NEW YORK, Nov. 3, 2021 /PRNewswire/ -- Discovery, Inc.
("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today
reported financial results for the quarter ended September 30,
2021.
David Zaslav, President
and Chief Executive Officer of Discovery said, "We made great
strides in the quarter operationally, financially and creatively.
The team drove solid momentum in our direct-to-consumer business,
which we grew to 20 million paid subscribers at quarter end on the
strength of our global brands and fan-favorite content, including
the Summer Olympic Games and Shark Week. Additionally, we delivered
double-digit growth in both advertising and distribution revenues,
as we doubled next generation revenues year over year. This strong
performance once again drove very healthy cash flows during the
quarter, further strengthening our balance sheet and financial
profile. We are very excited about our pending merger with
WarnerMedia and the opportunity to bring these two companies
together, combining iconic and globally cherished franchises and
brands, and positioning us to more efficiently drive global scale
across the combined portfolio."
Third-Quarter 2021 Financial Highlights
- Total revenues of $3,150 million
increased 23%, as reported and ex-FX(1), compared to the
prior year quarter.
-
- U.S. advertising revenues increased 5% and distribution
revenues increased 21%; and
- International advertising revenues increased 28%, or 26% ex-FX,
and distribution revenues increased 7%, or 6% ex-FX.
- Net income available to Discovery, Inc. was $156 million and diluted earnings per share was
$0.24.
- Total Adjusted OIBDA(2) was $726 million.
- Cash provided by operating activities was $811 million and free cash flow(3) was
$705 million.
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Dollars in
millions, except per share amounts
|
2021
|
|
2020
|
|
%
Change
|
Ex-FX(1)
|
|
2021
|
|
2020
|
|
%
Change
|
Ex-FX(1)
|
|
Total
revenue
|
$
|
3,150
|
|
|
$
|
2,561
|
|
|
23
|
%
|
23
|
%
|
|
$
|
9,004
|
|
|
$
|
7,785
|
|
|
16
|
%
|
14
|
%
|
|
Net income
available to Discovery, Inc.
|
$
|
156
|
|
|
$
|
300
|
|
|
(48)
|
%
|
|
|
$
|
968
|
|
|
$
|
948
|
|
|
2
|
%
|
|
|
U.S. Networks Adjusted
OIBDA
|
963
|
|
|
951
|
|
|
1
|
%
|
|
|
2,836
|
|
|
3,029
|
|
|
(6)
|
%
|
|
|
International Networks
Adjusted OIBDA
|
(79)
|
|
|
127
|
|
|
NM
|
|
NM
|
|
|
287
|
|
|
527
|
|
|
(46)
|
%
|
(43)
|
%
|
|
Total Adjusted
OIBDA(4)
|
$
|
726
|
|
|
$
|
954
|
|
|
(24)
|
%
|
(24)
|
%
|
|
$
|
2,680
|
|
|
$
|
3,194
|
|
|
(16)
|
%
|
(16)
|
%
|
|
Diluted earnings per
share
|
$
|
0.24
|
|
|
$
|
0.44
|
|
|
(45)
|
%
|
|
|
$
|
1.46
|
|
|
$
|
1.40
|
|
|
4
|
%
|
|
|
Cash provided by
operating activities
|
$
|
811
|
|
|
$
|
860
|
|
|
(6)
|
%
|
|
|
$
|
1,914
|
|
|
$
|
2,186
|
|
|
(12)
|
%
|
|
|
Free cash
flow
|
$
|
705
|
|
|
$
|
787
|
|
|
(10)
|
%
|
|
|
$
|
1,641
|
|
|
$
|
1,896
|
|
|
(13)
|
%
|
|
|
NM: Not
Meaningful
|
Operational Highlights
- Ended Q3 with 20 million DTC Subscribers(5), an
increase of 3 million subscribers since the end of Q2.
- Generated $425 million of Next
Generation Revenues, growth of approximately 100% versus the prior
year quarter.(5)
- Recently launched discovery+ in Canada and the
Philippines; the app is also now available on Cox Contour TV
and Contour Stream Player.
- Finalized multi-year U.S. distribution agreements with DirecTV
and Verizon.
- Successfully broadcast the Tokyo 2020 Summer Olympic Games, which reached
over 372 million people in Europe
across TV and digital platforms, and delivered 1.3 billion minutes
of Olympics content on our streaming services.
Segment Results
U.S. Networks
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Dollars in
millions
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
%
Change
|
|
Advertising
|
$
|
991
|
|
|
$
|
941
|
|
|
5
|
%
|
|
$
|
3,090
|
|
|
$
|
2,964
|
|
|
4
|
%
|
|
Distribution
|
841
|
|
|
696
|
|
|
21
|
%
|
|
2,465
|
|
|
2,143
|
|
|
15
|
%
|
|
Other
|
26
|
|
|
22
|
|
|
18
|
%
|
|
82
|
|
|
64
|
|
|
28
|
%
|
|
Total
revenues
|
$
|
1,858
|
|
|
$
|
1,659
|
|
|
12
|
%
|
|
$
|
5,637
|
|
|
$
|
5,171
|
|
|
9
|
%
|
|
Costs of revenues,
excluding depreciation & amortization
|
459
|
|
|
445
|
|
|
3
|
%
|
|
1,339
|
|
|
1,334
|
|
|
—
|
%
|
|
Selling, general
& administrative(6)
|
436
|
|
|
263
|
|
|
66
|
%
|
|
1,462
|
|
|
808
|
|
|
81
|
%
|
|
Adjusted
OIBDA
|
$
|
963
|
|
|
$
|
951
|
|
|
1
|
%
|
|
$
|
2,836
|
|
|
$
|
3,029
|
|
|
(6)
|
%
|
Third-Quarter 2021
- Total U.S. Networks revenues increased 12% to $1,858 million compared to the prior year
quarter.
-
- Advertising revenue increased 5% primarily due to higher
pricing, the continued monetization of content offerings on our
next generation platforms, and higher inventory, partially offset
by lower overall ratings and secular declines in the pay-TV
ecosystem.
- Distribution revenue increased 21% primarily driven by
discovery+ and increases in contractual affiliate rates, partially
offset by a decline in linear subscribers.
- Subscribers to our fully distributed linear networks at
September 30, 2021 were 3% lower than
at September 30, 2020. Total
subscribers to our linear networks were 8% lower, or 4% lower
excluding the impact from the sale of our Great American Country
linear network.
- Total operating expenses increased 26% to $895 million compared to the prior year
quarter.
-
- Costs of revenues increased 3% primarily due to third-party app
store fees and our growing content investment in discovery+.
- SG&A expenses increased 66% primarily due to higher
marketing-related expenses to support discovery+.
- Adjusted OIBDA increased 1% to $963
million compared to the prior year quarter.
International Networks
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Dollars in
millions
|
2021
|
|
2020
|
|
%
Change
|
Ex-FX
|
|
2021
|
|
2020
|
|
%
Change
|
Ex-FX
|
|
Advertising
|
$
|
467
|
|
|
$
|
365
|
|
|
28
|
%
|
26
|
%
|
|
$
|
1,420
|
|
|
$
|
1,017
|
|
|
40
|
%
|
32
|
%
|
|
Distribution
|
538
|
|
|
503
|
|
|
7
|
%
|
6
|
%
|
|
1,592
|
|
|
1,504
|
|
|
6
|
%
|
4
|
%
|
|
Other
|
290
|
|
|
34
|
|
|
NM
|
|
NM
|
|
|
363
|
|
|
87
|
|
|
NM
|
|
NM
|
|
|
Total
revenues
|
$
|
1,295
|
|
|
$
|
902
|
|
|
44
|
%
|
43
|
%
|
|
$
|
3,375
|
|
|
$
|
2,608
|
|
|
29
|
%
|
25
|
%
|
|
Costs of revenues,
excluding depreciation & amortization
|
1,072
|
|
|
554
|
|
|
94
|
%
|
92
|
%
|
|
2,218
|
|
|
1,389
|
|
|
60
|
%
|
52
|
%
|
|
Selling, general
& administrative(6)
|
302
|
|
|
221
|
|
|
37
|
%
|
32
|
%
|
|
870
|
|
|
692
|
|
|
26
|
%
|
19
|
%
|
|
Adjusted
OIBDA
|
$
|
(79)
|
|
|
$
|
127
|
|
|
NM
|
|
NM
|
|
|
$
|
287
|
|
|
$
|
527
|
|
|
(46)
|
%
|
(43)
|
%
|
|
NM: Not
Meaningful
|
Third-Quarter 2021
- Total International Networks revenues increased 44% to
$1,295 million, or 43% ex-FX,
compared to the prior year quarter.
-
- Advertising revenue increased 28%, or 26% ex-FX, primarily
driven by improved overall performance in all regions as
advertising markets continued to recover from the impact of
COVID-19, as well as benefiting from the broadcast of the Summer
Olympics throughout Europe.
- Distribution revenue increased 7%, or 6% ex-FX, primarily due
to higher Next Generation Revenues driven by discovery+ subscriber
growth, partially offset by lower contractual affiliate rates in
some European markets.
- Other revenues increased to $290
million, driven by sublicensing of Olympics sports rights to
broadcast networks throughout Europe.
- Total operating expenses increased 77% to $1,374 million, or 75% ex-FX, compared to the
prior year quarter.
-
- Costs of revenues increased 94%, or 92% ex-FX, primarily due to
costs related to the Olympics, and to a lesser extent European
sporting events and leagues returning to a more normalized
schedule, as well as higher content investment to support
discovery+.
- SG&A increased 37%, or 32% ex-FX, primarily due to higher
marketing-related expenses to support discovery+ and the Olympics,
and to a lesser extent, personnel costs to support discovery+.
- Adjusted OIBDA of $(79) million
decreased $206 million compared to
the prior year quarter, or decreased $205
million ex-FX.
Free Cash Flow
Third quarter 2021 cash provided by
operating activities decreased to $811
million from $860 million in
the prior year quarter. Free cash flow decreased to $705 million from $787
million, primarily attributable to higher content spend for
our direct-to-consumer platforms and the Olympics, partially offset
by improvements in working capital.
Other
Interest Rate Derivative Contracts
In
anticipation of the proposed transaction with WarnerMedia, the
Company executed various interest rate derivative contracts with a
total notional value of $15 billion
during the third quarter. The objective of these contracts is to
partially mitigate interest rate risk associated with the expected
issuance of future debt to finance the cash portion of the proposed
WarnerMedia transaction. The contracts did not receive hedging
designation for accounting purposes. As such, changes in the fair
value of the derivative contracts are recognized in "Other income
(expense), net" in the consolidated statements of operations, which
could create volatility in "Net income" in the coming quarters
until the closing of the proposed transaction with WarnerMedia. The
financial impact during the third quarter was $106 million.
2021 Outlook(7)
Discovery may provide
forward-looking commentary in connection with this earnings
announcement on its quarterly earnings conference call. Details on
how to access the audio webcast are included below.
Earnings Conference Call Information
Discovery will
host a conference call today, November 3, 2021 at 8:00 a.m. ET, to discuss its third quarter 2021
results. To listen to the audio webcast of the earnings call,
please visit the Investor Relations section of the Corporate
website at https://corporate.discovery.com/.
Cautionary Statement Concerning Forward-Looking
Statements
This press release contains certain
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations, forecasts and
assumptions that involve risks and uncertainties and on information
available to the Company as of the date hereof. The Company's
actual results could differ materially from those stated or implied
due to risks and uncertainties associated with its business, which
include the risk factors disclosed in its 2020 Annual Report on
Form 10-K filed with the SEC on February 22,
2021 and its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2021, expected to be filed on or before
November 9, 2021.
Forward-looking statements include statements regarding the
Company's expectations, beliefs, intentions or strategies regarding
the future, and can be identified by forward-looking words such as
"anticipate," "believe," "could," "continue," "estimate," "expect,"
"intend," "may," "should," "will" and "would" or similar words.
Forward-looking statements in this release include, without
limitation, statements regarding investing in the Company's
programming, strategic growth initiatives, changes in the pay-TV
ecosystem, the timing and effects of its pending transaction with
AT&T Inc. and WarnerMedia and related transactions, and the
impact of COVID-19. Actual results may differ materially from the
results predicted due to risks and uncertainties, including the
Company's ability to complete, integrate, maintain and obtain the
anticipated benefits and synergies from its proposed transaction to
combine the Company's business with AT&T's WarnerMedia. The
Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is
based.
Non-GAAP Financial Measures
In addition to the results
prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") provided in this release, the Company has
presented Adjusted OIBDA and free cash flow. These non-GAAP
measures should be considered in addition to, but not as a
substitute for, operating income, net income, earnings per diluted
share and other measures of financial performance reported in
accordance with GAAP. Please review the supplemental financial
schedules for reconciliations to the most comparable GAAP
measures.
About Discovery
Discovery, Inc. (Nasdaq: DISCA, DISCB,
DISCK) is a global leader in real life entertainment, serving a
passionate audience of superfans around the world with content that
inspires, informs and entertains. Discovery delivers over 8,000
hours of original programming each year and has category leadership
across deeply loved content genres around the world. Available in
over 220 countries and territories and nearly 50 languages,
Discovery is a platform innovator, reaching viewers on all screens,
including TV Everywhere products such as the GO portfolio of apps;
direct-to-consumer streaming services such as discovery+, Food
Network Kitchen and MotorTrend OnDemand; digital-first and social
content from Group Nine Media; a landmark natural history and
factual content partnership with the BBC; and a strategic alliance
with PGA TOUR to create the international home of golf. Discovery's
portfolio of premium brands includes Discovery Channel, HGTV, Food
Network, TLC, Investigation Discovery, Travel Channel, MotorTrend,
Animal Planet, Science Channel, and the multi-platform JV with
Chip and Joanna Gaines, Magnolia
Network, as well as OWN: Oprah Winfrey Network in the U.S.,
Discovery Kids in Latin America,
and Eurosport, the leading provider of locally relevant, premium
sports and Home of the Olympic Games across Europe. For more information, please visit
corporate.discovery.com and follow @DiscoveryIncTV across social
platforms.
|
DISCOVERY,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited; in
millions, except per share amounts)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Advertising
|
$
|
1,458
|
|
|
$
|
1,306
|
|
|
$
|
4,510
|
|
|
$
|
3,981
|
|
|
Distribution
|
1,379
|
|
|
1,199
|
|
|
4,057
|
|
|
3,647
|
|
|
Other
|
313
|
|
|
56
|
|
|
437
|
|
|
157
|
|
|
Total
revenues
|
3,150
|
|
|
2,561
|
|
|
9,004
|
|
|
7,785
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
Costs of revenues,
excluding depreciation and amortization
|
1,529
|
|
|
1,003
|
|
|
3,553
|
|
|
2,731
|
|
|
Selling, general and
administrative
|
944
|
|
|
633
|
|
|
2,947
|
|
|
1,913
|
|
|
Depreciation and
amortization
|
341
|
|
|
341
|
|
|
1,043
|
|
|
1,001
|
|
|
Impairment of goodwill
and other intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
Restructuring and
other charges
|
7
|
|
|
53
|
|
|
29
|
|
|
75
|
|
|
Gain on
disposition
|
—
|
|
|
—
|
|
|
(72)
|
|
|
—
|
|
|
Total costs and
expenses
|
2,821
|
|
|
2,030
|
|
|
7,500
|
|
|
5,758
|
|
|
Operating
income
|
329
|
|
|
531
|
|
|
1,504
|
|
|
2,027
|
|
|
Interest expense,
net
|
(159)
|
|
|
(161)
|
|
|
(479)
|
|
|
(485)
|
|
|
Loss on
extinguishment of debt
|
(6)
|
|
|
(5)
|
|
|
(10)
|
|
|
(76)
|
|
|
Loss from equity
investees, net
|
(9)
|
|
|
(18)
|
|
|
(20)
|
|
|
(62)
|
|
|
Other income
(expense), net
|
78
|
|
|
(28)
|
|
|
255
|
|
|
(92)
|
|
|
Income before income
taxes
|
233
|
|
|
319
|
|
|
1,250
|
|
|
1,312
|
|
|
Income tax (expense)
benefit
|
(36)
|
|
|
11
|
|
|
(144)
|
|
|
(275)
|
|
|
Net income
|
197
|
|
|
330
|
|
|
1,106
|
|
|
1,037
|
|
|
Net income
attributable to noncontrolling interests
|
(32)
|
|
|
(29)
|
|
|
(116)
|
|
|
(82)
|
|
|
Net income
attributable to redeemable noncontrolling interests
|
(9)
|
|
|
(1)
|
|
|
(22)
|
|
|
(7)
|
|
|
Net income available
to Discovery, Inc.
|
$
|
156
|
|
|
$
|
300
|
|
|
$
|
968
|
|
|
$
|
948
|
|
|
Net income per share
available to Discovery, Inc. Series A, B and C common
stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.24
|
|
|
$
|
0.44
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
|
Diluted
|
$
|
0.24
|
|
|
$
|
0.44
|
|
|
$
|
1.46
|
|
|
$
|
1.40
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
506
|
|
|
505
|
|
|
503
|
|
|
510
|
|
|
Diluted
|
663
|
|
|
672
|
|
|
665
|
|
|
677
|
|
|
DISCOVERY,
INC.
CONSOLIDATED
BALANCE SHEETS
(unaudited; in
millions, except par value)
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
3,116
|
|
|
$
|
2,091
|
|
|
Receivables,
net
|
2,462
|
|
|
2,537
|
|
|
Content rights and
prepaid license fees, net
|
254
|
|
|
532
|
|
|
Prepaid expenses and
other current assets
|
824
|
|
|
970
|
|
|
Total current
assets
|
6,656
|
|
|
6,130
|
|
|
Noncurrent content
rights, net
|
3,688
|
|
|
3,439
|
|
|
Property and
equipment, net
|
1,310
|
|
|
1,206
|
|
|
Goodwill
|
12,957
|
|
|
13,070
|
|
|
Intangible assets,
net
|
6,784
|
|
|
7,640
|
|
|
Other noncurrent
assets
|
2,923
|
|
|
2,602
|
|
|
Total
assets
|
$
|
34,318
|
|
|
$
|
34,087
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
2,361
|
|
|
$
|
2,190
|
|
|
Deferred
revenues
|
625
|
|
|
557
|
|
|
Current portion of
debt
|
349
|
|
|
335
|
|
|
Total current
liabilities
|
3,335
|
|
|
3,082
|
|
|
Noncurrent portion of
debt
|
14,436
|
|
|
15,069
|
|
|
Deferred income
taxes
|
1,248
|
|
|
1,534
|
|
|
Other noncurrent
liabilities
|
1,901
|
|
|
2,019
|
|
|
Total
liabilities
|
20,920
|
|
|
21,704
|
|
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interests
|
358
|
|
|
383
|
|
|
Equity:
|
|
|
|
|
Discovery, Inc.
stockholders' equity:
|
|
|
|
|
Series A-1
convertible preferred stock: $0.01 par value; 8 shares authorized,
issued and outstanding
|
—
|
|
|
—
|
|
|
Series C-1
convertible preferred stock: $0.01 par value; 6 shares authorized;
4 and 5 shares issued and outstanding
|
—
|
|
|
—
|
|
|
Series A common
stock: $0.01 par value; 1,700 shares authorized; 170 and 163 shares
issued; and 169 and 162 shares outstanding
|
2
|
|
|
2
|
|
|
Series B
convertible common stock: $0.01 par value; 100 shares authorized; 7
shares issued and outstanding
|
—
|
|
|
—
|
|
|
Series C common
stock: $0.01 par value; 2,000 shares authorized; 559 and 547 shares
issued; and 330 and 318 shares outstanding
|
5
|
|
|
5
|
|
|
Additional paid-in
capital
|
11,043
|
|
|
10,809
|
|
|
Treasury stock, at
cost: 230 shares
|
(8,244)
|
|
|
(8,244)
|
|
|
Retained
earnings
|
9,522
|
|
|
8,543
|
|
|
Accumulated other
comprehensive loss
|
(717)
|
|
|
(651)
|
|
|
Total Discovery, Inc.
stockholders' equity
|
11,611
|
|
|
10,464
|
|
|
Noncontrolling
interests
|
1,429
|
|
|
1,536
|
|
|
Total
equity
|
13,040
|
|
|
12,000
|
|
|
Total liabilities and
equity
|
$
|
34,318
|
|
|
$
|
34,087
|
|
|
DISCOVERY,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
Operating
Activities
|
|
|
|
|
Net income
|
$
|
1,106
|
|
|
$
|
1,037
|
|
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Content rights
amortization and impairment
|
2,735
|
|
|
2,118
|
|
|
Depreciation and
amortization
|
1,043
|
|
|
1,001
|
|
|
Deferred income
taxes
|
(502)
|
|
|
(198)
|
|
|
Share-based
compensation expense
|
134
|
|
|
62
|
|
|
Gain on
disposition
|
(72)
|
|
|
—
|
|
|
Equity in losses of
equity method investee companies, including cash
distributions
|
57
|
|
|
96
|
|
|
Gain on sale of
investments
|
(20)
|
|
|
—
|
|
|
Loss on extinguishment
of debt
|
10
|
|
|
76
|
|
|
Impairment of goodwill
and other intangible assets
|
—
|
|
|
38
|
|
|
Other, net
|
(147)
|
|
|
34
|
|
|
Changes in operating
assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
Receivables,
net
|
44
|
|
|
156
|
|
|
Content rights and
payables, net
|
(2,578)
|
|
|
(2,100)
|
|
|
Accounts payable,
accrued liabilities, deferred revenues and other noncurrent
liabilities
|
124
|
|
|
(166)
|
|
|
Foreign currency,
prepaid expenses and other assets, net
|
(20)
|
|
|
32
|
|
|
Cash provided by
operating activities
|
1,914
|
|
|
2,186
|
|
|
Investing
Activities
|
|
|
|
|
Purchases of property
and equipment
|
(273)
|
|
|
(290)
|
|
|
Proceeds from sales
and maturities of investments and dissolution of joint
venture
|
498
|
|
|
67
|
|
|
Investments in and
advances to equity investments
|
(137)
|
|
|
(141)
|
|
|
(Payments for)
proceeds from derivative instruments, net
|
(102)
|
|
|
85
|
|
|
Purchases of
investments
|
(103)
|
|
|
(250)
|
|
|
Business
acquisitions, net of cash acquired
|
—
|
|
|
(26)
|
|
|
Other investing
activities, net
|
87
|
|
|
5
|
|
|
Cash used in
investing activities
|
(30)
|
|
|
(550)
|
|
|
Financing
Activities
|
|
|
|
|
Principal repayments
of debt, including premiums to par value and discount
payment
|
(574)
|
|
|
(2,193)
|
|
|
Borrowings from debt,
net of discount and issuance costs
|
—
|
|
|
1,979
|
|
|
Distributions to
noncontrolling interests and redeemable noncontrolling
interests
|
(231)
|
|
|
(216)
|
|
|
Purchase of
redeemable noncontrolling interests
|
(31)
|
|
|
—
|
|
|
Repurchases of
stock
|
—
|
|
|
(741)
|
|
|
Principal repayments
of revolving credit facility
|
—
|
|
|
(500)
|
|
|
Borrowings under
revolving credit facility
|
—
|
|
|
500
|
|
|
Other financing
activities, net
|
25
|
|
|
(101)
|
|
|
Cash used in
financing activities
|
(811)
|
|
|
(1,272)
|
|
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
(69)
|
|
|
40
|
|
|
Net change in cash,
cash equivalents, and restricted cash
|
1,004
|
|
|
404
|
|
|
Cash, cash
equivalents, and restricted cash, beginning of period
|
2,122
|
|
|
1,552
|
|
|
Cash, cash
equivalents, and restricted cash, end of period
|
$
|
3,126
|
|
|
$
|
1,956
|
|
|
DISCOVERY,
INC.
SUPPLEMENTAL
FINANCIAL DATA
RECONCILIATION OF
NET INCOME TO
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
(unaudited; in
millions)
|
|
|
Three Months Ended
September 30, 2021
|
|
U.S.
Networks
|
|
International
Networks
|
|
Corporate,
Inter-segment Eliminations, and Other
|
|
Total
|
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
$
|
156
|
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
9
|
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
32
|
|
|
Income tax
expense
|
|
|
|
|
|
|
36
|
|
|
Other income,
net
|
|
|
|
|
|
|
(78)
|
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
9
|
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
6
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
159
|
|
|
Operating income
(loss)
|
$
|
738
|
|
|
$
|
(174)
|
|
|
$
|
(235)
|
|
|
$
|
329
|
|
|
Depreciation and
amortization
|
222
|
|
|
90
|
|
|
29
|
|
|
341
|
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
36
|
|
|
36
|
|
|
Restructuring and
other charges
|
4
|
|
|
4
|
|
|
(1)
|
|
|
7
|
|
|
Transaction and
integration costs
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
|
Inter-segment
eliminations
|
(1)
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Adjusted
OIBDA
|
$
|
963
|
|
|
$
|
(79)
|
|
|
$
|
(158)
|
|
|
$
|
726
|
|
|
|
|
Three Months Ended
September 30, 2020
|
|
U.S.
Networks
|
|
International
Networks
|
|
Corporate,
Inter-segment Eliminations, and Other
|
|
Total
|
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
$
|
300
|
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
1
|
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
29
|
|
|
Income tax
benefit
|
|
|
|
|
|
|
(11)
|
|
|
Other expense,
net
|
|
|
|
|
|
|
28
|
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
18
|
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
5
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
161
|
|
|
Operating income
(loss)
|
$
|
696
|
|
|
$
|
21
|
|
|
$
|
(186)
|
|
|
$
|
531
|
|
|
Depreciation and
amortization
|
225
|
|
|
93
|
|
|
23
|
|
|
341
|
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
29
|
|
|
29
|
|
|
Restructuring and
other charges
|
29
|
|
|
13
|
|
|
11
|
|
|
53
|
|
|
Inter-segment
eliminations
|
1
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
Adjusted
OIBDA
|
$
|
951
|
|
|
$
|
127
|
|
|
$
|
(124)
|
|
|
$
|
954
|
|
|
DISCOVERY,
INC.
SUPPLEMENTAL
FINANCIAL DATA
RECONCILIATION OF
NET INCOME TO
ADJUSTED OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
(unaudited; in
millions)
|
|
|
Nine Months Ended
September 30, 2021
|
|
U.S.
Networks
|
|
International
Networks
|
|
Corporate,
Inter-segment Eliminations, and Other
|
|
Total
|
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
$
|
968
|
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
22
|
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
116
|
|
|
Income tax
expense
|
|
|
|
|
|
|
144
|
|
|
Other income,
net
|
|
|
|
|
|
|
(255)
|
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
20
|
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
10
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
479
|
|
|
Operating income
(loss)
|
$
|
2,241
|
|
|
$
|
(30)
|
|
|
$
|
(707)
|
|
|
$
|
1,504
|
|
|
Depreciation and
amortization
|
671
|
|
|
281
|
|
|
91
|
|
|
1,043
|
|
|
Employee share-based
compensation
|
(1)
|
|
|
—
|
|
|
125
|
|
|
124
|
|
|
Restructuring and
other charges
|
5
|
|
|
24
|
|
|
—
|
|
|
29
|
|
|
Transaction and
integration costs
|
—
|
|
|
4
|
|
|
48
|
|
|
52
|
|
|
Inter-segment
eliminations
|
(3)
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(Gain) loss on
disposition
|
(77)
|
|
|
5
|
|
|
—
|
|
|
(72)
|
|
|
Adjusted
OIBDA
|
$
|
2,836
|
|
|
$
|
287
|
|
|
$
|
(443)
|
|
|
$
|
2,680
|
|
|
|
|
Nine Months Ended
September 30, 2020
|
|
U.S.
Networks
|
|
International
Networks
|
|
Corporate,
Inter-segment Eliminations, and Other
|
|
Total
|
|
Net income available
to Discovery, Inc.
|
|
|
|
|
|
|
$
|
948
|
|
|
Net income
attributable to redeemable noncontrolling interests
|
|
|
|
|
|
|
7
|
|
|
Net income
attributable to noncontrolling interests
|
|
|
|
|
|
|
82
|
|
|
Income tax
expense
|
|
|
|
|
|
|
275
|
|
|
Other expense,
net
|
|
|
|
|
|
|
92
|
|
|
Loss from equity
investees, net
|
|
|
|
|
|
|
62
|
|
|
Loss on
extinguishment of debt
|
|
|
|
|
|
|
76
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
485
|
|
|
Operating income
(loss)
|
$
|
2,309
|
|
|
$
|
213
|
|
|
$
|
(495)
|
|
|
$
|
2,027
|
|
|
Depreciation and
amortization
|
676
|
|
|
259
|
|
66
|
|
|
1,001
|
|
|
Impairment of goodwill
and other intangible assets
|
—
|
|
|
38
|
|
—
|
|
|
38
|
|
|
Employee share-based
compensation
|
—
|
|
|
—
|
|
|
53
|
|
|
53
|
|
|
Restructuring and
other charges
|
41
|
|
|
17
|
|
|
17
|
|
|
75
|
|
|
Inter-segment
eliminations
|
3
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
Adjusted
OIBDA
|
$
|
3,029
|
|
|
$
|
527
|
|
|
$
|
(362)
|
|
|
$
|
3,194
|
|
|
DISCOVERY,
INC.
SUPPLEMENTAL
FINANCIAL DATA
SELECTED FINANCIAL
DETAIL
(unaudited; in
millions)
|
|
|
CALCULATION OF
FREE CASH FLOW
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
$
Change
|
%
Change
|
|
2021
|
|
2020
|
|
$
Change
|
%
Change
|
|
Cash provided by
operating activities
|
$
|
811
|
|
|
$
|
860
|
|
|
$
|
(49)
|
|
(6)
|
%
|
|
$
|
1,914
|
|
|
$
|
2,186
|
|
|
$
|
(272)
|
|
(12)
|
%
|
|
Purchases of property
and equipment
|
(106)
|
|
|
(73)
|
|
|
(33)
|
|
(45)
|
%
|
|
(273)
|
|
|
(290)
|
|
|
17
|
|
6
|
%
|
|
Free cash
flow
|
$
|
705
|
|
|
$
|
787
|
|
|
$
|
(82)
|
|
(10)
|
%
|
|
$
|
1,641
|
|
|
$
|
1,896
|
|
|
$
|
(255)
|
|
(13)
|
%
|
Definitions and
Sources
(1) Methodology for
Calculating Growth Rates Excluding the Impact of Currency
Effects: The impact of exchange rates on our business is an
important factor in understanding period-to-period comparisons of
our results. For example, our international revenues are favorably
impacted as the U.S. dollar weakens relative to other foreign
currencies, and unfavorably impacted as the U.S. dollar strengthens
relative to other foreign currencies. We believe the presentation
of results on a constant currency basis ("ex-FX"), in addition to
results reported in accordance with GAAP, provides useful
information about our operating performance because the
presentation ex-FX excludes the effects of foreign currency
volatility and highlights our core operating results. The
presentation of results on a constant currency basis should be
considered in addition to, but not a substitute for, measures of
financial performance reported in accordance with GAAP.
The ex-FX change represents the percentage change on a
period-over-period basis adjusted for foreign currency impacts. The
ex-FX change is calculated as the difference between the current
year amounts translated at a baseline rate, which is a spot rate
for each of our currencies determined early in the fiscal year as
part of our forecasting process (the "2021 Baseline Rate"), and the
prior year amounts translated at the same 2021 Baseline Rate.
In addition, consistent with the assumption of a constant
currency environment, our ex-FX results exclude the impact of our
foreign currency hedging activities, as well as realized and
unrealized foreign currency transaction gains and losses. Results
on a constant currency basis, as we present them, may not be
comparable to similarly titled measures used by other
companies.
(2) Adjusted OIBDA and Adjusted OIBDA
Excluding the Impact of Currency Effects: The Company evaluates
the operating performance of its segments based on financial
measures such as revenues and Adjusted OIBDA. Adjusted OIBDA is
defined as operating income excluding: (i) employee share-based
compensation, (ii) depreciation and amortization, (iii)
restructuring and other charges, (iv) certain impairment charges,
(v) gains and losses on business and asset dispositions, (vi)
certain inter-segment eliminations related to production studios,
(vii) third-party transaction and integration costs, and (viii)
other items impacting comparability.
The Company uses this measure to assess the operating results
and performance of its segments, perform analytical comparisons,
identify strategies to improve performance, and allocate resources
to each segment. The Company believes Adjusted OIBDA is relevant to
investors because it allows them to analyze the operating
performance of each segment using the same metric management
uses.
The Company excludes share-based compensation, restructuring and
other charges, certain impairment charges, gains and losses on
business and asset dispositions and acquisition and integration
costs from the calculation of Adjusted OIBDA due to their impact on
comparability between periods. The Company also excludes the
depreciation of fixed assets and amortization of intangible assets,
as these amounts do not represent cash payments in the current
reporting period. Certain corporate expenses and inter-segment
eliminations related to production studios are excluded from
segment results to enable executive management to evaluate segment
performance based upon the decisions of segment executives.
Adjusted OIBDA should be considered in addition to, but not a
substitute for, operating income, net income, and other measures of
financial performance reported in accordance with U.S. GAAP. Refer
to the comments in footnote 1 for the methodology used to calculate
growth rates excluding foreign currency effects.
(3) Free Cash Flow: The Company
defines free cash flow as cash flow from operations less
acquisitions of property and equipment. The Company believes free
cash flow is an important indicator for management and investors of
the Company's liquidity, including its ability to reduce debt, make
strategic investments, and return capital to stockholders.
(4) Financial Highlights
Table: This table presents a selection of the Company's
financial results. Because the table as shown excludes the
"Corporate, Inter-segment Eliminations, and Other" operating
segment, the row "Total Adjusted OIBDA" will not foot as presented
in the table.
(5) Direct-to-Consumer (DTC)
Definitions:
Next Generation
Revenues: Subscription and advertising revenues generated
from the Company's DTC products, as well as revenues from TV
Everywhere, our GO applications and other digital properties.
Direct-to-Consumer Subscriber: A subscription is 1)
a subscription to a direct-to-consumer product for which we have
recognized subscription revenue from a direct-to-consumer platform;
2) a subscription received through wholesale arrangements in which
we receive a fee for the distribution of our direct-to-consumer
platforms, as well as subscriptions provided directly or through
third-party platforms; and 3) a subscription recognized by certain
joint venture partners and affiliated parties. We may refer to the
aggregate number of subscriptions across our direct-to-consumer
services as subscribers. A subscriber is only counted if they are
on a paying status and excludes users on free trials. At the end of
each quarter, we include the actual number of users that rolled to
pay up to seven days immediately following quarter end.
(6) SG&A Expenses: Selling,
general and administrative expenses exclude employee share-based
compensation and third-party transaction and integration costs.
(7) 2021 Outlook: Discovery does
not expect to be able to provide a reconciliation of the non-GAAP
forward-looking commentary to comparable GAAP measures as, at this
time, the Company cannot determine the occurrence or impact of the
adjustments, such as the effect of future changes in foreign
currency exchange rates or future acquisitions or divestitures that
would be excluded from such GAAP measures.
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SOURCE Discovery, Inc.