10-QPeriod: Q2 FY2021

Warner Bros. Discovery, Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 3, 2021For Securities:WBD

Summary

Warner Bros. Discovery, Inc. (WBD), previously operating as Discovery, Inc. for this filing, reported solid financial performance for the period ending June 30, 2021. Total revenues increased by 21% year-over-year to $3.06 billion for the quarter, driven by a significant 29% jump in advertising revenue and a 12% increase in distribution revenue. This growth was primarily fueled by a recovery in advertising markets post-COVID-19 and the successful launch and expansion of its direct-to-consumer (DTC) product, discovery+. The company saw net income available to Discovery, Inc. rise substantially to $672 million from $271 million in the prior year's quarter, reflecting strong operational execution and a favorable tax benefit. The company also highlighted progress on its transformative merger with WarnerMedia, announced in May 2021, which is expected to close in mid-2022, positioning the combined entity for significant future growth in the media landscape.

Financial Highlights

48 data points
Beta

Revenue

$3.06B

65.5% Gross Margin

Net Income

$672.00M

21.9% Net Margin

EPS (Diluted)

$1.01

Total Assets

$34.57B

Cash & Equivalents

$2.83B

Free Cash Flow

$757.00M

Financial Statements
Beta
Revenue$3.06B
Cost of Revenue$1.05B
Gross Profit$2.01B
SG&A Expenses$952.00M
Operating Expenses$2.28B
Operating Income$779.00M
Interest Expense$157.00M
Net Income$672.00M
EPS (Basic)$1.02
EPS (Diluted)$1.01
Shares Outstanding (Basic)589.00M
Shares Outstanding (Diluted)664.00M

Key Highlights

  • 1Total revenues for the quarter increased 21% to $3.06 billion, driven by strong advertising and distribution growth.
  • 2Advertising revenue surged 29% year-over-year, reflecting a recovery in ad markets and the impact of discovery+ monetization.
  • 3Distribution revenue grew 12%, bolstered by the discovery+ service and increased contractual affiliate rates.
  • 4Net income available to Discovery, Inc. more than doubled to $672 million, up from $271 million in the prior year's quarter.
  • 5The company reported $2.8 billion in cash and cash equivalents as of June 30, 2021, indicating a strong liquidity position.
  • 6Significant progress was made on the proposed merger with WarnerMedia, announced in May 2021, with an expected closing in mid-2022.
  • 7Adjusted OIBDA remained relatively stable at $1.117 billion for the quarter, despite increased investments in marketing and content for discovery+.

Frequently Asked Questions

Revenue growth was primarily driven by a strong recovery in advertising markets post-COVID-19, a 12% increase in distribution revenue which was boosted by the discovery+ service and higher affiliate rates, and robust performance in the International Networks segment. The launch and expansion of the direct-to-consumer product, discovery+, played a significant role in both advertising and distribution revenue growth.

The merger with WarnerMedia, announced in May 2021, is progressing as planned, with the transaction expected to close in mid-2022. The deal is structured as a Reverse Morris Trust, where AT&T's WarnerMedia assets will combine with Discovery's businesses. Both companies' boards have approved the transaction, and customary closing conditions, including regulatory approvals and shareholder approval for Discovery, are being pursued.

The company reported a strong financial position with $2.8 billion in cash and cash equivalents as of June 30, 2021. Operating activities generated $1.1 billion in cash during the first six months of the year. The company also has a $2.5 billion revolving credit facility and commercial paper program, providing ample liquidity to meet its short-term and long-term obligations.

The launch and ongoing rollout of discovery+ significantly contributed to the company's results. It drove increases in distribution revenue through new DTC subscribers and also supported advertising revenue growth. While there were increased marketing and content investments related to discovery+, the overall financial impact was positive, contributing to top-line growth and a substantial increase in net income.