10-KPeriod: FY2016

Warner Bros. Discovery, Inc. Annual Report, Year Ended Dec 31, 2016

Filed February 14, 2017For Securities:WBD

Summary

Discovery Communications, Inc. (now Warner Bros. Discovery) reported its 2016 fiscal year-end results, highlighting substantial global reach through its extensive network portfolio, including flagship brands like Discovery Channel and TLC. The company's revenue streams were primarily driven by distribution and advertising fees from pay-TV and free-to-air networks across its U.S. and International segments. While the U.S. Networks segment demonstrated solid growth in revenue and Adjusted OIBDA, driven by contractual rate increases, the International Networks segment experienced a slight revenue decline and a more significant drop in Adjusted OIBDA, impacted by higher content expenses and shifts in advertising revenue dynamics. Financially, the company reported a total revenue of $6.5 billion and net income of $1.2 billion for 2016. Discovery Communications actively managed its capital structure through debt issuances and significant share repurchases, indicating a focus on returning value to shareholders. The company also navigated various market risks, including the evolving digital content landscape and foreign currency fluctuations, particularly in the context of Brexit.

Financial Highlights

47 data points
Beta

Revenue

$6.50B

62.6% Gross Margin

Net Income

$1.19B

18.4% Net Margin

Total Assets

$15.67B

Cash & Equivalents

$300.00M

Free Cash Flow

$1.29B

Financial Statements
Beta
Revenue$6.50B
Cost of Revenue$2.43B
Gross Profit$4.07B
SG&A Expenses$1.69B
Operating Expenses$4.44B
Operating Income$2.06B
Interest Expense$353.00M
Net Income$1.19B

Key Highlights

  • 1Total revenues reached $6.5 billion in 2016, a 2% increase year-over-year, with Distribution revenue growing 5% and Advertising revenue showing a slight 1% decrease.
  • 2The U.S. Networks segment generated $3.3 billion in revenue and $1.9 billion in Adjusted OIBDA, representing 51% and 79% of total consolidated figures, respectively, showcasing its significant contribution.
  • 3International Networks contributed $3.0 billion in revenue and $848 million in Adjusted OIBDA, making up 47% and 35% of the consolidated totals, respectively.
  • 4The company acquired exclusive broadcast rights across all media platforms in Europe for the Olympic Games between 2018 and 2024 for €1.3 billion ($1.5 billion).
  • 5Discovery Communications returned significant capital to shareholders through stock repurchases, totaling $1.37 billion in 2016, with $1.1 billion remaining authorization as of December 31, 2016.
  • 6The company reported consolidated net income available to Discovery Communications, Inc. of $1.19 billion in 2016, a 15% increase from the previous year.
  • 7As of December 31, 2016, the company had $7.9 billion in total debt and maintained a $2.0 billion revolving credit facility.

Frequently Asked Questions

Discovery Communications' primary revenue drivers were distribution fees from cable, satellite, and telecommunications providers (affiliate fees) and advertising sales on its television networks and digital products. These two streams accounted for the vast majority of the company's total revenue.

The U.S. Networks segment performed more strongly, with higher revenue growth and a significantly larger contribution to Adjusted OIBDA (79% of total). The International Networks segment saw a slight revenue decrease and a 12% drop in Adjusted OIBDA, primarily due to increased content spending and shifts in advertising revenue, despite efforts to grow distribution.

Discovery Communications actively managed its capital through debt issuances and significant share repurchases. In 2016, the company repurchased $1.37 billion of its common stock, indicating a strong focus on returning value to shareholders and managing its share count.

Key risks identified include shifts in consumer behavior due to technological innovations affecting content distribution, consolidation among cable and satellite providers leading to increased leverage for distributors, the unpredictable nature of content acceptance by viewers, cybersecurity threats, intense competition, and risks associated with international operations such as currency fluctuations and regulatory changes (e.g., Brexit).