DISCA - Earnings call transcript Q2 2019 | Warner Bros. Discovery, Inc.

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Operator

Good day ladies and gentlemen, welcome to Discovery's Second Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Andrew Slabin, Executive Vice President of Global Investor Strategy. Sir, you may begin.

Andrew Slabin

Good morning everyone. us second joining call. XXXX for you for quarter Discovery's earnings Thank

JB CEO, me our our Gunnar and Zaslav, are Chief President and Officer; Joining David Officer; President today Networks Discovery International. Chief Executive Financial Perrette, and Wiedenfels,

for Gunnar, but open with received access Gunnar free from some David, our at opening release, on the call, today's and not corporate.discovery.com. feel comments You should On to earnings and we JB if will take have website our call then to we it will and David begin questions.

statements like start, I prospects remind we forward-looking today of These pursuant Before are comments about from performance that differ Safe XXXX. Private of our regarding made and on financial could company's would statements to current risks Act Reform plans, events, cause to business the you Litigation future make we and management's provisions to future that that assumptions materially expectations. are may knowledge and involve uncertainties results the Harbor and based the actual Securities

other projections them. update any disclaims or intent providing the company forward-looking to In obligation statements, and

For Annual additional made year Securities for Exchange important information December affect subsequent ended Report our XXXX Commission. XX, and the with please see the that these filings could expectations, on U.S. our and factors

turn And David. with over call will that, I to the

David Zaslav

and morning call. welcome Good everyone to conference our earnings QX

and all across with the our results strides Scripps through of initiatives healthy benefits financial making flowing our areas of the Discovery strategic operating had global with world. number strong a the acquisition business, a quarter, around significant of while

we exciting fan towards the super-serve and well-positioned, extremely and opportunities consumer pivot to solid communities. streaming marketplace, our on aggregate a are We footing continue remain financial and see direct where global to

met and our we exceeded quarter domestically accelerating with guidance core revenue the internationally. growth both of metrics, all For or

company quarter's one operating growth. growth, you on cylinders X% and domestic numbers international in affiliate our quarter all fee growth, and proud X, through this X% numbers, fee and And, advertising I'm X, set take performance. achieved anticipate international X% of growth, Gunnar great growth affiliate quarter, detail. domestic is We in another It's very team and are will X which X. healthy the we QX, advertising of the X% This of

our got nice at the real core the believe, abroad. believe Contrary TV and business many getting is around I a and We've and advertising we tailwind perhaps are feels the here at dead, world, are television far even back, from The business end what performing it globally. we domestically television the growth of from top industry to meaningful or sustainable.

position our to for testament network television. strategy on fifty-four XX% one for of a meaningful stronger. America our our women across other. have top and all share. leadership. women, broadcast networks industry and The believe, number made company the I with ID no HDTV, in women. And the TLC, like These poised and never cable OWN, Food, been huge accomplishment twenty-five number media us A to storytellers, one for in grow our media creative networks the has America And to company with

audience our content XX% other scripted there incredibly of playing was Really at expensive of only lot level NBC, great stuff media the in Discovery from that's past any night, of crowded, and there's one Disney, of clear, was the companies. XX% an company nearly and be of a female from This To networks. great one landscape. Warner, Sunday Inc. number Amazon, our watching content amazing pie, the competitive it's across but CBS, But

with the hugely into that on successful And than media and season, been more us highest We company, led it's engagement love sales advertisers have a the television. upfront that brands healthy prominence networks other highest robust including the resonance like and behind for and view reinforced numbers length brands, which comprehensive apps recognizable Discovery in of audiences super and the a upfront our was our the CPM within tune time, have sales quality for record of sold the Premier, calling had brand-safe any card by of and industry. and which first and and for value the products, traction has delivering new traction increases, mobile-first go some

Nielsen. across On apps go, daily our in which up we're seeing much fully of all get streams, of total records by great setting picked doesn't traction

For one Shark day. streams each million Week seen over alone we've

as mobile-first all in The as stronger, lifestyle has performance our by of reception Scripps global time growth, and America example continued branded the some operating of younger continued regions, serves at share of Europe. well particularly Latin the in travels as key while to feels networks, across positive same been launches content, Food HD subscriber demos. this audience well pay-TV growth to Internationally, a great and our in promising it quite of time, ecosystem, a best-in-class how momentum content within driven platform our than integration

X% they're the I'm our pleased economies there if top linear two time which macro were sustain headwinds, of and of still, And the tailwind, up This ten when terrific an quarter, market markets markets, on to us our overall, top our when average international was of are are stabilize. ten of and momentum. a to across the average helping delivery with pockets real top These in our and digits. certain X% really healthy was in ten. growth international share countries that, note up positions a at up audience across six results double of well,

We IP genres in all and a our IP Strategically, Discovery territories functionality. across differentiated different has of of and with a platforms, assets. made that all utility great have portfolio own virtually and bet

iconic of Games, Tennis brands on events Tour, home, crime, like and beloved the areas, oprah, the live have and travel, many PGA and science, Olympic the in passion history, We natural planet, people's Grand most the cars, food, sporting cycling. Slam

when with IP of a roughly industry and in Globally, in channels important. unrivalled the XXX nearly market real-life strategically pay-TV scale at key content in We to genres. produce every programming a hours air value year of our X,XXX been our powerful with around more has free A twelve new have over to the time never ten we globe. original engine,

our The combination a and gives promotion, we reach a head consumer for portfolio and funnel and immersive direct comes trusted of believe, strong start marketing us brands, building real huge top experiences. of it to around when

sports, and approach Our categories focused and across that factual. three consumer strategy has on doing been broad lifestyle,

