All eyes were on Warner Bros. Discovery’s second-quarter earnings Thursday following Wednesday’s report that the company was preparing a major restructuring of its content divisions, and the entertainment conglomerate added 1.7 million global streaming subscribers to HBO Max and Discovery+ to reach 92.1 million global subscribers.
The quarter ended with revenues of $10.82billion for the company trading under the stock ticker WBD. Revenues decreased 1% year-over year, and the diluted EPS was -$1.50. Yahoo Finance reported that earnings fell 3 cents per share and the analyst expectations were not met.
As a result the company’s stock plunged more than 12% in after-hours trading.
Warner Bros. Discovery did not break out individual subscribers for HBO and HBO Max, which last quarter when it was still controlled by AT&T had reached a combined 76.8 million customers worldwide by the end of March.
“We’ve had a busy, productive four months since launching Warner Bros. Discovery, and have
more conviction than ever in the massive opportunity ahead,”David Zaslav, CEO of the company, made this statement. “We have the most powerful creative engine and bouquet of owned content in the world, as highlighted by our industry leading 193 Emmy nominations, and we intend to maximize the value of that content through a broad distribution model that includes theatrical, streaming, linear cable, free-to-air, gaming, consumer products and experiences, and more, everywhere in the world. We’re confident we’re on the right path to meet our strategic goals and really excel, both creatively and financially, and couldn’t be more excited about the future of our company.”
WBD’s Q2 revenue breakdown was headlined by the Networks Segment ($5.74 billion) and followed by the Studio Segment ($2.79 billion) and the Direct-to-Consumer Segment ($2.2 billion). The company reported a loss of $3.4B in the quarter, despite the fact that revenues soared to $6.6B in the three-months ending June 30, which resulted in a net loss. As a result of the merger, this was not unexpected. The conglomerate is currently seeking $3 billion in cost-savings through synergy.
The company reported that cash generated by operations increased to $1.01 Billion and that free cash flow rose to $789 Mn in Q2. As they strive to continuously generate cash, this is a critical metric for Zaslav as well as the executive team.
Discovery and AT&T’s WarnerMedia completed its merger to form the combined company, Warner Bros. Discovery was launched in April. The company had $53B in gross debt at Q2 and expected to have paid $6 billion off that amount by August.
Since the merger, Zaslav has aggressively remodeled the company by constructing three distinct divisions — Warner Bros. and New Line, DC Entertainment and Warner Animation Group — that report directly to him. He’s also ousted key executives such as former Warner Bros. head Toby Emmerich while hiring new studio chiefs Michael De Luca and Pamela Abdy as well as former Disney film chief Alan Horn in an advisory role.
Zaslav’s leadership team has repeatedly emphasized a goal of reaching $3 billion in cost savings to help pay down the debt it acquired in the merger. “It’s not about winning the spending war,”Gunnar Wiedenfels, Discovery’s Chief Financial Officer, said that he received the information back in February. “Money doesn’t score goals.”
