Warner Bros Discovery Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001437107-24-000110
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001437107-24-000165
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 176 previous paragraphs and 199 current paragraphs.
116 unchanged; 43 reworded; 35 added; 16 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 12 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Content revenue decreased 13% for both the three and six months ended June 30, 2024. The decrease for the three months ended June 30, 2024 was primarily attributable to lower volume of third-party licensing deals at DTC and a 27% decrease in television product revenue attributable to the timing of initial telecast productions and lower licensing revenue, partially offset by a 19% increase in theatrical product revenue attributable to higher home entertainment revenue due to the performance of Dune: Part Twoand higher film rental revenue due to the performance of Godzilla x Kong: The New Empire.
Current report
Our principal component of costs of revenues is content expense. Content expense includes television/digital series, specials, films, games, and sporting events. Amortization related to both historical cost basis and any fair value adjustments to content arising from business combinations is included in costs of revenues. The costs of producing a content asset and bringing that asset to market consist of production costs, participation costs, and exploitation costs.
Current report
Selling, general and administrative expenses decreased 3% and 5% for the three and six months ended June 30, 2024, respectively, primarily attributable to lower overhead expenses and lower marketing costs due to the prior year launch of Max in the U.S.
Current report
Gain (loss) on extinguishment of debt
Current report
During the three months ended June 30, 2024, the Company commenced a tender offer to purchase for cash up to $2.61 billion in aggregate purchase price (excluding accrued and unpaid interest) of its senior notes. The Company completed the tender offer in June 2024 by purchasing senior notes in the aggregate principal amount of $3,399 million validly tendered and accepted for purchase pursuant to the offer and recorded a gain on extinguishment of $542 million. (See Note 8 to the accompanying consolidated financial statements.)
Current report
Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis. The Studios discussion below also includes intra-segment revenue and expense between product lines, which represented 3% of total revenues and operating expenses for this segment for the three and six months ended June 30, 2024.
Current report
Fluctuations in results for our Studios segment may occur due to various factors, including (but not limited to) the timing and number of new film releases each quarter, the timing of marketing expenses recognized relative to (i.e., prior to) a film’s release, and the mix of content distributed each period.
Current report
Content revenue decreased 6% for the three months ended June 30, 2024, primarily attributable to a 27% decrease in television product revenue and a 41% decrease in games revenue, partially offset by a 19% increase in theatrical product revenue.
Current report
•The decrease in television product revenue was attributable to the timing of initial telecast productions and lower licensing revenue.
Current report
•The decrease in games revenue was attributable to the weak performance of Suicide Squad: Kill the Justice League, which was released in the first quarter of 2024 as compared to the strong performance of Hogwarts Legacy, which was released in the first quarter of 2023.
Current report
•The increase in theatrical product revenue was attributable to higher home entertainment revenue due to the performance of Dune: Part Two and higher film rental revenue due to the performance of Godzilla x Kong: The New Empire, which was released in the first quarter of 2024.
Current report
Content revenue decreased 10% for the six months ended June 30, 2024, primarily attributable to a 66% decrease in games revenue and a 26% decrease in television product revenue, partially offset by a 30% increase in theatrical product revenue.
Current report
•The decrease in games revenue was attributable to the weak performance of Suicide Squad: Kill the Justice League, which was released in the first quarter of 2024 as compared to the strong performance of Hogwarts Legacy, which was released in the first quarter of 2023.
Current report
•The decrease in television product revenue was attributable to lower initial telecast revenue, reflecting lower episode deliveries as a result of the WGA and SAG-AFTRA strikes in the prior year and the timing of television production, as well as fewer television series resulting in lower licensing revenue.
Current report
Costs of revenues decreased 3% and were flat for the three and six months ended June 30, 2024, respectively. The decrease for the three months ended June 30, 2024 was primarily attributable to a 35% decline in television product content expense commensurate with lower television revenue, partially offset by 38% higher theatrical product content expense commensurate with higher theatrical revenue. For the six months ended June 30, 2024, a 29% decrease in television product content expense commensurate with lower television revenue was offset by a 40% increase in theatrical product content expense commensurate with higher theatrical revenue.
Current report
Selling, general and administrative expenses increased 2% and decreased 2% for the three and six months ended June 30, 2024, respectively. The increase for the three months ended June 30, 2024 was primarily attributable to higher marketing expense. The decrease for the six months ended June 30, 2024 was primarily attributable to lower overhead expenses, partially offset by higher marketing expense.
