WBD - Earnings call transcript Q2 2022 | Warner Bros. Discovery, Inc.

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Operator

Good afternoon ladies and gentlemen. Thank you for standing by and welcome to the Warner Bros. Discovery Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Additionally, please be advised that today’s conference call is being recorded. I would like to hand the conference over to Mr. President, Strategy. Vice Executive Slabin, Global Investor Andrew Sir, now begin. you may

Andrew Slabin

Gunnar welcome Good David Discovery’s CEO; and and Games. to Global QX and and Perrette, Zaslav, our CEO JB earnings and is Bros. Streaming today Warner afternoon President, CFO; me call. President Wiedenfels, With

The conference performance. the Act make Before In the pursuant I’d These today’s Safe involve remind them. statements Private and risks forward-looking based projections Reform statements, include forward-looking forward-looking providing materially actual Harbor you disclaims to management’s and assumptions that start, uncertainties will regarding XXXX. current and statements differ could future cause and intent of Securities comments to of Litigation update plans, we business other statements knowledge to are that financial company or provisions the made obligation and results like call the include that we company’s events expectations. about any our future to on from prospects

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David Zaslav

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Jean-Briac Perrette

Thank you, David and hello everyone.

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Gunnar Wiedenfels

and good afternoon, Thank JB, everyone. you,

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Turning Based we XXXX, to year the adjusted billion EBITDA $X corrective for full to least realization to expect billion our be $XX in at on actions billion. XXXX. $X our synergy XXXX outlook of and impact of

half our we The restructuring to spend, make as impact target of third working approximately improvements our our quick timing EBITDA approximately of a the on capital want cadence free flow give cash With convert of content progress cash that, long-term will investments, and flow balance CapEx sheet. towards snapshot XX%. adjusted to expect XXXX We of into free in generation. I to

current ratings X.X our leverage category We are or the to we long-term target Xx, XXXX, gross within to earlier. by expect by gross will end of leverage our hit reiterating and our which be of mid-XXXX

QX, free of term to continue will reduction debt we the loans. $X.X before, then. cash generated billion billion all of flow $XX at stated debt virtually total end As including dedicate to of We had until

financing with average importantly, maturity interest an average years XX and interest our generally for the our debt of long-term fixed. vast rate a than equally rates X.X% are is more and of Importantly, debt majority

process as of in made down $X earlier April. paid we the in merger that, and combined we in August. in of part currently have us pay XXXX, July, the $X.X in With by of we in $X.X a agreement. Also this capital and closing billion due transaction $X.X and post-closing And week, will will that, result AT&T payments billion since end with August, billion XXXX. finalized prepayments remaining working adjustment the due no XXXX have due billion with as have the We note, AT&T

across work organization. combination, but this fully And deeper the and strategic a driving decades to of has to team the We monetization on deliver been comprehensive leadership end with the come of focused for Analyst this to one only questions. together have have of creative JB we done is today, you never we take at if there amount through as dive David’s opportunities you happy scratched broad to it towards significant with the to excited and surface the a and much your David, progress our with look share over we’re operator, way. we’ve With that, Day to lot remain covered the and really a take of closing, value year. take message more key hard strength well the across come. the of to being will DXC away combined ground continent networks In underlying as of quickly, upside I the be bedrock the the is I our that about excited company like turn along to I’d and will respect

Operator

Thank ahead. you, Your sir. [Operator Deutsche go Kraft Please at Bank. Bryan Instructions] will first question come from

Bryan Kraft

about canceling if to afternoon. press the lot David, I guess, of of of Batgirl. the good I course, being first, is in need delayed rates reporting two, Hi, a there could. and some I ask

more you you’re content Bros. just that low Is direction for you. where – have particular, with What’s be SaaS the then of Can Thank DC to not making accustomed where almost or achieve Warner you it? to the intent might of might about consumers limited Western Batgirl? completed. building and cancel be taking talk one got SaaS you was the paying what’s where services offer I JB markets are in you penetration And it paid the markets basically service otherwise issue? in decision reason penetration the changes would the therefore, broadly, think the there to way just happening film and like for had a where business, you’ve universe? product. on U.S. And for the more to will film,

