10-QPeriod: Q2 FY2015

Warner Bros. Discovery, Inc. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 5, 2015For Securities:WBD

Summary

Discovery Communications, Inc. (WBD) reported revenues of $1.65 billion for the three months ended June 30, 2015, a 3% increase year-over-year. Net income available to Discovery Communications, Inc. stockholders was $286 million, a decrease from $379 million in the prior year's comparable period. The company experienced a decline in operating income, primarily driven by increased costs of revenue and selling, general, and administrative expenses, despite growth in distribution revenue. International Networks saw a notable decline in Adjusted OIBDA, impacted by the Eurosport acquisition and currency fluctuations. The company's balance sheet shows total assets of $15.73 billion, with a decrease in cash and cash equivalents to $232 million from $367 million at the end of 2014. Debt levels remain substantial, with the noncurrent portion of debt increasing to $6.86 billion. Significant activity includes the issuance of new Euro and USD denominated senior notes, as well as the redemption of existing senior notes. The company continues its stock repurchase program, with $416 million remaining authorization.

Financial Highlights

45 data points
Beta

Revenue

$1.65B

65.9% Gross Margin

Net Income

$286.00M

17.3% Net Margin

Total Assets

$15.73B

Cash & Equivalents

$232.00M

Free Cash Flow

$313.00M

Financial Statements
Beta
Revenue$1.65B
Cost of Revenue$564.00M
Gross Profit$1.09B
SG&A Expenses$430.00M
Operating Expenses$1.10B
Operating Income$557.00M
Interest Expense$77.00M
Net Income$286.00M

Key Highlights

  • 1Total revenues for Q2 2015 increased 3% to $1.65 billion, driven by a 12% rise in distribution revenue, partially offset by a 4% decrease in advertising revenue.
  • 2Net income available to Discovery Communications, Inc. stockholders declined 25% to $286 million compared to $379 million in Q2 2014.
  • 3Operating income decreased 13% to $557 million, impacted by a 10% increase in costs of revenue and a 6% rise in selling, general, and administrative expenses.
  • 4International Networks' Adjusted OIBDA decreased 11% to $266 million, primarily due to the integration of Eurosport and foreign currency fluctuations.
  • 5Cash and cash equivalents decreased to $232 million as of June 30, 2015, from $367 million at the end of 2014, with cash used in financing activities increasing significantly.
  • 6The company issued new senior notes totaling €600 million and $300 million in March 2015 and redeemed $850 million of existing senior notes.
  • 7A significant commitment was made to acquire exclusive broadcast rights for the Olympic Games from 2018 to 2024 for €1.3 billion.

Frequently Asked Questions

For the three months ended June 30, 2015, Discovery Communications, Inc. reported total revenues of $1.65 billion, an increase of 3% compared to the prior year. Net income available to Discovery Communications, Inc. stockholders was $286 million, a decrease of 25% from $379 million in the same period last year. Operating income decreased by 13% to $557 million.

Distribution revenue increased by 12% primarily due to annual contractual rate increases and subscriber growth, particularly in the U.S. Networks and International Networks segments. However, advertising revenue saw a slight decrease of 4%, influenced by lower audience delivery in the U.S. and shifts in advertising markets.

As of June 30, 2015, the company had $232 million in cash and cash equivalents, a decrease from $367 million at the end of 2014. Total debt remains substantial, with the noncurrent portion of debt at $6.86 billion. The company issued new senior notes and redeemed existing ones during the period. Management believes its current cash balance, operational cash flow, and revolving credit facility are sufficient to meet liquidity needs for the next twelve months.

Discovery committed to acquire exclusive broadcast rights for the Olympic Games from 2018 to 2024 for €1.3 billion ($1.4 billion). Additionally, TF1 announced its intent to exercise its put option for its remaining 49% interest in Eurosport for €491 million ($547 million), which will require significant cash outlay. The company also faces risks related to foreign currency fluctuations, particularly in Venezuela, and regulatory changes in international markets, such as new advertising laws in Russia.