Current report
Adjusted EBITDA decreased 24% and 55% for the three and six months ended June 30, 2024, respectively.
Current report
Distribution revenue decreased 8% and 7% for the three and six months ended June 30, 2024, respectively, primarily attributable to a 9% and 8% decline in domestic linear subscribers for the three and six months ended June 30, 2024, respectively, partially offset by a 5% and 6% increase in domestic contractual affiliate rates for the three and six months ended June 30, 2024, respectively. In addition, the exit from the AT&T SportsNet business had unfavorable impacts of $71 million and $148 million for the three and six months ended June 30, 2024, respectively. Declines in linear subscribers are expected to continue throughout 2024.
Current report
Costs of revenues decreased 10% and 9% for the three and six months ended June 30, 2024, respectively, primarily attributable to lower content expense, including the allocation of U.S. sports costs to DTC, and our exit from the AT&T SportsNet business, which had a favorable impact to cost of revenues of $98 million and $179 million for the three and six months ended June 30, 2024, respectively.
Current report
Selling, general and administrative expenses was relatively flat for the three months ended June 30, 2024 and decreased 3% for the six months ended June 30, 2024. The decrease for the six months ended June 30, 2024 was primarily attributable to lower overhead expenses.
Current report
Adjusted EBITDA decreased 7% and 8% for the three and six months ended June 30, 2024, respectively.
Current report
Domestic subscriber - We define a Domestic subscriber as a subscription based either in the United States of America or Canada.
Current report
International subscriber - We define an International subscriber as a subscription based outside of the United States of America or Canada.
Current report
Distribution revenue increased 1% for the three and six months ended June 30, 2024, primarily attributable to a 7% increase in subscribers following the launch of Max in Latin America in the first quarter of 2024 and in Europe in the second quarter of 2024, partially offset by continued domestic linear wholesale subscriber declines.
Current report
Global ARPU consisted of the following.
Current report
Global ARPU increased 4% for the three and six months ended June 30, 2024, primarily attributable to subscriber growth of the ad-lite tier domestically along with a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets.
Current report
Content revenue decreased 70% and 62% for the three and six months ended June 30, 2024, respectively, primarily attributable to lower volume of third-party licensing deals.
Current report
Selling, general and administrative expenses decreased 17% for the three and six months ended June 30, 2024, primarily attributable to lower marketing costs due to the prior year launch of Max in the U.S. and lower overhead expenses.
Current report
Adjusted EBITDA decreased $103 million and $69 million for the three and six months ended June 30, 2024, respectively.
Current report
The following tables present our Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).
Current report
2 ARPU: The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period. Where daily values are not available, the sum of beginning of period and end of period divided by two is used.
Current report
Adjusted EBITDA decreased 19% and 6% for the three and six months ended June 30, 2024, respectively, primarily attributable to higher securitization expense.
Current report
During the three months ended June 30, 2024, the Company issued €650 million of 4.302% fixed rate senior notes due January 2030 and €850 million of 4.693% fixed rate senior notes due May 2033. After December 2029 and February 2033, respectively, the senior notes are redeemable at par plus accrued and unpaid interest.
Current report
•Investments
Current report
In May 2024, we sold our 50% interest in All3Media, an equity method investment, for proceeds of $324 million.
Removed paragraphs (16)
Previous report
Other revenue decreased 9% for the three months ended March 31, 2024, primarily attributable to lower studio production services due to the impact of the WGA and SAG-AFTRA strikes and fewer services provided to the unconsolidated TNT Sports UK joint venture, partially offset by the opening of Warner Bros. Studio Tour Tokyo in June 2023.
Previous report
Selling, general and administrative expenses decreased 6% for the three months ended March 31, 2024, primarily attributable to a reduction in personnel and overhead expenses at DTC and Networks, partially offset by higher theatrical marketing expense.
Previous report
Costs of revenues increased 3% for the three months ended March 31, 2024, primarily attributable to higher theatrical product content expense commensurate with higher theatrical revenue, and to a lesser extent, higher games content expense due to the impairment of Suicide Squad: Kill the Justice League. These increases were partially offset by lower television product content expense commensurate with lower revenue, including the impact of the WGA and SAG-AFTRA strikes.
