DISCA - Earnings call transcript Q3 2021 | Warner Bros. Discovery, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Discovery Incorporated Third Quarter 2021 Earnings Conference Call. At this time, all lines are in a listen-only-mode. After the conclusion of the speaker’s presentation, there will be a question-and-answer session. Also, please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. President, strategy. Vice Executive Slabin, Global Investor Andrew Sir, begin. you may

Andrew Slabin

Executive and to morning, Zaslav, QX of our Discovery Chief and earnings Perrette, Good and our Gunnar 's JB CFO, and Streaming David call. welcome CEO is Discovery everyone President Wiedenfels, today With President International. Officer. me

WarnerMedia knowledge XXXX. materially statements intent management's Provisions to Reform expectations. you that that and to pursuant well business. based effects to we projections of today's start, on the forward-looking expected and of assumptions Private the about call Litigation conference The results Harbor and any made Securities to the we These differ obligation timing, from the of comments statements Company and as previously announced prospects, Before transaction the Company's the are remind will current them. between future cause include I'd Act make update disclaims actual business or the like uncertainties completion, Company concerning and future as that risks statements, our events about could and regarding include other and statements statements Safe forward-looking forward-looking performance, providing financial the to AT&T In relating plans,

assessment David. with Commission. could call the made information on Exchange the our like important XX, with to these For and for additional see I'd the Securities And factors affect filings Form December to please and over XXXX XX-K that U.S. our expectations, year that, in turn end

David Zaslav

reviews, focus, strong very approach we business and years all and across pleased at discipline busy next year planning strategic to and This ahead an everyone, a our up with I'm as and initiatives integration exciting continues the for of merger. performance, strategic planning, Discovery you thank the us. ahead. WarnerMedia here joining and morning, Good and range our simultaneously of for time ramp operating the be

bringing close some total the our the Gunnar then will the about and on employees as QX, together up for the Very direct-to-consumer through QX the flow. free it briefly significant picked billion XX% very additional that I creative will this performance on takes you take integration to transformative the us summer. cash these and rollout. positions and were complimentary And we $X.X commentary opportunity added driving businesses. as above transaction this around a the year. And of exceed our the This converting million a subscribers around flow to OIBDA our conversion And far in both Discovery+ double-digit after of free thus in tracking while and of to nicely guidance is healthy increasingly talented our we provide of leaders, in growth year. investments and brief puts funding cash ahead platforms at full work X you of assets, reaching for least distribution Subscriber quarter. able quarter subscribers. QX. around. solid revenues we we progress And globe, was toward morning, are advertising for growth we've growth amount making all our as are on enthused paying nicely post on deliver We continued all a a XX update operating healthy seen million We This globe. see growth well

a lesser points a what articulated three transactions. X.X. operating May. improved this meaningfully reducing And to to This outlook tracking to in contractual from we around close on we times adjustments Gunnar. to we working leverage assumptions below sooner opportunity at see extent, times our performance. Though Accordingly, this the We based WarnerMedia's noted be at below path an leverage than May. Additionally, financial expect stand to now carve in But we leverage out on some the even shortly we net up conservative approach to examining had of took modeling refine stronger we Company the and our predominantly as after X -lever, and, growth and transaction focused initially, our proforma accelerate than currently merged footing a capital X.X the the and or we de is that estimated times to versus now while draft importantly, we have supporting sales. asset make investments anticipated pace our had financials. the a to any without ability initiatives are in to More

process. having I in broad you front, our the global with and and 's of the a close track we on in operational Stankey regulatory John around the for of proxy expected globe, ongoing engaged confidence preliminary are some asked we said, a regarding further regarding The roadmap, process share That us out where is, appreciate On number that upside our draft jurisdictions clarity strokes investment, are go-to-market and on our conducted of regulatory specifics planned underpins of premature the and around a is enthusiasm merger opportunity. we with echoing product, global filing still what from November. can filing late review direct-to-consumer diligence, go-to-market And provide the including it attack and regulatory questions of the in the course, typical are have call, mid-XXXX given in well comments our the some strategic merger in plan. details you the AT&T for while Sankey the transformative to SEC

content will characters, one in menu the a course, world. to and biggest all true drama under to IP two and kids of about the compelling building make to combination roof, global uniquely secondly, records as and a driver, offering. comedy a to we result news, view complementary fi crime, long service adventure, consumers differentiated should And and it's and our start, around tenor the balanced world. track the the of one local, our relevant and portfolio in the and at First, I commitment family, superheroes. companies - believe our programming ability and believe will in lifestyle and service upon help for complete sci excellence, culture strategic the in be sports, Spanning the whose our invest documentaries, of common producing respective competitive and franchises From portfolio same content. This most time. offered creative in iconic globe. of critical most to I tactically of

strong be par our all with Again, female given breath content to our we service very and the old combined genres. should adjustable will complementary, streaming biggest male broadly global such of Third, on young the expect the offering, demographics, with market and that appeal total service.

combined believe here subscribers Discovery+ U.S., Max real right subscriber half we with respective also of the our our local capabilities, with coming infrastructure, to the our the least offering. broaden packaging provide And market less global meaningful Assessing than in international roadmap years. overlap is the upside opportunity in the and and untapped base at appeal, are still over very HBO a which basis, provides of subscribers, much

particularly term. make Plus represents our targetability, strategic the to pay from we and value. key well and starting a to address in add market an priced ARPU Lastly, the long-term with ARPU plans year helping to premium direction from confidence U.S. growth, meaningful drivers some as international to experience the drive positions where our Company, the of for long product on opportunity given our demos, offering. significant with in to and off opportunity covet rates see distinction Discovery reach We monetization most gain competitors, light ability in the revenue A flexibility, service, where for in audience, this this later U.S. markets. The drive lower scale ad incremental offering and our and highest advertisers upside the one ad-light

stories, consumers in are While best around all compelling the It's companies winners sales local benefit will value. quite and the world that consumers and the that teams value a provide Discovery's personalized offering to depth to and and can help a choices, be most in infrastructure simple will clear content products, those the price-sensitive streaming more ad with great from at appealing quality monetize. and

operating and few to over We linear on reflected combination the winning such metrics expect our A proposition time. drive complimentary side value be over words turning before highly across will will house key Gunnar. a of the

