		NM

(*) A non-GAAP financial measure; see the section starting on page 13 titled Definitions & Sources for additional details.

Q1 2024 Free Cash Flow Highlights

• Q1 2024 cash provided by operating activities increased to $585 million from $(631) million in the prior year quarter. Free cash flow increased to $390 million from $(930) million primarily driven by a more disciplined approach to content investment and the timing of production, on-going working capital improvement initiatives, and lower cash restructuring costs, partially offset by lower operating profits.
• As of March 31, 2024, the Company had $5,170 million drawn on its revolving receivables program, a $30 million decrease vs. Q4.

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Q1 2024 Earnings Press Release | May 9, 2024

2024 Outlook

Warner Bros. Discovery, Inc. ("Warner Bros. Discovery", the "Company", "we", "us", or "our" ) may provide forward-looking commentary in connection with this earnings announcement on its quarterly earnings conference call. Details on how to access the audio webcast are included below.

Q1 2024 Earnings Conference Call Information

Warner Bros. Discovery will host a conference call today, May 9, 2024 at 8:00 a.m. ET, to discuss its first quarter 2024 financial results. To access the webcast of the earnings call, please visit the Investor Relations section of the Company's website at

www.wbd.com.

Cautionary Statement Concerning Forward-Looking Statements

Information set forth in this communication contains certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties and on information available to Warner Bros. Discovery as of the date hereof. The Company's actual results could differ materially from those stated or implied due to risks and uncertainties associated with its business, which include the risk factors disclosed in the Company's filings with the U.S. Securities and Exchange Commission, including but not limited to the Company's most recent Annual Report on Form 10-K and reports on Form 10-Q and Form 8-K.

Forward-looking statements include statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as "anticipate," "believe," "could," "continue," "estimate," "expect," "intend," "may," "should," "will" and "would" or similar words. Forward-looking statements include, without limitation, statements regarding future financial and operating results, the Company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Warner Bros. Discovery expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this communication may also contain certain non-GAAP financial measures, identified with an "(*)". Reconciliations between the non-GAAP financial measures and the closest GAAP financial measures are available in the financial schedules in this release and in the "Quarterly Results" section of the Warner Bros. Discovery, Inc. investor relations website at: https://ir.wbd.com.

About Warner Bros. Discovery

Warner Bros. Discovery is a leading global media and entertainment company that creates and distributes the world's most differentiated and complete portfolio of branded content across television, film, streaming and gaming. Available in more than 220 countries and territories and 50 languages, Warner Bros. Discovery inspires, informs and entertains audiences worldwide through its iconic brands and products including: Discovery Channel, Max, discovery+, CNN, DC, TNT Sports, Eurosport, HBO, HGTV, Food Network, OWN, Investigation Discovery, TLC, Magnolia Network, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, Warner Bros. Motion Picture Group, Warner Bros. Television Group, Warner Bros. Pictures Animation, Warner Bros. Games, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies, Discovery en Español, Hogar de HGTV and others. For more information, please visit www.wbd.com.

Contacts

Media	Investor Relations
Laura Watson	Andrew Slabin	Peter Lee	Gabriele Cattoni
[phone]	[phone]	[phone]	[phone]
[e-mail]	[e-mail]	[e-mail]	[e-mail]

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Q1 2024 Earnings Press Release | May 9, 2024

Warner Bros. Discovery, Inc. Consolidated Statements of Operations

			Three Months Ended March 31,
Unaudited; in millions, except per share amounts
	2024			2023
Distribution	$	4,985	$	5,163
Advertising		2,148			2,298
Content		2,558			2,954
Other		267			285
Total revenues		9,958			10,700
Costs of revenues, excluding depreciation and amortization		6,058			6,685
Selling, general and administrative		2,232			2,388
Depreciation and amortization		1,888			2,058
Restructuring and other charges		35			95
Impairment and loss on dispositions		12			31
Total costs and expenses		10,225			11,257
Operating loss		(267)			(557)
Interest expense, net		(515)			(571)
Loss from equity investees, net		(48)			(37)
Other income (expense), net		11			(73)
Loss before income taxes		(819)			(1,238)
Income tax (expense) benefit		(136)			178
Net loss		(955)			(1,060)
Net income attributable to noncontrolling interests		(7)			(8)
Net income attributable to redeemable noncontrolling interests		(4)			(1)
Net loss available to Warner Bros. Discovery, Inc.	$	(966)	$	(1,069)
Net loss per share available to Warner Bros. Discovery, Inc. Series A common stockholders:
Basic		$	(0.40)		$	(0.44)
Diluted	$	(0.40)	$	(0.44)
Weighted average shares outstanding:
Basic		2,443			2,432
Diluted		2,443			2,432