Previous report
Selling, general and administrative expenses decreased 5% for the three months ended March 31, 2024, primarily attributable to lower games marketing expense due to the release of Hogwarts Legacyin the prior year and lower bad debt expense, partially offset by higher theatrical marketing expense due to the nature of releases in the first quarter of 2024 compared to the first quarter of 2023.
Previous report
Adjusted EBITDA decreased 70% for the three months ended March 31, 2024.
Previous report
Distribution revenue decreased 6% for the three months ended March 31, 2024, primarily attributable to a decline in linear subscribers in the U.S. and our exit from the AT&T SportsNet business, partially offset by increases in U.S. contractual affiliate rates and inflationary impacts in Argentina.
Previous report
Other revenue decreased 29% for the three months ended March 31, 2024, primarily attributable to fewer services provided to the unconsolidated TNT Sports UK joint venture.
Previous report
Costs of revenues decreased 8% for the three months ended March 31, 2024, primarily attributable to our exit from the AT&T SportsNet business, allocation of U.S. sports costs to DTC, and lower costs associated with the unconsolidated TNT Sports UK joint venture, partially offset by timing of domestic sports rights expense. In addition, the three months ended March 31, 2023, was favorably impacted by lower general entertainment content expense, partially offset by inflationary impacts in Argentina and higher election coverage expense.
Previous report
Selling, general and administrative expenses decreased 8% for the three months ended March 31, 2024, primarily attributable to lower personnel and overhead expenses.
Previous report
Adjusted EBITDA decreased 8% for the three months ended March 31, 2024.
Previous report
As of March 31, 2024, we had 99.6 million DTC subscribers.1
Previous report
Distribution revenue increased 1% for the three months ended March 31, 2024, primarily attributable to price increases in the U.S. and certain international markets and international subscriber growth, partially offset by lower subscribers in the U.S. due to continued linear wholesale subscriber declines.
Previous report
Content revenue decreased 46% for the three months ended March 31, 2024, primarily attributable to lower volume of international licensing deals.
Previous report
Selling, general and administrative expenses decreased 19% for the three months ended March 31, 2024, primarily attributable to lower personnel and overhead expenses.
Previous report
Adjusted EBITDA increased 59% for the three months ended March 31, 2024.
Previous report
Adjusted EBITDA improved 2% for the three months ended March 31, 2024, primarily attributable to reductions to personnel costs and technology-related operating expenses, partially offset by higher securitization expense.
Reworded paragraphs (43)
Previous wording
Other headwinds in the industry, such as continued pressures on linear distribution and soft linear advertising markets in the U.S., have had, and are expected to continue to have, a material impact on the operations and results of the Company, including a negative impact on the results of operations attributed to declines in linear advertising revenue. The increase of digital advertising available in the marketplace has also resulted in, and is expected to continue to result in, increased competition for advertising expenditures for both traditional linear networks and ad-supported tiers in streaming services.
Current wording
Other headwinds in the industry, such as continued pressures on linear distribution and continued softness in the U.S. linear advertising market, have had, and are expected to continue to have, a material impact on the operations and results of the Company, including a negative impact on the results of operations attributed to declines in linear advertising revenue. In addition, declines in linear subscribers are expected to continue throughout 2024. The increase of digital advertising available in the marketplace has also resulted in, and is expected to continue to result in, increased competition for advertising expenditures for both traditional linear networks and ad-supported tiers in streaming services.
Previous wording
In connection with the Merger, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company. The Company’s ongoing restructuring and transformation initiatives includes, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs. While the Company’s restructuring efforts are ongoing, this restructuring program is expected to be substantially completed by the end of 2024. We expect to incur up to $5.3 billion in pre-tax restructuring charges, of which we have incurred $4.3 billion as of March 31, 2024 related to this plan. Of the total expected pre-tax restructuring charges, we expect total cash expenditures to be $1.0 - $ 1.5 billion.
Current wording
In connection with the Merger, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company. The Company’s ongoing restructuring and transformation initiatives includes, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs. While the Company’s restructuring efforts are ongoing, this restructuring program is expected to be substantially completed by the end of 2024. We expect to incur up to $5.3 billion in pre-tax charges, of which we have incurred $4.5 billion as of June 30, 2024 related to this plan. Of the total expected pre-tax charges, we expect total cash expenditures to be $1.0 - $ 1.5 billion.
Previous wording
Distribution revenue decreased 3% for the three months ended March 31, 2024, primarily attributable to declines in Networks linear subscribers in the U.S. and continued DTC linear wholesale subscriber declines in the U.S., partially offset by increases in U.S. contractual affiliate rates.