Lifestyle, products product cycles. main sports, three Eurosport we global Europe, with three TV of and different Within player subscription-based in are working a different platform, First have Golf on network. all all across we offerings, cycling global fully the

second the are And Trend in lovers, Magnolia joint about well. to in First, over venture are on food our Gaines that also new actively plans and car things we Joanna with multi-platform Chip with category you XXXX, our going, launch focused building terrifically to And months. look at and to look Motor cooking we the talking plans and forward more continue coming space. to that

the And across important view soon-to-launch best the offer which content BBC brings interactive, globe. real-life and that this vertical Discovery experience, immersive important together within our of around and very factual, is one this comprehensive and vertical, service will family-friendly do a

speak One, SVOD product that number Poland. our consumer Additionally, in which direct there TVN all Europe globally. and is player are in of to the three one the Poland, depth to strategies products important breadth in of the

retail, opportunities ecosystems, ambitions like robust multiple start. direct-to-consumer suite as our driving very e-commerce over in create ProSieben for to has our are Hulu Nordics in across And last sponsorships, May three, AVOD, the multi-platform gotten of growth from venture which streams a SVOD Germany, the instruction Overall regions. ground year. Dplay offering strong our a well solid with in has enjoyed platforms revenue, as which Joyn and as advertising, the subscription as well growing off to revenue

efforts is and a Peter and technology the for Underpinning efficiencies stack, resources to which our consumer better products. is to and existing allow of reduce range direction new drive under and us being functionality, these experience, market will team, repositioned the time evolving his that Faricy dramatically of to

Amazon he about We a you got from marketplace. both and As will where where headed. excited today, remain where business many we of are Amazon over decade, remember, is spent building we Peter our

within while position cash for appropriately position free to our ourselves the linear core and generating growth, investing revenue maximizing the judiciously and growth. time, stable are future same flow at We ecosystem,

of opportunities, and rapid great change but for believe still capture are global At viewers direct as we they and a long-term structural the industry, time with our verticals, well-positioned runway. migrate early also risks, are we as will of provide -to- to we while platforms. as our there us player, we to very recognize global launching consumer believe we And stages they solid alternative are any in

in are more to and relationship food home leaning ways our passionate With very around in, there unique that, With believe the to where functionality and our leverage know-how depth as direct thank assertively opportunities of where our breadth, that , IP a fans much. with into we vertical you world. see such that, are we and reshape distinctive many we

through And I'd take financials. the over you Gunnar, our like to to turn to call

Gunnar Wiedenfels

you Thank you, joining thank and us David, everyone for today.

well our operational strategically core transform of metrics, as and are acceleration our we across progress as pivot one pleased extremely I performance, four every to strong as financial very am with second revenue which and making an Discovery. quarter demonstrated the continue we

of of many differentiated leaning at in, growth we stages level and a high in of and such, front still opportunities the delivering are that And the presence us. build as uniquely we top are complemented performing industry U.S. by at see people's of We products very the early performance our efforts which power to unique supporting our global passions. in is breadth our and and scale streaming to enjoying the and direct-to-consumer distribution, benefits of

second financial share to like some I'd our quarter. from highlights

As the to all exchange international be quarter. and earlier Please earnings currency the results. our comments filed on more have of And a foreign financial drivers constant this a did metrics morning business material our for terms unless this always, comprehensive refer company, for impact will our in for total some second quarter of view, otherwise stated. release of our my

international performance advertising quarter, affiliate included impact international from acquired of and growth, a consolidation Discovery again U.K. the X% from strong In X% X% one-month very growth, with growth. roughly of TV, three percentage growth the which achieved which growth, second the point affiliate US networks one U.S. operating added X% ad

decline by growth invest of costs, international grew increase which in X% a OIBDA also previously to function the of X% as and U.S. growth revenue would modestly adjusted we benefit an in expenses an noted increase company in our our we've offset begin We businesses. total strong X%,

Additionally, XX This to we us of of of our bringing to times. ratio reported months second allowed $X.X trailing cash $XXX quarter of XXXX, end roughly flow leverage free billion cash the free still, of a net million X.X quarter costs. million accounting for $XXX the cash in flow restructuring with

Starting commentary. drivers for XXXX. four the forward-looking some with Now, key share quarter let of me the third revenue

a advertising Remember, ratings, growth X% for we in expected is range similar dynamics be growth more comp year's as First, driven monetization though U.S. last are in third usual. facing to slightly by X% the to and the quarter. pricing, difficult in against X%

quarter in this ratings Serengeti night our Channel driven be premiere Also, contribution events are there factor will key on high-profile mind, the that please quarter. in Discovery Sunday keep some this like a which this

New City in seen a live no about this excited York you very billboard bus where doubt promotion, you've or series. all If

full and headwinds the across year growth third in from change our tailwinds, range, affiliate until have of perspective our while we subscriber now quarter. in platforms. grow and reaffirm distribution a to guidance particularly best both there given of the digit revenue what X% in in the up U.S. U.S. today's major beyond we This no is representation assumes trends seen industry are virtual number mid-single again Second, indeed affiliate can likely

from grow TV international advertising a of percentage from share add markets our of expect at growth Lifestyle which digits two points contribution growth thus international contributions to quarter our accelerate single digital we U.K. in by we full also should business, Third, QX. expected least driven and growth, an in additional investments, high is nicely three to top to expect the advertising

launches we've as of international markets, affiliate be continued to number the a digital digits number of products monetization mid finally market. a aided and investments is in And channel continued and streaming across up underlying improvement seen by subscriber of trends our new expected in growth single

previously investments flow free noted to out XXXX, guidance, consumer from transformation real growth portfolio of Turning CapEx year the we total estate to expect to necessary in another the development. our making after to cash as company healthy items related build direct and technology in even global such to infrastructure continue consolidation, and software projects step-up and

these opportunity ultimate our level support need we across will initiatives set profile of by and determined of magnitude be based and cadence to The will investment new the success initiatives. and the spending, existing

our cash and last flow behind versus year quarter. our ultimate changed has takes full view on out not we puts Accordingly, the laid what free

OIBDA will cash As partially taxes. in cash be lower and higher to growth direct such, offset based by charges, restructuring increased growth CapEx on consumer, adjusted investments and higher