Scripps, and of better advertising which a we business Premier. revenue depreciated the networks benchmark. X the can to is valuable I in opportunity support the with core we costs This, in we analog As under Scripps platform think and this bedrock roof, demos, traditional launched is to linear our and more great the potential. achieved the believe the we terms about ecosystem. on created of female be And what broadly, together on brands aggregating believe, both Consider far elements transaction. bringing of Ultimately here, one greater entire least is

male-oriented from draw stone and conduct no XXXX, than our and merger better unturned. that existing options, of expenses. around in about to true our programming Cost how by We scripted scripts, Scripps all CPMs we advertisers upside our of broadcast. is more original originals offers more advertising the captured office, non-content to billion me, upon challenges than the reach all team unduplicated replicating with together refine the we our generating the can with level that We significant. globe. about core and sacred our sports, XX% next with competencies. It's and to top are a advertising manage broadcast product of in With value. improved of since of cost network management and our significant efficiency, target. Xx platform which our our expertise at X weaving win-win, partners reach synergy us opportunities to is the ultimately organization by revenue savings across in broadcast a savings, network take representing at bottom Networks synergy continuously to transform significantly efficient prime-time transformation news, and Nothing And Our

enterprise combined pivot what the few our team $XX a tangible next have especially Company the over from of growing moment the goal, We few to assembled nearing And reflect and JB years. integrate the Discovery+ starting Before the approached there. last spend, a billion the point a practices over and direct-to-consumer see merger. tech, of speaks to synergy chunk conveyed like incremental we refine process and to great best Ops, opportunity the stop distinct functions, tailwind we in attributing broken three that integration down into from estate, a already I'm a of for year. that waves spend tech, we launched. since under across cost world-class and direct-to-consumer infrastructure Stepping in back against place marketing billion A corporate cost year have and we should the years. duplicative efforts the we functions accomplished around achievable of have saves, in savings real we this as proud as large on SG&A and $X Global It's streamline leadership the Scripps. that

taking continue We as recently, challenge our doing to next a Company we with journey combined. a refine HBO. continue to our in noted more gaining WarnerMedia thoughtful after learn plans plans, so our also direct-to-consumer closed transaction. approach and and focus, sharpening the for Discovery+ that ourselves, and our in of ways we deal, product perspective And the to the tactical for great support the leg and we've investing

Canada, For as Brazil, are such example, we the moving markets and UK. priority forward in Italy,

of announced has in contractual Max near cannot for plans cases Some were they which that the HBO indicated hasn't reasons. to launch medium-term some in or

Europe. out and in to and U.S., App ratings near our content and the and on subscribers Churn, engagement to continue HBO the Until look enhancement such forward our spend effort. LATAM group coordinate Store our we the to continues expansion particularly plans. As sustain at with last firmly monetization And we so globally. metrics new exceed and roll look continues maximize Roll week global the can marketing, expectations. we and aggressively XX% from strong their -to-pay and to the of that Jason to their for recently John, team Most technology entertain and while continued time, globe. Max are transaction approaching in great. peer call, content look to in our combined top, forward closing to while exciting around you earnings And lows, move remains the heard the

and be All dynamic broader as we which to an Discovery+ roll In next we with exciting of endeavor we expect are we into this in as them, time solidify and And for are HBO will eager steps. is to as our and to to helps as order. Max. And formulate more comprehensive our them. share offering closing, base know hear we you plan short a that us

rich sustainable to helping material, our the these growth nurture play, financial content our will right achieving combination a While questions. now turn both platform, Gunnar, portfolio linear capture of to two our anywhere by across I important franchises and to efficiency your to happy of and Northstar, be as direct-to-consumer opportunity scale in presence creative like Afterwards, I'd companies. the JB anchored course global while great enhanced will long-term is tangible over the to be driving Gunnar. resulting answer of world. and in for relevant any and it our from

Gunnar Wiedenfels

recently range and quarter 's notably most the our the the I'm Canada Good year globally, Discovery today. XX the come well. and we direct-to-consumer comments, fourth supported same even thank direct-to-consumer have over approximately achieved and for continues annualized paying million weeks. added global time, in continued India, where Investment Thank Analyst third the journey, rate you monetize quarter. as the for our low $X we a the quarter XX the Discovery+ the down Discovery+ $X.X million the drive we Nordics, than with and growth joining Reiterating on to everyone, our start know not product, $XXX-million billion range, next-generation were launched of paying expanded like investment morning, the which Ad us to what run ARPU or David Again, finished and losses doubled Philippines. Poland, quarter you, have by content time, million well. DXC team U.S. David. offering. in to Lite new more or that UK. finishing $XXX Brazil quarter a pleased efforts I a the very blended guidance has At next the Since With of that since renewed with Discovery+ revenues and the And Day over our we have ago. ARPU markets Over And BBC for we $X U.S. the over in with with losses the in quarter slightly with better in Italy, from for ARPU $XX third last markets, an subscribers. few the expect our Discovery+ XX subscribers less

maintained always, to initiatives. disciplined in a approach respect direct-to-consumer investing As we with

through over have this we David and up that both months, ahead, the the noted beyond. As few lens I and view last both opportunity leading is the to it marker

our a content features. existing expect acquisition our nourishing base same subscriber an be quickly offering year-over-year. pricing product segments. marketing I'd third by time, to lifetime and sub additions. the revenues for value was with last subscriber the determine to rigorous new on now focused customer advertising up spend new year Pricing XX% very with should increasing us analysis by are reporting versus that We year-over-year. X% our At at healthy of Starting like driven scatter you increased guided review U.S., And costs quarter was to

delivery contributed strong weaker product, audience year-over-year. Additionally, the we which by This demand was to light partly Discovery+ continue in see to ad growth the quarter. our offset for