David Zaslav

are has we Wonder world, our look of at Well, are Motion fantastic Warner brands opportunity to bring back the top entire Woman, they Great. DC., us. Bros. XXX. you look the for a Warner me that in the fact of animation is great drive to at Aquaman, – turning know, the over those start the And as ability that to as all the are group Warner films. Thanks, produce with library, let opportunities history, between these We you great story with high-quality a together with that we big Group And Superman, Bryan. when ambition and the the known Picture list and IP have, the the is broadly, everywhere great DC us. is Batman, world for one when

a the will We – to We effectively where have Alan to very We’ve focus team business to that where part we very that together stronger that, build on done with going put a on focus much business as Feige be DC. structure long-term, the DC. could plan with growth similar at and we’re sustainable of focusing Kevin XX-year It’s restructured reset. Iger Bob Horn out think just going a there a Disney. of quality. we’re And

to not any ready. before going We’re release film it’s

film to We’re make not quarter. release to going a a

the of we We’re DC think something can make is not But to as general – be in going as on possible. focus to and release now. we films it better, film under a is make going we how we’re good do that each these focused

DC working of films we great Shazam up, Flash. those. are Adam, some And on have The We all Black and coming

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going case for We we cannot idea find for of it. expensive economic And films it. so direct-to-streaming, find this an an economic value can’t

we’re making a shift. so And strategic

theatrical the launched window. our been we’ve the A talking shorter with As town part be in exhibition number theatrical about to movies that, windows. of of and commitment will the out

marketing of have take different platform where for. us that kinds might and motion look companies Some of always fiction all we be But having the platform campaigns advantage will we biggest agile. a

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believe out movie to going movie and a we to it. unless and to We’re are we want And pivot go a mean, into in that’s not going focus. not put want want particularly we movie we to and going release with think where quarter. to we it. a not to we DC, make to elevate I And we’re

Jean-Briac Perrette

the comments. about different be that we’re would at be kind will reminder our that offering. as Number Bryan, it content of product we premium one two just – fast, quick And in than that in that the look a a on space, totally talking SVOD be is content would for

episodes portfolio. So wouldn’t that make that over fast. the – is product the sense necessarily XXX titles and across number a lot premium different combined might make content totally one, distinction a with There our is of sense in to

few market, thing we going And as richest, by that we the and is through have how on you over part to opportunity take more The through it. you think will details we’re is assessment – months. that’s and will looking the we back look of think and we’re second to where we come market the at of look, next the we

David Zaslav

do. the grow going Just to and but what we’re DC brand, to the DC grow DC to protect the – characters, also our the that’s is brand, is job to objective

Bryan Kraft

Thank you.

Andrew Slabin

Great. question please. next Operator,

Operator

from You Ehrlich Please comes America Bank Jessica Securities. next of Reif of ahead. go question

Jessica Reif Ehrlich

hope I questions. meant you. you Thank

go thing assets, So your you each if one networks. linear challenged I’d of an but of being one David, mean, have like the actually amazing to to are thing clearly set around it’s – okay, that’s I speakers. one

is far sub QX results video I think the bad so the losses in are the U.S. big surprise in how

you It on your kind pricing it growth? For sounds you important just see losses us like coming you great, Where JB, news of going like direct-to-consumer of direct-to-consumer? to $X could about do synergy, How a if longer-term plus part sports – your are an And and DXCs ‘XX just to to the of your is thinking side, new just billion about view different So down, should – peaking this talk your content your you of guess, I But $X linear the to ‘XX on networks? magnitude color be linear? are that $X.X we’re for underlying film the billion are How so give content base. was strategy. Gunnar, guidance, from on for year if you billion, $XX what billion about guidance getting then, the take be $X as – sounds at can $XX.X billion content billion normalized. upfront?

