Warner Bros. Discovery (WBD) earnings Q4 2023

The exterior of the Warner Bros. Discovery Atlanta campus is pictured after the Writers Guild of America began its strike against the Alliance of Motion Pictures and Television Producers, in Atlanta, Georgia, on May 2, 2023.

Alyssa Pointer | Reuters

Warner Bros. Discovery missed analyst targets for both profit and revenue in the fourth quarter as advertising slumped and the company failed to provide free cash flow guidance for 2024.

Shares of Warner Bros. Discovery closed down 10% on Friday after the report.

The company’s fourth-quarter net loss was $400 million, or 16 cents per share, compared with a loss of $2.1 billion, or 86 cents per share, during the year-ago period. Warner Bros. Discovery reported a 14% decline in linear television advertising revenue excluding changes in foreign exchange and a 4% drop in actual distribution revenue.

“This business is not without its challenges,” Chief Executive Officer David Zaslav said during the company’s fourth-quarter earnings conference call. “Among them, we continue to face the impacts of ongoing disruption in the pay TV ecosystem and a dislocated, linear advertising ecosystem. We are challenging our leaders to find innovative solutions.”

Here’s what the company reported for the quarter ended Dec. 31, versus analysts’ estimates, according to LSEG, formerly known as Refinitiv:

  • Loss per share: 16 cents vs. 7 cents expected
  • Revenue: $10.28 billion vs. $10.35 billion expected

Fourth-quarter adjusted EBITDA was $2.5 billion, down 5% from a year ago, excluding the impact of foreign exchange, as studio revenue lagged as a result of strikes by the Writers Guild of America and the Screen Actors Guild-American Federation of Television and Radio Artists.

Studio revenue dropped 17% to $3.17 billion in the quarter. Adjusted EBITDA for the unit fell 29% to $543 million.

“The studio has really been underperforming, including the end of the year, where we had some real struggle,” Zaslav said during the earnings conference call.

Free cash flow

Warner Bros. Discovery generated $3.31 billion in free cash flow in the fourth quarter and ended 2023 with $6.16 billion in free cash flow, up 86% from a year prior. Zaslav has prioritized boosting free cash flow and shrinking the company’s debt.

Still, the company said there will be free cash flow headwinds in 2024 as content spend increases with the completion of the writers’ and actors’ strikes last year.

Chief Financial Officer Gunnar Wiedenfels declined to give free cash flow guidance for 2024 while noting that the Olympics, a commitment to increasing Max revenue with increased spend and the uncertainty of annual EBITDA could all weigh on cash generation this year.

“I expect 2024 to be another strong free cash flow year,” Wiedenfels said. “I deliberately do not want to give a specific quantitative free cash flow guidance.”

Warner Bros. Discovery paid down $1.2 billion of debt in the quarter and $5.4 billion in debt in 2023. It still has $44.2 billion of gross debt remaining after…

Read More: Warner Bros. Discovery (WBD) earnings Q4 2023

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