We depending DXC year our the of continue these on negative investments to of million expect on of $XXX rollout OIBDA investments. a totaling XXXX impact adjusted $XXX million timing to roughly the full

enjoyed And previously though, in the investment another noted, our of margin was second in which digital basis points as we, more ramp spending again, of half through flow in company will quarter the total heavily QX the we've improvement, expected year. XXX

serve of and businesses. better and creating Peter And technology his the team direct with respect consumer to more a global robust to global our streaming are platform to all step-up,

later incremental year as in We will this further. discuss the we in proceed detail

However, currently a third operate upon different depend operated party digital dozen scope, over platform. in on terms owned of platforms products a our and scale and and dozen

SVOD materially great example improvement was that will to in strong Nordics this reduced the new among services as our AVOD general subscriber platform market. a this, how new and the XXX% much year-over-year first nearly delivered quarter. Dplay, produce. and a to Dplay and in is growth, entertainment our churn, technology in can marked second to app in broad functionality migrate and resulting improvement we've experience up Streamlining consumer existing popular of the efficiency and very as boost is speed the the consumer well experience

initiatives. I it our the of consumer function International worth early part business, is from as we're growth seeing, to believe acceleration linear particularly a revenue core well that direct across out we large stable streaming segment Importantly, calling are again once as in our is and in seeing traction a both

Moving on to taxes.

we year in one-time this made in taxes free As negative With previewed, the to tax there non-cash quarter, benefit rate XX%. to second cash there quarter cash flow. XXXX Remember was a now and was our full book the benefit $XXX digit is or we be impact no range. non-cash our mid-single a second tax that had our rate to million our expect which tax book

prudently of this is lower time. plan Regarding capital we towards one the allocation, our X.X to continue within number and two, priorities There X have not our net optimize changed. currently to still range times leverage to over delever leverage end range

Number along will shareholders. with continue return to investments And number we finally, M&A. enhancing two, evaluate will concurrently, three, strategic value opportunistically we to excess capital

exchange let I foreign XXXX close, me our will on results. Before impact quantify have expected the that

OIBDA at Given to $XXX negatively is $XX $XX the million impact million our the to and reported movement FX of now expected rates, to by million versus revenues dollar by XXXX $XXX million roughly results. current spot

direct flow we our consumer to with of pleased financial operating performance free very towards healthy am stable I closing, generate our both pivot In and cash outlook the and as the company, embrace business global from to continue core our media.

will you your morning. happy David, questions this any may And again I to for that JB Thank answer and be now you have. time

Operator

question Instructions] first America Ehrlich Our Bank with comes Merrill of Lynch. Reif Jessica [Operator from

Your line is open.

Jessica Reif Ehrlich

questions. two have I

First to benefit we for U.S. the market. robust market. price seem the can from to it's back have advertising besides I David, incredibly to mean some you and levers the of go

into like demand? in it Is this growth non-advertising a driving will of on where the Could of maybe the a even Disney advertisers you-- or Plus. color like give some in can what us traditional pull? You mean, media? digital is seems - I content, you talked little lot back inventory. are more be bit is there you about And of monetizing drivers more platforms what growth what

that for about, little international out? go JB, guess over And we or more derive you’d anything platforms expenses you've which saw to a some want and the you a I spending, of tech benefits call up then the will about lot, bit Gunnar talked can talk you time, else the

David Zaslav

are strong that and television a broadcast to And the to low lower. talking CPMs finding agencies platform still was upfront was strong The of is piece the we so move 'XXs accelerating. so is in lot a try of of to one scatter that, and sell spent up see the, are and up that the and really still a is much where most effective - product, lift think advertisers is we it 'XXs ability high look most there ourselves I are of I and back. getting that to it think as to time and Well, do I kind Jessica. very the Thanks, the was leading we it and

what is there the are the that can digital, Who You a What that, of next you're of television you feeling buying? are there talent fear are addition you environment buying? What’s that. and safety, you a is to is buying? in do on In to? that that

narrative these changed. overall of digital the And for a lot companies has

America that positive, company. I think a environment said for channels and that's top so ID, one's a our the TLC while I And I've for but the HG and this have that OWN. us in four ever said, moment an is before big women women for sets for American with more overall we that African done and number Food, one for no channel

hard together. all you put but And it do that, we've worked when to

the company now terms are TV America, the we of us, spend one the We time with in reached, it's in number they women Discovery.

cable that moment, is over a where companies and Jersey guy the in broadcast CBS. their NBC ABC business are out looked big broadcast of centerpiece the a and companies New really really I when river. in And looking This great the than to started as was bigger and

other upfront to to want sleep and go wake before safe to number women that to we upfront. brands be we’re the people drive they to brands less place and women, that thing most really that that with but reach the than the is they we’re and reach have broadcasters the even CPM want into watch not And that watch go we're have able to it into with the going effective with that up proud is our so trying one half though reach the with we of demo, to

developing And new products. hard we've on worked really so some

us product, Premier, come you a CPM, on given is six our and would much a why but rating spend money X.X you have than a five seven rating. broadcaster nine We to when a get which higher traditional unique or get on rating Discovery or is and a which can

we so with that. And some progress made

We're company to authenticated apps really has them, also they the broadcasters go is channels that people to, the only media that interest effective them won't for spend with time they for to series. for believe series to the services download and and I go reason a these in general general, go and those

spending doing and idea million is age average of the we're where over so is And time time Food length and getting and up streams HG on streams the the people in the the quite that and and with - ID millions length and of X high. are Discovery and 'XXs

safe have we overall, So brands. great

us. and reruns more to content sustainably We that a the that more women and broader the advertisers for our live of grow with And something you is scripted is of is recognize series I've continue are time expect for that go competing declining have only is and have to in share place fashion. movie this could and is a and businesses, double-digit see broadcast the a quality share we scripted that also that lot going services the those largest to long saying been

you're we flowing really and - upfront. had going great, it. feel really the And some growth to year, we for a - think feel meaningful great so to going through good we about I see We're next