Current wording
Distribution revenue decreased 4% and 3% for the three and six months ended June 30, 2024, respectively, primarily attributable to 9% and 8% declines in Networks domestic linear subscribers for the three and six months ended June 30, 2024, respectively, and lower domestic subscribers at DTC largely resulting from continued linear wholesale subscriber declines in the U.S., partially offset by 5% and 6% increases in domestic contractual affiliate rates for the three and six months ended June 30, 2024, respectively.
Previous wording
Advertising revenue decreased 7% for the three months ended March 31, 2024, primarily attributable to audience declines in domestic general entertainment and news networks and soft linear advertising markets in the U.S., partially offset by higher Max U.S. engagement.
Current wording
Advertising revenue decreased 3% and 5% for the three and six months ended June 30, 2024, respectively, primarily attributable to audience declines in domestic networks of 13% for both the three and six months ended June 30, 2024, respectively, and continued softness in the U.S. linear advertising market, partially offset by higher Max U.S. engagement and ad-lite subscriber growth.
Previous wording
Content revenue decreased 14% for the three months ended March 31, 2024, primarily attributable to lower games revenue due to the performance of Suicide Squad: Kill the Justice League compared to Hogwarts Legacy in the prior year and lower TV licensing revenue, partially offset by higher theatrical film rental revenue due to the performance of Dune: Part Two.
Current wording
The decrease for the six months ended June 30, 2024 was primarily attributable to a 66% decrease in games revenue due to the performance of Suicide Squad: Kill the Justice League compared to Hogwarts Legacy in the prior year, a 26% decrease in television product revenue attributable to lower initial telecast revenue, as well as fewer television series resulting in lower licensing revenue, and lower volume of third-party licensing deals at DTC, partially offset by a 30% increase in theatrical product revenue attributable to higher film rental revenue due to the performance of Dune: Part Twoand Godzilla x Kong: The New Empire.
Previous wording
Other revenue increased 4% for the three months ended March 31, 2024, primarily attributable to the opening of Warner Bros. Studio Tour Tokyo in June 2023, partially offset by lower studio production services due to the impact of the WGA and SAG-AFTRA strikes.
Current wording
Other revenue increased 16% and 3% for the three and six months ended June 30, 2024, respectively, primarily attributable to the opening of Warner Bros. Studio Tour Tokyo in June 2023.
Previous wording
Costs of revenues decreased 9% for the three months ended March 31, 2024, primarily attributable to lower content expense related to the amortization of purchase accounting fair value step-up for content.
Current wording
Costs of revenues decreased 6% and 7% for the three and six months ended June 30, 2024, respectively, primarily attributable to lower content expense related to the amortization of purchase accounting fair value step-up for content.
Previous wording
Depreciation and amortization decreased 9% for the three months ended March 31, 2024, primarily attributable to intangible assets acquired during the Merger that are being amortized using the sum of the months’ digits method.
Current wording
Depreciation and amortization decreased 9% for both the three and six months ended June 30, 2024, primarily attributable to intangible assets acquired during the Merger that are being amortized using the sum of the months’ digits method.
Previous wording
Restructuring and other charges decreased 64% for the three months ended March 31, 2024. Restructuring and other charges primarily includes contract terminations, facility consolidation activities, organizational restructuring, and other charges. (See Note 3 to the accompanying consolidated financial statements.)
Current wording
Restructuring and other charges decreased 19% and 37% for the three and six months ended June 30, 2024, respectively. Restructuring and other charges primarily includes contract terminations, facility consolidation activities, organizational restructuring, and other charges. (See Note 3 to the accompanying consolidated financial statements.)
Previous wording
Impairment and loss on dispositions was $12 million for the three months ended March 31, 2024.
Current wording
Impairments and loss on dispositions was $9,395 million and $9,407 million for the three and six months ended June 30, 2024, respectively, primarily attributable to a $9.1 billion pre-tax, non-cash goodwill impairment charge related to the Networks reporting unit (see Note 2 to the accompanying consolidated financial statements) and a $231 million right-of-use (“ROU”) asset impairment charge related to the Hudson Yards, New York office lease. (See Note 13 to the accompanying consolidated financial statements.)
Previous wording
Interest expense, net decreased $56 million for the three months ended March 31, 2024, primarily attributable to lower debt during the period. (See Note 8 and Note 9 to the accompanying consolidated financial statements.)
