The exterior of the Warner Bros. Discovery Atlanta campus was photographed after the Writers Guild of America began its strike against the Motion Picture and Television Producers Alliance on May 2, 2023 in Atlanta, Georgia.
Alyssa Poynter | Reuters
warner bros discovery Both profit and revenue missed analysts’ targets in the fourth quarter as advertising slumped and the company failed to provide free cash flow guidance for 2024.
Shares of Warner Bros. Discovery fell 10% on Friday following the report.
The company’s fourth-quarter net loss was $400 million, or 16 cents per share, compared with a net loss of $2.1 billion, or 86 cents per share, in the year-ago period. Warner Bros. Discovery reported a 14% decline in linear television advertising revenue, excluding currency fluctuations, and a 4% decline in actual distribution revenue.
“This business is not without its challenges,” CEO David Zaslav said on the company’s fourth-quarter earnings conference call. “Amid this, we continue to face continued disruption in the pay TV ecosystem and the impact of a decentralized and linear advertising ecosystem. We encourage leaders to find innovative solutions. I am asking you to do so.”
Here’s what the company reported: Quarter ended December 31stAccording to LSEG (formerly Refinitiv), this compares to analyst expectations:
- loss per share: Prediction of 16 cents vs. 7 cents.
- revenue: $10.28 billion vs. expected $10.35 billion
Adjusted EBITDA for the quarter was $2.5 billion, a decrease of 5% year over year, excluding currency effects. This was due to sluggish studio profits due to strikes by the Writers Guild of America, the Screen Actors Guild, and the National Television Federation. Radio artist.
Studio revenue for the quarter fell 17% to $3.17 billion. The segment’s adjusted EBITDA decreased 29% to $543 million.
“The studio’s performance was really weak, including at the end of the year, and we were forced to struggle quite a bit,” Zaslav said at the financial results conference.
free cash flow
Warner Bros. Discovery generated free cash flow of $3.31 billion in the fourth quarter and ended 2023 with free cash flow of $6.16 billion, an increase of 86% year over year.Zaslav is Prioritized increasing free cash flow and reducing the company’s debt.
Still, the company said it expects free cash flow headwinds in 2024 as content spending increases following the end of last year’s writers’ and actors’ strike.
Chief Financial Officer Gunnar Wiedenfels declined to give a free cash flow outlook for 2024, but said he expected the Olympics, Max’s efforts to increase revenue through increased spending, and a decline in annual EBITDA. All that certainty could weigh on cash generation this year, he said.
“We expect 2024 to be another year of strong free cash flow,” Wiedenfels said. “I intentionally don’t want to give specific quantitative free cash flow guidance.”
Warner Bros. Discovery repaid $1.2 billion of debt in the quarter and is on track to pay off $5.4 billion of debt in 2023. After paying down $12 billion in debt over the past two years, the company still owes a total of $44.2 billion.
Maximum profit in 2023
The company’s flagship subscription streaming service, Max, ended 2023 in the black, with full-year adjusted EBITDA of $103 million.
Zaslav has significantly reduced content spending on streaming services since merging WarnerMedia and Discovery in 2022. Thanks to his efforts, Max was able to reach profitability ahead of its traditional media rivals’ streaming divisions. disney, comcastNBCUniversal and Paramount Global.
The company reported 97.7 million global direct-to-consumer subscribers, an increase of 2% from the previous quarter.
The company said Max will be profitable in 2024, but as the studio increases content spending, the studio could incur losses before recovering in the second half of the year. Warner Bros. Discovery predicted Max would generate $1 billion in EBITDA in 2025.
Max inventory is currently only available in the U.S., but will be rolled out to 40 international markets by the end of 2024, Zaslav said during the call.
sports joint venture
Zaslav did not reveal pricing details for the company’s upcoming sports While the joint venture between Disney and Fox was announced earlier this month, he reiterated that the product is aimed at the 60 million U.S. households that currently do not have cable TV.
Zaslav said one benefit of the service, scheduled to launch in fall 2024, is that consumers won’t have to worry about finding the right channel for Major League Baseball, National Hockey League or National Basketball Association playoff games. He pointed out that. That’s because streaming apps automatically send consumers to any game on Fox, ESPN, TNT, or TBS.
Warner Bros. Discovery President and CEO David Zaslav presents the 4K restoration shown at the 2023 TCM Classic Film Festival Opening Night at the TCL Chinese Theater on April 13 in Hollywood, California. He attended the world premiere of the 1959 film “Rio Bravo.” , 2023.
Aude Gerucci | AFP | Getty Images
“Not many people are going to unsubscribe from cable TV to watch this,” Zaslav said. “Younger people who don’t subscribe, we can go after the people we’re missing out on.”
Warner Bros. Discovery continues to negotiate with the NBA to renew media rights, but Wiedenfels said it would not overpay, based on the company’s internal estimates of the league’s value.
“Investing in sports rights is very easy to lose control of,” Wiedenfels said. “That’s not how we operate. We know exactly what value we assign and we remain disciplined during discussions.
Disclosure: NBCUniversal is the parent company of CNBC.
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