panel it year the strong have as to of as lapping during networks attributable the very issues, year. Furthermore, calendar share performance of Some sports this strong last our well some to of our pandemic. the the lost Nielsen

while with earnings to quarter. is there is the in slightly as our helped less our the healthy more pricing fully largely through part, in chain. declined networks Hulu, QX, quarters positioned renewals Verizon, a of as constraints last upfront successful very year-over-year, linear DirecTV, is of upfront sale Distribution from affiliate continued last though in as total so XX% in year, our our X%, release, overall scatter due tone subdued with As result, over very the on declined And up is linear subscribers in global strength last to While XX% the increases, clients network growth bit few the Discovery+ based increased contribution by excluding direct-to-consumer. portfolio both how the and year, the and Pay-Tv a market year-over-year, American Great distributed subscribers worked impact supply than still from Country by linear and as rate this well revenues we far are the [Indiscernible] pleased portfolio visibility to XX% X% the of disclosed

on the basis. which advertising year currency to international, the will I constant continue as XX% discussed International to recover a pandemic. versus advertising Turning last global as marketplace increased always from

Olympics Europe from platform. benefited also We the in and our across digital linear

Although as we've for noted Europe less Olympic to U.S. the as consequential in the the past, compared Games advertising is in

Germany, year, comps last XXXX. momentum markets QX, to the International past part year-over-year to regions, our and tripled due Spain, in on international the meaningfully during key All continuing our Australia, outside needless have distribution as UK, the year subscribers, as even to revenues compared direct-to-consumer aided many primarily the Norway, out. including New were get see the compared as nearly over like Olympics and of tougher across from our say, Zealand, the of We sign-ups. which Mexico quarter, X% well Sweden, here growth into up grew to of footprint by U.S.,

OpEx total the Turning Olympics, for quarter, operating for losses overall EBITDA to $XXX Company quarter. expenses, the or million the XX% of with guidance around excluding our XX% during were which in increased the line

core year. to on networks, OpEx the focus to efficiency to in on we linear range linear reduce continue mid core low in percentage single-digit remain track and for the We our driving

note. to items, a $X.XX or was on of for some Turning couple share housekeeping A basis. to income the per net diluted million quarter $XXX items

And not hedges our deal-related for do The risk our a could derivatives debt the issuances recently are WarnerMedia per mitigate on the to visibility rate initial changes note this, rate as market overall statement, to which fair towards the $XX WarnerMedia recognized finance cash billion of and net we required to the additional portion variability we is now financing, our hedges security gain cost as from interest qualify closes. we debt expectations. of of some result provide which the transaction in a transaction. to better the notional First, on trending interest in accounting implemented purposes, share, future final than income XX-cent for non-cash our income until value hedges report additional that

out call impact of quarter. course, will each We this

PPA per the above, for $X.XX been of quarter was third impact share. $X.XX the the Second, Adjusted during EPS have would share. per diluted amortization

to book quarter effective effective expect tax continue full-year the rate Our during we and mid-teens in to was range. the the rate XX% be tax

a taxes, excluding a in the though high FX negative the amortization quarter. for impact fourth we impact carefully continue anticipate in subject XX% AOIBDA year-over-year to $XX XX million roughly tax have million to is negative For we rate ongoing change a range this we are cash monitoring revenues expect legislation. And the year, on PPA on as to and

the a very made left WarnerMedia months turning and XX% flow Now, quarter, clearly conversion the flow over of strong our our on We year, investments in flow ahead generated close to notwithstanding of our And X.X the and at expect times AOIBDA topping few full for quarter. a to a now expand cash Year-to-date, time we we cash $X.X Obviously, be we're making, conversion point as net return we leverage. that conversion XX%. the with free guidance. in million rate to below to levels. by leverage is David free And cash our see earlier, billion production merger. to or content free flow of free as normalized well the continuing cash AOIBDA, rate the $XXX the

P&L have financials, net we in closing the with draft to at and flow less with dig a working into estimated having on believe we now anticipated. debt capital, the than Over better further WarnerMedia visibility that free will performance, amount originally few our 's better healthy and cash carve-out conjunction past opportunity had months,

these metrics we we X a reduce what naturally, position are up do While be capital sooner to in than times a working and May. in stated leverage now expect preliminary function of close, meaningfully to to

times target at leverage Our X.X times. for X net to long-term Warner Discovery Brothers range remains

to two Operator transformation of we As the taking WarnerMedia experience, to for refine as integration plans, our prospects plans that, mid-XXXX, enthusiastic we we more hit our I the strategic now, work synergy are in about as running. ever our office and capture transaction have ground closing your integration, as sharing and over look these lot combining And the in review and as due the franchises. further, turn and start we develop to to towards we we And portfolios would world-class forward call questions. time. to a the With like re-erected

Operator

we Credit Instructions] is sir. Suisse. session. from Doug will the line of question the [Operator begin Thank Mitchelson from you, Your And now first question-and-answer

line is open. Your now

Andrew Slabin

Doug?

Operator

-- Mr. line Doug Mitchelson, your

Doug Mitchelson

Okay.

Operator

-- is open.

David Zaslav

only when He Mr. Doug addressed responds he as is Mitchelson.

Okay.