I us deploying much Gunnar? will you reasons where lead world back, strong and more so sustainable world IP investing the with see the for And and we're and for leader TV taking the is, is remains the IP that invest globally of in that the around at a scatter granted and this IP the in long-term moment, see that's growth. in horse think moment, we're you'll game we're not that with and for one that in why and

Gunnar Wiedenfels

Yes, morning, Jessica. good

I doing be in what and that listen, So financial lot we we're are going this with the could making seeing a of exactly happier to do. progress were profile quarter. not said we you We're

from an impact seeing increase, margin spoken sort startup benefit of was in. some guided cost I at continue had coming our of million negative about to quarter from synergies. some to already I of $XXX point to We the that million to we're in, even and It space digital kicking another though $XXX investments end and in that had of

in global a amortization coming lot pushing. your a to is Faricy has rollout. his up what's International general, question first number, and in obviously Golf the of the up TV on are That's reflected Dplay, coming expenses. picking Peter started year, initiatives expense digital through on There’s speed we're its that IP

start also But UK you some You the on as investments we're and revenue on expenses. little seeing also side making initiatives had, you're kicking of for a in TV basis, well. as bit added the of impact had already like-for-like accelerate that's consolidation bottom the line one month, to these is

very some driven an those in by extent from side, guiding the affiliate quarter, ad metrics. sales we're and the it both first, The growth, numbers for just digital on Obviously to is acceleration X% the investments. heard, you X% contributions to in a maybe second strong

really So us. for working it's well it's really-- very

because One the comment we on we base cost base. to little It's it's I shifted a the company look transformation, more, went insightful in through last more as total want going cost segment forward. expenses our at around bit make have to

basis. So are roll a on now on D&I a expenses the lot JB carrying going the those as is leveraged segment of to out products be global we that

D&I-heavy going even are out that's forward. going move investments to, as the to somewhat and we XXXX, that's For

with are. could be happier again, So not where we

Operator

JPMorgan. Alexia from comes question with next Our Quadrani

open. Your line is

Alexia Quadrani

a guess, bigger first maybe David, picture question. I off,

of the compete to feel have or sense acquisitions to do make which larger continue and some guess, of for a someone be fantastic the hear such and a more your you scale, referenced players, scale, portfolio competitive. need on term, these look done, the the would with with this acquisition quarter thoughts outlook. You've in see clearly merger you you of else with to the opening potentially Scripps do kind love it in some or comments to longer I'd to continue for job your to I benefits

hear I'd on thoughts to Discovery environment updated love positioning. the current your Just and is

And are then and really just has I Discovery maybe any to? channel? give strong. secondly, Discovery, a more specific.TLC looking should Ratings a bit sort you other more softer in at Channel you there? program little And been that Are Serengeti, color to Discovery change guess look the trends any can of maybe a forward delta we rating

David Zaslav

you in the Thanks our a number quality way. together fact our to all content for really that positions to transaction quality with expectations free meaningful you grow see cash see in us women on us that's continue side, side, on their that has the company and what and the Scripps on in Alexia. leadership flow, the exceeded makes together levels that our in one TV America The

When I bit more scale billion. I international you We're over the we're player it we're color guess, One, will JB $X ways. largest in give the a space. the making only think probably I of the one, think - two little of

world need that view global. the be to deals Disney as than with the and - and we’re show more the U.S. just the But Rupert as Comcast

We have infrastructure country. in every

We have every content in country.

every in country. We brands and and IP have credibility

cetera. the the that think so the sports and we're sport a in I have of quantity leader U.S. we leader we outside have and scale, so and And also et

on and to terms to side a international and are there lot going to bigger are sport catch So want in us. try the of of is and scale guy we up players a that

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decade, that and area history. of for BBC history majority the fact bought world. with in the we natural of of together dominant we home, science we the the are player the area next the the In have In the natural entire library globally more than

in the the we leader. player are In the dominant are world. crime, We

define have with it we’re in we categories that So the quality you chosen. leader of each for number on these how things and one depends women

is is which And Joanna Oprah character then we've picked new categories, categories, Chip Gaines. and and different which

where are, we we going feel challenges. have we're about good ecosystem the continues continue to as to grow we think I and pretty think to So

watch, is to is that of do going how challenge what have XX% want be I watch other stacked people the series, many I of stuff do what think where next is XX% the I This up. them to get I scripted us. do that

we're to I do I to buy why in our is it's get think that's reinforcing And what - more in our scale is trying else our more IP share And from to about with perspective, the our stuff and from genres. grow BBC, going do to that's is why playing Golf globally continue Digest up Tiger and getting lock Woods no one space. us in think

good ago we on years Howard we're the TLC a for XX position Lee having down - was in with two So that a think we period a great TLC dealing run were very of is months.

And Nancy and a in we living. is Lee for I Daniels do this Howard what and dug

from people a even leadership our improved have Finch great and now, Kathleen the Scripps. more We with lot team of

some great and Discovery put confidence of lot these up is down. seen channels started a before and it, Sunday one that on last we we in. best thing now X-minute So with that think we a We I it minutes our out. SERENGETI a if going history pushed we did We are took seen got globally have discovery have the best that channels. and And two every content SERENGETI of of go to the promo team natural haven't we the actually you across on

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Operator

with Drew next Sachs. comes Borst Our Goldman from question

Your line is open.

