01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Warner Bros.
Discovery, Inc. (WBD), formerly Discovery, Inc., is presenting its 2021 annual report, highlighting significant events and operational performance leading up to its transformative combination with AT&T's WarnerMedia business. The anticipated merger, structured as a Reverse Morris Trust transaction, is expected to create a leading global entertainment company. During 2021, WBD continued to grow its advertising and distribution revenues, driven by the launch and expansion of its direct-to-consumer (DTC) streaming service, discovery+.
Financially, the company saw a 14% increase in total revenues, reaching $12.19 billiona, while operating income declined by 20% to $2.01 billion, impacted by increased costs for content, particularly related to the Olympics and discovery+ investment, and higher selling, general, and administrative expenses. The company ended the year with $3.9 billion in cash and cash equivalents, with a strong liquidity position to fund its ongoing operations and strategic initiatives, including the substantial debt associated with the impending WarnerMedia combination.
02—Key points
Key Highlights
- Warner Bros. Discovery (WBD) reported total revenues of $12.19 billion for the year ended December 31, 2021, a 14% increase compared to 2020.
- Operating income decreased by 20% to $2.01 billion in 2021, primarily due to increased content expenses and higher selling, general, and administrative costs.
- The company launched discovery+, its aggregated direct-to-consumer (DTC) streaming service, in January 2021, reaching 22 million paid DTC subscribers by the end of the year.
- WBD is progressing towards its combination with AT&T's WarnerMedia business, a transaction anticipated to close in the second quarter of 2022, subject to shareholder and regulatory approvals.
- The company ended 2021 with $3.9 billion in cash and cash equivalents, demonstrating a strong liquidity position.
- Advertising revenue increased by 11% to $6.22 billion, driven by market recovery post-COVID-19 and Olympic broadcast revenue.
- Distribution revenue also rose by 11% to $5.41 billion, primarily due to the growth of discovery+ and increased contractual affiliate rates.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $12.19B$10.67B | +14.2% |
| SG&A Expenses | $4.02B$2.72B | +47.5% |
| Operating Expenses | $10.18B$8.16B | +24.8% |
| Operating Income | $2.01B$2.52B | −20.0% |
| Interest Expense | $633.00M$648.00M | −2.3% |
| Net Income | $1.01B$1.22B | −17.5% |
| EPS (Basic) | $1.55$1.82 | −14.8% |
| EPS (Diluted) | $1.54$1.81 | −14.9% |
| Shares Outstanding (Basic) | 588.00M599.00M | −1.8% |
| Shares Outstanding (Diluted) | 664.00M672.00M | −1.2% |
05—Questions
Frequently Asked Questions
What is the status of the proposed combination with WarnerMedia?
The company has entered into definitive agreements with AT&T to combine with WarnerMedia's entertainment, sports, and news assets. The transaction is structured as a Reverse Morris Trust and is anticipated to close in the second quarter of 2022, pending shareholder approval and customary closing conditions, including regulatory approvals. Significant progress has been made, including receiving unconditional antitrust clearance from the European Commission and expiration of the Hart-Scott-Rodino statutory waiting period.
How did the company perform financially in 2021?
In 2021, WBD reported a 14% increase in total revenues to $12.19 billion. However, operating income saw a 20% decrease to $2.01 billion, largely due to increased content expenses related to the Olympics and the investment in discovery+, as well as higher selling, general, and administrative expenses primarily for marketing discovery+.
What is the company's strategy regarding direct-to-consumer (DTC) services?
WBD launched its aggregated DTC streaming service, discovery+, in the U.S. in January 2021 and has since expanded it internationally. The company aims to reach consumers across various platforms and has seen significant subscriber growth, reaching 22 million paid DTC subscribers by the end of 2021. This strategy is a key focus for future growth and engagement.
What is the company's debt position and liquidity?
As of December 31, 2021, WBD had approximately $15.2 billion in consolidated debt. The company ended the year with $3.9 billion in cash and cash equivalents, indicating a strong liquidity position. The upcoming WarnerMedia combination will involve a significant increase in debt, which the company plans to manage through its revolving credit facility and ongoing operations.
06—Continue