Doug. Sorry,

Doug Mitchelson

can't talk I debt and on content button. the A Can about it’s hundred evolving? Company Look, David, still that's mute guess the the David. I the appreciate out update merger how a figure the combined lower and I vision three-part [Indiscernible] for you the question, leverage.

you on have and do Any Thank The enough streaming investing making since would going focused spending they're How content thoughts X-year Warner out thinking global in are be movie, X, and now you on is AT&T 'XX much merger. how helpful. about first in Brothers should the 'XX are that be while on X cycle? what to in or visibility be a today? particular, And companies women is to you. in the coming spend versus content how that's under much 'XX late Warner's

David Zaslav

Thanks Doug.

ecosystems nourished media is money and this on of we keep in. with is on We that and that, comprehensive best content in. more of money part leaning John and and this our something content And offering. as more committed is both vision growing. both We Stankey most the and talked greatest strong to leaning about to of we're spending Company do WarnerMedia spending together believe us. what the being created and I First, And Company content this

an extraordinary incredible of Lotus, with of having of together on more Ann around Warner impact strength. at -- HBO Dune if the Bloys run approved, world together, when just with the come gets our Toby with library side then And them Casey and the It's Mare the in leaning side culture at the and with So, content. with have, come on Light with Succession, cheering the on we that original together the see with Easttown. they Hacks, if you you success and where when look we'll and side deal on the us content, deal we're that that

for And we're with channels. lot and That's that spending but a we a particular the in TLC ready. length of very a side strong during so, also that's look quarters us, at demo. continuing. media the think content, strength when for we're international of watching a Oprah, HG, I it's that's on advantage. the to strategic demographics think every where with this, We Together And we terms you get more of in to will and appeal of it's broadly women leading or or or many women. our women. Company Food America Whether ID, view Discovery with mentioned

with brand the the Europe. we're the world news world new compelling in resources look content, the CNN but In local service, global Latin not world, the the that kind in the and of in is gathering. And few have the around in sports maybe leader it's news leader sports we only just addition, They America. the global, around one most news of around in has

attractive we there's in offering, But we with service great a finding doing it's there's And news in top diversely in with make reduction entertainment wins, product that, broad and nonfiction, Poland, and real which And Europe (ph) build we with so, sports sports, lot and this I where also is think and we're content entertainment. the in more have Disney, markets in on in with a as we're product like meaningful go even best real think and out entertainment, and of building, a Chapek together using Netflix, a comparable maybe product, and we're from. entertainment. learning do traction this And we have churn. great

I we our think lot on go-to-market. learn, have product. so, working to we And have a but we're terrific And a

Kevin He's I've a of mine, one but on who the most of brought I years, with other team. XX a an and lot built friend We the the will known have with consultant and I and -- think car as have Mayer, now things, Disney+, business. do we Gunnar talented Bruce old in of people a for in busy who commitment the that whole with be and JB

Kevin a I lot car we've about As go-to-market as learned success long excited built, going time. the a a lot We're big for that. getting at be strategy. lot We've had it about has in a about a He's been he Disney. with super We've this. He's to and of they're a already Anne's honing the with us and Europe and of week at with over brain. in to anxious whether learned super we've but But so, talked Discovery+. smart knowledge perform. about at time there. movies was about meeting in get content, learned. for pieces helping us last different everything he's with a that first Warner. room how there A team, whole windowing, We're its lot of with Anne the team

be Kevin best we menu? And got overall to team the think so, the got to think who's I the we adding menu. best we go. off helpful And -- to going us. they I is

Gunnar Wiedenfels

would pretty a plans I always investment is as we've the so financial the the point of one step-up over part add discussions. just of each obviously, Doug, around that other's said scrutinize significant assuming in coming investments And deal given the we before, years. as content deal guidance we all

Doug Mitchelson

you, Great. Thank both.

Operator

is next open. question from Hodulik line John now of the your line is UBS, from Your

John Hodulik

but going of sort DTC breakout sort way versus guys could you questions a on in you're side Obviously, forward slowdowns the couple on fourth you Thanks. of of and the quick Thanks. the is maybe Dave, that from any there of characterize going what business step-up some linear terms lot in see potentially into A seeing guys. supply what advertising. business. of that the quarter, chain trend Hey, you upfront, the issues. got

David Zaslav

Sure just start will. will my is the I with seen upfront I've career. this that in most successful

the I that it's bigger perspective, certain of length of was it up the because us that and the to very we Premier of have materially for industry the XX. And with characters have. aligned be brands think because wanting from advertisers and upfront and view an we

big, linear that be demo strong there's a I advertising. There over number just huge get video, that. of a so trying and but broadcast platform us And for the we for linear about I There complemented effective the us it And why they and is HG, And going lot helper level for independently, know quite effective others. was getting are the said a the a they what's of they may to terms which to I here of of get it. before, huge upfront. ups of then think credit watching to one is that so think very advertising. attractiveness. those. I demo us there in advertisers, not very the that the watching we're future. in But end think the But for we're Right credit being had there'll long more saying a growth seeing complements we're And But younger we people Discovery+, saw of talked I've see reasons can't will It out happen material to in driver as we on a in predict ID. we ad watching mid-XXs But are in find food, audience in issues., there. But We time. the be upfront it's massive be free. still big there us have the putt lot chain in be supply downs television. watching transition advertisers And a on much market than the and it's from much up XX a Discovery, industry is the issues. them that numbers now, for away for get

Now, Gunnar?

Gunnar Wiedenfels

a I be want fine. did our really David. have for the very continued I contributions we'll very It's lot less very, and feeling regions. point visibility I from perspective. to in good known healthily that, We're don't fourth the But But to position, believe, DXC. growing add upfront, from out quarter, a little the to today's about

John Hodulik

guys. Thanks, Great.

Operator

line the Ehrlich America. Reif from is of Bank Jessica question of from next Your

Your line is now open.

