01—Abstract
Summary
Summary of the 10-K filed February 14, 2017. Cited figures are marked; the original filing is the authoritative source.
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 billiona 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.
02—Key points
Key Highlights
- Total 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.
- The 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.
- International Networks contributed $3.0 billion in revenue and $848 million in Adjusted OIBDA, making up 47% and 35% of the consolidated totals, respectively.
- The 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).
- Discovery 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.
- The company reported consolidated net income available to Discovery Communications, Inc. of $1.19 billion in 2016, a 15% increase from the previous year.
- As of December 31, 2016, the company had $7.9 billion in total debt and maintained a $2.0 billion revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Warner Bros. Discovery, Inc. kept $0.18.
- Revenue$6.50B100.0%
- Cost of revenue−$2.43B37.4%
- Gross profit$4.07B62.6%
- Operating costs−$2.01B30.9%
- Operating income$2.06B31.7%
- Interest, other & tax−$864.0M13.3%
- Net income$1.19B18.4%
Where FY2016 revenue went
$6.50B- Cost of revenue: $2.43B, 37% of revenue
- SG&A: $1.69B, 26% of revenue
- Net income: $1.19B, 18% of revenue
- Interest, other & tax: $864.0M, 13% of revenue
- Other operating costs: $317.0M, 4.9% of revenue
Kept 18% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 14, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $6.50B$6.39B | +1.6% |
| Cost of Revenue | $2.43B$2.34B | +3.8% |
| Gross Profit | $4.07B$4.05B | +0.3% |
| SG&A Expenses | $1.69B$1.67B | +1.3% |
| Operating Expenses | $4.44B$4.41B | +0.7% |
| Operating Income | $2.06B$1.99B | +3.7% |
| Interest Expense | $353.00M$330.00M | +7.0% |
| Net Income | $1.19B$1.03B | +15.5% |
05—Questions
Frequently Asked Questions
What were Discovery Communications' primary revenue drivers in 2016?
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.
How did the International Networks segment perform compared to the U.S. Networks segment?
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.
What was the company's strategy for managing its capital and returning value to shareholders?
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.
What are the key risks identified by the company in its operations?
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).
06—Continue