Warner Bros. Discovery Inc (WBD, Financial) released its third-quarter earnings report on November 8, 2023, revealing a mixed financial performance with strategic highlights that may interest value investors. The company reported a modest revenue increase and a substantial reduction in net loss compared to the same period last year, alongside a significant improvement in Adjusted EBITDA and free cash flow.
Financial Performance Overview
For the third quarter, Warner Bros. Discovery Inc (WBD, Financial) posted total revenues of $9,979 million, marking a 1% increase on an ex-FX basis compared to the prior year quarter. The net loss available to WBD was $(417) million, which included substantial pre-tax amortization and restructuring expenses. Despite these charges, the net loss showed a notable improvement from the $(2,308) million reported in the same quarter of the previous year.
Adjusted EBITDA for the quarter stood at $2,969 million, a 22% increase on an ex-FX basis year-over-year. The company's cash provided by operating activities surged to $2,516 million, and reported free cash flow increased to $2,059 million. WBD also made significant strides in debt repayment, reducing its debt by $2.4 billion during the quarter and ending with $45.3 billion of gross debt and a net leverage of 4.2x.
Segment Highlights and Challenges
Warner Bros. Discovery Inc (WBD, Financial) experienced mixed results across its various segments. The Studios segment saw a 3% revenue increase ex-FX, driven by the theatrical success of "Barbie," which became the highest-grossing film in Warner Bros. history. However, Adjusted EBITDA for the segment decreased by 6% ex-FX compared to the previous year.
The Networks segment faced a 7% revenue decline ex-FX, with decreases in distribution, advertising, and content revenue, while Adjusted EBITDA dropped by 9% ex-FX. Conversely, the Direct-to-Consumer segment reported a 5% revenue increase ex-FX and a significant improvement in Adjusted EBITDA, which was $111 million compared to a loss in the prior year.
Strategic Developments and Future Outlook
David Zaslav, President & CEO, commented on the quarter's results, stating:
I am very pleased with the strong financial results that our company delivered in Q3, underscored by 22% growth in Adjusted EBITDA and over $2 billion in free cash flow, putting us on track to meaningfully exceed $5 billion for the year and contributing to our nearly $12 billion in debt paydown to date.
The company also highlighted the successful launch of its new streaming services, CNN Max and the Bleacher Report Sports Add-On tier, which are expected to contribute to increased engagement and lower churn on Max.
Warner Bros. Discovery Inc (WBD, Financial) remains focused on driving future growth and creating long-term value for shareholders, with a disciplined approach to content investment and a commitment to improving its leverage position.
For detailed financial tables and further information, investors are encouraged to review the full earnings release and financial statements. As always, value investors should consider the broader economic context, the company's strategic initiatives, and its competitive position within the industry when evaluating the investment potential of Warner Bros. Discovery Inc (WBD, Financial).
Explore the complete 8-K earnings release (here) from Warner Bros. Discovery Inc for further details.