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Q1 2024 Earnings Press Release | May 9, 2024

Warner Bros. Discovery, Inc. Consolidated Balance Sheets

Unaudited; in millions, except par value			March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	2,976	$	3,780
Receivables, net			6,303			6,047
Prepaid expenses and other current assets			4,623			4,391
Total current assets			13,902			14,218
Film and television content rights and games			20,439			21,229
Property and equipment, net			5,937			5,957
Goodwill			34,891			34,969
Intangible assets, net			36,648			38,285
Other noncurrent assets			8,002			8,099
Total assets		$	119,819		$	122,757
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,245	$	1,260
Accrued liabilities			10,288			10,368
Deferred revenues			1,993			1,924
Current portion of debt			3,430			1,780
Total current liabilities			16,956			15,332
Noncurrent portion of debt			39,148			41,889
Deferred income taxes			8,303			8,736
Other noncurrent liabilities			10,118			10,328
Total liabilities			74,525			76,285
Commitments and contingencies
Redeemable noncontrolling interests			179			165
Warner Bros. Discovery, Inc. stockholders' equity:
Series A common stock: $0.01 par value; 10,800 and 10,800 shares authorized;			27			27
2,679 and 2,669 shares issued; and 2,449 and 2,439 shares outstanding
Preferred stock: $0.01 par value; 1,200 and 1,200 shares authorized, 0 shares			-			-
issued and outstanding
Additional paid-in capital			55,175			55,112
Treasury stock, at cost: 230 and 230 shares			(8,244)			(8,244)
Accumulated deficit			(1,894)			(928)
Accumulated other comprehensive loss			(913)			(741)
Total Warner Bros. Discovery, Inc. stockholders' equity			44,151			45,226
Noncontrolling interests			964			1,081
Total equity			45,115			46,307
Total liabilities and equity		$	119,819		$	122,757

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Q1 2024 Earnings Press Release | May 9, 2024

Warner Bros. Discovery, Inc. Consolidated Statements of Cash Flows

Unaudited; in millions

Operating Activities

Net loss

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Content rights amortization and impairment

Depreciation and amortization

Deferred income taxes

Share-based compensation expense

Equity in losses of equity method investee companies and cash distributions

Gain from derivative instruments, net

Other, net

Changes in operating assets and liabilities, net of acquisitions and dispositions:

Receivables, net

Film and television content rights, games, and production payables, net

Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities

Foreign currency, prepaid expenses and other assets, net

Cash provided by (used in) operating activities

Investing Activities

Purchases of property and equipment

Investments in and advances to equity investments

Other investing activities, net

Cash used in investing activities

Financing Activities

Principal repayments of term loans

Principal repayments of debt, including premiums and discounts to par value

Borrowings from debt, net of discount and issuance costs

Distributions to noncontrolling interests and redeemable noncontrolling interests

Borrowings under commercial paper program and revolving credit facility

Repayments under commercial paper program and revolving credit facility

Other financing activities, net

Cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Net change in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, beginning of period

Cash, cash equivalents, and restricted cash, end of period

Three Months Ended March 31,

20242023

$	(955)		$	(1,060)
	3,827			4,723
	1,888			2,058
	(399)			(669)
	101			111
	58			62
	(43)			(23)
	7			97
	(304)			(486)
	(2,778)			(4,051)
	(753)			(1,652)
	(64)			259
	585			(631)
	(195)			(299)
	(53)			(13)
	41			55
	(207)			(257)
	-			(1,500)
	(1,047)			(106)
	-			1,500
	(130)			(237)
	2,200			932
	(2,200)			(933)
	(60)			(88)
	(1,237)			(432)
	(74)			29
	(933)			(1,291)
	4,319			3,930
$	3,386		$	2,639

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