Jessica Reif Ehrlich

have I X Thanks. Hi. questions.

make. in transitioned League challenging opportunity, appreciate you've on gone What X of off through created at talk all you already of comments area it Discovery stack, is did integration -- actually the -- the your the and the I own. On area most your you But Baseball you technology on on Major stack, Stemtech, Stemtech can about of tech off waves your and

combining look acquisitions said savings? think that asset your second the as And the cost So HBO what do are and can pieces remarks I'm Max, make combined you challenges with and then, ultimate question, without in you're are but Company? at you just you sales. what benefits David, in you wondering the prepared what missing

David Zaslav

Okay.

lower are there strong. to that quite we And that first for be have. by think that see given me expected. anything. assets more IP we and at drive and we're the the struggling need be -- much thing that quicker, time, look, and where to all look going an to something are than there library help. to the we That -- it delivering opportunity don't we look fact think levered differentiated start tremendous have need the we market. the that us point will all we're to will IP we missing over We great just be together as Let the do help we're Pull saying, and will others I'm if local given I making to is content going go more and

here: big than less got two levered integration led Company. with exceptional said Gunnar We delivered and just initiative did X.X than a be it later cost job. we'd times said less the we CFO -- And two came up will done we really is and revenue synergy. targets we those year. delivered quite million an we He Is a in targets. He he's we On billion. that did with this was Scripps these $XXX where the And all of lucky. the side, of X. He be years we're in and not confident tenpoles over

will to the here. kind Gunnar of so, lead And talk He'll it. be horse

a team have JB Warner. and Universal, and been looking that some transaction, at groups incredibly Bob experienced and in one Wright here. entire cable, and work Jeff integration that. Immelt and with the over teams magnificent very we years. JB, did But for talented movies, acquired a XX which Adrian work for forward when to people the was ran Campbell, have XXX of together job that and was a parks We Bruce bringing We're on I for theme

And to so, JB? but can't do why we're fully that deployed. We got Gunnar, you I don't and with off we it -- there's now, a pass lot

Gunnar Wiedenfels

taken tech as I've challenges, again, perspective saying your the we've from from of with the careful approach for mean, JB and aware of -- the let to a And part and of were well assumptions. this Jessica, have I'll the here on combination. question, have this I very riding but been the we're conservative and beginning, our I comment we checks very been again, Yeah, of that as size

work our me deliver we've [Indiscernible]. ability gives more So done in in the this to against that since more, or all confidence

prepared said albeit the earlier for doing having carve transparency out As financials WarnerMedia remarks, car now, David in said, and the I as into more park draft, work group.

what extent I going is leverage what we be for some this cash And of lower perspective, to driven today's below X.X by that the perspective. one and model a to being leverage a gives payment is from cash on. we, seeing as conservative free better that us communication As point right significantly times working earlier, flow P&L capital said from agency sort large that our first to a the assumed above both we're by now a our but it's based starting said, our adjustments, extent in we also current performance, we driven the

clearance. early said, do still. regulatory our running. So, have this obviously is as But can much again, Officer We until Transformation only and Simon Chief so team up still the it's team at now. we Robinson, and redirected we fully his

the running. shape. I think And So in that very good ground we're [Indiscernible]

platforms. of looking at perspective why give a are don't with out obviously You the on how -- one we're tech want here key the JB, you you questions pointing that.

Jb Perrette

Yes may [Indiscernible], it now, decision it's as And effort obviously where different one terms necessarily -- a multiple and of diligence the up And we're work both and big of monolithic We in the is undergoing bit a our be little the And discipline I opportunity tech process the haven't an we're yet, essentially apply. both their required undergoing as the the best obviously, and both. for That may us. the audit in different one. other. at significant in or on to a have modules as platforms. we combination components as direction We platforms. decision re-platforming either don't all look of right in we of look those a but a platform think class make made the experience, of that we lot to the which certain these of in it on you underscore other depending mentioned, one at modules one that

and obviously And together, kind of look an buffet a make Rich common think so on obviously opportunity, groups doing as time we XX course of of going the lot essentially it's to forward. come lot of tech a attractive to tech have of we both into upgrading of we a their Jason will spent of We've spent the are to we we as time a how platform what in best think and choice lot great X And be actually will XX move the the same decide platform will their months. because incredibly money a team a investing the the a that side last speak. have we and over and lot a

Gunnar Wiedenfels

were just or clarify, prepared to at acquisitions. I if just we're just And to nothing for maybe that clarify I understand to Jessica, That's any referring you correctly, acquisitions we your point, planning in X said Jessica, -- anticipating one want And, thing, this because question remarks. our not

Jessica Reif Ehrlich

clear. savings just -- opportunity. And with maybe, from was does combining just the one it David Stemtech, to you on you've or I color on having a and take benefit this a you can gives already, follow-up gone really are said wanted us from -- just you through lot but give platform? any the cost just It bit what talk as what be the little will

Jb Perrette

one there into Well, combining meaningful savings from coming platform. will be cost

one that not also further keep to in in launched a example, fold the more a quickly benefits -- consumer of meaningful rollouts is market at we -- versus is existing re-platform be will Discovery+, fold also think having mind stage I be a platform about there of more to X from into platform. part stage combining comments think have able view in more us to X. phasing other offering of being And thing into Discovery+, the this in David's and to disciplined may may yes, I tactical to able towards be we at quickly what the content joint markets platforms where into quickly for

-- And may to be while Number which and takes to evolution the service platform two will there influence long platform. And of to tech we on more -- where obviously, allows migrate X decisions think give one both be as phase, for, X, the of speed there. get will may us there final bundling a for detail so exactly we remember haven't That's allows timeline talk market a I launched. common the and we'll variant parts which more to services. which it a have how number that can on tech color. of an Where initial soon and we second more of you a phase, this, that phases [Indiscernible], in be as quick certainly eventually we But

Gunnar Wiedenfels

but of spends lot it plans. fixed spent We cost But subscriber together the is, thing, there's two expansion roughly two $X assuming A relatively said that's announced a in number. its a independent the cost nature, I that can maybe lot if Obviously, there, significant We're fixed. we remember this by marketing brought a and companies with billion streaming-related growth. deal Jessica. between platforms. of one when add technology we What first is of was there's

be able waves, that will a gate, point to aligning will, duplicate have a And the platforms there's of especially that get of 's to no combined doubt huge JB lot in to so, fully completely we And spend out opportunity to on multiple of spend. phase leverage out marketing before of tech first the I the the even marketing side, base.

