Warner Bros Discovery Q4 Revenue Slips On Ad And Studio Softness; Company Touts “Significant Operating And Financial Gains” In Streaming

Warner Bros Discovery revenue fell 11% to $11 billion (or a drop of 9% when foreign exchange fluctuations are excluded), mostly due to advertising softness and tough studio comparisons.

EBITDA also tumbled 5% to $2.603. Shares in the media giant shed about 3% in after-hours trading.

On the plus side for the company, DTC losses narrowed and free cash flow improved, with those metrics among those the company is highlighting as it forges ahead with a massive restructuring. In the earnings release, CEO David Zaslav pointed to “significant financial and operating” gains in streaming during the quarter. Total subscribers (including linear HBO) gained 1.1 million to 96.1 million, slightly undershooting consensus estimates.

Sales were light versus Wall Street consensus ($11.23 billion) on weak advertising and tough comparisons with licensing revenue from last year. Net losses were inflated by previously announced restructuring costs. Much of the restructuring as the company has pursued a stated objective of $3.5 billion in cost savings, with major programming like onetime HBO tentpole Westworld being pulled off of the company’s owned platforms. Zaslav has steered WBD toward a more open-minded approach to content licensing and Westworld is slated to become an anchor tenant on a planned FAST launch. Silicon Valley, in a similar initiative, is airing on TBS.

WBD is planning an investment day in the second quarter to lay out its rebranding and streaming strategy as it looks to bring HBO Max and Discovery+ to market as a rebranded, combined offering. After talking up the streamlining of two apps into one for months, the company decided last week to continue offering Discovery+ as a stand-alone service. WBD has been a leading advocate of Wall Street’s new religion of streaming profitability, as opposed to revenue and subscriber growth.

The message of the Zaslav-led conglom now is that it’s making solid progress on a major overhaul. It’s been painful, with layoffs and scuttled content for $5.3 billion in total restructuring charges through 2024, and an anticipated $3.5 billion in cost savings. The WGA recently slammed Warner-Discovery as “the latest disastrous merger to demonstrate the harms of consolidation, and particularly the threat to diversity when gatekeepers combine to increase their power.”

Free cash flow, or the cash left from revenue after paying all financial obligations, beat consensus at $2.48 billion, compared with $784 million. Other media congloms like Paramount and Disney have posted negative free cash flow for the latest quarter as they continue to fund their streaming ambitions. WBD’s asset mix is unique, arguably, given that HBO Max launched on top of existing subscriber outlets and has been offered at no extra charge to linear subscribers to HBO.

Gross debt, a big issue, stood at nearly $50 billion. WBD will have paid down $7 billion in debt since the Discovery-Warner Media merger closed in April of 2022, but it’s still got a heavy load.

Wall Street in recent months has switched to a glass-half-full sentiment on the company’s prospects, with the stock up over 60% year to date, reversing losses from 2022.