10-QPeriod: Q2 FY2017

Warner Bros. Discovery, Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 4, 2017For Securities:WBD

Summary

Discovery Communications, Inc. (WBD) reported steady revenue growth in the second quarter of 2017, with total revenues increasing by 2% to $1.745 billion, driven by a 5% rise in distribution revenue across both U.S. and International Networks. Advertising revenue remained flat year-over-year. The company saw a decrease in net income available to Discovery Communications, Inc. stockholders, falling 8% to $374 million for the quarter, attributed to higher costs, particularly in content spending, and a loss on debt extinguishment. A significant development announced post-quarter was the agreement to acquire Scripps Networks Interactive for $14.6 billion, which is expected to close by early 2018. This strategic move highlights a focus on expanding market presence and content offerings. The company also continues its share repurchase program, signaling a commitment to returning value to shareholders.

Financial Highlights

45 data points
Beta

Revenue

$1.75B

63.7% Gross Margin

Net Income

$374.00M

21.4% Net Margin

Total Assets

$16.15B

Cash & Equivalents

$206.00M

Free Cash Flow

$157.00M

Financial Statements
Beta
Revenue$1.75B
Cost of Revenue$634.00M
Gross Profit$1.11B
SG&A Expenses$389.00M
Operating Expenses$1.11B
Operating Income$630.00M
Interest Expense$91.00M
Net Income$374.00M

Key Highlights

  • 1Total revenues grew 2% to $1.745 billion for the quarter ended June 30, 2017.
  • 2Distribution revenue increased by 5% year-over-year, showing strong performance in affiliate fees.
  • 3Advertising revenue remained flat, indicating a stable, albeit ungrowing, advertising market.
  • 4Net income available to Discovery Communications, Inc. stockholders decreased by 8% to $374 million.
  • 5The company incurred a $54 million loss on extinguishment of debt related to a debt repurchase program.
  • 6Discovery announced a significant agreement to acquire Scripps Networks Interactive for $14.6 billion.
  • 7The company continued its share repurchase program, with $0.8 billion remaining authorization as of June 30, 2017.

Frequently Asked Questions

The most significant announcement was the agreement to acquire Scripps Networks Interactive for $14.6 billion, which was made shortly after the quarter end, on July 31, 2017. This acquisition is expected to significantly expand Discovery's portfolio and market reach.

Total revenues increased by 2% to $1.745 billion, primarily driven by a 5% increase in distribution revenue, which includes affiliate fees. Advertising revenue remained flat year-over-year.

As of June 30, 2017, Discovery had $206 million in cash and cash equivalents. The company has access to a $2.0 billion revolving credit facility and a commercial paper program, indicating sufficient liquidity for its short-term needs. Operating cash flow generation remains strong.

The decrease in net income available to Discovery Communications, Inc. stockholders was largely due to an increase in costs of revenues, particularly higher spending on content such as sports rights, and a $54 million loss recognized from the extinguishment of debt. Foreign currency fluctuations also played a role, with net losses reported in other (expense) income, net.