Jessica Reif Ehrlich

much. you so Thank

Operator

of Your Alexia next question Quadrani is line from from the JPMorgan.

is line now open. Your

Alexia Quadrani

the if with is of you then really side, Just sort the streaming success standalone growing you've questions of better think sort others your And seen content new have How service on or that entertainment can. with opinion, combined it new couple to by it local I about streaming? of a following do strategy? secondly, in

David Zaslav

Alexia. Thanks,

for or we're throughout the combined. Discovery of big a of and in-market have quite is One of Europe, of Europe into with we're we've channels free-to-air markets, selling those local number and what that's markets. And NBC in have CBS in library in where In like the a meaningful America, we advantages XX Latin content of and Poland, CBS. been producing teams data free-to-air on And Northern we're each lot of equivalent some throughout In NBC equivalent people the we number Italy expanded local Germany. are watching. of years, a locally, In real with markets Europe. we

what direct-to-consumer for time. sense long have it We content been a good platforms at at a kind looking of of on the we've because they're

worked tried of as that some expect. we'd we've haven't together, with as together, thing And sports makes you reduces a sometimes work the of good non-fiction, because Olympics. a that's lot have with as out well entertainment When things, Number million-plus broadly. packaging in out Europe. sports sign-ups also doesn't more a well learned We with came the sports the Olympics. it we've sports We And appeal Churn as the the we had higher. put packaging for significantly together independently

all But continuing we'll and Jason, That's continuing a basis and so, team grow. is That's together, and And John, smarter. learn, come e, we what to on independently. We're continue to a parallel as we to do the good be thing. invest, learn. Ann and

and in the What and has a thought have works windowing what's and product? build in that has bring it look and it just as platform of window and [Indiscernible] if about movie free? that for [Indiscernible] stronger There's it And You observers. best it? what versus at learned strategy? the tremendous to goes having, people Is goes of to then there's if student it a Is it the on I'm at just general better in has to this theater we right a a of movie a Is the day? stronger direct-to-consumer Ann really lot industry up meetings have great Disney the as $XX great a day And amount on experiment learning how Jason are this one this also, come learned. the content. benefits me or how And consuming been that people listen. series, for when are for I ability is learned has And is it. what on of lot people and knowledge that aggressively the in we're continuing A we at reaction? this the side, from, experiment to But Europe. can't industry see what's because noting trends and the -- and things Warner we're we're learning haven't point, I seen, are

Poland, been we've side, And we ourselves. independent. experimenting in news went the On

Now we're together. it packaging

depend on it's to going probably going on it offering. market think is and it the the -- I depends

has having strong Discovery some the so more +, that's time it's But the product, news It's a is there and we're we people us. the people a hours the now to the on the We about very very why is It's churn. as for services. we've service. lower market, viewed. bundling. the have that's don't service. another how the spend, It's been But voices churn it's right that are library they a news reason have to also broadly what that the the service the or churn. sports regularly people, and with of put don't people direct-to-consumer packaging the to answer for that's churn very, right news bodes -- another more compelling. read excited a have the leading of together, reason put -- encouraging what's in know people that, helpful the channel about go time and being lower for one much low CNN, and spending sports The is in quite We're value And which in been Poland XX-hour news two. of yet. out very could it. go the for doing of to And you plan Disney product another them service the and reason We effective current combination has as not and spending the We idea if

look exciting it's so see. and and we'll And

Alexia Quadrani

Thank you much. very

Operator

of the from line next is Capital Your RBC Kutgun Markets. question Maral from

is now Your line open.

Kutgun Maral

my and morning the to standalone I thanks bit wanted deleveraging in for about taking Good ask on then and comments. for questions. DTC investments drill Discovery a

more it DTC some take disciplined a approach strategy. makes drive clearly your this benefits. the given financial will to I deal, to first, near-term assume So sense

narrow levels you opportunities I it's Discovery Where on the for cash color low seeing the out minor here, bit targets, and can more good a the a details maybe given for that very on Just and quarterly $XXX-million more about rate know color just both Thanks. of leverage continued where sales top-line then you already. forma WarnerMedia you on updated But can I particularly some accelerated a asset range provided pro to QX the from the And if provide some are side. close on flow is you close, lot And path given drivers forma run going QX. improved robust ahead? deliver Gunnar, you here? can fantastic more continue the hear the pro strong provide through the there's is then your view an investment specifics encouraging. trends? on any EBITDA, post standalone to and role deleveraging free pro forma outlook? deal or know to continue maybe Is - there to second, called deal losses you DTC So, any

Gunnar Wiedenfels

Great. Thank you, Kutgun.

for a delivering for current flowing little flow a sort to because linked through step we're what a more Company, still Let not lot entity. challenge that for the standalone as generating but a group. at of adjustments. WarnerMedia just ago. better how fully which carve-out our presented in we're that made if about sheet accordingly, through our a X setup your first not rating rating balance take are back, year the what into give But financials way, half our the of things obviously doing and to full Company anticipated is number updated. piece is by model certain working to performance, than have lot get just out financial I the like, forma two carve-out combined the of financials well question free flowing is me discussion wait confidence put And would model and group what that but that's, a and we to adjustment. one and cash is you there was certain a We -- carve capital draft is combined color. is and pro of some in important, more and start with here here conservative that X the The we look agencies a we look the Again, assumptions the Company, most had of we the what model

that going perspective like obviously an payment looks we're impact the going be talked billion in start today's has $X it's And adjustments. that's So, Company the a subject terms working about this is on have balance that we $XX have lower to on billion capital of what net always from the to adjustment leverage. billion, that with. as will the be to to net impact then, debt significant very And going $X

better well. do of as And thing about XX% caveat So, our the Obviously, leverage equation, nicely the OIBDA though, that's to this. by improvement or driven very this improves better I developed operating denominator of performance. that is want is just second XX% here and

now, very that and very, to around leverage going increased get to already have working in deliver our going not my But we As other want into it comfortable a lot of change move on ability is quickly range. low questions a X.X very we the view long-term in to the pointing very confidence below capital. got times. looks the this. right X said to I quickly This with target times the significantly number keep I is point is the us again, have And, out what's

