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Warner Bros. Discovery's (WBD) Q2 Earnings Decline Y/Y

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Warner Bros. Discovery (WBD - Free Report) reported second-quarter 2022 loss of $1.50 per share. The company had reported earnings of $1.01 in the year-ago quarter. The Zacks Consensus Estimate was pegged at breakeven for the reported quarter.

Revenues increased 220.9% year over year to $9.82 billion, which missed the Zacks Consensus Estimate by 14.7%.

Warner Bros. Discovery was the #1 TV portfolio for total time spent by viewers in the United States, TNT was the #1 TV network overall for Men 18-49 & 18-34, driven by sports, and TLC was the #1 cable network in the industry, ex-sports, in Primetime for Women 25-54.

Top-Line Details

Advertising revenues increased 66.5% year over year to $2.72 billion. Distribution revenues increased 268.8% year over year to $4.83 billion. Content revenues increased from $100 million reported in the year-ago quarter to $2.06 billion. Other revenues were $204 million compared with $16 million reported in the year-ago quarter.

Studios (28.5% of revenues) reported revenues of $2.7 billion, up from $2 million reported in the year-ago quarter. Games were a strong contributor behind the release of LEGO Star Wars - The Skywalker Saga.

TV licensing revenues declined due to lower TV production revenues, partially offset by the timing of new series availabilities for distribution. Theatrical performance was unfavorably impacted by the timing of releases. Home entertainment across theatrical and television product was down due to strong COVID-induced demand in the prior-year quarter.

Networks (58.4% of revenues) revenues increased 101.1% on a year-over-year basis to $5.74 billion, primarily driven by strong demand for sports advertising, partially offset by lower news, kids, and general entertainment performance in the United States.

International networks were impacted by modest declines in EMEA, offset by growth in Latin America, excluding the impact of Chilevisión, which was sold in September 2021.

Direct-to-Consumer (DTC) revenues (22.6% of revenues) increased from $216 million reported in the year-ago quarter to $1.22 billion. Global DTC ARPU was $7.66.

WBD ended second-quarter 2022 with 92.1 million global DTC subscribers compared with 90.4 million subscribers in the previous quarter, as adjusted for the company's new DTC subscriber definition. The new definition resulted in the exclusion of 10 million legacy Discovery non-core subscribers and inactivated AT&T mobility subscribers from the previous quarter subscriber count.

Operating Details

In the second quarter, selling, general and administrative (SG&A) expenses increased 271.6% from the year-ago quarter’s levels to $3.53 billion.

Adjusted EBITDA increased 49% from the year-ago quarter’s levels to $1.66 billion.

The company reported an operating loss of $3.63 billion compared to an operating income of $779 million in the year-ago quarter.

Balance Sheet

As of Jun 30, 2022, cash & cash equivalents were $2.57 billion compared with $4.16 billion as of Mar 31, 2022.

Zacks Rank & Stocks to Consider

Currently, Warner Bros. Discovery carries a Zacks Rank #3 (Hold).

The company’s shares have declined 25.8% in the year-to-date period compared with the Zacks Consumer Discretionary sector’s decline of 29.5%.

Here are some better-ranked stocks worth considering in the broader sector.

DraftKings (DKNG - Free Report) carries a Zacks Rank #2 (Buy). DKNG’s shares have decreased 41.4% in the year-to-date period compared with the Zacks Gaming industry’s decline of 31.9%. DKNG is scheduled to report second-quarter 2022 results on Aug 5, after market close. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enthusiast Gaming (EGLX - Free Report) carries a Zacks Rank #2. EGLX’s shares have fallen 35.4% in the year-to-date period. EGLX is scheduled to report second-quarter 2022 results on Aug 15.

Century Casinos (CNTY - Free Report) carries a Zacks Rank #2. CNTY’s shares have slumped 28.2% in the year-to-date period. CNTY is scheduled to report second-quarter 2022 results on Aug 5, after market close.

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