David Zaslav

more. I people Madness, are overall at watching. Well, we’re end, certain up levers declined is live look It’s linear why time of of with is together non-fiction ‘XX. food in news, leveled they we big below you up, look start biggest branded for since the been tuning best a The It’s That the HG a because tuning of all at don’t sport, live get linear at sports, ID In is for decline. and when the secular day. in are There Well, when they and library business. the you the secular portfolio was that NBA watch where decline. the in kind the And people have, dramatically. age entertainment of believers said March news. nobody some There business with numbers off.

good but cash we to years going hard we many, very a us significant come. very very think for it’s for So to it’s expect for business predict, and many us generator to be a

a have what running is It’s know team it. do. we great do. We how we to what This

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could we content ID of move where that crime put channels from now, we take document that programming vice old documentaries on the them or the exists – versa. on each the implement and to begun cable haven’t in libraries or HBO have We library on take and them that

that hasn’t yet. begun just we So –

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hanging dead That to out with was in product reach when a end, is in drive time. advertising But it the and been people that was ‘XXs. ability the what alive. long So the Broadcast kept around I was I’ve what Jack said.

were low this to We’re We still the in seeing time. CPM mid-teens increases.

We’re is big have going to both believers, and the great we’re said think that we to going Having that’s us. help we that, have thing sides.

then having is around of digital. dual in best this years, what the world, that hotter. together, the on HBO around and free team We the Max together the a very over cash initiative basket coming with and the next domestically and full our premium we has service, been advantage flow compelling Discovery+ driver HBO ad-light world. Max And right business. the in free what is have full is quality few to Quality the never a that Casey in matters, And from team traditional It’s to delivering. in now, and big have

the spent on down last next dramatically than doubling all team. and year that year this year contract, spend under HBO and We’re before. year committed and are going we we’re to They more

Jean-Briac Perrette

sports guess really about we’re going it’s – news to and and experimentation disciplined. to I for sports, Jessica, I’d as say it on on that the categorize I’d streaming, continue be

one biggest our essentially ongoing, Sports at upsell experiment really will that. more driver, closing are and the into we case, And where an UK two core will in that through bundle the on Champions obviously, we through – price and have one a sports. doing with to buy is experiments We get is Brazil entertainment And higher tier we we – the on Mexico a be offering a a where we as at happy we Europe, as point. there. sports got which closer very League In results now acquisition this in probably the be in as same BT deal our which of price then a to second

as it’s critical live news disciplined the want love we think still we two the pay-TV strategy In see better part a understand see it bit so to we’re more we relates more I And going sports. healthy, going, to that of to stay play say a about have really and what we But I’d little there. out news, right is smart experiments ecosystem. is to traditional important and the

obviously to CNN factual streaming that the world to outside Discovery+, across long-form a users CNN our and continue lot over and services, to and product sitting But home continue has particular, we films, with core opportunities award-winning be of the to future CNN from continue kind CNN.com together. their just but not a move will And demand that that service. significant eventually Originals with in morning, user now lastly, that the to products we million live of models with XXX more service. associate so, natural within programming that see with in exclusively firmly experiment comes And as on monetize product this ways to and other models, the that and we we on where huge initially ad-supported base can it news, can a then on find announced potentially as news digital comes that

Gunnar Wiedenfels

then And on guidance. the Okay. Jessica,

reasons. adjusted we it just post for now ago in the when the $X.X walk we budget the available streaming And little supportive that the space between So you that differences industry billion versus prior obviously right. even this predominantly billion spoke, dynamics is XX and to we less last macroeconomic what The the $XX April today close. projections that the months billion, to year to recap, than was next your a outlook three see our to then made baseline for specifically, question to the is outlook math for us closing in answer WarnerMedia legacy year, or from $X

flow correction we’re closing to I I see $X you quarter after measures said. that some right, of next the $X synergy as first the support have that do capture, we quarter, of implemented are billion think should that also billion through course So right year. from to second going

QX, side. put it’s just I to are the together, out the guide in underlying bit are is, answer as don’t prudent making we’re in David laid synergy right usual I are further the said, the reason environment. you the about to There if for That underlying really significant or little the about I numbers. think in as is progress a core that The assuming any growth on so there business. is business. in underlying spoke many not a the think in those linear meaningful now. excited opportunities yes, there. So I’m main growth outlook business improvement macroeconomic the do the cost super that we here factors

we the will So keep monitoring external factors.

doing keep we go and control the the we will We areas along. work you as for that update

Jessica Reif Ehrlich

you. Thank Great.

