10-QPeriod: Q3 FY2017

Warner Bros. Discovery, Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:WBD

Summary

Warner Bros. Discovery, Inc. (WBD), formerly Discovery Communications, Inc., reported its financial results for the nine months ended September 30, 2017. The company experienced a notable increase in total assets, reaching $23.1 billion, up from $15.7 billion at the end of 2016, primarily driven by substantial debt issuance to finance the anticipated acquisition of Scripps Networks Interactive, Inc. Total revenues for the nine months increased to $5.0 billion from $4.8 billion in the prior year period. Despite revenue growth, net income available to Discovery Communications, Inc. stockholders decreased to $807 million from $890 million in the comparable period of 2016, reflecting increased interest expenses and other costs associated with the pending Scripps acquisition. The company announced its agreement to acquire Scripps Networks Interactive for an estimated $11.5 billion in a cash-and-stock transaction, expected to close in early 2018. This strategic move signals a significant expansion of WBD's media portfolio. The substantial debt financing undertaken for this acquisition, alongside increased operating expenses, impacted profitability in the current period. Investors should monitor the integration of Scripps and its impact on future revenue synergies and cost efficiencies, as well as the company's leverage levels.

Financial Highlights

45 data points
Beta

Revenue

$1.65B

59.4% Gross Margin

Net Income

$218.00M

13.2% Net Margin

Total Assets

$23.14B

Cash & Equivalents

$6.99B

Free Cash Flow

$699.00M

Financial Statements
Beta
Revenue$1.65B
Cost of Revenue$670.00M
Gross Profit$981.00M
SG&A Expenses$457.00M
Operating Expenses$1.22B
Operating Income$433.00M
Interest Expense$136.00M
Net Income$218.00M

Key Highlights

  • 1Total assets increased significantly to $23.1 billion as of September 30, 2017, driven by debt financing for the Scripps acquisition.
  • 2Revenues grew to $5.0 billion for the nine months ended September 30, 2017, compared to $4.8 billion in the prior year.
  • 3Net income available to Discovery Communications, Inc. stockholders decreased by 9% to $807 million for the nine months ended September 30, 2017.
  • 4The company announced a definitive agreement to acquire Scripps Networks Interactive for approximately $11.5 billion, expected to close in early 2018.
  • 5Interest expense increased substantially by 19% to $318 million for the nine months ended September 30, 2017, due to debt issued for the Scripps acquisition.
  • 6Cash provided by operating activities increased to $1.17 billion for the nine months ended September 30, 2017, from $834 million in the prior year, bolstered by improved operational results and tax benefits.
  • 7As of September 30, 2017, the company had $6.99 billion in cash and cash equivalents, providing substantial liquidity.

Frequently Asked Questions

The substantial increase in total assets from $15.7 billion at December 31, 2016, to $23.1 billion at September 30, 2017, is primarily due to the issuance of approximately $6.8 billion in senior notes and the arrangement of $2 billion in term loan credit facilities to finance a portion of the pending acquisition of Scripps Networks Interactive.

The pending acquisition of Scripps Networks Interactive, announced in July 2017, led to increased interest expenses due to debt financing. Additionally, the company incurred $62 million in transaction and integration costs related to the acquisition and its planned integration, which impacted selling, general and administrative expenses and overall profitability for the nine-month period.

Total revenues showed modest growth, increasing by 4% to $5.0 billion for the nine months ended September 30, 2017. Distribution revenue grew due to higher affiliate fee rates and SVOD revenue, while advertising revenue saw a smaller increase. The company anticipates future revenue growth will be significantly influenced by the successful integration of Scripps Networks Interactive and its associated content and distribution platforms.

The company maintained a strong liquidity position, with $6.99 billion in cash and cash equivalents as of September 30, 2017. This, along with available credit facilities, is expected to be sufficient to fund its operating needs, including debt obligations and investments, over the next twelve months.