Warner Bros. Discovery Sees Q1 Loss Despite Streaming Improvements

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Warner Bros. Discovery posted a first-quarter loss, buffeted not only by the dynamics of streaming video that are eroding traditional media-industry economics, but also by charges related to the 2022 merger that created the company out of the former WarnerMedia and Discovery Inc.

The owner of HBO, TNT and the Discovery Channel said its loss of $1.069 billion included $1.81 billion of “acquisition-related intangible assets and $95 million of pre-tax restructuring expenses.” The company also indicated that the debt it took on to finance the merger was affecting its financials. Warner Bros. Discovery had $836 million of “semi-annual interest payments largely attributable to merger-related debt that overwhelmed its cash flow.

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The company reported a loss of $1.07 billion, compared with profit of $456 million in the year-earlier period. Executives took pride in the company’s ability to reverse losses in its streaming operations.

“We’ve come through some major restructurings and have repositioned our businesses with greater precision and focus. And we see a number of positive proof points emerging, with DTC perhaps the most prominent,” Warner Bros. Discovery CEO David Zaslav said in a statement. “We made a meaningful turn this quarter with $50 million in segment EBITDA and 1.6 million net adds, and we feel great about the trajectory we are on. In fact, we now expect our U.S. DTC business to be profitable for 2023 — a year ahead of our guidance.”

Analysts felt the company has yet to prove it has mastered its fate. “It’s been over a year since Warner Bros Discovery completed its merger and it looks like David Zaslav is still figuring out the best way to move this combined company forward,” said analyst Jamie Lumley at Third Bridge. “With revenue dropping on an annual basis across all business segments and a swing to an overall net loss, it’s clear there is still a lot of work to do to get the company on firm footing.”

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