Drew Borst

I which Thank year them PGA wanted on of streaming arrangement. your could, of you're if you detail to the for your dig on the in I additional believe some service, XX-year is initiatives. streaming in because of first I one the

potentially and live you eight to think I markets. up went

some of first if So you could year, deal is progressing? I in this learnings share how the and wonder just that early

David Zaslav

at going to consumer learn sports we with. going learned always the a were I'm one them you to is of content. The you a Sure, seeing IP, player that business you or read need Monahan of need to lot the We've well. that can led Eurosport very or it's that and something over this people and several morning and us need about had transact local for is lot fact direct years. Jay actual live that What going we be tomorrow Liberty. about

came where loads work that so where we weeks course we world Asian local Golf any about PGA year, it - after IP Latin added then the could and to get you we to And take it's the days XX the a Golf JB the of in tours the four Digest lot out of about a golf And a I of the XX% then, of it's week and tour. it's IP tour, and tour, conclusion read this if in vacation. in did American because we, can go figure best is European

well, So up going the first very year. markets of coming be bigger our we're doing we are, of are on some to this

have with the years we'll direct doing consumer, in attacking with but outside lot of the to is international U.S. Over on I the U.S., because what world you're by also in us now a as three to and well the now golf what led just JB space? thoughts the think next, we're Tiger. from Digest everywhere Golf

JB Perrette

the great think it’s on bit Well golf I is there Drew news a two-for-one. a particularly piece also of the

where those like year days, Japan and the We have as early this we're and great app. traction business its the in the consumer you us product as X developed helping know And seeing And is fact product were first team the is, it's traction about that has that launched. up which heard you've pick earlier also in us but Spain markets Alex year. the of our markets on on traditional said, itself in the up months direct our and I talk the great core

our on great we and Not portfolio our expand we it strengthen direct core. the for on revenue but relationship expand to with side, only to do entire our leveraged consumer

have And very a and that under develop legacy there channel markets to served. Discovery up way the is for in a business using additional those like for opportunities actually come Korea example key see We business. core next market conversations we're other if can to in us market that's It's small our year. we today

are great X take seeing time. But over it also - And core you're helping accelerate broadcast continue business markets. and time digital for so affiliate of markets those in traction through consumer traditional take our that to relationships of and opportunity impact us more direct those and will the which to that and X relationships couple a launch growth allowing in immediate to of accelerate

Drew Borst

a And could U.S. networks I follow-up - about for probably if margins. Gunnar I to ask get in wanted

maybe maybe business XX% of Historically, EBITDA understand even in certain XX but had years. or hitting look For is here. next that XXs could you typically a been Serengeti vicinity? a think out comments low say, low hover high segment even the think and XXs you about over the XX that Is XXs margins months. it’s more in this mid that some content, that business past quarters this caught the we as to XX% been I your few

Gunnar Wiedenfels

Yes, of we look cost the synergies massive from sort a one, integration Number lot points. Drew I enjoying mean overlap. one-for-one obviously was footprint a couple been have Scripps and with the of of U.S.

I we've why little comment to made cost we got seeing look X total Number because you're hit such at U.S. from that's So been. out our share a this a earlier is, company significant the of basis, already, this a

which U.S. increase of some corporate cost the of see is out You moving sort in expenses, segment.

increasing when me that cost come of over in of which coming is margins you're seeing but to all all, increase have important presented it's through, much margin the The well. the the company previously second points quarter. first results, all as And in I total a to said, an that in we're saving And do more investments not So, some seeing the guided growth quarter margin now, we why through manage company topline right XXX for reason not keep as it's we for the make that basis basis topline. increase I to just from objective another margin. time

you decline no of see if none being That U.S. there at to the said, margins core I the for business business, is that. reason look in

going initiatives. D&I start I And rolling hit of expense out working year highly first separate some are drive as incremental little those is the footprint, investment of part of very really next two terms shape. in we the product couple know, when cash factual obviously a a - a perfect business are you on it's earlier, as also in we may generative but that's that world, BBC absolutely cost said U.S. change those, highly efficient, to core the again like products However, more in

a guidance our affiliate an lot both investments And gives runway. growth. in at future heard us revenues of the You've then for

Operator

Suisse. with Doug comes question next from Credit Mitchelson Our

is open. Your line

Doug Mitchelson

a much. guess world. couple direct the us so home remarks prepared distinct comments I with being of Thanks your teased food at and of end questions, fans around with and relationships first, reshaped the you on into David

if end you both roll you of for I and you'll and about target start Gunnar, leverage see your you opportunities be to talk the you think at regard, the that could range. of the So forward look, bottom the in to year, when

I that cash of seeing opportunities think capacity. you've $X certainly talked been an about to this strategic billion $X When Are sort next that look plus free of you basis, you've excess you approaching annually. inorganic the flow run for at on invest while. rate means of year, a looking billion are

So, on Thanks. helpful? any thoughts that would be

David Zaslav

things area think way. look, Okay, our I terms are of in is where directionally moving this the industry, another

about You XG talked driving utility about not versus to home. is Hans seconds, he’s the XG.You seconds talking Randall, XG.What in real able in six movie seven XG? in value to a download he about two talk is providing to in it's is and being second

kitchen money? And room. They now and that They is where own spend If, do spend we the kids office, spend the living the What it, people have. is home that content their in their own the the question and home home. going on the on okay, with on got it. to whoever is, room, their it we we this do where can it

food cooking Magnolia so be will now as And Jo. and relaunching and with with Chip genres have DIY and we these with HG and

We both experts greatest of have the in these areas.

what scripted creating curated viewing else if content need a to of and you and experience you, is robust, We movies, with movies purchases great. that's needs have they're and be ever curated, and is series better doing than script fantastic, be credible to - scripted look everyone if at series

Fleabag, on way is is watch the and of of So you of all one hits by companies, production Amazon. the can one one - which the three the big

is it. you great. That's do view can all So

or and but view cry can that's it. You laugh it

it. view just You

to content a has transact. view view and or and real Our ability do

world got So fee That's Golf, terms lot true circle,XXX for of subscribers completely or they HSN in but then has audience the home, content full true at do channels, running back that in imagine he way, home QVC true can fighting they were but going our and of a was, were to an on and monthly inefficient time people you've also subscribers them that a and QVC can pay value it stuff. all to helped get HSN a is that transact. and has but food world it's buy people spend come he where over owned creating of the go shareholder a for people with view HSN that lot along and Malone the and in it's if cycling, over create and QVC lot you trying and it's in of on to in a true food, and and in it's

they - that Stuff - what's that wanted the to to is the that they what best, kitchenware. really be what's the needed wanted know best

can we going they're with what so us, like to view if not only groups, we're be going do we are these us. is passion and to aggregate hell to fighting able over And with do time do they but can to it

home of real all and talent and content create all of we do take utility. have and with the our the view all or we how is, So expertise, XG we're our we having discussions some everyone, that

to have and able globally the Golf passion So I that to Grail be and then have but groceries. get they a where to go and love, the would say, all stay vacation wearing, we're to button Holy hit on aggregate a tuned, the Golf that recipe audiences by get Tigers a them clubs

on. on stay what that's We're So we're working it tuned. real hard working and

Doug Mitchelson

And Thanks. the M&A side. on

Gunnar Wiedenfels

Well, yes.