Current wording
Interest expense, net decreased $56 million and $112 million for the three and six months ended June 30, 2024, respectively, primarily attributable to lower debt during the period. (See Note 8 and Note 9 to the accompanying consolidated financial statements.)
Previous wording
Losses from our equity method investees were $48 million for the three months ended March 31, 2024. The changes are attributable to our share of earnings and losses from our equity investees. (See Note 7 to the accompanying consolidated financial statements.)
Current wording
Losses from our equity method investees were $23 million and $71 million for the three and six months ended June 30, 2024, respectively. The changes are attributable to our share of earnings and losses from our equity investees. (See Note 7 to the accompanying consolidated financial statements.)
Previous wording
Income tax (expense) benefit was $(136) million and $178 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in income tax benefit for the three months ended March 31, 2024 was primarily attributable to an increase in pre-tax book income and the tax attribute carryforwards in jurisdictions for which no tax benefit can be recognized.
Current wording
Income tax benefit was $7 million and $260 million for the three months ended June 30, 2024 and 2023, respectively, and income tax (expense) benefit was $(129) million and $438 million for the six months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024, the Company recorded a non-cash goodwill impairment charge of $9.1 billion, the majority of which was not deductible for tax purposes. (See Note 2.) The increase in income tax expense for the three and six months ended June 30, 2024 compared to the same periods in 2023 was primarily attributable to an increase in pre-tax book income excluding the non-cash goodwill impairment charge, the effect of foreign operations, including the tax attribute carryforwards in jurisdictions for which no tax benefit can be recognized, and an increase in uncertain tax positions, primarily attributable to a one-time favorable audit resolution reserve release included in the 2023 income tax benefit for the three and six months ended June 30, 2023.
Previous wording
Income tax benefit for the three months ended March 31, 2024 reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the effect of foreign operations, changes in uncertain tax positions, and state and local income taxes.
Current wording
Income tax expense for the three and six months ended June 30, 2024 reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the non-deductible goodwill impairment charge and the effect of foreign operations.
Previous wording
The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. The Company believes Adjusted EBITDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes employee share-based compensation, restructuring, certain impairment charges, gains and losses on business and asset dispositions, and transaction and integration costs from the calculation of Adjusted EBITDA due to their impact on comparability between periods. Integration costs include transformative system implementations and integrations, such as Enterprise Resource Planning systems, and may take several years to complete. The Company also excludes the depreciation of fixed assets and amortization of intangible assets, amortization of purchase accounting fair value step-up for content, and amortization of capitalized interest for content, as these amounts do not represent cash payments in the current reporting period. Adjusted EBITDA should be considered in addition to, but not a substitute for, operating income, net income, and other measures of financial performance reported in accordance with U.S. GAAP. We prospectively updated certain corporate allocations at the beginning of 2024. The impact to prior periods was immaterial.
Current wording
The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. The Company believes Adjusted EBITDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes employee share-based compensation, restructuring, certain impairment charges, gains and losses on business and asset dispositions, and transaction and integration costs from the calculation of Adjusted EBITDA due to their impact on comparability between periods. Integration costs include transformative system implementations and integrations, such as Enterprise Resource Planning systems, and may take several years to complete. The Company also excludes the depreciation of fixed assets and amortization of intangible assets, amortization of purchase accounting fair value step-up for content (which is included in consolidated costs of revenues), and amortization of capitalized interest for content, as these amounts do not represent cash payments in the current reporting period. Adjusted EBITDA should be considered in addition to, but not a substitute for, operating income, net income, and other measures of financial performance reported in accordance with U.S. GAAP. We prospectively updated certain corporate allocations at the beginning of 2024. The impact to prior periods was immaterial.
Previous wording
The table below presents our Adjusted EBITDA by segment (in millions).
Current wording
The table below presents our Adjusted EBITDA for each of the Company’s reportable segments, corporate, and inter-segment eliminations (in millions).
Previous wording
The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).
Current wording
The following tables present, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).
