Warner Bros. Discovery, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Studio Rebuild: Returned studios to industry leadership, with a robust movie slate planned for 2026-2027, including a new Gremlins film set for November 19, 2027, with Steven Spielberg and Chris Columbus involved.
• HBO Max Global Scaling: Expanded HBO Max globally, with over 150 million total streaming subscribers expected by end of 2026. Strong EBITDA contribution from streaming, and successful launches like It: Welcome to Derry.
• Linear Networks Resilience: Linear networks remain indispensable, providing cash flow, with digital extensions of brands like CNN streaming app being a compelling proposition.
• Debt Reduction: Net leverage ratio down to 3.3x EBITDA, with $1 billion paid down from bridge loan facility in Q3.
• Separation Transaction: Team working on separation transaction and Board's strategic alternatives evaluation, with active process underway.

Segment Performance

• Studios: Led 2025 box office domestically, internationally, and globally. In Q3, launched new DC Studios era with Superman, and had movies like Weapons and The Conjuring: Last Rites grossing over $750M. Expect studios to exceed $2.4 billion in EBITDA in 2025 and work towards $3 billion EBITDA goal.
• Streaming (HBO Max): Available in over 100 countries, added over 30 million new streaming subscribers in 3 years. Streaming segment to contribute over $1.3 billion in EBITDA in 2025. Upcoming launches in Germany, Italy, U.K., and Ireland in 2026. HBO recognized with 30 Emmy Awards, shows like The Pitt, The White Lotus drove strong engagement.
• Linear Networks: Networks like TNT, TBS, CNN, etc., are cash flow contributors despite linear TV headwinds, with digital extensions of brands.

Guidance

• Studios expect to exceed $2.4 billion in EBITDA in 2025 and work towards $3 billion EBITDA goal.
• HBO Max aims to have over 150 million total streaming subscribers by end of 2026.
• Upcoming international launches of HBO Max in Germany, Italy, U.K., and Ireland in 2026.

Risks

• Significant risks and uncertainties outside control that could affect forward-looking statements, as per SEC filings.
• Impact of strategic alternatives evaluation on the business, including potential effects on the tax-free nature of separation.

Question and Answer

Q: Jessica Reif Ehrlich on library, sports, and Discovery Global Networks. How to mine deep catalog and color on Discovery Global Networks; thoughts on sports portfolio and stand-alone sports app.

A: Gunnar Wiedenfels mentioned feeling good about sports portfolio, progress on stand-alone sports app; David Zaslav and Jean-Briac Perrette discussed library mining, access to Discovery Global assets on HBO Max in separation.

Q: Kannan Venkateshwar on streaming apps and linear decline. Thoughts on streaming apps disintegrating to different apps vs licensing; linear decline rate and comp benefit.

A: David Zaslav talked about CNN streaming app as compelling stand-alone; Gunnar Wiedenfels said industry is doing right thing, expecting better trajectory for linear.

Q: Robert Fishman on HBO Max global scale, content spending. Confidence in gaining global scale; balance of investing in new IP vs franchises.

A: David Zaslav and Jean-Briac Perrette discussed HBO Max's high-quality positioning, data on content performance in markets, and balance of IP and franchises.

Q: Ben Swinburne on $3 billion EBITDA ambition and tax implications of strategic review. Thoughts on bridge to $3 billion EBITDA; tax implications of separation.

A: David Zaslav spoke on path to $3 billion EBITDA; Gunnar Wiedenfels declined to comment on tax implications of strategic process.

Q: Steven Cahall on HBO content process and sports opportunities. Unique aspects of HBO content development; sports opportunities.

A: David Zaslav highlighted exceptional team at HBO driving quality content; unknown executive mentioned opportunities in sports market on organic basis.

Q: Rick Prentiss on ARPU trends and IP monetization. ARPU trends domestically and internationally; IP monetization items.

A: Jean-Briac Perrette discussed ARPU trends with factors like affiliated party transaction reset and ad-supported SKU rollout; Gunnar Wiedenfels talked about franchise management and leveraging content franchises effectively.