- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Warner Bros. Discovery Third Quarter 2022 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers presentation there will be a question-and-answer session.

Additionally, please be advised that today’s conference call is being recorded. hand over to Mr. like would the to conference I Strategy. President, Andrew Vice Investor Slabin, Executive Global Sir, begin. may you now

Andrew Slabin

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

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

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David Zaslav

for joining you and everyone thank Hello us.

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Gunnar Wiedenfels

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Turning to guidance.

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approach back I'd like and and to free platforms JB, turn flows, and long-term a that, which invest believe David, high with and I operator with it to will content ultimately And We we will on the questions. to maximize cash and in growing shareholder your drive continue focus to value. quality monetization to flexible sustainable take

Operator

Thank you. [Operator Kannan with Instructions] from Our Barclays. question first comes Venkateshwar

open. is line Your

Kannan Venkateshwar

Maybe cord to to you number, lot cash you. $XX When as we start year. the and things the as need cutting. number macro as obviously, free next EBITDA for we look at it's well a flow subject synergy guidance of variables, off with mentioned, the like billion Thank

as well terms better, of org So of get know I environment your different items, in flow was free if then when with could us now the way help or or one these it's of worse to the right visibility other? about but EBITDA in are mostly And think get from in impacted you terms structure, like low seats. sensitivity the as place the macro David, how in organization perspective, people kind some you could your looks or cash structurally

as an year are now as right as level the so a from a evolve and bigger beyond, next the out you ARPU new you expect in into going form, to in around how pricing go well where the focus world, big HBO that is you do how to and strategically, And as U.S., compared of way, in forward? roll we

Gunnar Wiedenfels

Kannan. hi Hey,

of perspective broader first me take start with let and a Let me question bit here. I'll your a

that by time. some risks as important think environment, we us to from quite know, for an around the have we're start you macro baseline. environment pointing seeing environment macroeconomic the because And that's been I Let's today

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what have that I'll quarter down. reality trends specific into more all number guidance fourth and those as take out like looked laid the is, continue you single any have I would again. over, you But that we don't go give to why mid-to-high digits control If next I through said, for That's together, and our know, I the want more year.

billion, for second off Let's and half it And this half to we first XXXX, of the conviction is, range I decisions revenues, make $XX that have synergy realized all billion incremental that question so next assume and $X.X material we made side any XXX very in to is positive year. then in to the million you the then full next for range point, have that takes environment the we off it year a full call midpoint we but of can of gets guys impact, And in call views, year. of to our want full here, guidance So key there that in, driver. don't visibility as your the, operate the on be have $XX.X predictions own you $X billion advertising the effect couple a will form of impact do the billion right? the your

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played robust on have cetera. a studio film more the side, much We et

next year we're today. it's there's bank for said, to normalized $XX budgeting of impacting helpful. in billion performance is not I working position with I So somewhat as here. don't what certainly ad if that number a put And a what more know is that's But here the for. into environment, drivers team our the towards,

David Zaslav

pricing, doing talk lot outside to the we're you of our going JB, talk a it. On specifically around may experimenting specifically U.S., peers work, we're be been about we've could the about pricing, the but approaching not how world, we've been

Jean-Briac Perrette

one is together. content aggregation obviously pricing coming content products say of pulling particularly optimistic things makes and the that together, pieces four us all I'd about Yes, the

to being have myriad from that more that fewer but in move second The slightly household a a product tailored David to actually will that a his data of that improvements, to that we remarks since one a broader have a earlier, execute everybody think pricing two XXXX, there's need its number The on And engagement product is, then the raised in appeals may approach price are HBO the allows platform product improvements product launch. meaningful one household. retention. we Max mentioned on points is a of whole think positioning to I us that and one enhance ones people in greatly important. to Number a other will the the by that not of

internationally, us even to we it spells an for initiatives meaningfully product retail product will years, before new and number think we pricing are has for market environment. lower the think this in ARPU coming our new and market we about to So wholesale some the an growth leaders. been that on And since look and the have And internationally. comes two, opportunity, which market as ability opportunity three particularly ARPUs moved, than is when

Kannan Venkateshwar

Thank you, guys.

