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Warner Bros. Discovery (WBD) Q3 Loss Narrows Y/Y, Ad Sales Fall
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Warner Bros. Discovery (WBD - Free Report) reported third-quarter 2023 loss of 17 cents per share, narrower than a loss of 95 cents in the year-ago quarter. The Zacks Consensus Estimate for loss was pegged at 12 cents per share for the reported quarter.
Revenues increased 2.2% year over year to $9.97 billion, which beat the Zacks Consensus Estimate of $9.88 billion.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
Advertising revenues decreased 12% year over year to $1.79 billion. Distribution revenues increased 0.7% year over year to $5.02 billion. Content revenues increased 12.2% year over year to $2.84 billion. Other revenues were $317 million, up 55.4% from the year-ago quarter.
Studios (32.3% of revenues) reported revenues of $3.22 billion, up 4.5% from the year-ago quarter. Revenues increased 3% ex-FX from the prior-year quarter on a pro forma combined basis.
Within the segment, content revenues increased 3% ex-FX to $3 billion as theatrical revenues increased significantly due to the strong performance of Barbie as well as more titles released in the current year quarter. Games revenues increased meaningfully due to the third-quarter release of Mortal Kombat 1 and the continued performance of Hogwarts Legacy.
TV revenues declined significantly, primarily due to certain large licensing deals in the prior year and the impact of the WGA and SAG-AFTRA strikes.
Other revenues increased 5% ex-FX due to the second-quarter opening of Warner Bros. Studio Tour Tokyo and continued strong attendance at Warner Bros. Studio Tours London & Hollywood, partially offset by the impact of the WGA and SAG-AFTRA strikes on studio production services.
Networks (48.8% of revenues) revenues decreased 7% on a year-over-year basis to $4.86 billion. Within the segment, advertising revenues decreased 13% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets mainly in the U.S. and, to a lesser extent, certain international markets.
Content revenues decreased 22% ex-FX, primarily driven by lower third-party licensing deals and lower international sports sublicensing, partially offset by higher inter-segment content licensing to direct-to-consumer (DTC).
DTC revenues (24.4% of revenues) increased 5.2% from the year-ago quarter to $2.43 billion. Global DTC average revenue per unit was $7.71, which increased 2% ex-FX versus the prior-year quarter.
WBD ended third-quarter 2023 with 95.1 million global DTC subscribers, which indicated a decline of 0.7 million global subscribers sequentially. Global DTC average revenue per user was $7.82, which reflected a 6% ex-FX increase from the prior-year quarter.
Operating Details
In the third quarter, selling, general and administrative expenses decreased 11.5% from the year-ago quarter’s levels to $2.29 billion.
Adjusted EBITDA increased 22.5% from the year-ago quarter’s levels to $2.96 billion.
Third-quarter 2023 cash provided by operating activities increased to $2,516 million from $124 million in the prior year quarter. Reported free cash flow increased to $2,059 million from $(192) million, primarily attributable to higher operating profits combined with working capital improvements, in addition to lower content spend due to WGA and SAG-AFTRA strikes and a more disciplined approach to content investment.
The company reported an operating income of $97 million against an operating loss of $2.19 billion in the year-ago quarter.
Balance Sheet
As of Sep 30, 2023, cash & cash equivalents were $2.38 billion compared with $3.02 billion as of Jun 30, 2023.
As of Sep 30, 2023, the company had $5,190 million drawn on its revolving receivables program, a $105 million decrease from the second quarter's balance of $5,295 million.
Zacks Rank & Stocks to Consider
Currently, Warner Bros. Discovery carries a Zacks Rank #3 (Hold).
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Warner Bros. Discovery (WBD) Q3 Loss Narrows Y/Y, Ad Sales Fall
Warner Bros. Discovery (WBD - Free Report) reported third-quarter 2023 loss of 17 cents per share, narrower than a loss of 95 cents in the year-ago quarter. The Zacks Consensus Estimate for loss was pegged at 12 cents per share for the reported quarter.
