WBD Comes Up Short During 2Q

Warner Bros. Discovery reported second-quarter results Thursday that fell below Wall Street expectations across the board and revealed subscriber totals that were down from the previous quarter.

Global direct-to-consumer streaming subscribers at the end of the period were 95.8 million, below the 96.7 million subscribers analysts were expecting according to StreetAccount, and a decrease of nearly 2 million from the end of the first quarter.

The company launched its combined Max streaming service during the second quarter, merging HBO content with unscripted hits from the Discovery networks into one platform.

CNBC reports customers dropping their Discovery+ subscriptions for Max were likely to blame for the decline in subscribers. Data provider Antenna estimated that Discovery+ cancellations were up about 68% compared with June 2022 due to the switchover to Max.

Still, the company said it had repaid $1.6 billion in debt during the quarter and announced a tender offer aimed to pay down up to $2.7 billion more.

It follows a tender offer from June, which also drove the stock. Paying down its heavy debt load stemming from the 2022 merger of Warner Bros. and Discovery has been a focus as the company looks to return to investment-grade status by the end of the year.

The company ended the second quarter with $47.8 billion in debt and $3.1 billion in cash on hand.

David Zaslav

“The team has worked really hard in the last 16 months to restructure this business for the future to build ... a real storytelling company where we can continue to invest our meaningful free cash flow to serve all of our diverse businesses,” CEO David Zaslav said on an earnings call Thursday. “The de-levering we’re doing now, which is really accelerated — and accelerating — is a key element of making this turn.”

The Wall Street Journal reports Zaslav said the company was in a position to turn its attention to news and sports now that its new streaming service, Max—which combined the company’s two main streaming platforms, HBO Max and Discovery+—was launched in late May.

“News and sports are important differentiators. They’re compelling and they make these platforms come alive,” Zaslav said during a call with investors to discuss the company’s second-quarter earnings. “You will hear from us on that soon.”

Warner Bros. Discovery, whose assets include HBO, CNN, TNT and the Warner Bros. movie and TV studios, said it paid down $1.6 billion in debt during the quarter, lowering its debt load to $47.8 billion. Warner Bros. Discovery also announced a new debt tender offer for up to $2.7 billion.

Here’s what the company reported for the quarter ended June 30:

• Loss per share: 51 cents vs. 38 cents expected
• Revenue: $10.36 billion vs. $10.44 billion expected
• WBD reported a net loss of $1.24 billion, or 51 cents per share, a sharp improvement from a net loss of $3.42 billion, or $1.50 per share, a year earlier.
• Revenue of $10.36 billion was 5% higher year over year on an actual basis, but 4% lower when taking into account the impact of foreign currency and the merger, which closed early last year.

The company’s direct-to-consumer streaming segment turned a profit for the first time during the first quarter of this year, but posted a loss of $3 million for the second quarter. Company executives had warned of that reversal, citing costs associated with the Max launch.

Executives had been planning to combine the two streamers for more than a year as part of the rationale for the merger between Warner Bros. and Discovery. The pricing for subscribers has so far remained the same – $9.99 a month with commercials and $15.99 a month without ads. 

Warner Bros. Discovery’s studios dragged down earnings, with total revenue for the segment falling 8% to $2.58 billion compared with last year, when the company had a stronger film slate that included “The Batman.” On a pro forma combined basis — factoring in the impact the merger — the segment was down 23%.

CFO Gunnar Wiedenfels said Thursday that the company’s films underperformed at the box office during the second quarter. This past quarter “The Flash” was released in theaters, a flop that barely topped $100 million at the domestic box office. “It’s ironic to have to say that, given how successful ‘Barbie’ has been,” Wiedenfels said, noting the impact of that recent blockbuster will be felt in the third quarter.