Warner Bros. Discovery Q1 earnings fall Y/Y, ad sales rise

Warner Bros. Discovery WBD reported first-quarter 2023 loss of 44 cents per share. The company had reported earnings of 69 cents in the year-ago quarter. The Zacks Consensus Estimate was pegged at 21 cents per share for the reported quarter.

Revenues increased 238.7% year over year to $10.7 billion, which beat the Zacks Consensus Estimate by 0.7%.

Top-Line Details
Advertising revenues increased 55.7% year over year to $2.29 billion. Distribution revenues increased 281.9% year over year to $5.16 billion. Content revenues increased from $323 million reported in the year-ago quarter to $2.95 billion. Other revenues were $285 million compared with $8 million reported in the year-ago quarter.

Studios (30% of revenues) reported revenues of $3.2 billion, down 8.5% from the year-ago quarter. Revenues decreased 7% ex-FX from the prior-year quarter on a pro forma combined basis.

Within the segment, content revenues decreased 8% ex-FX to $3.02 billion as higher games revenues from the release of Hogwarts Legacy were more than offset by lower TV licensing, theatrical film rental and to a lesser extent, home entertainment revenues.

Networks (52.2% of revenues) revenues decreased 11.9% on a year-over-year basis to $5.58 billion. Advertising revenues decreased 14% ex-FX due to audience declines in domestic general entertainment and news networks and soft advertising markets mainly in the Unites States and to a lesser extent, certain international markets.

The broadcast of the 2022 Winter Olympic Games in Europe negatively impacted the year-over-year growth rate in the quarter by approximately 100 basis points. The decline was partially offset by higher domestic sports advertising due to the NCAA March Madness tournament.

Within the segment, content revenues decreased 51% ex-FX, primarily because of the sublicensing of Olympic sports rights to European broadcast networks in 2022.

Direct-to-Consumer (DTC) revenues (22.9% of revenues) decreased 2.4% from the year-ago quarter to $2.45 billion. Global DTC average revenue per unit was $7.48.

WBD ended first-quarter 2023 with 97.6 million global DTC subscribers compared with 96.1 million subscribers in the previous quarter.

The launch of Hogwarts Legacy was the largest release of all time for Warner Bros. Games and the best-selling game year to date with over $1 billion in retail sales.

Operating Details
In the first quarter, selling, general and administrative expenses increased 129.6% from the year-ago quarter’s levels to $2.38 billion.

Adjusted EBITDA increased 154.2% from the year-ago quarter’s levels to $2.61 billion.

Cash used in operating activities was $631 million, which included $836 million of semi-annual interest payments largely attributable to merger-related debt.

The company reported an operating loss of $557 million against an operating income of $353 million in the year-ago quarter.

Balance Sheet
As of Mar 31, 2023, cash & cash equivalents were $2.59 billion compared with $3.73 billion as of Dec 31, 2022. Nasdaq