Andrew Slabin

the go Great. Operator, lets question. next to

Operator

next Doug Suisse. Your of Please Credit from go ahead. question comes Mitchelson

Doug Mitchelson

taking so question. the for Thanks much

does XXXX, a point big to So in tier Thanks. the I what’s by to And to engagement? increase something the get How able that supported let of do. in pricing the ad longer conversion long-term at is the flow on what curious on a point XX% you XX% And of going service? flow to that I’m driver, that on that that you try that a to do United XX% Gunnar, through the increases higher goal or to confidence particularly engagement back period you in talk the and out to you’re your are ability about? carried you’re and through It’s from what’s broaden that, to usual level, and your just you price bottom time? your JB, advertising XX% and over in feather monetize holding lower cash following price that of XX%, keep trying think, free higher Or And about to ad your line? that’s dollars level the ‘XX thinking is States? as the thought ad

Gunnar Wiedenfels

Let me with question. start, your Doug, cash flow

the are that, So addition a outlook. have to we in our laid pieces this essentially that third then the half bottom conversion same out guidance moving for number I now, currents the to cross EBITDA financials. of drivers line, obviously, behind and in right And

be As have our we the our will cost the to some content we out. restructuring, move definitely our will achieve CapEx pans for requirements, see there through to synergy investment for program, and cadence how

of going we term to a these from But continued don’t yet, sort that give see impact year-over-year progress that especially will want I am goal. towards longer to are for that all confident I numbers, these basis. So factors but XXXX to your point, are guidance

Jean-Briac Perrette

And Number will in confident to think we better there rolling that on tell much, offering. key campaign, something one are stood of that for which marketing They Max out we engagement, think obviously, think service, bigger what is a real is, levers brand about was we Doug, the series. and have we coming streaming. questions And particular, in On to I new and a on I has our point, content big proposition be are ability scripted which the premium with the there kind will high-quality with very why HBO a drama noisy as expanding the service you drive is brand HBO engagement. much a a much new never market our a campaign certainly, executed define is.

the And this we think the significant. a, of is so, marketing brand and component

much And from of a surfaced and content have more search of the with seen side this we on Discovery be – content much And then broader is we from third, are Discovery+ across confident as and product users. product a the time is, that HBO limit proposition to can two services genres Max And really through what limitations with use by bring all viewed we the share the you That’s get content one. of combined where of the Second longer and at the actually a product the see today, much see use the the amount underestimated. much I more engagement complete be enhancements earlier. on that obviously, based pricing, nothing that together higher will we a array drastically the and level. talked to much on two, We watch can’t content enhanced moment.

yet, will have far bunch go of come more a will We into we want as don’t to discuss are details specific this through different out we but when certainly we scenarios, pricing market, working really to from XXXX. for but you probably we

Doug Mitchelson

Thank Alright. you.

Andrew Slabin

Thanks Doug.

on please. the question to move next Let’s

Operator

Please of question Morgan next Stanley. ahead. Swinburne Ben go from Your comes

Ben Swinburne

and When longer the kind what path ‘XX net adds, should EBITDA, be in as of so at business of this have sort to it’s million about of of a can we that know tech kind the streaming like And you we for Day, as that growing you we sounds pause it sort Thanks. get And you starting everything in growth outlook And business the going your hear clearly in at details. so of are But here to to about of least you think Wanted afternoon. guys a or one stack. over bit of view thinking have earnest you billion $X at one really all have half might year? XX lot we ask being going see next about I a wondering, product Good the back Investor ‘XX David, is a when more will cost am to do? flawed. not I are to term lot strategy of a direct-to-consumer. just that then

probably there for of sympathy think a I – lot market the is today. that in

idea strategy about when about you historical wholesale, business kind economics? to EBITDA, a long wasn’t reclaiming out those of of back Thank look can you the that those the back of which back am I mostly rolling really you business? think more I $X.X you. billion ‘XX here, you did you for long-term economics just the entertain HBO when was or thinking target, If did know like to XXXX ago. opportunity wondering laid least at the the but just substantially get

Gunnar Wiedenfels

But is Gunnar. – actually this

very because take are both I actually related. me Let they think questions

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marketing, said, etcetera, before we to be As we cautious are little going a more regarding re-launching.