Let to me the mean I you free cash leverage start a made reference in flow.

answer about question, development. cash to excited be So super free our just continue the flow M&A before David

the I've after for rest of that million we restructuring, of cash of to takes spoken Still, saw $XXX and have of You the billion end puts $X.X the key sort also QX. year.

increase the and tax through half year. half. investments Whereas line digital A in kick really little improvement. feeling very of free the has good But we CapEx in to part second first going of the come in are flow cash is the increase already more that, of started the good on some only just bottom cash a

with our to And we're you David to X.X, strategic slightly current want that bad As obviously, will is happy now so continue David you evaluate X.X we're M&A also saw, but probably anything well. But happy in hand. progress thing very our environment, as add and the else regarding leverage but with has not add? more, opportunities come there down a to

David Zaslav

opportunistically, kick or Campbell and we everything. JB looking this we point, tires but anything on significant always as the We're don't see Bruce at

We quite that things have I for that looking you are update was us. you sense. of think you're, what UKTV could the make good on the and can some you deal at that mean, maybe

Gunnar Wiedenfels

our really part and an know, opportunity try Scripps food see We as HG opportunities the we as assets you see there and and is there. take world of to strategy the do around is we've bought

it. looked help basis, food Scripps will We have network that bring either an at at, home and really us and and try portfolio rebrand in off with take and content and in them then as rebrand UKTV's a on consolidated those of the HG example into assets bringing channels selectively bedrock to drive the food there the that

ways selectively where launched we're it. get in buy markets to addition at there doing Channel that can to or those channels additional the channel core we're then in opportunities additional is a And we of which looking to some accelerate slots organic positions

opportunities sort that we mid-scale can to on and help rolling business. the see do some we things tuck-in core accelerate of our think So smaller

David Zaslav

bigger. are some And players of get. to there are I are do we cost some that here. and much saying smaller There coming a and things infrastructure that that are, lot could JB have to

be have Who XXX of a because us you where scale. groups this want some CPM. want benefit and what have cases created that for you've to all you so lot of to tough them. where have in it's advertising And countries to, advertising when do things we've to the tucked-in in players, country-by-country There tuck-in don't in with some smaller playing others space us you gotten

Operator

Morgan Our next Ben with Stanley. from question comes Swinburne

open. Your line is

Ben Swinburne

David your or look DXC JB, when you portfolio. at

seven the I remarks. prepared got specific listed looking you've you've think the to services build your of sort verticals you stuff brands pulling market curious of a in or about tie linear your think and Magnolia some out and those you to of strategy. was of factual how thinking for kind into example, I these just about the longer-term app. also verticals I you think potentially sort cooking four Are together, single were in back and food

around just about or services the also I'm sort about the and universe of sort market world fundamentally given view the think just U.S. different, is model if explosion of the of how evolves, wondering of And here. these the how to streaming the given you pay-TV kind putting of you these you how think U.S. the maturity

the of on there this have color we on more be know million do scaling guys. same that helpful. don't or lean or start to sight in to point any but and And $XXX $XXX million if cost ramp Thanks maybe you roll Can as Gunnar want yet that line at the about numbers. just would to talk think help it you then for you investments topic, expect you into at to to base do all expect us next about year? I

David Zaslav

lot against being Well, and IP the even significantly that's have business Gunnar global a as look, and its says. mid-single investing have core us on IP holding a We I company. aggregating us about now growing company leading talked in

of the, Library, the History European all most and PGA As the the of world. golf in most of and the Natural you see PGA, BBC the Tour, the of most

believe we globe cycling And all in being a that the world a going some lot opportunity we've works we value. the so the it huge And this most significant up of cycle, to of think to because in adding so ways of if the been you create us trying give now. guys is In IP learned that people We've to. New give and Digital else and businesses multiple doing different we a than we anybody been we've businesses running do real core order to are while. what is a have for create And a Media it huge that could we lot. above these

executives business the with we're talking all things. A doing our ago these years - and in had fighting, in dealing we to bring have pros. we platforms and got trenches We TV, said, we end to were few consumers, strategic great existing the cable that in the

people than Faricy from and brought Peter a Amazon who here. And DIRECTV. at decade. built - We in Amazon best product people two brought the brought worked marketplace more for We from over so, we

One that from million XX all TICKET. who SAC Leever XX that Kaplan about acquisition built built subscribers Alex DIRECTV subscriber to and and Karen SUNDAY and

do people we a team well the have this so, was that And And on I over have different this business living. a and XXX a I of we've when brought whole Board so saw engineers. subscriber for we new we hired, acquisition, It's Sirius.

building have a Redmond. in whole we're We team that

but company our see the Eurosport the going that somebody getting that disrupting and to by now that And we're so, who ourselves real us. is we separate people to ran going business. We're were our build hiring Eurosport industry, built to golf disrupt - a player not disrupt as

gives bit us on - a side. advantage little of that but color so, And JB think your one I

JB Perrette

and Yeah, the question look cash I far we the and In video at trying very our we is world, talk reality also normal the about of are is the to that direct-to-consumer the expensive early think lot a all them competitors and lens negative. Ben, these flow to about out so Disney’s how the CBS. supermarkets very NBC it's to and we at your build The scale. look don't question see - in traditional we

what at more look Our stores. we building less about much as strategy and them as space competitors is that out sort frankly about and more of specialty

XX may learn some huge only time we are very and unlike portfolio XX subs portfolio ourselves these that million different. subs. we it stores specialty potential watch, is XX in services how see million, And be do buy million see of XX when those But that out out million, has of roll that's maybe having in watch, aggregate, some globally. building million, million, XX over we're ourselves we single-digit And think play, you a them, are we

David Zaslav

Go ahead.

