The outside of the Warner Bros. Discovery Atlanta campus is pictured after the Writers Guild of America began its strike against the Alliance of Motion Pictures and Television Producers, in Atlanta, Georgia, on May 2, 2023.
Alyssa Pointer | Reuters
Warner Bros. Discovery missed analyst targets for each profit and revenue within the fourth quarter as promoting slumped and the corporate failed to offer free money flow guidance for 2024.
Shares of Warner Bros. Discovery closed down 10% on Friday after the report.
The corporate’s fourth-quarter net loss was $400 million, or 16 cents per share, compared with a lack of $2.1 billion, or 86 cents per share, throughout the year-ago period. Warner Bros. Discovery reported a 14% decline in linear television promoting revenue excluding changes in foreign exchange and a 4% drop in actual distribution revenue.
“This business just isn’t without its challenges,” Chief Executive Officer David Zaslav said throughout the company’s fourth-quarter earnings conference call. “Amongst them, we proceed to face the impacts of ongoing disruption within the pay TV ecosystem and a dislocated, linear promoting ecosystem. We’re difficult our leaders to search out revolutionary solutions.”
Here’s what the corporate reported for the quarter ended Dec. 31, versus analysts’ estimates, in keeping with LSEG, formerly referred to as Refinitiv:
- Loss per share: 16 cents vs. 7 cents expected
- Revenue: $10.28 billion vs. $10.35 billion expected
Fourth-quarter adjusted EBITDA was $2.5 billion, down 5% from a 12 months ago, excluding the impact of foreign exchange, as studio revenue lagged consequently of strikes by the Writers Guild of America and the Screen Actors Guild-American Federation of Television and Radio Artists.
Studio revenue dropped 17% to $3.17 billion within the quarter. Adjusted EBITDA for the unit fell 29% to $543 million.
“The studio has really been underperforming, including the tip of the 12 months, where we had some real struggle,” Zaslav said throughout the earnings conference call.
Free money flow
Warner Bros. Discovery generated $3.31 billion in free money flow within the fourth quarter and ended 2023 with $6.16 billion in free money flow, up 86% from a 12 months prior. Zaslav has prioritized boosting free money flow and shrinking the corporate’s debt.
Still, the corporate said there might be free money flow headwinds in 2024 as content spend increases with the completion of the writers’ and actors’ strikes last 12 months.
Chief Financial Officer Gunnar Wiedenfels declined to provide free money flow guidance for 2024 while noting that the Olympics, a commitment to increasing Max revenue with increased spend and the uncertainty of annual EBITDA could all weigh on money generation this 12 months.
“I expect 2024 to be one other strong free money flow 12 months,” Wiedenfels said. “I deliberately don’t want to provide a particular quantitative free money flow guidance.”
Warner Bros. Discovery paid down $1.2 billion of debt within the quarter and $5.4 billion in debt in 2023. It still has $44.2 billion of gross debt remaining after paying off $12 billion of debt within the last two years.
Max profitable for 2023
The corporate’s flagship subscription streaming service, Max, ended 2023 profitable, with full-year adjusted EBITDA of $103 million.
Zaslav has dramatically cut content spending for the streaming service since merging WarnerMedia and Discovery in 2022. His efforts have helped Max reach profitability before the streaming divisions of legacy media rivals Disney, Comcast‘s NBCUniversal and Paramount Global.
The corporate reported 97.7 million global direct-to-consumer subscribers, a 2% increase from the previous quarter.
The corporate said Max could be profitable in 2024, though it will lose money in the primary half of the 12 months because the studio increases content spending before recovering within the second half. Warner Bros. Discovery forecast Max would generate EBITDA of $1 billion for 2025.
Max’s promoting tier, currently only available within the U.S., might be rolled out to 40 international markets by the tip of 2024, Zaslav said throughout the call.
Sports JV
Zaslav didn’t offer any pricing details for the corporate’s forthcoming sports three way partnership, announced earlier this month with Disney and Fox, but he reiterated the product might be for the 60 million U.S. households that do not currently subscribe to cable.
Zaslav noted one in all the advantages to the service, set to launch in the autumn of 2024, is consumers won’t should worry about finding the suitable channel for playoff games for Major League Baseball, the National Hockey League or the National Basketball Association, since the streaming app will routinely send consumers to any game on Fox, ESPN, TNT or TBS.
President and Chief Executive Officer of Warner Bros. Discovery David Zaslav attends the world premiere of the 4k restorated 1959 movie “Rio Bravo” presented on the Opening Night of the 2023 TCM Classic Film Festival within the TCL Chinese Theatre in Hollywood, California, April 13, 2023.
Aude Guerrucci | AFP | Getty Images
“We do not see a variety of people unsubscribing to cable as a way to get this,” Zaslav said. “The younger generation that just isn’t subscribing, we’re capable of go after those who we’re missing.”
Warner Bros. Discovery continues to barter with the NBA for renewed media rights, but won’t overpay in keeping with the corporate’s internal estimates of the league’s value, Wiedenfels said.
“It’s extremely easy to lose control over sports rights investments,” Wiedenfels said. “That is not how we do it. We all know exactly what value we assign, and we stay disciplined during our discussions.
Disclosure: NBCUniversal is the parent company of CNBC.
Don’t miss these stories from CNBC PRO:
