Warner Bros Discovery (WBD) third quarter 2022 earnings

Warner Bros Discovery (WBD) third quarter 2022 earnings

Warner Bros. Discovery reported its third-quarter earnings on Thursday, missing analyst expectations as it felt the effects of a tough advertising environment and costs associated with its post-merger restructuring.

CEO David Zaslav also announced that the merged version of the company’s HBO Max and Discovery+ streaming services will arrive in the spring, earlier than the previously announced summer release date.

Here’s what the company reported compared to analysts’ expectations, according to Refinitiv:

  • Income: 9.82 billion dollars against the expected 10.36 billion dollars

The company reported a loss per share of 95 cents, citing macroeconomic headwinds, particularly in advertising.

Shares fell more than 5% after hours Thursday, after falling 5.6% to $11.97 in the regular trading session.

Warner Bros. Discovery is the result of a merger between AT&T’s WarnerMedia and Discovery, which was completed earlier this year. Since the merger was completed, the company has been in the midst of significant cost-cutting measures, such as laying off employees and pulling content from streaming service HBO Max.

“While we have much more work to do and some difficult decisions remain, we have complete conviction about the opportunity that lies ahead,” Zaslav said in the company’s press release Thursday.

Later, on an earnings conference call, he added: “In fact, we see this as a meaningful opportunity, one that we embraced wholeheartedly to look into each of our businesses and see what’s working, what’s not working, is it structured the right way , and doing so has the right resources.”

In the past year, Warner Bros. Discovery’s valuation nearly halved as Wall Street lowered its expectations for global streaming subscriber growth. Streaming services have been competing for subscribers, with industry behemoth Netflix losing customers earlier this year and unveiling an ad-supported tier at a cheaper price.

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“I think the great experiment in chasing subscribers at all costs is over,” Zaslav said on the earnings call Thursday, adding that the company’s focus will be to generate $1 billion in earnings before interest, taxes, depreciation and amortization from its streaming business by 2025.

Management also noted that HBO Max has not increased its subscription price since its launch nearly three years ago, putting it in a good position to do so when it relaunches as a combined platform with Discovery+.

The company is also moving forward with its plans to launch a free, ad-supported streaming service, “aggressively attack” the market and “move quickly,” Zaslav said Thursday. Advertising-supported streaming services such as Foxhis Tubi and Paramount GlobalPluto TV has seen their viewership increase and add significant ad revenue.

The company said it added 2.8 million direct-to-consumer streaming customers in the third quarter, bringing its total to 94.9 million global subscribers. Revenue for the direct-to-consumer segment fell 6% to $2.3 billion, as it saw declines in licensing and distribution revenue.

Warner Bros. Discovery’s movie studio segment saw revenue fall 5% to nearly $3.09 billion compared to the same period last year, as Warner had more theatrical releases.

In late October, the company said in public filings that it estimated it would book $1.3 billion to $1.6 billion in pretax restructuring charges during the third quarter. The restructuring is expected to be largely completed by the end of 2024, and will incur approx. $3.2 to $4.3 billion in total pre-tax restructuring charges.

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Meanwhile, the decline in advertising has hit media companies.

Revenue for the TV network segment fell 8% to $5.2 billion. The segment was particularly affected by an 11% decrease in advertising revenue.

Warner Bros. Discovery CFO Gunnar Wiedenfels said advertising headwinds continued to affect the company into the fourth quarter, adding that they remained the biggest variable on the company’s performance in 2023.

Industry peer Paramount Global reported earnings on Wednesday, also missing analyst estimates as TV and advertising revenue fell.

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