Revenues increased 2.2% year over year to $9.97 billion, which beat the Zacks Consensus Estimate of $9.88 billion.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
Warner Bros. Discovery, Inc. price-consensus-eps-surprise-chart | Warner Bros. Discovery, Inc. Quote
Top-Line Details
Advertising revenues decreased 12% year over year to $1.79 billion. Distribution revenues increased 0.7% year over year to $5.02 billion. Content revenues increased 12.2% year over year to $2.84 billion. Other revenues were $317 million, up 55.4% from the year-ago quarter.
Studios (32.3% of revenues) reported revenues of $3.22 billion, up 4.5% from the year-ago quarter. Revenues increased 3% ex-FX from the prior-year quarter on a pro forma combined basis.
Within the segment, content revenues increased 3% ex-FX to $3 billion as theatrical revenues increased significantly due to the strong performance of Barbie as well as more titles released in the current year quarter. Games revenues increased meaningfully due to the third-quarter release of Mortal Kombat 1 and the continued performance of Hogwarts Legacy.
TV revenues declined significantly, primarily due to certain large licensing deals in the prior year and the impact of the WGA and SAG-AFTRA strikes.
Other revenues increased 5% ex-FX due to the second-quarter opening of Warner Bros. Studio Tour Tokyo and continued strong attendance at Warner Bros. Studio Tours London & Hollywood, partially offset by the impact of the WGA and SAG-AFTRA strikes on studio production services.
Networks (48.8% of revenues) revenues decreased 7% on a year-over-year basis to $4.86 billion. Within the segment, advertising revenues decreased 13% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets mainly in the U.S. and, to a lesser extent, certain international markets.
Content revenues decreased 22% ex-FX, primarily driven by lower third-party licensing deals and lower international sports sublicensing, partially offset by higher inter-segment content licensing to direct-to-consumer (DTC).
DTC revenues (24.4% of revenues) increased 5.2% from the year-ago quarter to $2.43 billion. Global DTC average revenue per unit was $7.71, which increased 2% ex-FX versus the prior-year quarter.
WBD ended third-quarter 2023 with 95.1 million global DTC subscribers, which indicated a decline of 0.7 million global subscribers sequentially. Global DTC average revenue per user was $7.82, which reflected a 6% ex-FX increase from the prior-year quarter.
Operating Details
In the third quarter, selling, general and administrative expenses decreased 11.5% from the year-ago quarter’s levels to $2.29 billion.
Adjusted EBITDA increased 22.5% from the year-ago quarter’s levels to $2.96 billion.
Third-quarter 2023 cash provided by operating activities increased to $2,516 million from $124 million in the prior year quarter. Reported free cash flow increased to $2,059 million from $(192) million, primarily attributable to higher operating profits combined with working capital improvements, in addition to lower content spend due to WGA and SAG-AFTRA strikes and a more disciplined approach to content investment.
The company reported an operating income of $97 million against an operating loss of $2.19 billion in the year-ago quarter.
Balance Sheet
As of Sep 30, 2023, cash & cash equivalents were $2.38 billion compared with $3.02 billion as of Jun 30, 2023.
As of Sep 30, 2023, the company had $5,190 million drawn on its revolving receivables program, a $105 million decrease from the second quarter's balance of $5,295 million.
Zacks Rank & Stocks to Consider
Currently, Warner Bros. Discovery carries a Zacks Rank #3 (Hold).
NetEase (NTES - Free Report) , AST SpaceMobile (ASTS - Free Report) and Genius Sports Limited (GENI - Free Report) are some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector. While NTES sports a Zacks Rank #1 (Strong Buy), ASTS and GENI carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of NetEase have gained 55.2% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.
Shares of AST SpaceMobile have declined 14.1% year to date. ASTS is slated to report its third-quarter 2023 results on Nov 13.
Shares of Genius Sports Limited have gained 48.5% year to date. GENI is set to report its third-quarter 2023 results on Nov 13.