Warner Bros. Discovery's Q1 Revenue Drops as Audience and Market Challenges Persist

Zinger Key Points
  • Warner Bros. Discovery reports Q1 revenue drop to $9.96B: Misses $10.23B estimate, EPS loss wider than expected.
  • WBD sees subscriber growth despite revenue fall: Total DTC subscribers rise to 99.6 million, streaming bundle with Disney on the horizon.

Warner Bros. Discovery, Inc WBD reported a fiscal first-quarter revenue decline of 7% ex-FX year-on-year to $9.96 billion, missing the consensus of $10.23 billion

EPS loss of $(0.40) missed the consensus loss of $(0.23). Net loss was $(966) million versus $(1.07) billion year-over-year.

The company reported an adjusted EBITDA of $2.10 billion, a 20% ex-FX decline, primarily driven by the success of Hogwarts Legacy in the prior year quarter, while Suicide Squad: Kill the Justice League generated significantly lower revenues.

Studios revenues were $2.82 billion, down 13% ex-FX Y/Y on a pro forma combined basis. Content revenue decreased 14% due to the impact of the WGA and SAG-AFTRA strikes and specific large licensing deals in the prior year. 

Networks revenues were $5.13 billion, down by 8% ex-FX, on a pro forma combined basis.  The AT&T SportsNet exit negatively impacted the growth rate by 200 bps.

Distribution revenue decreased 6% ex-FX, primarily driven by declines in U.S. pay-TV subscribers. 

Advertising revenue fell 11% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets, mainly in the U.S.  and Latin America.

DTC revenues were $2.46 billion, flat ex-FX Y/Y on a pro forma combined basis. Distribution revenue increased by 1% ex-FX, primarily attributable to price increases in the U.S., Latin America, and specific international markets.

Advertising revenue increased 70% ex-FX, primarily driven by higher engagement on Max in the U.S.

Total DTC subscribers increased to 99.6 million from 98.5 million a year ago. Global DTC ARPU was $7.83, a 4% ex-FX increase from the prior year.

WBD generated $585 million in operating cash flow and held $3.4 billion in cash and equivalents as of March 31, 2024. 

WBD’s earnings follow the company’s plans to bundle its streaming services with those of Walt Disney Co DIS, binding Max, Disney+, and Hulu and offering it to consumers this summer at a discount, CNBC reports.

Price Action: WBD shares traded lower by 2.18% at $7.63 premarket at the last check Thursday.

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