We expect for FY 2024 that the company will earn roughly $10 billion in FCF, supported by both growing earnings, and decreased interest payments. Discovery has the ability to drive substantial shareholder returns. The debt paydown will improve the company's FCF margins towards $10 billion in FCF. $40 billion in long-term debt is a number that the company can comfortably afford, although it could pay it down further should it choose to do so. That will save the company hundreds of millions in interest payments and is something that the company can cover with its free cash flow ("FCF"). That means in the company's first 2 years, the company will aim to pay down at least $12 billion in debt. That'll be combined with roughly $15 billion in adjusted EBITDA, implying a debt target of ~$38-45 billion. The combined company has roughly $57 billion in debt, however, the long-term target is to get that towards 2.5x-3.0x by roughly YE 2024. Discovery is to improve the financial position. The first order of business, especially in a rising interest rate environment, for Warner Bros. This strong financial performance from the company's 1Q 2022 earnings is something that we expect to continue to improve in the upcoming quarters for the companies. With double-digit YoY increase from the prior year, that's well in line for 2023E guidance of roughly $52 billion in revenue.ĭiscovery's OIBDA increased by 23% YoY and the combined companies are also on track for $14 billion in 2023E adjusted EBITDA and ~$8.5 billion in free cash flow. That brings their combined company revenue to $11.9 billion, or annualized at roughly $48 billion. WarnerMedia earned $8.7 billion in 1Q 2022 revenue, while Discovery earned $3.2 billion in revenue during the same time period. The combined company (taken from AT&T and Discovery investor reports without combination) had strong 1Q 2022 earnings. Another takeaway is in regards to many metrics, such as versus revenue, Warner Bros. Discovery can use its other businesses to subsidize its costs for streaming, unlike Netflix, which needs to make all the money back from streaming. Netflix is pure-play streaming with no theater releases or anything else.Īn important part of that is that Warner Bros. Discovery has a substantial non-streaming business as well. The first is that market cap is tough to compare because Disney, for example, has numerous other businesses. So, what's the takeaway here? There are a few ways to look at it. In total, these large streaming companies control 21.2% of the overall industry and market. That's along with competitors such as Netflix ( NFLX) (6.8%), YouTube/YouTube TV (GOOG, GOOGL) (6.7%), Disney ( DIS) (5.1% total), and Prime Video ( AMZN) (2.6%). HBO Max has a 1.0% share of the streaming industry, making it one of the largest companies. Discovery operates in a competitive industry, but the company has been performing well. As we'll see throughout this article, despite this weakness, Warner Bros. Since the split from AT&T, the company has seen its share price drop by almost 50%, pushing its market capitalization towards roughly $35 billion. ( NASDAQ: WBD) has underperformed since its separation from AT&T ( T).
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