10-QPeriod: Q1 FY2019

Warner Bros. Discovery, Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 2, 2019For Securities:WBD

Summary

Warner Bros. Discovery, Inc. (WBD), operating as Discovery, Inc. for this reporting period, presented its first quarter 2019 financial results, showing a significant turnaround from the prior year. The company reported net income of $418 million, a substantial increase from a net loss of $8 million in the same period of 2018. This improvement was largely driven by the successful integration and performance of the acquired Scripps Networks, which contributed significantly to revenue growth. Total revenues increased by 17% to $2.7 billion. The company saw robust growth in its U.S. Networks segment, with revenues up 49% to $1.8 billion, and International Networks revenue slightly decreased by 13% to $952 million, though on a pro forma, constant currency basis, both segments showed growth. Adjusted OIBDA, a key profitability metric for management, more than doubled to $1.16 billion, indicating strong operational performance and synergy realization post-acquisition. The company maintained a solid liquidity position with $745 million in cash and cash equivalents and ample availability under its revolving credit facility.

Financial Highlights

45 data points
Beta

Revenue

$2.71B

65.6% Gross Margin

Net Income

$384.00M

14.2% Net Margin

Total Assets

$32.44B

Cash & Equivalents

$745.00M

Free Cash Flow

$498.00M

Financial Statements
Beta
Revenue$2.71B
Cost of Revenue$930.00M
Gross Profit$1.78B
SG&A Expenses$626.00M
Operating Expenses$1.93B
Operating Income$774.00M
Interest Expense$182.00M
Net Income$384.00M

Key Highlights

  • 1Net income surged to $418 million for Q1 2019, a dramatic improvement from a net loss of $8 million in Q1 2018, largely attributable to the Scripps Networks acquisition.
  • 2Total revenues increased by 17% to $2.7 billion, driven by strong advertising and distribution revenue growth, particularly in the U.S. Networks segment.
  • 3Adjusted OIBDA (Adjusted Operating Income Before Depreciation and Amortization) rose by 63% to $1.16 billion, demonstrating improved operational profitability and integration success.
  • 4U.S. Networks segment revenue grew by 49% to $1.8 billion, fueled by the inclusion of Scripps Networks' portfolio and organic growth in advertising and distribution.
  • 5The company successfully managed its debt, with total debt decreasing to $16.46 billion from $16.92 billion at the end of 2018, and maintained compliance with its debt covenants.
  • 6Cash flow from operations significantly improved to $542 million, up from $160 million in the prior year, reflecting the positive impact of higher net income.
  • 7The company announced plans for a new $1 billion stock repurchase program in April 2019, signaling confidence in future performance and commitment to returning value to shareholders.

Frequently Asked Questions

The primary driver of the significant increase in net income to $418 million was the successful integration and operational performance of the Scripps Networks, acquired in March 2018. This acquisition contributed substantially to revenue growth and synergies, leading to a turnaround from the net loss reported in the prior year.

The acquisition of Scripps Networks significantly boosted Discovery's revenue streams, particularly in the U.S. Networks segment, which saw a 49% increase in revenue. Advertising and distribution revenues were strong across both U.S. and International Networks, with the combined entity benefiting from a larger content library and broader reach.

As of March 31, 2019, Discovery had $745 million in cash and cash equivalents and substantial availability under its $2.5 billion revolving credit facility. The company actively managed its debt, reducing total debt and maintaining compliance with its covenants. The company's liquidity is expected to be sufficient for the next twelve months, supported by operating cash flows and available credit.

Discovery closely monitors market risks, including foreign currency fluctuations. While the company reports results in U.S. dollars, it also provides 'ex-FX' (excluding foreign exchange) commentary to offer a clearer view of operational performance, adjusting for currency volatility. This approach helps investors understand the underlying business trends.