Gunnar Wiedenfels

And second couple that want expenses in to too make digital question regarding past a talk about scaling But little we obviously well. then next on year. it's of your early for about to guidance spoken as a - I Ben bit points have the

way, working pulled see flexible back we've just on same We But the comfortable we progress won’t something. we didn't to afraid investments. needed also not what's to some if where the with and additional here that products other we're get we will be behind get

at from XX% careful X% expect so, perspective the look onto not very be And spending top that on And and up you rather a betting again, we're for our us where seeing progress - doesn't enough a, aggressive make to other farm, little it a the and the sound or down not something bit difference hand of it need. somewhere underlying potentially between if we if It's it's sooner crazy. to growth than we're but future later.

Ben Swinburne

color the everybody. sense. makes Yes, for Thanks

David Zaslav

point is the driving last this these these. The about but all we channels. talked of have before, I've cost

free a have and of markets with Europe. CBS of We air in to equivalent NBC number channels in -

have everywhere. to We XX XX cable channels

watching us already we are have in people groups these affinity So and scale.

tell particular have to, we so the out don't to sign go ability buy to and for people And to up product. a and

confusing finally, movies in I the great hell got a existing is have reasons the infrastructure really in helper. that's promoting so, great for me got people scripted, of come churn. to the think I which a have this came - future scripted money a as The do? I in And re-subscribe of ground Crown so, I a, one order I I we PGA great up, the And to to saying don't be everything real let can We from have you it about spending - Fleabag. tell media the is us a real ton or tell curation. me environment, next back got Amazon. hey, you come and of the do all for series is What the to that and choice question and us.

When company to a infrastructure people as existing and have that's curate you know don't we time. have to go have for they how long For personalities’ fan to personalities. true been

Woods talked going PGA Tiger And so, golf, I you on know want players. to to the what's in

you they'll want it Gaines going Chip home you. in what's and to If know curate to on Joanna for talk the

and about for she to you make what do life about a she think how can of your you and recommendations to what lot Oprah will better loves. make to talk want come You

company think to a real Property curation, so, be personalities - And to we're those we are bridges going of Brothers. the those

Operator

Our question comes with from next Michael MoffettNathanson. Nathanson

open. line Your is

Michael Nathanson

you share the was Scripps growth attribute guys a the help. international JB And wonder integration couple David, assumptions out called you you is, had first the have I share. for viewing how I one that to can would much know one that I the in of of Scripps

should from how with seen those quantify share And content you could big players what then you've So that, anything you the about international you've benefit is international, developed. is Scripps for that internationally. is

of driver about? the meaningful you're a now becoming that is talking growth that So

JB Perrette

So or international investment by performance for and growth and factors. is, X share of hard been we've organic the a content, is improve core commissioning content and audience to our one really driven the Number X on better it re-commissioning. try commissioning, reviews local working

content seeing stronger markets. of And our in performance so, our of we're particularly biggest some local organic

of strengthen content not introduce forget think that markets work these The lot I is, we of it. hard was been is this Scripps seen actually initially content and try part the introduce into need how to types because people a to content our and networks largely year a the in yet on you audiences, can some we've where second obviously own making see

several Scripps to audiences' this licensed to liking Latin markets those almost several it initially we the content - to XX and America, months seen for in had years and ago it took the years our get it XX then to We've it. networks introduced where in on actually accustomed in

the month what's continuous now existing in the improvements quarter sort second to of the we seen hearing and And we third content quarter, track on the is networks. year. in our we've started third content since great last of month performance performance this Ad

second the driver. sort that's So of key

market. us The HG rebranding channels, do and the America across Germany. more to in food Latin series TV in get XX% almost UK you've is, obviously the we plus of whole those we in are We've which assets. channels, commitments with channels, launches opportunities now distributed have obviously We're for seeing a launched UK for launch the seen third to

so opportunity And big seeing a we're there.

we the The put beginning sell the it, where we've licensee on in the from audience only where pay. monetization it perspective of channels a the as end launched the is of content coming at I'd And of those existing seen say team packages our to CPM what so advertising and seen an ability because to day we networks. and improvements beginning markets U.S. Dave from do we we've the the perspective, well they that is haven't high really the own these the which the endemic which But here endemic seen assets sponsorship these categories yet, strength categories. in talked the the of is

we as working And uniquely we're better that's selling at rework the to the now better and the over piece next that we we great time. product, have quarters over and see internationally channels the better upside continuing category that of that several get endemic

from see we the growth side on to be the distribution as and much in this we beginning audience So able continued an to growth better monetize see accelerating those endemic categories.