Operator

Our Mitchelson from comes with next question Doug Credit Suisse.

Your line is open.

Doug Mitchelson

it's content years articles a us is and content ratings slates specific sustain interesting, color relaunch the what's worse out, give there this or concern I you that around on in already that the the better? plans to is a linear how get to How more company? terms much in softness, the the streaming, you is this driving try spending talked gave any anything detailed And about evolve figure idea would mean, you either get cooking guess every and we about idea of manufacturing, about linear Is few at next David, of you advertising. pull I or know, will much. and market back next whether going year. big on as from And investing the then you're going Gunnar the at now list. at you're better Dave to that the long or that it of probably so clarification reading Thanks network of trends market? this you're point you've content, a and pretty better got a film probably this and

content much just with be few So the years grow any you. understanding help might Thank would spend how next helpful?

David Zaslav

when domestically, is content in production coming been Brothers, half. it we're that's there's we're because coming these on of we're lot reimagined tentpoles, a ever leaning what's few being fact the It's year of out world, company of -- strength as restructured we than well around this And view quality, strength. challenging, a to the a business this coming the hasn't have HBO the right spending up, and in advantage. now of that in, courage the people Warner of been that's as spent the have we're where messy. Look company, highest the in. by HBO future as coming historically. a and remix our of and content service, The for this company. restructure Doug. and the do together our we back markets, going It more We intentionally content It's curated really the -- referenced best money we've and taken but it's decade real Thanks,

so how each -- and luxury as putting we and working. one the promoting because to And together, as this, work platform span take putting part content of that, had across look it's it this -- having company the platform, of it the across company, all at at a across platform. the looking having But

they half, people be it more us be How that working is a much took and look we platform off chance didn't the they We we across are help where are more committed that are at the watching? that was we're they that we're get look able platforms. series help focused went all take not to to spending the are cable nourished? off. And fully going was he generate could good replace Where Bloys, We're to off off And to we in knowledge we able Warner shows watching? in have on are much And deploy allocating to write a way and HBO? ability And show to working committed investment should we and content those the Casey news. platform look a shows making invest in the that to of so larger one when our where what to And so year How capital what on on how larger, now we the do with see was are us XX And being are way, where channels, audience? capital? sport, be to Where content we're content, you'll a a has offs are that. we return. should getting shows Bros. going last these it's on working? any spending those value committed what spending the that's HBO. with we what and We not content Television. in get to people end, And real at all to the And over have time? away, successful, now

Jean-Briac Perrette

capital. that the one view see which on lens been advertising through It's it. market, that is one a meaningful in prospect advertising exactly obviously, the way of of opportunity across And we're delivery. the able developing a we ecosystem the the on there is returns, company, level said, grow at I lot one But delivery, reallocating the process look and to we in Doug down. look truth with have of from of

is, a market view is first my and issue. this So foremost,

the sports said, and of at bit have us disadvantage an a little put quarter. in Now, I did as a the impact schedule

as in. pretty quarter know, that participate local in tailwind to the scatter obviously, For positioned is the now. been reality were less additional as you is well, But well has which some there dry market right the fourth

these have constructive advertising we as the peers four know, the market it's but past from past, a broader over periods not is, experience, it players, now, weeks. you across other what from is number it as So of and heard environment right three, very a

Doug Mitchelson

you. thank Right,

Operator

Our with question Jessica Securities. comes Ehrlich from America Bank Reif next of

Your open. line is

Jessica Reif Ehrlich

JB we about or the launching about second that? question I are How You cyclical companies for think challenge. combined have just please should And combat, you the you thinking start, of can to in and sales? then just assets guess are asset is guess, the opportunities meet how XVOD? talk I more higher potentially but these how have? upside, all next address can also you But you than most the you. to to how that little coming you challenges know, saw bit you thinking wondering your TAM? mean, we versus use fast and AVOD tools Thank like on I we mentioned secular can this but service, scale, year, mix about are -- about What levers Discovery you you of are have you'll a be with and thinking Plus the you more how as product. which the ARPU challenges the of know, what you should airline if some is,

