Today, Warner Bros. Discovery, Inc. reported financial results for the first quarter of 2022 (January 1 through March 31). The results are for Discovery, Inc. and do not include first-quarter performance for WarnerMedia, which was acquired on April 8.
As we saw last week, AT&T reported that WarnerMedia’s operating income declined 32.7% year-over-year. In terms of operating profit and cash flow, "WarnerMedia was really below my expectations," Warner Bros. Discovery Chief Financial Officer Gunnar Wiedenfels said in today's earnings call. However, the company is still confident about achieving its targeted $3 billion in annual cost synergies, despite CNN+ shutting down on April 30.
On the other hand, total revenue for Discovery Inc. was $3.16 million, an increase of 13%. U.S. advertising revenues increased 5% and distribution revenues increased 11%. U.S. Networks revenues increased 7% compared to the prior year's quarter to a little less than $2 million, and total operating expenses for U.S. Networks decreased 8%.
Net income for the Discovery businesses in the first quarter of 2022 was $456 million, or 69 cents a share, up from $40 million, or 21 cents a share, a year ago. The results exceeded Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 56 cents per share.
The company ended Q1 2022 with 24 million DTC (direct-to-consumer) subscribers, an incline of two million subscribers since the end of the fourth quarter. However, subscribers to Discovery linear networks on March 31 were 4% lower versus the prior year.
In this morning's earnings call, Zaslav stressed that the company "is not trying to win the direct-to-consumer spending war,” the WBD CEO said. As he has said before, he promises that the newly combined WarnerMedia-Discovery company would “invest in scale smartly.”
Zaslav added that the company’s combined 100 million streaming subscribers give them “true optionality over time to drive our strategic decision-making.”
Throughout the call, Discovery Inc. expressed how unfortunate Warner Media's revenue decline was but wanted to pay attention to the future ahead. It's still early days, so hopefully, the mega-merger will see a combined growth in revenue, thanks to its large library and combined streaming subscribers.
It will be interesting to see this new structure come to fruition, and how CNN will dust itself off after its failed streaming offering. The plan is not "fully baked," according to the company, and it will not be launching anything new or "chase aggressively behind subscriber goals." Figuring out the best way to combine HBO Max and Discovery+ and managing churn will be its priority.