Warner Bros. Discovery (WBD) reported first-quarter results Thursday before the bell that missed revenue and profit expectations. Free cash flow surged amid aggressive cost cutting, while the company’s linear TV business continued to decline.
Revenue was $9.96 billion, below Bloomberg consensus expectations of $10.27 billion, down 7% from $10.70 billion in the first quarter. quarter 2023. The company reported an adjusted loss per share of $0.40 compared to a loss of $0.44 a year earlier.
The stock fell about 3% in premarket trading as investors digested the results.
WBD, like other traditional media companies, is struggling with an unfavorable advertising environment. The network’s advertising revenue fell 11% in the first quarter compared to the year-ago period. The company reported network advertising revenue of $1.99 billion, below Bloomberg’s expectations of $2.01 billion.
Studio business has also struggled, despite high-profile films like “Dune 2.” The segment was penalized by games with “Suicide Squad: Kill the Justice League” underperforming, especially compared to last year’s “Hogwarts Legacy” release.
Segment revenue was $2.82 billion, a 13% year-over-year decline excluding adverse currency effects. This missed estimates by $3.01 billion.
Free cash flow was a bright spot in the quarter, with the figure jumping to $390 million, beating Bloomberg consensus expectations of $239 million. The company reported negative free cash flow of nearly $1 billion in the year-ago period.
The company’s direct-to-consumer (DTC) streaming business also outperformed. It added 2 million Max subscribers in the quarter, ahead of Bloomberg consensus expectations of 1.25 million and also ahead of the 1.6 million subscriptions added in the first quarter of 2023.
Streaming ad revenue jumped to $175 million, beating Bloomberg estimates of $157 million and up 70% from the $103 million the company reported a year ago.
The DTC division was also profitable in the quarter at $86 million, a year-over-year improvement of $36 million. In February, the company revealed that its direct-to-consumer streaming unit made a profit for the full year 2023, posting $103 million in EBITDA, compared to a loss of about $2.1 billion for the whole of 2022.
Despite the hurdles to profitability, Wall Street analysts pointed to several tailwinds heading into the second half, including WBD’s upcoming sports streaming partnership with Disney (DIS) and Fox (FOXA), as well as its Max streaming service recently launched in markets outside of the United States, including Latin America and Europe.
And on Wednesday, WBD and Disney announced they would. offer a package streaming services Disney+, Hulu and Max in the United States starting this summer. Customers will be able to sign up for the package, with or without advertising, on…