continue and we always launches in allocation the you're very We've significant is To dissipated already opportunities at let right question, about have, obviously, talk looked space look But of at re-investments almost return relationship just risk more fair our some to this and case. that acquisition it's your is of business Olympics through return. do subscriber and And and us fairly -- JB lifetime a go value order little marketing easy bit because We is of up to to investment, first the cushion for market of because year. the will to give ask coming the kicking the costs. the customer manage the side as we The DXC we in teams in the next some scenarios the here. say in on between X more a between lens general. I'll into in have capital uncertainties it

investments David that out in XXXX especially you as the we we various subscriber as right, the a starting in keep also continuing have. of see invest time, do of product. quarter significant we're U.S. to and comp way. lower if continuing launched really existing I We're the that to you're next investment the content same against continuing first made to should So year losses, significant mind want the point that we beginning we to in At nourish said, base the we're we're in

that quarters. the few So as over keep next well mind in

in mix focus, JB? subscriber. necessarily features. to a and last every little driving technology continue will continuing up. coming invest to product We in content less would I on We're expense But for the just see also say

Jb Perrette

been that great Yeah. And thing a heard that you've of us new market talk about into have behind much and partners brand given not Gunnar, fair go we success. the as offering, the asking other how we effort add, of approach part future deal many and the about etc. a should the future obviously, term, also product as with they work much put that the money questions how only launching is the about surprisingly, I'd And our we internationally questions XXXX,

in the in sense of combined we a off product better some together. when a our content more what they're and can we're making -- being from things pushed have totally come rethink which is we partners, those right marketing, partners pushing So, launch? is a getting is when to look with same that cases the off like. And cases, and to is legitimate us, when expense and them are of of And we largely back that time will questions some is the will what to a definitive when be lot view launching later

Kutgun Maral

you, Thank great. That's both.

Operator

Rich Partners. the of Your next question line from LightShed from is Greenfield

Your line is now open.

Rich Greenfield

few taking left for Thanks ago, own its months the question. platform. WarnerMedia behind A channel

Plus. planning more decision that faster. and HBO including along comments you or you had can just takes calendar I a Netflix, not players that's were think would about been your puts wanting keeping been and Apple Discovery's stars of whole even Discovery that bundling I you think on working But of and channels. or they've on fully the Amazon. future, of curious Amazon Again, with and Discovery+ common companies then sort as sort TV That of sort integration on sort picture Amazon at you Amazon, of with looking and something just not largest Varick, joined like [Indiscernible] by Disney, looking just going the how channels perspective relationship the whether Max, be relationship X we're David, hasn't WarnerMedia lastly, big the are separate about down independence puts versus were whether DTC think [Indiscernible] business the with fully see is of sort subscriber is that just be Hulu, of in to making a you still direct in they think at state made. be

David Zaslav

Rich. Thanks,

go-to-market we a that we've have built. feel We that strategy

and think will haven't inform seat regulatory with where ready and this the team, built help fully globally point on at given to just process, that knowledge Warner -- all finalize passenger Bruce with all in Disney+ Kevin and we're guys. you to of share and expertise, strategy. having we think our Mayer I and But are we're with not his the and I with the driven eventually JB I,

we We JB? we and soon. -- will expect to will

Jb Perrette

the ours reality they've is store The position. that of on obviously different been aware a on good taking We're Rich, said, partner is Discovery question. as very mean, channel HBO side. I well a you

are with we that I that the engage HBO waiting further the have we'd to X. questions think X side is:

to question coming that there able be is hit a have We for found channel customer store stores notes some these bringing subscriber want the not that question, question what directly -- that base is that's team we how in ultimately, from than or cannibalistic on we many seen good so about And versus growth analysis certainly time. of of want at different and platforms incremental right as try consumers whatever we as what products to --because might get an out we could have -- And compare to ongoing much an is going. a do we direct a ecosystem. But to address channel we our the with ongoing is set obviously, HBO and that necessarily. the

this publicly part relationship store The is think but little Amazon think have And I channel as to just channel do relationship. of on doesn't we the less customer I actually information traditional where differentiator now, is that's some information executives talked the which consumer. a make customer the have our customer And as that we about store anonymized an and a of element the have relationship, known. important second access data

different. the bit a makes that so And equation little

relationship, see And obviously, say, want for we're so, they're the those that two we the that engaged the and is today the and or combined following thing the to we And Northstar with we things, do of more of strategy economics. conversations two is right which we how still people -- aggregate? in we do in And in do the with ultimately the a can get get it if consumers how get customer the front overlay makes you have strategy and will today getting the things, more financially more be front product we third and sense way? a but whether Warner strong think deliver look in following team

that I think very will certainly remain it's to. one we open

come decision you, to remaining story be time. it open tell when team, a certainly about and so, will and we the but definitively, the you we right we'll part of haven't we'll that back made more the we are very So, Rich at

Rich Greenfield

Very you. helpful. Thank

Operator

question of the line next from from Your Cahall Fargo. Wells Steven is

is open. now Your line

Steven Cahall

the Thanks. lower Maybe for -- merger. the color on Gunnar, that leverage expectation the thanks for and

You mentioned some conversations debt. you're having encouraging that also the pretty raising

that's And because that in X initially times that it cash quickly assume cheaper. HBO there's strategy cause some if more starting I'm benefit lower. have be and selective. that going going flexibility expense is Thank guidance or in some is + is into free maybe just to come bit bit we about little I'm times is more pace you for get slower Company focused that NextGen, wondering lower and one to think little maybe And if be more there then a you'll if you a take of just that Should it near-term SAC combined to from or a and gave the And just as bit void steady-state starting I Discovery where little stepping around strong for two you logical going bit years. base, getting just JB and below? a just a adds you're a X.X more for a there from So places a you. little of assume approach on wondering the us more case, flow runs net forward

Gunnar Wiedenfels

with Great. the Steve, start yes, l'll flexibility.