And so that to sort JV incremental is in a after in summer. the of our lot kick of going has re-launched product growth their

JB other about ever, in marketing quarter. your we company, billion to David in heard to about on largest opportunities what kicking and is we synergy seeing to combined the to but are the very for helper think the an obviously The cost so I we And losses out possible for I lot we of that’s long-term said be you buckets. middle of the a for JB entire to are P&L. say rolled see, with we start-up do see campaign on some of DXC again, point, all as the of of additional is say, a a to across though, our want later. billion opportunities long-term We that opportunity the hopefully, cost And frameworks in the earlier. mean the of the heard the savings in as perspective, be before, give basis in even House fledged And fact XX%. still near-term of that then in the side point $X.X achieved, number And north savings. super that’s And that sort big And even markets Dragon. HBO, cost short-term, XXXX the very despite going the synergy opportunity. model has is here, this and number, in $X start XXXX margin you going excited fully continue various combined now of don’t

but to – going great a company one for confident DXC, religious are addition an platform. into support being we the that not pipeline DXC we additional turning be a as additional entire said, platform. as this So, about is And

is outlook. think I this a great So,

about excited it. are We

are implement will you We these plans and and posted. keep committed, we

David Zaslav

support it make the have the in and here X the hope the longer. have to series. and they brand. ability Max, to have that the are culture it’s out Casey the coming buzz the read with we we better, the But and real leadership, drive it their want creatives in people majority be locked – the they and about and doing a strategy HBO and and think possible. of His and us with the that embrace going is that some you It’s content at team to success the moment. He strong doing his team and Discovery to It’s really broader. people it’s very It’s taste of it’s the been much. is as and see And is unique talent, said having. at been to are There of we are incredible and relate only and the to affecting to for as fight make starting is Casey on not not the That next is how extraordinary I wants about. what content been what’s scripts, a and an the team but good. storytelling start success. up. was culture some Casey’s talking we truly Max to We unicorn. content aligns and this today the characters as and years, an well less we all how our we But extraordinary it the that energy be Casey fact – to way advantage. broader. drive HBO how before, It’s And asset. have HBO

that. going Discovery+ the be to in on home premium of CNN. of it content all as as and that. is curation, – think going that now original we that, will, the it’s it’s behind from that’s will be about content it’s company one And well how And put come of some that superb. we that about good. are product And quality, We about as all is everything And to

that of center team. that so quality And and Max the the is HBO of spoke

within to company. in We but me have something the already share addition not really help each meetings the great meet now with we the have do the on staff we of meetings, started creative storytelling, multiple team, a HBO we week with in about but about creative effective. that together everyone with talent. And lot talk been has how overall meetings the – a Max and person way That’s content only creatives to together once with the initiated talk do other you how all

So, very very and encouraged supportive.

Jean-Briac Perrette

appointment the have down for can successful low end if to of series, churn the thing they our where family. view small of the a service the people seen one the the is viable the a And data in you amount churn there down else. churn a is is our At streaming get all probably – Ben, and the go and appointment number points then is. offering as imagine, the to more everyone business as for business a in challenge viewing nothing And get across in come you out, having number. of day, we but is And it have great, so lower using it is, the more there people our something the that stickier breadth is, household, everyone service, churn in the ultimately, to have the matters your the in household,

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Gunnar Wiedenfels

part our going of have well projections, continue the part And to JB, that growing. mentioned should that’s that’s I as as

HBO much content, as that clear. keep are never before, to spend we We spending and intend growing as for to be

Ben Swinburne

Appreciate all Thanks color. the guys.

David Zaslav

Thanks Ben. question. the Operator, next take let’s

Operator

ahead. from MoffettNathanson. comes question Robert of next Your go Please Fishman

Robert Fishman

afternoon. us the to I address EBITDA to or how launching or thinking Hi. for markets? important in content you And lieu third-parties. to allocate sell billion target then help JB HBO’s Good forward DXC Gunnar. of discussed DXC, one you. ad-light have Gunnar, David, for are and you about how in renewal your to you strategy continuing David that one to how Sky Thank sell for you your DXC or future JB margin? play FAS in $X or Can just XX% those directly can platforms or do sports the costs to achieving you long-term like plan NBA into going

