Warner Bros. Discovery (NASDAQ: $WBD), a global media and entertainment company, recently released its second quarter fiscal 2024 results. The results were disappointing, missing analysts’ estimates.
Warner Bros. Discovery Second Quarter Results
For the second quarter, Warner Bros. Discovery reported revenue of $9.71 billion, a 6.2% drop year over year. The company losses increased to a GAAP loss of $4.07 per share compared to a $0.51 loss the previous year.
Analysts had forecast $10.07 billion in revenue, a 3.6% miss for the company, and a GAAP loss of $0.19, a $3.88 miss.
The media and entertainment giant reported a 16% year-over-year decline in adjusted EBITDA to $%1.8 billion, while free cash flow fell 43% year over year to $976 million. It has a gross debt of $41.4 billion with a net leverage of 4.0x.
DTC Subscriber Growth
The company saw 3.6 million in net additions for its global direct-to-consumer segment, currently its top priority. It now has 103.3 million subscribers globally. Despite this, its DTC business posted a loss of $107 million, a $104 million rise in losses compared to the previous year. Revenue for the DTC segment fell 6% year over year to $2.57 billion.
Networks Segment Records Massive Losses
Warner Bros. Discovery reported a net loss of $9.9 billion in its second-quarter results. The net loss includes a $9.1 billion non-cash goodwill impairment for the Network segment.
The loss follows the devaluation of its television networks due to uncertainty over the renewal of sports rights, the most important of which is the NBA.
Network revenue fell 9% YoY to $2.68 billion, while the segment’s adjusted EBITDA fell 8% to just below $2 billion.
TNT owned the media rights for the NBA and Stanley Cup playoffs, while TBS owned the rights for Tuesday night MLB games. Warner Bros. Media has introduced a new programming line for truTV, including dedicated sports programs that it plans to expand in the fall.
Warner Bros. Discovery NBA Rights
The company attempted to retain its NBA rights by exercising its matching rights provision. The move would have compelled the NBA to grant it a package of games given to Amazon (AMZN). However, the league denied the move, stating that the company did not match Amazon’s offer.
One of the main points of contention was whether Warner Bros. Discovery was legally allowed to match a package exclusive to a streaming platform. Additionally, Amazon had reportedly placed the payments for the first three years in escrow, while Warner Bros. Discovery provided a letter of credit.
After rejecting the deal, the NBA announced 11-year media rights deals for various media companies worth $77 billion from the start of the 2025-26 season.
Warner Bros. has recently picked up sports rights for various leagues and events. These include the French Open, the Mountain West Conference, and the Big East Conference. It has also entered a deal to sub-licenses select College Football playoffs from ESPN.
Warner Bros. Discovery Stock Tanks
Following the huge impairment loss from the loss of sports media rights, WBD stock tanked a few minutes after the opening bell. As of 9:39 AM EDT, the stock was down 9.46% at $6.98 per share.
Its price is just shy of its 52-week intraday low of $6.94, achieved on June 20, 2024. Year to date, the stock was already down 34%.
Its market capitalization has also suffered, and as of the close of trading on Wednesday, it was at $18.8 billion, compared to over $50 billion when Discovery acquired WarnerMedia in April 2022.
Is Warner Bros. Discovery A Buy Or Sell?
Looking at its Q2 results and stock performance, finding strong points for WBD is difficult. It missed EPS and revenue estimates, and margins were negative due to the impairment charge. Overall, this was a weak quarter for the company.
Does the weak quarter present an opportunity to buy WBD? When making this decision, it is important to check factors like business qualities, valuation, and coming quarters.
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