David Zaslav

this talked if we Can you Scripps sort three I mean I We deal. international of remember opportunity back the add layers. as one point close Michael, about when

got we the we're the And being we're that some layer some launching numbers. actually of platforms to that our point utilizing now at the that and The networks was seeing content take and on very contributing our we time. the savings then, first cost going said quickly then existing happening where to

Operator

you. Thank

question Our comes next from Greenfield TBD. Rich with

open. is line Your

Rich Greenfield

things quick churn keep are learning and David, Faricy new. year, you you things before one. over were a as quick at what Peter business and that And on last charge importance given how a the acquisition the relative for value a full One, to you, all how I've Just about subscriber churn start look you thinking the on the subscription you guess the subscriber year. bringing are a because of then back how follow-up. like like two what service direct-to-consumer talking in for about go do got lifetime I in do the are you

David Zaslav

consume We the different. content lot, a way a on is people screen very learned small

and And something. don't to when go a in something and it get to your you and finger morning You an expect you're see update. you for to the expect up rub TV get it on paying

it's the that you you needs is updated to need, the early began things IP, very Planet live we learned on thought Open. need what of U.S. We IP on content, then that we PGA definition that of just or it's or regularly Earth, thought. is it's it professional one Planet than different the be also to So and we content it's understand frozen the

one maybe But is passionate is buying in. the That the They're area. of of about the reasons that one they it. reasons particular they're are that other

breakfast. that lot they and reason with is the working the Golf the we bought we or content what they're us all deal Digest, they're we What that eating their they their did day. So every on, content game shots. the practice create trick reason them the reason or Tiger of What PGA IP. working and short-form the shots hitting have players That's a that takes on the about of that teddy with for hate

that value natural history, on Officer, use science is about one building, writing global for what best of of but they're is we're people up that. worried and what lifetime Chief one Golf, had Amazon, the and What IP Peter can global technical that from platform in it's, idea can our we we the build for we're is over put brought Technology - for and a investing to this it's so of one we

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that’s so so, if and learned one. And in groups. thing And passion second is you're the we - we can then

We that's free opportunity have of pay. that's that those funnel, and and the don't rest driven have guys advertiser an

So you Eurosport.com that is might month funnel for ultimately, you or have might platform. for XX Natural like and people you History, for or Golf million for a what what really see or an is for there, is that's, Chip free, cycling gets come Jo advertiser see a science

Golf, love And what pre-screened. for but a to they what's are that so see they people those aggregated love advertising people to a ultimately Golf. but network of see going want the free to broadcast network million scores, then Golf there see like the that they global doing we and dollars. and maybe to We're world That's They broadcast that's on people and in XXX are that's we've an Golf, want Jo platform. are they Chip are free, they global come is kind for wearing, home, because Golf make advertising want for they all

go instead take the of are able free And of there, and network want and from trying lessons all to people, to something of future the they That's Woods? be Tiger That's number one. the broadcast to those Golf then, for them everyone, they being many be hanging of the new out there time. how

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end hanging Netflix, and we funnel create have so have a people around for going monetizing us up, of Eurosport.com. not on lot And massive done a we this it you're with to free with we've for ability to advertising already but

groups then that you it affinity but a whole sponsors put created up pay next these go love people aggregate we to and We in don't out come We hang us thing. huge be that We that Europe, are, people that's you for we level around think a the could it and what think ecosystem. thing and where if with free. the a and they advertise and little leader on

Rich Greenfield

just. Then just a quick,

go Okay, ahead guys.

Gunnar Wiedenfels

with world, sexy only maybe I I'd we've three think David's is of great company over stories year, the got for point to know is brought you seemingly environment but and great last thing over well is much more Yes, I of great on is less guess of critical driven inherently Peter product a has also instinct add is and side the three, less look, lot with creative in in decades that absolutely been content and the the which databased the rely as of and trying a a a and Peter data we we can it cadence and all UX drive and tackling to are of with with all use of bit experiences better a discipline starts little sort which actually and media of companies. content way our in the a traditionally at for see everything rates, data, blocking distribution, times kind collect elements to great starts a now teams, looking buffering response using stream that product and it with service the customer to better the quality, still that

biggest what customer discipline had months, plus app four lot the have that the getting to frankly also over us that course or play was star problem to seeing reviews, entire the consumer. and distributed response now, in a in six not and of rated have ago infused the that's better was and you've part a I think and that point all on app and we organization of we nine Nordics, of infused well times talk you're deep of lot a brought of two responses our a a gotten team of is, the heard I rated about proof leadership it the it customer sudden last feedback plus think year He's that direct-to-consumer our strong is in across store maybe

piece a us. but also a product this step of of part improvement. the forward a still it's so huge We long for go, got is way big been to And

Rich Greenfield

the signed XXXX, peers the vMVPD, that Gunnar, improving I'm price Just you're report months. XX talking a quick is deals with net facing increases, we or raise of actually if been XXXX going universal have they vMVPD you due you the QX subscribers. driven that’s that QX, price. follow-up trends just the about the media how as flat company think should QX, over your to of versus at by growing the the only look challenges for major to certainly vMVPD universe last think add vMVPD up shrinking curious about I Bunch all subscriber you've carriage

Gunnar Wiedenfels

out virtual a clearly, some lot growing. it's not, we don't have do gone to it's of have ago want but and but year revenue in also growing, a Well, certainly to only entire subscriber reflected again and our both people detail, even certainly landscape you I not from and And affiliate go numbers, see rate. the traditional that into best growth calling distribution in to not

David Zaslav

look then the down, network sports and the you extenuating going regional for it's sports retrans ratings And pay you use here the sports sports every pay the then slammed them will the network drive their U.S., sport one year, own and down. you marketplace for of up a network then - yearning is for sports in retransmission every and prices also and every broadcaster has they to and on going

a $XX that we're they slammed are to consumers every other comes, with, get a in spend when then come content is a And slam is, country like going U.S. will there there’s the to reckoning, or that that's the the down, and the have in where going we content the so that there and they time going and world to $XX want, down be service.

have but forced huge and have, the to will forced and have like of the want I that to top forced to the being carry sports platforms them of consumers, us. are of those that retrans the carry being spending because content to one piece carry not will a being to choices sports networks. every with we coming quality don't every people of that services we that have were carry people because - they're us, came regional those to time of one they They're and forced is

going And it's and come I'm with there and, enough, saying and that's it's a to it's that at pissed and those of consumers you're are the those numbers enough. moment now the coming reckoning fees it's enough is seeing are looking don't it all MVPD's when a stuck you're like because what

Operator

Thank today's you. This conference. day. gentlemen, for have wonderful and concludes that you Thank joining a the Ladies question-and-answer concludes session. and everyone

Warner Bros. Discovery (WBD) 6 Aug 192019 Q2 Earnings call transcript