David Zaslav

Warner greatest and – we together the we companies. production most incredible Malone, at legacy as that they had all in In three Bros. names XX Fries and with have. and and We the largest Television own and would operation media. Mike production really quality And awe Discovery, highest Great. look talent the

spent Welch, guys when I Jack Bros. were content so built business maker was they this a said profitable. for TV. are A and a a and best to when room, content. the Warner TV. entertainment think it the of company. – mean Warner we at selling That’s be of the legacy heritage by profitable a when of more he maker And for I money Warner business NBC, of Bros. the the creating big us. lot left carrying third-parties. We being less is want of content. There the must-see We to have very great could content sell maker, said it content. it the it. was is all greatest It’s it before

do going We have we some that, of we best want the to of to do are And that. it. continue to and

growing important down sitting we Max, we library through that’s pivoting what’s us critical strategically, HBO anything to the going to decision JB, us. are the a huge In content. of with And data, of down with addition, have to Casey, to HBO, sitting

kind drive right to that are that We be we no keep have are now. then on economic content we impact value. of this And could monetize non-exclusive to going to using What want even content not why that and exclusively. us,

amounts using. and motion content not are massive of that TV picture we So,

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Jean-Briac Perrette

specifically, And on years relationship important and and in our Sky left have Robert, them. multiple with obviously we long-standing existing

question it’s time about, gave that another we you so outside as on. Sky, that And with deal, has – the is we the talked horizon – projections this to we have of don’t point. not deal XXXX at

market And so as in back certainly will to come how the we to we you we three thoughts on get closer to that end go further markets. of with deal, those

Gunnar Wiedenfels

we Number And not go out earlier. allocating fast costs, one, will then along. one then Robert, part activity clear. guidance to as we any clarify the just sports thing I laid we Again, to want two make to update things. just about is that point of you the And

the costs is we intercompany are individual structure. now David reporting and segment on looks how are sort arm’s segmenting we way importantly, negotiated the that at business activity all the the informs length So, units, an of following as revenues that means that and these segments business, the also the treating structure, essentially basis. individual But essentially are

otherwise, is third-party is our terms. partners fair fair at chunk the assume I needless really going for economics businesses is that in show and actual sports the account you our this market to clearly from to of accounted content, space. of will way see a studio important best the say, think of fairly terms. consolidated leads perspective, So, the you important in to and also It’s third-party values the eliminations that or bigger that the and P&L. any But from And very at essentially should be we – perspective to

Robert Fishman

a lot. Thanks Great.

Andrew Slabin

please. Thanks next question Robert. Operator,

Operator

Guggenheim. comes Morris ahead. of Your Michael next Please question from go

Michael Morris

some it HBO you brand. HBO with to looking has the know share guys. I brand basis us you, going there like to in like ask as but Thank you and a are been be doesn’t more don’t afternoon. feel Good that value itself enough maybe about the I broad or HBO later press global is for. on the would year, have maybe one would as indications you much

about impacted change share sort the discussing I that you about items have curious to when anything I maximizing And I times relative industry guess When initiated the your of brand that a projections, were that am on the a you merger. future dynamics, you question and can you bit. hoping in mentioned have expand of couple that. can for if maybe So, am you feel second of how streaming my you Gunnar.

valuations dynamics have on you the Thank that see didn’t I industry a So, that come is ago? be could the of profitability business understand that in, you you more but now impacting the or specific see you. year the maybe

David Zaslav

think crown and so we first, one much all about. what is of HBO and and Well, how the company jewels represents series all brand were got television the Michael. great really I really Thanks the of introduced to premium

at – – has look the going is if see we now people and at people Max, data HBO saying to more, are The more you and more We look. how continue more to are place that’s look it’s looks right six place they that That the a highest go, prefer, It they different data did it than months place did ago. different the that’s that looks the year ago. than it quality.

are know we a and you will and talking we we evaluating, we determination. are let make consumers, to So, when

Jean-Briac Perrette

is not quality. live will difference what Also matter stands crown the best said, and television HBO be on. the brand is. called being for David will or ultimate that what, of There versus eventually the be what no a as beacon brand, HBO HBO jewel between service the the always may a

So, that remains unchanged mind. in any in our scenario

David Zaslav

it’s will and decision. name make as final the Whether keep we posted you in topco we the or not,