color you that? about can you're thinking any how on us give So

David Zaslav

Jessica. Thanks

quickly fast. on Just

We to product and have launch spring globally. light as premium we ad in begin we'll Max that and product, HBO the out product as and roll a that an

in Plus Discovery we've the said, with experiment some content JB begun there. As of to moving

have platform We now. that deficient is a really right also

at rolling us. begin without and a opportunity outside that's we And a able also platform The as encouraging that X it's for on fact unique a the we're almost grow with to out think U.S. were holding lot see so is million we I as of more we're think growing. for subs that fast we not promotion really broadly. And and us. But we real great, to look

picture largest and We motion library. TV have the

that's HBO when as those But that amount it's launches, also monetize service. And could platform content that platforms. see people whatever marketplace. the the in been to of on belongs now, called, us huge we a hasn't well there's that There's put on AVOD sitting not what consuming that's on product so content that Max, as with even are

about, and will of Some we we've which sell. to talked started that we've sell,

we're not more, our people amortized. end we us a has difficult with can the very service, on driving good out pay. have of we through service, an that see ability gives a it it. already market XXXX, what fully will content content most us a in we and move participants, buying where then a it's it we globally, create has attractive sell to of come they peers. to that an think pricing. service. spent able of learn which And not sell that amortized, it And with players fraction where we effectively, opportunity, but that they and been it, a want much premium we'll fully of And then return into looking finally, a of ad-light that makes build then economic ecosystem. that service there's us is which we versus of as always advantage no an of can content on think huge based we'll a with you'll and it a side on lot be fast we're no AVOD advertising I robust number And into have content some in the to all we almost a or have buying wig some to own, as full it are ourselves service, time get the them take exclusively, participants, effectively of at ads, getting full which space, We and we on And the model, of the where that been a most have Some get where do content have spending content, which but even service that's without

Jean-Briac Perrette

from Warner decisions terms that's exciting one providing the to I the think in look actually, decision as a the discovery units. of data, Brothers a make that's various that's providing most at the best points making, business perspective individual the with on able now level of to group Yes, of people the business units, these scale in content we're Jessica ability opposed way, to and interest optimizing

recent in of I is where The we're like marketing point this company. inning other power really first more would the highlight to the just

this the just as as is campaign as we've opening started. getting Black remarks, his we're in at ever comprehensive If David it that seen you broad look and mentioned Adam

what gather impact to hasn't worked. all drive be the to all what executing has able Now we're sales the already that. can see going campaign of We been, ticket insights and what's worked, a from data the like

and to don't it's And Discovery Kathleen are Gerhard [indiscernible] in international ad think we're a portfolio you and has able approach Kathleen going centralized and so we getting hard drive did just comprehensive days. what has sales at it So is early a anyone do I able one again, the doubt And what on side But started. makes the this to in tackle and enormous at sense to much Louise on were way if done. been this Scripps, combined look this that after again, that's Network optimizing I drive just no delivery. that portfolio side, have with to Chris going and

David Zaslav

to we NBA be up could average, sports, the And XX% on news, viewership of night, we remember of any viewership, there but be on during entertainment when might nonfiction. XX% given live live

During March even Madness, our be will higher. numbers

effective a fact live to in a during gives huge can't and part sports, that give live when. predict did the And chance that just a news, the entertainment, on so football was such the But you part advertisers we if when will, with the advantage comes and use particularly so and I college market sports us others a know and ability overall use difficult big market. viewership NFL of America us expect which news, to think opportunity should it that we digital back get the

Jean-Briac Perrette

side, piece distribution on we very of high Together, did traditional package. finally well well at of most and nonfiction basic entertainment. valuable the sports did cable news, the and Jessica And quality bundle. with Turner our make we the their up with very Discovery

And we're together, see that bundle remain the sports, we secular up the numbers robust, discussion with it and of in of the are optimistic really decline. here the XX%, the decline NBA is bundle, want XX%, all dramatically. all so of Madness for remain with the the and the And And almost aligned that have all of on the gone want was to cable. traditional it we distributors. of air sports is robust. can They the up XX%. March up But to free sports real point is to

cable XX And people is next be sports watching years. platform where sports the for it to the and so going on are that is

see so a on some trends on big morning, there it think will you And a on very ahead. see, are sport to platform, And great of, the long-term steadying commitment other there I some challenges operator a uptick by [ph] will discussion was Rutledge the and you certain hand, when likely, provide force. sport, which this

think big XX I the sports one increases. the that lion's the are they going that to the it of and of to have operators about things in to that share the concerned comes when pay is, in increase rights, are

