10-QPeriod: Q3 FY2018

Warner Bros. Discovery, Inc. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 9, 2018For Securities:WBD

Summary

Warner Bros. Discovery, Inc. (WBD) reported its quarterly results for the period ending September 30, 2018. The company's financial performance was significantly impacted by the acquisition of Scripps Networks Interactive, Inc. (Scripps Networks) which closed on March 6, 2018. This acquisition led to a substantial increase in both revenues and expenses, particularly in depreciation and amortization, as well as restructuring and integration costs. Despite a notable increase in total revenues to $2.59 billion for the quarter and $7.74 billion for the nine months, the company experienced a decrease in net income available to Discovery, Inc. stockholders, falling to $117 million for the quarter and $325 million for the nine months, compared to $218 million and $807 million in the prior year, respectively. This decline in profitability was largely due to higher interest expenses, restructuring charges, and increased operating costs stemming from the Scripps acquisition. The company's balance sheet reflects the significant integration of Scripps Networks, with substantial increases in goodwill and intangible assets. Looking ahead, investors should monitor the company's ability to realize synergies from the Scripps integration, manage its increased debt load, and navigate the evolving media landscape characterized by shifting consumer preferences and technological advancements.

Financial Highlights

45 data points
Beta

Revenue

$2.59B

64.0% Gross Margin

Net Income

$117.00M

4.5% Net Margin

Total Assets

$32.91B

Cash & Equivalents

$531.00M

Free Cash Flow

$907.00M

Financial Statements
Beta
Revenue$2.59B
Cost of Revenue$934.00M
Gross Profit$1.66B
SG&A Expenses$667.00M
Operating Expenses$2.22B
Operating Income$369.00M
Interest Expense$185.00M
Net Income$117.00M

Key Highlights

  • 1Acquisition of Scripps Networks significantly increased revenue and assets, but also debt and operating expenses.
  • 2Total revenues for the nine months ended September 30, 2018, increased by 55% year-over-year to $7.74 billion.
  • 3Net income available to Discovery, Inc. stockholders decreased by 46% to $117 million for the quarter and by 60% to $325 million for the nine months, impacted by acquisition-related costs and higher interest expenses.
  • 4Goodwill increased significantly to $13.1 billion due to the Scripps acquisition.
  • 5Total debt increased to $17.48 billion (net of discount/issuance costs) at September 30, 2018.
  • 6The company is incurring substantial restructuring and integration costs related to the Scripps acquisition, totaling $224 million for the quarter and $652 million for the nine months.
  • 7Adjusted OIBDA increased by 82% for the quarter and 56% for the nine months, driven by the Scripps acquisition, but excluding transaction costs and other items.

Frequently Asked Questions

The primary driver of the financial changes was the acquisition of Scripps Networks Interactive, Inc. (Scripps Networks), which closed on March 6, 2018. This acquisition significantly impacted revenues, assets, liabilities, and operating expenses.

While the Scripps acquisition boosted revenues significantly, it also led to higher operating costs, including interest expenses, depreciation, amortization, and restructuring charges related to integration. Consequently, net income available to Discovery, Inc. stockholders decreased compared to the prior year.

The company's total debt increased significantly to approximately $17.48 billion (net of discount and issuance costs) as of September 30, 2018, largely due to debt assumed and incurred to finance the Scripps acquisition.

The company is undertaking significant restructuring and integration activities to achieve synergies from the Scripps acquisition. This includes costs associated with employee terminations, contract terminations, and relocation of its headquarters, which contributed to higher restructuring and other charges.