HomeMost PopularInvestingWarner Bros. Discovery (WBD) Q1 Earnings Miss, Ad Sales Fall

Warner Bros. Discovery (WBD) Q1 Earnings Miss, Ad Sales Fall

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Warner Bros. Discovery WBD reported first-quarter 2024 loss of 40 cents per share, wider than the Zacks Consensus Estimate of a loss of 24 cents. The company had incurred a loss of 44 cents in the year-ago quarter.

Revenues decreased 6.9% year over year to $9.95 billion, which missed the Zacks Consensus Estimate of $10.28 billion.

Advertising revenues decreased 6.5% year over year to $2.14 billion. Distribution revenues dropped 3.4% year over year to $4.98 billion. Content revenues declined 13.4% year over year to $2.55 billion. Other revenues were $267 million, up 6.3% from the year-ago quarter.

Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise

Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise

Warner Bros. Discovery, Inc. price-consensus-eps-surprise-chart | Warner Bros. Discovery, Inc. Quote

Top-Line Details

Studios (28.3% of total revenues) reported revenues of $2.82 billion, down 12.2% from the year-ago quarter. Revenues decreased 13% ex-FX from the prior-year quarter on a pro forma combined basis.

Within the segment, content revenues fell 14% ex-FX to $2.62 billion. Games revenues declined significantly due to the success of Hogwarts Legacy in the prior-year quarter, while the release of Suicide Squad: Kill the Justice League in the first quarter generated significantly lower revenues.

TV revenues declined meaningfully as production delays resulting from the WGA and SAG-AFTRA strikes led to fewer episodes delivered during the first quarter, as well as the timing of content availabilities and licensing deals.

Theatrical revenues increased significantly due to Dune: Part Two and higher carryover from fourth-quarter 2024 titles compared with the year-ago quarter.

Dune: Part Two and Godzilla x Kong: The New Empire have grossed more than $1.2 billion in global box office. Dune: Part Two is the highest-grossing movie of 2024 to date, with more than $700 million in the global box office.

Home Entertainment revenues grew materially due to Wonka and Aquaman and the Lost Kingdom.

Networks revenues (51.5% of total revenues) decreased 8.2% on a year-over-year basis to $5.12 billion. The AT&T T SportsNet exit negatively impacted the growth rate by approximately 200 basis points.

Within the segment, distribution revenues decreased 6% ex-FX, or 3% ex-FX excluding the impact from the AT&T SportsNet exit. The decline in distribution revenues, excluding the AT&T SportsNet exit, was primarily due to a fall in U.S. pay-TV subscribers, partially offset by improvements in U.S. contractual affiliate rates and inflationary impacts in Argentina.

Advertising revenues declined 11% ex-FX, primarily attributable to audience declines in domestic general entertainment and news networks, as well as the soft linear advertising market in the U.S. and Latin America, offset by growth in EMEA. The AT&T SportsNet exit was a modest headwind to advertising revenues.

Content revenues increased 8% ex-FX, primarily driven by higher inter-segment content licensing to DTC.

DTC revenues (24.7% of revenues) rose 0.2% from the year-ago quarter to $2.46 billion.

Within the segment, distribution revenues increased 1% ex-FX, primarily driven by the prior year’s price increases in the U.S. and Latin America, and international subscriber growth, partially offset by lower subscribers in the United States resulting from continued linear wholesale subscriber declines.

Advertising revenues surged 70% ex-FX, primarily driven by higher engagement on Max in the United States due to the launch of B/R Sports on Max in October 2023 and ad-lite subscriber growth.

Content revenues plunged 46%, primarily due to lower volume of third-party international licensing deals.

Subscriber Details

WBD ended first-quarter 2024 with 99.6 million global DTC subscribers, which increased 2 million sequentially. Global DTC ARPU was $7.83, up 4% ex-FX year over year.

Domestic subscribers rose 0.7 million sequentially to 52.7 million while international subscribers increased 1.3 million sequentially to 46.9 million.

Operating Details

In the first quarter, selling, general and administrative expenses decreased 6.5% from the year-ago quarter’s levels to $2.23 billion.

Adjusted EBITDA declined 19.5% from the year-ago quarter’s levels to $2.1 billion.

First-quarter 2024 cash provided by operating activities came in at $585 million compared with $631 million in the prior-year period.

The company reported free cash flow of $390 million against a negative free cash flow of $930 million in the prior-year period.

The company reported an operating loss of $267 million compared with an operating loss of $557 million in the year-ago quarter.

Balance Sheet

As of Mar 31, 2024, cash & cash equivalents were $2.97 billion compared with $3.78 billion as of Dec 31, 2023.

WBD repaid $1.1 billion of debt during the reported quarter and ended the quarter with $43.2 billion of gross debt and 4.1x net leverage.

The company maintains an undrawn $6 billion revolving credit facility.

Zacks Rank & Stocks to Consider

Currently, Warner Bros. Discovery carries a Zacks Rank #3 (Hold).

Some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector are Manchester United MANU and Netflix NFLX, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Manchester United have plunged 24% year to date. The Zacks Consensus Estimate for MANU’s 2024 revenues is pegged at $827.26 million, indicating a year-over-year increase of 5.83%. The consensus mark is pegged at a loss of 37 cents per share, which has remained steady over the past 30 days.

Shares of Netflix have jumped 25.2% year to date. The Zacks Consensus Estimate for NFLX’s 2024 revenues is pegged at $38.68 billion, indicating year-over-year growth of 14.69%. The consensus mark for earnings is pegged at $18.3 per share, up 7.4% over the past 30 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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