Warner Bros. Discovery stock falls as it writes down $9.1 billion, misses estimates

Warner
Bros.
Discovery‘s
stock
dropped
Wednesday
after
it
reported
a
$9.1
billion
write-down
on
its
TV
networks
and
missed
analyst
estimates
on
revenue.

Here
is
how
Warner
Bros.
Discovery
performed,
based
on
a
survey
of
analysts
by
LSEG:

• 
  Loss
  per
  share:
  36
  cents
  vs.
  a
  loss
  of
  22
  cents
  expected
• 
  Revenue: $9.7
  billion
  vs.
  $10.07
  billion
  expected

The
company’s
shares
were
down
roughly
9%
in
aftermarket
trading.

Warner
Bros.
Discovery
on
Wednesday

reported
the
non-cash
goodwill
impairment
charge,
which
was
triggered
by
the
reevaluation
of
the
book
value
of
the
TV
networks
segment.
The
book
value
was
higher
than
the
market
value
as
traditional
TV
networks
continue
to
see
customers
flee
and
advertisers
are
opting
to
spend
on
digital
and
streaming
instead.

“While
I
am
certainly
not
dismissive
of
the
magnitude
of
this
impairment,
I
believe
it’s
equally
important
to
recognize
that
the
flip
side
of
this
reflects
the
value
shift
across
business
models,”
said
CFO
Gunnar
Wiedenfels on
Wednesday’s
earnings
call,
adding
that
the
company
is
focusing
on
growth
in
the
studios
and
streaming
units.

He
said
Warner
Bros.
Discovery’s
balance
sheet
carries
a
significant
amount
of
goodwill
stemming
from
mergers
and
acquisitions,
namely
the

combination
of
Warner
Bros.
and
Discovery
in
2022.

“It’s
fair
to
say
that
even
two
years
ago
market
valuations
and
prevailing
conditions
for
legacy
media
companies
were
quite
different
than
they
are
today,
and
this
impairment
acknowledges
this
and
better
aligns
our
carrying
values
with
our
future
outlook,”
CEO
David
Zaslav
said
on
Wednesday’s
call.

Executives
highlighted
Warner
Bros.
Discovery’s
continued
mission
of
paying
down
debt,
much
of
which
stems
from
the
2022
merger.
During
the
second
quarter
the
company
paid
down
$1.8
billion
in
debt.
As
of
June
30,
it
had
$41.4
billion
in
gross
debt
and
$3.6
billion
cash
on
hand.

The
company
also
noted
uncertainty
surrounding
future
sports
rights
renewals,
including
the
NBA.
Warner
Bros.

Discovery
sued
the
NBA
in
July,
looking
to
forcibly
invoke
its
matching
rights
on
a
package
of
games
earmarked
for


Amazon‘s
Prime
Video
as
part
of
the
league’s
new
media
rights
deal.

Revenue
for
Warner
Bros.
Discovery’s
TV
networks
—
a
portfolio
that
includes
TBS,
TNT,
Discovery
and
TLC
—
was
down
8%
to
$5.27
billion
during
the
second
quarter,
with
both
distribution
and
advertising
revenue
down
in
the
segment.

However,
the
company’s
streaming
business,
centered
around
the
platform
Max,
was
a
bright
spot.

The
company
said
Wednesday
it
added
3.6
million
subscribers
during
the
quarter
ended
June
30,
bringing
its
total
number
of
global
streaming
customers
to
103.3
million.

The
international
expansion
lifting
subscriber
growth,
as
well
as
increased
ad
spending
on
streaming,
is
propelling
its
streaming
business
toward
profitability,
executives
said
Wednesday,
with
the
expectation
that
it
would
continue.

Zaslav
also
touted
the
streaming
bundles
Warner
Bros.
Discovery
is
forming
—
an
entertainment

pairing
with


Disney’s
Disney+
and
Hulu
—
and
a

sports
bundle
with
Disney’s
ESPN
and


Fox
set
to
launch
this
fall.

Still,
direct-to-consumer
streaming
revenue
decreased
5%
to
$2.57
billion,
driven
by
content
revenue
dropping
70%
due
to
a
lower
volume
of
third-party
licensing
deals.
Yet
advertising
revenue
for
streaming
was
up
99%,
the
company
said,
driven
by
higher
domestic
engagement
on
Max,
and
ad-supported
subscriber
growth.
Global
revenue
also
increased
4%
driven
by
the
ad
tier.

Total
revenue
for
the
quarter
was
down
6%
to
$9.7
billion.
Total
adjusted
earnings
before
interest,
taxes,
depreciation
and
amortization
decreased
15%
to
$1.8
billion.

Correction:
This
article
has
been
updated
to
reflect
that
Warner
Bros.
Discovery’s
revenue
was
$9.7
billion
for
the
quarter.