Warner Bros Discovery (WBD) stock fell more than 17% to $9.56 in afternoon trading after the company announced third quarter earnings where the highlights were a marginal overall revenues gain and a substantial fall in advertising revenue.
Overall revenues climbed 1% year-on-year to $9.98bn, while Barbie and The Nun II were the theatrical highlights of a light release schedule impacted by the Hollywood strikes.
The stricken advertising market resulted in a 12% year-on-year advertising revenues slide in the TV network segment reflecting the soft ads market in the United States. WBD leadership warned advertising revenue in 2024 would continue to be challenged.
President and CEO David Zaslav noted the ongoing impact of the “generational disruption” caused by the strikes and said he hoped the SAG-AFTRA work stoppage would end soon.
WBD reported a 22% year-on-year growth in adjusted EBITDA to $2.97bn, while net loss dropped to $417m compared to $2.1bn a year ago.
Global streaming subscribers dropped 700,000 to 95.1m since the last quarter, and the company reported more than $2bn in free cash flow.
WBD paid $2.4bn of its massive debt load and ended the quarter with $2.4bn of cash on hand and owing $45.3bn in debt. Zaslav said the company has paid down nearly $12bn in the debt it assumed with last year’s acquisition of WarnerMedia from AT&T and added the company was on track to finish 2023 with more than $5bn.
Reported free cash flow of $2.06bn marked a huge swing from a $192m deficit a year ago and was attributed to higher operating profits and working capital improvements, as well as a considerably reduced outlay on production and marketing costs amid the strikes.
WBD’s direct to consumer segment gained 5% year-on-year to reach $2.44bn, partly due to increased subscription costs. Advertising revenues gained 30% and climbed from $106m to $138m.
The 700,000 global streaming member loss is understood to be due to the light content offering and subscribers to the stand-alone Discovery+ service migrating to Max, which includes the majority of Discovery+ content.
In the studios segment, revenues of $3.2bn climbed 3% compared to a year ago and adjusted EBITDA declined 5% to $727m.
Barbie delivered the highest grossing film in Warner Bros’ history on more than $1.44bn at the global box office, while The Nun II on $267m became the sixth film in ’The Conjuring Universe’ to cross $250m worldwide.
WBD also launched its news streaming service CNN Max in the United States on September 27, ahead of the October 5 launch of the Bleacher Report sports add-dn tier.
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