Warner Bros. Discovery WBD reported third-quarter 2024 earnings of 5 cents per share, significantly higher than the Zacks Consensus Estimate of a loss of 7 cents. The company had incurred a loss of 17 cents in the year-ago quarter.
Revenues decreased 6.2% year over year to $9.62 billion, which missed the Zacks Consensus Estimate by 3.4%.
Advertising revenues decreased 6.4% year over year to $1.68 billion. Distribution revenues dropped 2.1% year over year to $4.92 billion. Content revenues declined 4.1% year over year to $2.7 billion. Other revenues were $300 million, down 5.36% from the year-ago quarter.
Warner Bros. Discovery, Inc. Price, Consensus and EPS Surprise
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
Studios (27.8% of total revenues) reported revenues of $2.68 billion, down 16.92% from the year-ago quarter. Revenues decreased 17% ex-FX from the prior-year quarter on a pro forma combined basis.
Within the segment, content revenues fell 18% ex-FX to $2.46 billion. TV revenues increased 30% ex-FX, primarily due to higher initial telecast revenues due to the impact from WGA, as well as SAG-AFTRA strikes in the prior year.
Games revenues declined 31% ex-FX, primarily due to better performance of the previous year’s portfolio, mainly Mortal Combat 1 against the current offering.
Theatrical revenues decreased 40% ex-FX, primarily due to low box office revenues as the performance of Beetlejuice Beetlejuice, as well as Twisters this year, was offset by Barbie’s strong performance in the prior year.
Other revenues increased marginally 0.48% year-over-year to $210 million.
Networks revenues (52.1% of total revenues) increased 2.9% on a year-over-year basis to $5.01 billion. The AT&T T SportsNet exit negatively impacted the growth rate by approximately 200 basis points (bps).
Within the segment, distribution revenues decreased 7% ex-FX, primarily due to a 9% decline in domestic linear pay-TV subscribers and an approximately 200 bps impact from the AT&T SportsNet exit, partially offset by a 5% increase in domestic affiliate rates.
Advertising revenues decreased 13% ex-FX, primarily due to a decline of 21% in domestic network audiences and the soft advertising market in the United States, partially offset by the broadcast of the Olympics in Europe this year.
Content revenues increased to $618 million, primarily driven by the sublicensing of the Olympics sports rights to broadcast networks throughout Europe, amounting to $578 million.
DTC revenues (27.4% of revenues) increased 8% from the year-ago quarter to $2.63 billion.
Within the segment, distribution revenues increased 8% ex-FX, primarily driven by a 15% rise in subscribers, as well as higher pricing following the launch of Max in Latin America in the first quarter of 2024 and in Europe in the second quarter of 2024. This was partially offset by continued domestic linear wholesale subscriber declines.
Advertising revenues surged 51% ex-FX, primarily driven by an increase in domestic ad-lite subscribers.
Content revenues plunged 11%, primarily due to the lower volume of third-party licensing deals.
Subscriber Details
WBD ended the third quarter of 2024 with 110.5 million global DTC subscribers, which increased 7.2 million sequentially.
Global DTC ARPU increased 1% ex-FX to $7.84, primarily driven by the growth of the ad tier domestically, higher pricing, along with the continued subscriber mix shift from linear wholesale to other distribution channels, partially offset by a rise in lower ARPU international markets.
Operating Details
In the third quarter, selling, general and administrative expenses increased 4.1% from the year-ago quarter’s levels to $2.38 billion.
Adjusted EBITDA declined 18.73% from the year-ago quarter’s levels to $2.4 billion.
Third-quarter 2024 cash provided by operating activities came in at $0.8 billion compared with $2.51 billion in the prior-year period.
The company reported a free cash flow of $632 million compared with a free cash flow of $2.05 billion in the prior-year period.
The company reported an operating income of $281 million compared with an operating income of $97 million in the year-ago quarter.
Net income available to Warner Bros. Discovery was $0.1 billion, which includes a $1.6 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses.
Balance Sheet
As of Sept. 30, 2024, cash & cash equivalents were $3.33 billion compared with $3.61 billion as of June 30, 2024.
WBD repaid or repurchased $0.9 billion of debt during the reported quarter and ended the quarter with $40.7 billion of gross debt and 4.2X net leverage.
As of Sept. 30, 2024, the average duration of the company's outstanding debt was 13.6 years, with an average cost of 4.7%.
The company maintains an undrawn $6 billion revolving credit facility.
Q3 Highlights
The company announced a multi-year renewal of the Charter carriage partnership for the entire portfolio of WBD offering of cable networks, as well as the inclusion of Max across Spectrum TV Select packages.
The Olympics 2024, Paris, generated over 215 million views across all WBD platforms, which accounted for an increase of 23% compared with the Tokyo 2020 games.
The Penguin ranked as one of the largest premieres on Max and had audiences similar to The Last of Us and House of the Dragon.
Zacks Rank & Stocks to Consider
Currently, Warner Bros. Discovery carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the broader sector that investors can consider are Madison Square Garden Entertainment Corp. MSGE and Carnival CCL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of MSGE have gained 36.3% year to date. The Zacks Consensus Estimate for MSGE’s fiscal 2025 revenues is pegged at $978.29 million, indicating a year-over-year increase of 1.98%. The consensus mark for earnings is pegged at $1.66 per share, which has gained 2 cents over the past 30 days.
Shares of Carnival have gained 30.7% year to date. The Zacks Consensus Estimate for CVL’s 2024 revenues is pegged at $25.19 billion, indicating a year-over-year increase of 16.63%. The consensus mark for earnings is pegged at $1.31 per share, which has increased 2.3% over the past 30 days.
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