Previous wording
Content revenue decreased 14% for the three months ended March 31, 2024, primarily attributable to lower games and TV licensing revenue, partially offset by higher theatrical film rental and home entertainment revenue. Games revenue decreased due to the performance of Suicide Squad: Kill the Justice League, which was released in the first quarter of 2024, compared to the prior year performance of Hogwarts Legacy. TV licensing revenue decreased due to lower episode deliveries as a result of the WGA and SAG-AFTRA strikes in the prior year, and the timing of licensing availabilities. Theatrical film rental revenue increased due to the performance of Dune: Part Two, released in the first quarter of 2024, as well as higher carryover from releases in the fourth quarter of 2023 compared to the fourth quarter of 2022. Home entertainment revenue increased due to the performance of Wonkaand Aquaman and the Lost Kingdom.
Current wording
•The increase in theatrical product revenue was attributable to higher film rental revenue due to the performance of Dune: Part Two and Godzilla x Kong: The New Empire, which were released in the first quarter of 2024, as well as higher carryover from releases in the fourth quarter of 2023 compared to the fourth quarter of 2022, and higher home entertainment revenue due to the performance of Dune: Part Two, Wonka, and Aquaman and the Lost Kingdom.
Previous wording
The table below presents, for our Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).
Current wording
The tables below present, for our Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).
Previous wording
Advertising revenue decreased 11% for the three months ended March 31, 2024, primarily attributable to audience declines in domestic general entertainment and news networks and a soft linear advertising market in the U.S. In addition, the three months ended March 31, 2024 was unfavorably impacted by our exit from the AT&T SportsNet business.
Current wording
Advertising revenue decreased 9% and 10% for the three and six months ended June 30, 2024, respectively, primarily attributable to audience declines in domestic networks of 13% for both the three and six months ended June 30, 2024, and continued softness in the U.S. linear advertising market.
Previous wording
Content revenue increased 8% for the three months ended March 31, 2024, primarily attributable to inter-segment content licensing to DTC.
Current wording
Content revenue increased 5% and 7% for the three and six months ended June 30, 2024, respectively, primarily attributable to timing of third party licensing deals, partially offset by lower inter-segment content licensing to DTC.
Previous wording
The following table presents, for our DTC segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).
Current wording
The following tables present, for our DTC segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).
Previous wording
The Company defines a “Premium Sports Product” as a strategically prioritized, sports-focused product sold on a stand-alone basis and made available directly to consumers. The current “independently-branded, regional products” referred to in (iv) above consist of TVN/Player and BluTV. We may refer to the aggregate number of DTC Subscriptions as “subscribers”.
Current wording
The Company defines a “Premium Sports Product” as a strategically prioritized, sports-focused product sold on a stand-alone basis and made available directly to consumers. The current “independently-branded, regional products” referred to in (iv) above consist of TVN/Player and BluTV. Subscribers to multiple WBD DTC products (listed above) are counted as a paid subscriber for each individual WBD DTC product subscription. We may refer to the aggregate number of DTC Subscriptions as “subscribers”.
Previous wording
Advertising revenue increased 70% for the three months ended March 31, 2024, primarily attributable to higher Max U.S. engagement, the B/R Sports on Max launch in October 2023, and ad-lite subscriber growth.
Current wording
Advertising revenue increased 99% and 86% for the three and six months ended June 30, 2024, respectively, primarily attributable to higher Max domestic engagement and ad-lite subscriber growth.
Previous wording
Costs of revenues increased 5% for the three months ended March 31, 2024, primarily attributable to the allocation of U.S. sports rights costs to DTC, partially offset by lower content expense and decreased content licensing costs commensurate with lower content revenue.
Current wording
Costs of revenues increased 5% for the three and six months ended June 30, 2024, primarily attributable to higher content expense driven by sports content, partially offset by decreased content licensing costs commensurate with lower content revenue.
Previous wording
The following tables present our inter-segment eliminations by revenue and expense, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).
Current wording
The following table presents our inter-segment eliminations by revenue and expense, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).
Previous wording
Inter-segment revenue and expense eliminations primarily represent inter-segment content transactions and marketing and promotion activity between reportable segments. In our current segment structure, in certain instances, production and distribution activities are in different segments. Inter-segment content transactions are presented “gross” (i.e., the segment producing and/or licensing the content reports revenue and profit from inter-segment transactions in a manner similar to the reporting of third-party transactions, and the required eliminations are reported on the separate “Eliminations” line when presenting our summary of segment results). Generally, timing of revenue recognition is similar to the reporting of third-party transactions. The segment distributing the content, e.g., via our DTC or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use. The content amortization expense related to the inter-segment profit is also eliminated on the separate “Eliminations” line when presenting our summary of segment results.