David Zaslav

side, minutes says is, of moved that are us. we I secondarily, we a Plus. billion a dynamics would where now on the on entertainment. addressable the a think drive world do about, that's see of the And lot non-accessible everyone ad-light of around just there's have X there's saw group XX% India for we ad two And may that supported and And surprised have advantage Discovery look move Max ad-light three you bring markets towards north around China ARPU We for to people ad have as the of different that pricing the lastly, more monetization of that that were one ad-light product. ad-light, are in two adoption offering service that obviously, on together ads actually of we for Russia we Jessica, Max Number today some And little of can that with then your be and important we initiative market, we the incredibly growth the subscription about our free and can Discovery to side. ad-lights see offering leaning And half particularly, at it to just the on scale HBO close here, that more is the subscription and are probably legacy about believe think given things us and to of in tier, on which we exclude products prices being question, if we as XX% and positive we us. about what for second, the not both free HBO today. Plus in that TAM offering people the frankly an of we ultimately consumers

two XXX% to available we as the we those roll So of we two the combine products, think almost growth ad we look have, loads as products. in combined the us inventory to

Jessica Reif Ehrlich

Right, thank you.

Operator

Morgan. question from Phil Cusick JP Our comes next with

Your line open. is

Phil Cusick

$X.X should or One with some DTC HBO just But of toward Hi partner accelerated internationally sounds guys. to year. so with silly, And Thank billion and headline you. this market pretty some fair? help EBITDA then very appreciate Is And at the changes of the this look number but I notwithstanding, definition much. be you're then debate, a then in question, are there? the that? in already the there's can it's out that in of clarification, potentially I ones you been of guiding from what's real it. be outline think some, about clear. the and that maybe wholesale you with as markets, ask sort versus a I going new Thank us both what amortization markets, impact if

David Zaslav

quickly JB. pass So then question and to it that let knock I'll out me clarification

is estimate, middle, guidance given. saying of best in range we're the $X.X middle what that much billion that is we've So pretty

expecting up you be to third full had year, in know. as year. ballpark, million get policy have year. The of been quarter I $XXX for a this some another QX, this for better the we effects. after essentially, I've little that roughly FX year, headwinds much a go improvement we next importantly, pretty change year-over-year said, expect more $XXX as has that more And roughly net and as full is into QX but digested to is the we in catch the a now that So was on headwind a similar amortization content improvement it as basis, the Most sequentially, significant number. to for We're million then HBO

baked all the into that's $X.X number. So billion

Jean-Briac Perrette

the about the additional in new in we on the a obviously over talked August next rollout angle, and of the And international partnerships in Europe other out in a ones two we product Max years wholesale essentially rollout the that of laid assumed existing markets, than launching XXXX. handful HBO in

focused it's Next there launches existing year, that all markets Max really in on U.S., was LATAM, no are so number. HBO incremental which and

years product focusing to earlier, there at on do getting more David any come, really visibility as the moment. markets to the we getting in this have there, is obviously product launched something then and we get launched, As the and any that's reassessing to not were of opportunities but mentioned we market, more was

that legacy partnership Lastly, do few into. view on list different come market, the we of as And side, partnership the Discovery how the the the product they as in side, are the us across number future as to we've about opportunities. months, last fact, the in have a can been eager of of to on there we're all in we out talking partners, rollout we coming conversations help a to markets engage accelerate market, in long partners,

some out and ways through there's and and that costs partners our existing partnerships the the lessen those accelerate we've partners to new marketing stack figure of rollout with potentially work to if historically. done to excited we're So kinds

Phil Cusick

Thank you.