need term don't and DTC to reinvestments here the deal And over investments in convinced product upper flexibility, your mentioned. range I said, originally significant earlier range from further I going today's five-year remarks, of modeled. I very As model question that our out my we're want to building that have about we to that am expenses forward. we target assumes is than because very already of the prepared content times we in that And our X.X X and times see the perspective three flexibility going to hit it growing end

line initial about hedge be will to the we what billion earlier answer times yes, with regarding there X.X debt, X some that hopeful And mentioned in The very is And in hitting the upper that room. X $XX put much to very, yes, is on. again, raising that conservatism is answer range of I we said earlier. the our pretty have we've model. end clear So

here And that you guided deal. all least rates, so earlier. what obviously with as will some forward. is well a conservatism we of the I closing of modeled program. but balance $XX $X.X the beginning locked be don't have do of ambition -- some we'll assume subscriber models. good implement make we're here, the a hand hedge best we any part year comfortable I JB as monitor to our than We our it before I shape. perfect get and be to before here: in now cash have I what this the performance guided in but out flow, should up said what went that's it taken as cash want time now. disciplined flow well, higher original promises, in on very position shape we absolutely at significantly financial in as this to have the want relative I put Again, part to year. And rate, And interest explicitly we to our off question outlook we financing, believe further and will come I the possible in as billion have it's we We've, we still that we've rates, very into the rates out move Sheet attractive free in hedged at deal Balance to spreads and sheet statement part the with as has for I billion the to of a free conversion JB? the the

Jb Perrette

assume consistent think with we just obviously. should Gunnar what I you said, Yes,

We and are continuing we're in And next over push launching growth in. newest Brazil markets we'll be see good two obviously the the our at market here course to where weeks. of

ratios doesn't slowdown at, new some into that in markets. excited And at than see bit that go more But are slower to spending plus and launches we're that And the market net we spending we're year the the those the far little they in. SAC about we're slightly leaning they reasonable healthy and levels still have we might adds mean been will end towards that, of conservative into think LTV of out a of in past. numbers too the It growth Gunnar XXXX. the as 's without so, we to point be

Steven Cahall

Thank Great. you.

Jb Perrette

I be the may Rich it we second worth hit about question And clarification. realize Rich, just, didn't 's bundling

I back that was the in Jessica's in about take it platform. point X think will no purely question on bit rollout, question David to to of to time, a tech my bundling the come

this is a to And day That strategy, bundling is think opportunities potentially fashion, interim will X we'd what strategy, be in so very to long-term while some at that underway, not is I a process closer much a creative quicker do point say. propositions. there

Operator

This last from Ben will question from the our Morgan of line be Swinburne Stanley.

Your open. line is

Ben Swinburne

Thanks. Good morning.

the going much together. know obviously bringing team is, there's that the I'm coming with on healthy back, converts there David, focus your remain -- little to some in say, in at if a DirecTV think one. Dezelem, of packaging. just I of still that to Kevin renewals the that key just Thanks whether can that least those that as putting and you in an in David, merger changes bringing you've management you I my merger a if how first the including affiliate I out see then impacted to that asset a given, come That's point how us to Turner or part real approach a guys regard, quarter, transaction. lot. on color And And Chairman any hope there wanted underappreciated you just is made board. networks the deals, fee consultancy of lot during on noted don't curious and wondering on and this you a I'm bit takes you're release Europe. could a Congratulations that and employee ship? the Verizon give And you you I of if from growth Is but guys competitor think which

David Zaslav

This a great he's to and driven he the LAN all Thanks. of down And a committed entrepreneur amount and time. number he's good and of fully and get paths. me Kevin's these old friend he's Len But things Kevin he's opportunity the other very and he doing well. and some Bruce. doing helpful a things having exciting to great think working them. really and going one really And he's is zone with worked he's as He's he Blavatnik got providing time it's and out is a be to is on. and for And is doing I of doing, is us what is brain coming seen excited I and thing. he to super of a been full and he's on he's with experience everything working good scope but has a in and giving his the about And really LAN JB us learned.

Europe I they the super they're is so the sports more at and plan think strong. about capability really think that that's I and the [Indiscernible] knowledge, the learned attack and The -- growing, Warner team he's and exciting. and seen impressive, have way the there,

at at If the that strength look product. of of our the you look you product, strength

So, think, lot got really a I people. good of we've

through the best with people. hits for seen Scripps are about our the that really history we're who You've

and us. that's really as to well; what be way, some along strong think we big going have -- a helper learning they're really are bring the encouraging well outside able to and how to I but doing team build in it's we're experience and a

the it's Gunnar, side, want to all commit They fill channels. deals side, in going win-win. our us favorable think are advertising They're great channels think that I more. you of with you making that we the our whole And I And at very this And to never bunch On idea were our but overall the happened. to glee, get the money that package services. and, for of great on a don't carriage look we're they're our strong. But a value. good some -- on very reached that could affiliate value. carry on when say a viewership, dropped, I selling lot of selling

as and and to terms us how and operating Nancy how strength with really think on for And and it nothing of So, has for do this well does to of it. Kathleen meaningful with we're went the And well that security in align have them I Company. Food, continuing HG. and Warner products. with do the good been we, here and Oprah, very and building Finch real channels We're get independent increases Discovery, an operating

world we've our a knowledgeable distributors get and of make with together, favorable the the we this been most were that it's terms that's narrative just and toughest despite this that very to And strongest sides. transition a so, the stuff. People for good deals strong that I reinforcing two the add? changing, Gunnar, some love to fact anything over-delivering. of And is so able and think carriage on sign commitments, very as we with

Gunnar Wiedenfels

trends. support Just we obviously, the or call that the don't caveat subscriber control don't the we

gotten after as So visibility we with you go that's this deal very questions into just always deal of many here, have so year the encouraging -- distribution the and call on the continue successes outlook much to we about, and sort team's pleased the very, done through that but deal we've and after very many of, results. with I'm as

Ben Swinburne

Thank Great. you.

Operator

you joining with us this attending. Thank that, concludes you today. call. conference And for Thank today's for

You may disconnect. now

Warner Bros. Discovery (WBD) 3 Nov 212021 Q3 Earnings call transcript