Warner Bros. Discovery's Q1 Revenue Drops as Audience and Market Challenges Persist

Warner Bros. Discovery, Inc (NASDAQ:WBD) reported a fiscal first-quarter revenue decline of 7% ex-FX year-on-year to $9.96 billion, missing the consensus of $10.23 billion.

EPS loss of $(0.40) missed the consensus loss of $(0.23). Net loss was $(966) million versus $(1.07) billion year-over-year.

The company reported an adjusted EBITDA of $2.10 billion, a 20% ex-FX decline, primarily driven by the success of Hogwarts Legacy in the prior year quarter, while Suicide Squad: Kill the Justice League generated significantly lower revenues.

Studios revenues were $2.82 billion, down 13% ex-FX Y/Y on a pro forma combined basis. Content revenue decreased 14% due to the impact of the WGA and SAG-AFTRA strikes and specific large licensing deals in the prior year.

Networks revenues were $5.13 billion, down by 8% ex-FX, on a pro forma combined basis.  The AT&T SportsNet exit negatively impacted the growth rate by 200 bps.

Distribution revenue decreased 6% ex-FX, primarily driven by declines in U.S. pay-TV subscribers.

Advertising revenue fell 11% ex-FX, primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets, mainly in the U.S.  and Latin America.

DTC revenues were $2.46 billion, flat ex-FX Y/Y on a pro forma combined basis. Distribution revenue increased by 1% ex-FX, primarily attributable to price increases in the U.S., Latin America, and specific international markets.

Advertising revenue increased 70% ex-FX, primarily driven by higher engagement on Max in the U.S.

Total DTC subscribers increased to 99.6 million from 98.5 million a year ago. Global DTC ARPU was $7.83, a 4% ex-FX increase from the prior year.

WBD generated $585 million in operating cash flow and held $3.4 billion in cash and equivalents as of March 31, 2024.

WBD’s earnings follow the company’s plans to bundle its streaming services with those of Walt Disney Co (NYSE:DIS), binding Max, Disney+, and Hulu and offering it to consumers this summer at a discount, CNBC reports.

Price Action: WBD shares traded lower by 2.18% at $7.63 premarket at the last check Thursday.

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