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Warner Bros. Discovery reported a big quarterly loss even as its U.S. direct-to-consumer segment turned a profit for the first time ever.
The company also expects the DTC, or streaming, business to be profitable for 2023 in the U.S., a year ahead of its expectations, CEO David Zaslav said in an earnings release Friday morning.
First-quarter revenue was $10.7 billion, roughly in line with analysts’ estimates. The company reported a net loss of $1.1 billion and adjusted EBITDA of $2.6 billion.
Here’s what the company reported, versus analysts’ estimates, according to Refinitiv:
- Revenue: $10.7 billion vs. $10.78 billion expected
- Loss per share: 44 cents vs. earnings of 1 cent expected
Warner Bros. Discovery’s stock fell as much as 5% in early trading after dropping nearly 4% on Thursday.
Like all major media companies, Warner Bros. Discovery is pivoting to streaming video as millions of Americans cancel traditional pay TV each year. The company ended the quarter with 97.6 million streaming subscribers, up 1.6 million from last quarter.
The U.S. direct-to-consumer segment turned a profit of $50 million for the quarter, a $704 million year-over-year improvement on a pro forma combined basis. Internationally, streaming still lost money, Warner Bros. Discovery head of streaming JB Perrette said during the conference call.
Warner Bros. Discovery is adding Discovery+ content to HBO Max and relaunching the service as Max in the U.S. later this month. Zaslav had previously promised its streaming business will be break-even by 2024 and profitable by 2025. Zaslav has aggressively cut back on content spending, including eliminating shows and movies from Max, to jump-start efforts to make the business profitable.
“We have a great product that’s going to be profitable for the year now,” Zaslav said on an earnings conference call. Zaslav noted the company also has news and sports that it hasn’t yet added to Max. Warner Bros. Discovery will be “disciplined” in its talks to renew National Basketball Association rights, Zaslav added.
David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives at the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 05, 2022 in Sun Valley, Idaho.
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“We have a great diversity of assets,” Zaslav said. “We’ve restructured this company now and are really tight. The environment is challenged, challenged, challenged, but as things start to pick up, you’re going to see a very quick turn at this company.”
Warner Bros. Discovery lost $930 million in free cash flow in the quarter, largely due to interest and sports media rights payments.
The company ended the fourth quarter with $49.5 billion in debt on its balance sheet, and $2.6 billion in cash on hand. Warner Bros. Discovery is attempting to boost free cash flow by cutting back on spending, including laying off thousands of employees last year, to reduce its hefty debt load.
The company’s cable networks segment brought in $5.6 billion in the quarter, down 10% year-over-year. Distribution revenue fell 3%, ex-foreign exchange, as more customers canceled cable. Advertising revenue dropped 14% in the quarter.
Warner Bros. studio revenue was $3.2 billion, a drop of 7% ex-FX.
WATCH: Warner Bros. Discovery CEO David Zaslav speaks to CNBC about 1st quarter earnings