10-QPeriod: Q2 FY2019

Warner Bros. Discovery, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:WBD

Summary

Discovery, Inc. (WBD) reported strong financial performance for the three and six months ended June 30, 2019. Total revenues saw a modest increase of 1% and 9% respectively, driven by growth in advertising and distribution revenues, partially offset by a decrease in other revenues, largely due to the sale of the education business and the prior year's Olympics rights sublicensing. Operating income significantly increased by 40% and 97% respectively, reflecting strong revenue growth and a substantial decrease in restructuring and other charges compared to the prior year, which included significant integration costs from the Scripps Networks acquisition. Net income available to Discovery, Inc. also saw a substantial improvement, increasing from $216 million in the prior year's comparable period to $947 million for the three months ended June 30, 2019. The company also highlighted a significant one-time, non-cash deferred income tax benefit of $455 million resulting from legal entity restructurings. The company maintains a strong liquidity position with $1.3 billion in cash and cash equivalents and significant unused capacity under its revolving credit facility.

Financial Highlights

47 data points
Beta

Revenue

$2.88B

67.5% Gross Margin

Net Income

$947.00M

32.8% Net Margin

Total Assets

$33.84B

Cash & Equivalents

$1.32B

Free Cash Flow

$596.00M

Financial Statements
Beta
Revenue$2.88B
Cost of Revenue$938.00M
Gross Profit$1.95B
SG&A Expenses$709.00M
Operating Expenses$1.97B
Operating Income$911.00M
Interest Expense$161.00M
Net Income$947.00M

Key Highlights

  • 1Total revenues increased by 1% to $2.89 billion for the three months ended June 30, 2019, and by 9% to $5.59 billion for the six months ended June 30, 2019, driven by advertising and distribution revenue growth.
  • 2Operating income saw significant growth, increasing by 40% to $911 million for the three months and by 97% to $1.69 billion for the six months ended June 30, 2019.
  • 3Net income available to Discovery, Inc. surged to $947 million for the three months ended June 30, 2019, compared to $216 million in the prior year period.
  • 4The company recorded a significant one-time, non-cash deferred income tax benefit of $455 million related to legal entity restructurings.
  • 5Cash provided by operating activities was $1.2 billion for the six months ended June 30, 2019, up from $716 million in the prior year period.
  • 6The company maintains a strong liquidity position with $1.3 billion in cash and cash equivalents and $2.3 billion in unused capacity under its revolving credit facility and commercial paper program as of June 30, 2019.
  • 7The company completed the issuance of $1.5 billion in aggregate principal amount of Senior Notes in May 2019.

Frequently Asked Questions

The substantial increase in operating income and net income is driven by a combination of solid revenue growth in advertising and distribution, coupled with a significant reduction in restructuring and other charges compared to the prior year. The prior year's charges were heavily influenced by integration costs associated with the Scripps Networks acquisition. Additionally, a one-time deferred income tax benefit related to legal entity restructurings significantly boosted net income in the current period.

Discovery, Inc. has a comprehensive debt management strategy. As of June 30, 2019, the company had $16.6 billion in outstanding debt. In May 2019, they issued $1.5 billion in new senior notes. The company has been actively managing its debt by redeeming certain senior notes and utilizing its revolving credit facility, which had significant unused capacity. They expect existing cash flows and credit facilities to be sufficient to meet their obligations over the next twelve months.

The acquisition of Scripps Networks, which closed in March 2018, continues to influence the financial results. While the prior year's results were heavily impacted by integration costs and restructuring charges related to this acquisition, the current period reflects the benefits of a more integrated business. The pro forma combined results for the six months ended June 30, 2019, show continued revenue growth and improved operating income compared to the pro forma combined prior year, indicating positive synergy realization and operational efficiencies.