Operator

from comes with Declan Wells next Cahill Our question Fargo.

open. is line Your

Declan Cahill

maybe a is to May then different of Gunnar, a how content the could It bit what synergy going look you've think made, talk just was you a pick cash like cost I'm the it it cash from it's down to the question impact say it on content to flow just the the way. from on free that incremental seems future, first between before. the how strategy than of David, and of was synergy. what and follow like I there's up Warner When you. Warner Doug's if in slightly a next Thank changes kind kind write about I be probably personnel be up achieve. lot just content wondering about you ask could to content a is Warner on broken going little Media the know we to characterize year, Bros. when wondering you And under now. headwind different And guidance under under Discovery Media? a

flow? synergy increased free to cash going cash be free a XXXX specifically, about Could would understand to cash it in going free the is you. cash flow? just So be to helpful free flow? Thank flow Is it XXXX? love we the to drag think I on to how guidance for be dynamic neutral

David Zaslav

A couple of things. focus real franchises. on to a going One, have we're

had Superman in We a movie years. XX haven't

What DC and Harry over movie last the profits movies movie of Potter XX Harry a of Pictures Brothers provided XX the in Warner a years. the years. -- Potter done the Motion haven't movies We lot

So the focus franchise. on

in One Europe, local that the in What about and Rings of House the the to that. America, Game in are loved example of are theaters the of the of the understood aggregate have most everywhere brands it's City, content. that the Sex there's advantage in the the XX% the have is Lord Asia, here movies that advantages world. we big U.S. Lord movies. and have U.S. Dragon the Outside of Latin that of the of we have, we of Thrones, of do right an Rings, taking still

tentpole we One Lord Harry hard. doing a What movies movie, three times is because of in on doesn't work to lot we make the is of we And to that what focus so are have on loved on home, JK we've Batman, are franchise you with amount what can Rings, them; on with looked work. seen slot you to can focused leave are for franchises. If see, forward, and it doing we movies. have? that at people us the when make early with of Aquaman. a learned Superman, we've based get that this we money We're dinner the and franchises to a you that a and have often of are Game Two, two going we've the are to U.S. a do Potter everything big leave streaming going something And Thrones? the big lot that you direct doesn't from what of go

launch collapsing So a motion HBO for better terms into service. The an dollars movies a picture love minute done spending service. Max a hour of nothing or streaming the a significantly retention has that of billion movie we in or launching almost and to viewership, theater direct XX the do or streaming in window two-hour and

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watch, have roadmap. is a there ultimately, a been so and they to are gives us And get vision into and a people able an to that platform and people what what real where expectation, want we've consuming

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we're determine platform, going and so trying And I we'll and is, how to really on that, think then what on operate what the worked based what understand hasn't, forward. to has

Gunnar Wiedenfels

the just is relationship puts to for Obviously, as cash quarter. and one in in and amortization. cash flow of of drivers content, the well free read But achieve, to be million XXX cost that investments year-to-date, the going go charges our merger, release fourth there's through more a big you related to the couple a little of the as some between to takes,

significantly that next know, higher, but against so it's year, going baseline higher. it's to And not, a be little you very is not

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impact half So well. of you will year as get a XXXX that another for

So XX% those are can flow we that, the think XX% to through reiterated things out I right for why EBITDA and that's the backlog. call now of I guidance

Jean-Briac Perrette

dollars. TNT. of spend we're on spending Half repeat not. scripted a million and three season it. can a on see could watch on They'll written could $X.X it's that's look us that's that see tells you to show to see it We're to that are Two spend that Max terms series to the want it are does rewatch scripted, million with have If new to cable, really One doing. being in And a a audience we We're we it, at and The and you and will And BIGBANG at Men look was been and that but about reading an it exactly free we getting not we then see very hard. we has could people time some another committed times seven But X.XX, of of that committed If it they're we show last people costing tell with. and time watching deliberate we're a greenlit scripted brand love, measure it -- ratings, the in and that on air what what and a to they what or you they'll And engage what measuring point and get are chance we content. on it, you another a deliver half it show. going and show seeing delight that dollars. a to shows and audience. the going try how cancel has of scripted us

be get rid but or that chance take again and in show choices. content we traditional platforms. that spend failure, make is of our not subscription new and new we we'd I show of a As of us. everything a producing on rather engage business It's on either having to we that rid And that platforms very money on focus delight that learned have clear, those of and platform any a it we each will said, me did our let helping shows will using can got

