Warner Bros. Discovery shares drop 10% as company misses estimates, warns of 2024 cash flow headwinds

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The exterior of the Warner Bros. Discovery Atlanta campus is pictured after the Writers Guild of America began their strike against the Alliance of Motion Pictures and Television Producers, in Atlanta, Georgia, U.S. May 2, 2023.
Alyssa Pointer | Reuters

Warner Bros. Discovery missed analyst targets for both profit and revenue in the fourth quarter but boosted free cash flow as its streaming service Max ended 2023 profitable for the first time.

Shares of Warner Bros. Discovery fell about 1% in premarket trading Friday after the report.

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Warner Bros. Discovery generated $3.31 billion in free cash flow in the fourth quarter and ended 2023 with $6.16 billion in free cash flow, up 86% from a year prior. Chief Executive Officer David Zaslav has prioritized boosting free cash flow and shrinking the company’s debt. Warner Bros. Discovery paid down $1.2 billion of debt in the quarter and $5.4 billion in debt in 2023. It still has $44.2 billion of gross debt remaining.

The company’s flagship subscription streaming service, Max, ended 2023 profitable, with full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $103 million.

Zaslav has dramatically cut content spending for the streaming service since merging WarnerMedia and Discovery in 2022. His efforts have helped Max reach profitability before the streaming divisions of legacy media rivals Disney, Comcast‘s NBCUniversal and Paramount Global.

The company reported 97.7 million global direct-to-consumer subscribers, a 2% increase from the previous quarter.

Here’s what the company reported for the quarter ended Dec. 31, versus analysts’ estimates, according to LSEG, formerly known as Refinitiv:

  • Loss per share: 16 cents vs. 7 cents expected
  • Revenue: $10.28 billion vs. $10.35 billion expected
President and Chief Executive Officer of Warner Bros. Discovery David Zaslav attends the world premiere of the 4k restorated 1959 movie “Rio Bravo” presented at the Opening Night of the 2023 TCM Classic Film Festival in the TCL Chinese Theatre in Hollywood, California, April 13, 2023.
Aude Guerrucci | AFP | Getty Images

The company’s fourth-quarter net loss was $400 million, or 16 cents per share, compared with a loss of $2.1 billion, or 86 cents per share, during the year-ago period.

Fourth-quarter adjusted EBITDA was $2.5 billion, down 5% from a year ago, excluding the impact of foreign exchange, as studio revenue lagged as a result of strikes by the Writers Guild of America and the Screen Actors Guild-American Federation of Television and Radio Artists.

Studio revenue dropped 17% to $3.17 billion in the quarter. Adjusted EBITDA for the unit fell 29% to $543 million.

Warner Bros. Discovery reported a 14% decline in linear television advertising revenue excluding changes in foreign exchange and a 4% drop in actual distribution revenue.

Given the declines among cable TV subscriptions, Warner Bros. Discovery announced earlier this month it plans to begin a joint venture with Disney and Fox to offer a smaller, less expensive bundle of linear networks that focus on sports programming.

Disclosure: NBCUniversal is the parent company of CNBC.

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