10-QPeriod: Q2 FY2020

Warner Bros. Discovery, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:WBD

Summary

Discovery, Inc. (WBD) reported a decrease in total revenues for the three and six months ended June 30, 2020, compared to the prior year, largely impacted by a significant decline in advertising revenue due to the COVID-19 pandemic. Distribution revenue showed modest growth. The company experienced a notable decrease in net income available to Discovery, Inc., primarily driven by reduced revenues and increased expenses, including a $36 million goodwill impairment charge for its Asia-Pacific reporting unit. Despite these challenges, Discovery maintained a strong cash position and managed its debt effectively, including issuing new senior notes and repaying outstanding balances. The company is actively managing costs and exploring innovative strategies to navigate the ongoing economic uncertainties caused by the pandemic.

Financial Highlights

46 data points
Beta

Revenue

$2.54B

68.1% Gross Margin

Net Income

$271.00M

10.7% Net Margin

Total Assets

$33.09B

Cash & Equivalents

$1.74B

Free Cash Flow

$879.00M

Financial Statements
Beta
Revenue$2.54B
Cost of Revenue$810.00M
Gross Profit$1.73B
SG&A Expenses$635.00M
Operating Expenses$1.82B
Operating Income$717.00M
Interest Expense$161.00M
Net Income$271.00M

Key Highlights

  • 1Total revenues for the three months ended June 30, 2020, decreased by 12% to $2.54 billion from $2.89 billion in the prior year, primarily due to a 21% drop in advertising revenue. For the six months ended June 30, 2020, total revenues decreased by 7% to $5.22 billion.
  • 2Net income available to Discovery, Inc. declined significantly, falling 71% to $271 million for the three months ended June 30, 2020, and 51% to $648 million for the six months ended June 30, 2020, compared to the prior year periods.
  • 3The company recorded a $36 million goodwill impairment charge related to its Asia-Pacific reporting unit due to the impact of COVID-19.
  • 4Distribution revenue showed resilience, increasing by 2% for the three months and 1% for the six months ended June 30, 2020, driven by growth in U.S. Networks.
  • 5Discovery proactively managed its liquidity, drawing $500 million from its revolving credit facility in March 2020 (later repaid), and issuing $2 billion in Senior Notes in May 2020 to fund tender offers and repay debt.
  • 6Operating income decreased by 21% for the three months and 11% for the six months ended June 30, 2020, reflecting the revenue decline and certain expense increases.
  • 7The company incurred a $71 million loss on extinguishment of debt related to the repurchase of senior notes in the second quarter of 2020.

Frequently Asked Questions

COVID-19 significantly impacted Discovery's financial performance, primarily through a substantial decline in advertising revenue due to reduced demand and production shutdowns. This led to a 12% decrease in total revenues for the three months ended June 30, 2020, and a significant drop in net income.

Discovery took several steps to preserve liquidity, including drawing down $500 million from its revolving credit facility (subsequently repaid), amending its credit facility to provide more flexibility in financial covenants, and issuing $2 billion in Senior Notes. These actions were aimed at ensuring sufficient liquidity amidst economic uncertainty.

The company stated that advertising revenue may continue to decline significantly if advertisers in certain sectors reduce spending or if production remains limited. The outlook remains uncertain and dependent on future economic developments and the containment of the pandemic.

Yes, Discovery recorded a $36 million goodwill impairment charge for its Asia-Pacific reporting unit during the three months ended June 30, 2020, due to the ongoing impacts of COVID-19 on its operating results.