Current wording
Inter-segment revenue and expense eliminations primarily represent inter-segment content transactions and marketing and promotion activity between reportable segments. In our current segment structure, in certain instances, production and distribution activities are in different segments. Inter-segment content transactions are presented at market value (i.e., the segment producing and/or licensing the content reports revenue and profit from inter-segment transactions in a manner similar to the reporting of third-party transactions, and the required eliminations are reported on the separate “Eliminations” line when presenting our summary of segment results). Generally, timing of revenue recognition is similar to the reporting of third-party transactions. The segment distributing the content, e.g., via our DTC or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use. The content amortization expense related to the inter-segment profit is also eliminated on the separate “Eliminations” line when presenting our summary of segment results.
Previous wording
Historically, we have generated a significant amount of cash from operations. During the three months ended March 31, 2024, we funded our working capital needs primarily through cash flows from operations. As of March 31, 2024, we had $3.0 billion of cash and cash equivalents on hand. We are a well-known seasoned issuer and have the ability to conduct registered offerings of securities, including debt securities, common stock and preferred stock, on short notice, subject to market conditions. Access to sufficient capital from the public market is not assured. We have a $6.0 billion revolving credit facility and a commercial paper program described below. We also participate in a revolving receivables program and an accounts receivable factoring program described below.
Current wording
Historically, we have generated a significant amount of cash from operations. During the six months ended June 30, 2024, we funded our working capital needs primarily through cash flows from operations. As of June 30, 2024, we had $3.6 billion of cash and cash equivalents on hand. We are a well-known seasoned issuer and have the ability to conduct registered offerings of securities, including debt securities, common stock and preferred stock, on short notice, subject to market conditions. Access to sufficient capital from the public market is not assured. We have a $6.0 billion revolving credit facility and a commercial paper program described below. We also participate in a revolving receivables program and an accounts receivable factoring program described below.
Previous wording
During the three months ended March 31, 2024, we borrowed and repaid $2,200 million under our Credit Facility and commercial paper program. As of March 31, 2024, we had no outstanding borrowings under the Credit Facility or the commercial paper program.
Current wording
During the six months ended June 30, 2024, we borrowed and repaid $11,605 million under our Credit Facility and commercial paper program. As of June 30, 2024, we had no outstanding borrowings under the Credit Facility or the commercial paper program.
Previous wording
We have a revolving agreement to transfer up to $5,500 million of certain receivables through our bankruptcy-remote subsidiary, Warner Bros. Discovery Receivables Funding, LLC, to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. We service the sold receivables for the financial institution for a fee and pay fees to the financial institution in connection with this revolving agreement. As customers pay their balances, our available capacity under this revolving agreement increases and typically we transfer additional receivables into the program. In some cases, we may have collections that have not yet been remitted to the bank, resulting in a liability. The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $5,170 million as of March 31, 2024.
Current wording
We have a revolving agreement to transfer up to $5,200 million of certain receivables through our bankruptcy-remote subsidiary, Warner Bros. Discovery Receivables Funding, LLC, to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. We service the sold receivables for the financial institution for a fee and pay fees to the financial institution in connection with this revolving agreement. As customers pay their balances, our available capacity under this revolving agreement increases and typically we transfer additional receivables into the program. In some cases, we may have collections that have not yet been remitted to the bank, resulting in a liability. The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $5,068 million as of June 30, 2024.
Previous wording
We have a factoring agreement to sell certain of our non-U.S. trade accounts receivable on a limited recourse basis to a third-party financial institution. No amounts were sold under the Company’s factoring arrangement for the three months ended March 31, 2024.
Current wording
We have a factoring agreement to sell certain of our non-U.S. trade accounts receivable on a limited recourse basis to a third-party financial institution. Total trade accounts receivable sold under the Company’s factoring arrangement was $57 million for the six months ended June 30, 2024.
Previous wording
During the three months ended March 31, 2024, we repaid $40 million of aggregate principal amount of our floating rate notes due March 2024.
Current wording
During the six months ended June 30, 2024, we repaid $40 million of aggregate principal amount of our floating rate notes due March 2024.
Previous wording
During the three months ended March 31, 2024, we repurchased or repaid $1,050 million of aggregate principal amount outstanding of our senior notes. In addition, we have $48 million of senior notes coming due in June 2024, and an additional $3,383 million of senior notes coming due through March 31, 2025.
