Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Warner Bros. Discovery Inc (WBD, Financial) added 6.5 million subscribers in Q4 2024, reaching a total of 117 million subscribers globally.
• The direct-to-consumer business contributed almost $700 million in EBITDA, marking a $3 billion improvement over two years.
• The company has a clear path to achieving at least 150 million subscribers by the end of 2026, which is expected to drive further revenue and EBITDA growth.
• Warner Bros. Discovery Inc (WBD) has struck multiyear renewal agreements with five of the six largest ATV providers in America, providing stability to its linear business.
• The company is implementing a new organizational structure to enhance strategic flexibility and unlock additional shareholder value.

Negative Points

• Warner Bros. Discovery Inc (WBD) faces near-term linear pressure as it adds direct-to-consumer and greater packaging flexibility.
• The company expects slower rate increases in its domestic affiliate business, moving from mid-single-digit to low single-digit growth.
• There is ongoing pressure on the linear television business, with weaker ad sales results than expected in Q4 2024.
• The company anticipates some deterioration in ARPU in the near term due to international expansion and lower-priced offerings.
• Warner Bros. Discovery Inc (WBD) is not providing consolidated financial guidance for 2025, citing uncertainties and moving pieces across its business segments.

Q & A Highlights

Q: Can you give an update on the restructuring and its potential long-term impacts? Also, how do you plan to address near-term linear pressure as you add direct-to-consumer and greater packaging flexibility? A: Gunnar Wiedenfels, CFO, explained that the restructuring is a priority and significant progress has been made, with the new structure effective January 1. This reorganization aims to enhance strategic flexibility and unlock shareholder value. David Zaslav, CEO, added that the restructuring provides visibility into the strength of their Studio and streaming business. Regarding linear pressure, Wiedenfels highlighted successful early renewals with rate increases, providing stability. He noted that while rate increases will be slower, the company is seeing positive revenue impacts internationally.

Q: Does Max have enough diversity in programming to compete with larger SVoD platforms, and what is the strategy for sports and news on Max? A: David Zaslav, CEO, emphasized Max's unique offering with high-quality storytelling and a vast library, including local content and sports. Jean-Briac Perrette, CEO of Global Streaming and Games, mentioned ongoing experimentation with sports and news models across different regions. The strategy involves leveraging global rights to find the best model for engagement and business sustainability.

Q: How do you view the asset landscape in the industry, and do you see Warner Bros. Discovery as a buyer or seller? A: David Zaslav, CEO, stated that global players will prosper, and Warner Bros. Discovery aims to secure a seat at that table. He noted pressure on regional players and the potential for consolidation through bundling. The company is open to opportunities but will prioritize shareholder value.

Q: Can you expand on the free cash flow outlook and balance sheet management? A: Gunnar Wiedenfels, CFO, highlighted the company's focus on free cash flow and debt reduction, having paid down $19 billion since the transaction closed. The balance sheet is strong, and the company aims for a leverage target of 2.5 to 3 times. Free cash flow will be driven by EBITDA, with continued focus on content investment and cost management.

Q: What are your thoughts on skinny sports bundles and their potential impact on cord-cutting and affiliate trends? A: David Zaslav, CEO, expressed that the success of skinny sports bundles will depend on the consumer value proposition. While aggregating sports on contemporary platforms is compelling, the value equation relative to the overall bundle price will be crucial. He emphasized the importance of improving the consumer experience to drive value creation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.