Gunnar Wiedenfels

as over if over response, look And on term viewpoints purely that laid more from revenue And on look, also subscriber here a And lot step at XX clear obviously, months top numbers. a most JB in past strategic maybe, then, of strategy. importantly, I for back have Mike, platform when subscriber point line how you are I is it of one here most think all us the here the we actually important I advance. growth, six take the and industry lot sort and so perspective, describing think out, is value and made our industry, additional as dynamics, changes portfolio have view focuses longer of support growth, the it’s I of that the one rather past XX to industry-wide a that for months a comes outlets. lineup changed. the of sort even the The along cost in for specifically a the on months, than content been larger the larger in in structuring is assets way being a and months DXC decisions, XX of distribution

to going platform. is great are its has for to with positioned to service decades DXC hard come. to customers space the and just not our Warner area uniquely fuel We to enormous one Discovery stories driving about surface tell them with be religious Bros. and

Andrew Slabin

Okay. you. Thank

next Let’s question. move on to the

Operator

John Your ahead. UBS. go next Hodulik question comes Please of from

John Hodulik

Great. information Thanks the this afternoon. for all thanks guys and

laid of first and idea on give some in as to you U.S. adding million Thanks. sort that How the the $XX you spend. new seeing the of you how We years have you of the I or able $XX on out rest cash billion roll a X and rest in as of the next to to growth had David, the the been that forma content to But expect spend that you new over been bumps you And over of product? I hit content if – be down then of of an domestic going see guys in spend. ‘XX the ballpark you U.S. guys and broken speed how grows on you the that world commentary growth, Amazon think AT&T. DXC And or do recently your terms next subs billion grows few this the do sub those growth and have of the dramatically out had most has reignite targets. XX basis more, down in that’s U.S. back can on you those the reach versus you here First, between for pro world? – – mean all, targets? us year are with

David Zaslav

are Look, aggregate, are effective will areas, In money significantly are going Thanks. we the more spend on on content. we an more we return. going in to – finding the spend less not to we because HBO product, other spend will we Max

across the want our the Warner are We do. We to and here Bros. Warner will the have worked at spend we and traditional each in year budget come. a that, HBO best creating content platforms, we what content. Television go in And product. at and that content That’s at That’s and up JB? creatives company. our years

Jean-Briac Perrette

Yes. going I think of mean our measured I to we ultimately be are spend. in terms

As to we going David what said, in. invest we were are reprioritizing

international Discovery+ markets. penetration, the Max the HBO are products of U.S., much penetrated obviously, in terms In the of the we and than more are

see by we inside of the But a the coming size greater even million skew U.S. penetration that outside U.S. still in $XX of more do So, the nonetheless, total numbers will of opportunity more growth the just international see U.S., from math, meaningful inherently get from if we to the to opportunity. likely because will

David Zaslav

is billion. on the mine desk corner care If – $X number the JB’s is. breakeven number But I and the we number don’t do what that the the and – of the really

every business to get We up We are make paid in paid. sure We pick get not fairly. want we trying sub. to the of

are is higher making content. are number because the better is paid that dramatically be content quality more If very number more robust content and markets, providing in the high-quality for $X We we have we and many over content us. should XXX and billion, we

significantly, going flow. drive we to profitability are we want want to cash grow free run but subs to We – and

Gunnar Wiedenfels

David point And been one on content on the that ramping spend. renting that have the – is to are would the the made, want have up make spending more the point been companies then other content cash we and spend. spend I Both up to

amortization also we catches that one as our business. higher viewed spend be drivers know into time as over cash conversion the our the as well year for should of the with site as grow to next So, up

John Hodulik

guys. sense. Makes Thanks

Andrew Slabin

Okay. Thank you.

Next question?

Operator

go Please Citi ahead. Your next from Jason of Bazinet question comes Group.

Jason Bazinet

basic very a had just I question.

is and think penciled Might question I DTC linear understand linear, And something you churn like make or to be that’s you your so business, up, like business, in is today guys and the out dynamics as the would be, streaming the with the they put and loaded – in that see into really Do you DTC My they relevant, you that is think both endemic you was If do the have agrees there the jumping it it just path fleet, transitory and potentially better always something fact, DTC. will it as sort it’s to to pursue content today. the pricing that than linear? pricing that this. the both app a industry good business of Swinburne change as don’t if that it said, of make to you market demonstrably or worse, is and with amount goes right? think business could

David Zaslav

Thanks Jason.

think a is a I having gift. First, This both fully balanced is company.