Current wording
During the six months ended June 30, 2024, we repurchased or repaid $4,497 million of aggregate principal amount outstanding of our senior notes. In addition, we have $506 million of senior notes coming due in September 2024, and an additional $3,165 million of senior notes coming due through June 30, 2025.
Previous wording
We effected capital expenditures of $195 million during the three months ended March 31, 2024, including amounts capitalized to support Max. In addition, we expect to continue to incur significant costs to develop and market Max.
Current wording
We effected capital expenditures of $447 million during the six months ended June 30, 2024, including amounts capitalized to support Max. In addition, we expect to continue to incur significant costs to develop and market Max.
Previous wording
Our uses of cash have included investments in equity method investments and equity investments without readily determinable fair value. (See Note 7 to the accompanying consolidated financial statements.) We also provide funding to our investees from time to time. During the three months ended March 31, 2024, we contributed $53 million for investments in and advances to our investees.
Current wording
Our uses of cash have included investments in equity method investments and equity investments without readily determinable fair value. (See Note 7 to the accompanying consolidated financial statements.) We also provide funding to our investees from time to time. During the six months ended June 30, 2024, we contributed $68 million for investments in and advances to our investees.
Previous wording
We had redeemable equity balances of $179 million at March 31, 2024, which may require the use of cash in the event holders of noncontrolling interests put their interests to us. Distributions to noncontrolling interests and redeemable noncontrolling interests totaled $130 million and $237 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
We had redeemable equity balances of $118 million at June 30, 2024, which may require the use of cash in the event holders of noncontrolling interests put their interests to us. Distributions to noncontrolling interests and redeemable noncontrolling interests totaled $161 million and $269 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
We expect to continue to make payments for income taxes and interest on our outstanding senior notes. During the three months ended March 31, 2024, we made cash payments of $118 million and $867 million for income taxes and interest on our outstanding debt, respectively.
Current wording
We expect to continue to make payments for income taxes and interest on our outstanding senior notes. During the six months ended June 30, 2024, we made cash payments of $484 million and $1,061 million for income taxes and interest on our outstanding debt, respectively.
Previous wording
Cash provided by (used in) operating activities was $585 million and $(631) million during the three months ended March 31, 2024 and 2023, respectively. The increase in cash provided by operating activities was primarily attributable to net income, excluding non-cash items and an improvement in working capital activity.
Current wording
Cash provided by operating activities was $1,813 million and $1,383 million during the six months ended June 30, 2024 and 2023, respectively. The increase in cash provided by operating activities was primarily attributable to an improvement in working capital activity, due mainly to lower net content investment in 2024, partially offset by a decrease in net income, excluding non-cash items. Cash flow for the six months ended June 30, 2023 was also positively impacted by the WGA and SAG-AFTRA strikes.
Previous wording
Cash used in investing activities was $207 million and $257 million during the three months ended March 31, 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily attributable to fewer purchases of property and equipment, partially offset by increased investments in and advances to equity investments during the three months ended March 31, 2024.
Current wording
Cash used in investing activities was $137 million and $567 million during the six months ended June 30, 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily attributable to proceeds from the sale of investments and fewer purchases of property and equipment during the six months ended June 30, 2024.
Previous wording
Cash used in financing activities was $1,237 million and $432 million during the three months ended March 31, 2024 and 2023, respectively. The increase in cash used in financing activities was primarily attributable to increased principal repayments of debt, partially offset by lower distributions to noncontrolling interests and redeemable noncontrolling interests during the three months ended March 31, 2024.
Current wording
Cash used in financing activities was $2,274 million and $1,683 million during the six months ended June 30, 2024 and 2023, respectively. The increase in cash used in financing activities was primarily attributable to increased principal repayments of debt, partially offset by a decrease in securitization receivables collected but not remitted and lower distributions to noncontrolling interests and redeemable noncontrolling interests during the six months ended June 30, 2024.
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Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Other revenue increased 20% and 12% for the three and six months ended June 30, 2024, respectively, primarily attributable to the opening of Warner Bros. Studio Tour Tokyo in June 2023.
Current report — wording carried from elsewhere
Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.
Current report — wording carried from elsewhere
Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.
Current report — wording carried from elsewhere
Subscriber information consisted of the following (in millions).
Current report — wording carried from elsewhere
Excluded from the ARPU calculation are: (i) Revenue and subscribers for DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV), that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers; and (iv) Users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The following table presents our Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions).