Warner Bros. Discovery reported that its efforts to staunch huge streaming losses were continuing to show results, with its direct to consumer segment showing an adjusted EBITDA loss of only $3 million in Q2, 2023, a $555 million year-over-year improvement on a pro forma combined basis.
But the company also reported global DTC sub losses of 1.8 million as its total DTC subs fell to 95.8 million and ad revenue in its traditional TV networks in its network segment of fell 13%, thanks to a slugging ad market and smaller TV audiences. That pushed revenues in the networks group down by 5% on a pro forma basis compared to the Q1, 2023.
Overall the results were below Wall Street expectations.
Q2 total revenues were $10,358 million, down 4% ex-FX compared to Q2 2022 a year earlier, and the company reported a net loss of $1.24 billion. However, Q2 total adjusted EBITDA was $2,149 million, up 23% ex-FX compared to the prior year quarter, on a combined basis.
Domestic U.S. and Canada DTC subs fell from 56.3 million in Q1 to 54.0 million in Q2, 2023, a 2.3 million sub loss in just three months.
Global subscriber counts where, however, higher than a year earlier, when the company reported 92.2 million subs in Q2 2022 and domestic DTC subs were up 0.9 million year over year.
Overall DTC revenues were $2,732 million, up 14% ex-FX compared to the prior year quarter Q2, 2023, on a pro forma combined basis and advertising revenue in the DTC segment increased by a healthy 25%.
DTC operating expenses were $2,735 million, down 8% ex-FX compared to the prior year quarter, on a pro forma combined basis.
“The important work we are doing to transform our businesses for the future continues to drive our strong financial performance as demonstrated by meaningful improvements to our balance sheet and our now increased synergy target of more than $5 billion,” David Zaslav, president and CEO in a statement. “This quarter alone we reported over $1.7 billion in free cash flow, and we remain bullish with respect to our delevering story and expect to be comfortably below 4.0x levered by the end of the year and at our target of 2.5-3.0x gross leverage by the close of 2024. All of which positions us well to lean into growth opportunities that will ultimately drive shareholder value, to include our Direct-to-Consumer business, which, in the wake of the successful launch of Max in the U.S., is tracking well ahead of our financial projections, having generated positive EBITDA in the first half of the year.”