We have free-to-air. our linear and

profit. content are for big maker of We a

where we profit. for gaming IP gaming have We into take our

have have in motion business world we We profit, gather greatest our the of talent streaming. for then the the to and some and picture

is business believe and becomes by has markets. will Roku be the a happening easier end be we a that flow do to to driving it will So, being they or re-packaging. – to to drive up amount to business, intermediaries be probably which reaction consumers people in couple and either are capital I best churn It’s fund or the they of easier, free And cash the be the and of over is experience like having that a There order economic re-packaging Amazon. will a for become is and it’s it transition, the expect to up or there think support an the some will the it’s is change. by streaming will may programmers underpriced. change. gift. as we – of Apple What terms and was which will over time, probably services, an critical going ended I as the the thoughtfully we

a that group Let’s love willing they was happy America shown television. HBO, but of decision money big them they very much, bouquet as There a is a robust in [ph]. opportunity. say, ahead big a have have of pay. of group to collapse overspend they Showtime, There domestically is to outside on spend People the are willing And and were lot. a to content. are buy why and that businesses, not U.S., that a pay Epic lot go to just love people It premium

just spend, idea Let’s subs charge spend, be in supported I great little. then clicks to was the like spend and think this everything and going were in collapse by that that very And currency. ‘XXs

And going very to sensible. are so we be

We are about free cash flow.

to best more that the not I be people we – sensibility collapsing think we touch the have. and willing quality content. highest And we will that a a pay will lot quality think could But a the great lot got think build there it. business on we businesses be that to everyone. have are We We library, for are streaming business of

Gunnar Wiedenfels

that compares a Yes. mean add just high the think business, to that potential XX%, I XX% for by maybe a that’s earlier that’s business. a we that plus That’s it DXC bar. just quantitatively. And We business judge – margin wouldn’t linear right. Look, how – XX% to we see well to I spoke understood reiterated I

opportunity so assuming the I and the very, is various manage the very mean are the increases can every that I get platforms. same content outlets the moderate not are returns at monetize our of business and the to ARPU here ecosystems our we out. that’s really distribution for of for a on price end it’s and return look, where laid the superior that across as a content day, We would fact these will these we the And able thing spent is also we say JB and last strength I time. And investments think our at coexist get many long dollar time, either/or.

David Zaslav

have there of a and lot we stable We having a piece cash a that’s lot And is world is four, for or to content, there that’s in better in the disruption, and effectively a register where a or lot of than cash there – in a ecosystem. where register. a things are registers. is five consumer of more can me, and it’s one and pay a every changing, six lot come cash have platform uncertainty watch If either

Jean-Briac Perrette

Thanks would Appreciate appreciate take if could we operator, we it. And Great. last Jason. it. the question,

Operator

Cowen comes Doug from of Please Your Creutz next Co. go question ahead. &

Doug Creutz

on. getting for Thanks Hey. me

bit products the do pretty have manage content How plan combined forced how Are conversions? to With going to to services that remain those rollout legacy you you the playing allow that you services? points. a Thank there that of conceptually people to obviously, be price summer, you. to Are different who product now going two subscribe next you on out? offerings transition? pretty different little and Can talk separate envision have you

Jean-Briac Perrette

as time, you will to of migrate product. lower Doug, product particularly, up Yes. period or migration obviously, allow, the grandfather that imagine, migrate and have for will possible new can some as new of Discovery+ – some into element the subscribers we a to of, them price them plan many as the

the the the Discovery+ of all current prices service so we up make at that time of sure the at own but point that at than stepping the at people, in subscribers inevitable some price transition get are are optimize And point, the some number is that retain, to to part today. the higher who time, obviously plan point people that same

price over time. plan to but So, subscribers, and be there the transition a also retention ARPU short ultimately points maximizes gets relatively period essentially of a of right will that

Doug Creutz

Thank you.

Andrew Slabin

will for And everybody call. you thank and us. Doug much that so joining our Thanks conclude

Operator

to Ladies for like disconnect thank and you participation your that everyone for call please your ask afternoon. conclude lines. this your does and would gentlemen, conference this We

Warner Bros. Discovery (WBD) 5 Aug 222022 Q2 Earnings call transcript