Warner Bros. Discovery said it lost $1.07 billion in the first quarter as it continues to try to rationalize its operations following last year’s merger of Discovery and Warner Media, which left the company saddled will billions in debt.
The company said it added 1.6 million direct-to-consumer subscribers since the end of the year and now has 97.6 million as it prepares to launch Max, the streaming service combining HBO Max and Discovery Plus. A year ago, it had 90.6 million subscribers.
The company had 55.3 million domestic subscribers, up from 54.6 million at the end of the year and 53.4 million a year ago.
Unlike other media companies, which have reported big losses in streaming, WBD's direct-to-consumer business cut costs and showed positive earnings before interest, taxes, depreciation and amortization of $50 million, compared to a pro forma loss of $654 million a year ago.
CEO David Zaslav said he expected the U.S. DTC business to finish the year in the black, a year ahead of schedule.
DTC revenue fell 2% to $2.5 billion. Distribution revenue was down 2% to $.2 billion and advertising revenue rose 27% to $103 million.
Overall Warner Bros. Discovery lost $1.07 billion, or 44 cents a share, in the quarter, compared to net income of $456 million, or 69 cents a share, a year ago. The loss includes $1.81 billion in pre-tax amortization of acquisition-related intangible assets and $95 million in restructuring expenses.
The numbers were below Wall Street forecasts.
Cash flow was a negative $930 million while adjusted EBITDA rose to $2.6 billion from $2.4 billion on a pro-forma basis a year ago.
Revenue fell 5% to $10.7 billion.
At the company’s networks segment, adjusted EBITDA fell 11% to $2.3 billion from a combination of both companies' network operations a year ago.
Revenues were down 12% to $5.6 billion. Advertising revenues were down 15% to $2.2 billion, or 7%, excluding last year’s Olympics. Distribution revenues dropped 4% to $3 billion.
“It is an important time for Warner Bros. Discovery,“ Zaslav said. “We’ve come through some major restructurings and have repositioned our businesses with greater precision and focus. And we see a number of positive proof points emerging, with DTC perhaps the most prominent.
“We made a meaningful turn this quarter with $50 million in segment EBITDA and 1.6 million net adds, and we feel great about the trajectory we are on. In fact, we now expect our U.S. DTC business to be profitable for 2023 — a year ahead of our guidance,” he added. “Even in today’s challenging marketplace, we are positioned to drive free cash flow and deleverage our balance sheet, and we remain confident in our strategy and ability to achieve our financial targets.”