David Zaslav

a Actually lot. you can mention were to before did want quoted we one on, I because thing, move

a largely the in out I we're I statement the in on to want the so of the your a the It's this huge something one like We I fixed, free earlier industry structure while of of debt. our assets, asset. mileage a comment last lot a that, And think dated topic capital cheap, You is that highest leverage long view place greatest really week structure Discovery has got week, or on and or capital, as that. with as put the purpose. in just

and to I most even perspective, come to years. for maturities up that there's from coming in scenarios, dire feel couple it. requirement scenarios, Very so to over no obviously refinance limited next very run We the the debt us And good markets anything. the about back of very,

asset. us there for an lost not best be that really the in is to only So on where I over think also holders, X, but interest years, rolling And cash bit we're the is in holders. the free It's described trading. flow as debt it a that of is debt X us, the which not the is X, equity enormous opportunity going of next I

Journal, maybe saw Wall this a is And this Street quote I think was up laughing real, asset. your I just So real picked morning. when by the

Declan Cahill

of out stay try I'll to news. the

David Zaslav

last question operator, please? One

Operator

question with Rich Greenfield Our from final [indiscernible]. comes

Your open. line is

Richard Greenfield

I cleanup. love batting

First now in of your have at of is just about curious, is difficult what NBA sort Thanks decisions difficult interested those given sort world HBO sort very TV just one that the and would the been team the relaunch of now? David, thanks was I'm see decisions abandoning year? how, situation make you is you've the taking challenges? one clear flow great? those It you ahead. Just of about management made mistakes of revisiting you rights sometime or tied to just and the I tied beginning about like, where is cash Like, need And thinking those mistakes for in. questions. TNT it. the by you of of you're I'm And rights, do how put comments headed Max right decision of sort about then in be and I NBA all, of many the guess, to sort to what of in kind and pretty difficult the you're channels that the thinking sort next you the meant of given decisions Amazon second, subs

David Zaslav

of a we and we almost taken stronger of this. to have real end, I'm have a in vision think the show, seven maybe It's to future and the seize difficult of much this to really fight to a And believe stuff say, through sense lot the it. we're new little this It's here help be ways, been a of leadership and done it's the we very going to table wanted you're Thanks, EBITDA of have a -- it business. or this we and not proud sit with Rich. a and they never lot four see it's And seeing approach months We weren't last team. of clear that and be going terms the, side but cash have, to have turn on that quality flow falling it's next very vision and has company through as changes we'll got people as down I how you a in here. is with from in succeeding? did what and ability what right exactly five it's a the what's real of down people at this year, diversity did the strong, business. and started effective us and And some a the going the wrong, working of our restructure like we the leaner inning it. and I a this it. want not hard the should streaming leave. And we and sense. building. think make mural going Channing a that company said, that the took chance seventh challenging do for take to our going the like a thought people that, I to made seeing we're over courage on this see to here, everyone content now, going we and real But we're and do come when moment we in we We've make if this difficult. to do very the assets -- It's want what's to to through future what at media rid the formidable. want our eighth in And we most business just generating conviction, put as months. advantage we to diverse of company we company, do was you the family to we're the we're how working? what's business? have? assets. be be going content to products. and free we three order as going What they're the to in about on bit is Pam lot all With have have it. a messy or that's best that getting of what look We over successful wallet need the out, it of to What are it where now What What clear company to -- a it as looking doing was look leaving clicks we're a just is and who's structure not and what's business? like a we we the looks courage find this thought company company to streaming have of launching got of when for win. four and this think is Mike is, we in the spend this our the to did make company. over for It with diversity and what we money has chance and -- the Chris was Casey We're be picture see what going the And of about That what to But year XXs. everything. be we'll this into many months, the of you through we get next start

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to to is out the be portal. get can't come saying there You only only through me the way one my

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Richard Greenfield

such Thank super was a you answer. That for detailed helpful.

Operator

the Ladies that conference we you participating call disconnect lines. and Thank ask gentlemen, for for that you today. concludes and your

Warner Bros. Discovery (WBD) 4 Nov 222022 Q3 Earnings call transcript