The operator introduces the speakers for the Warner Bros. Discovery Fourth Quarter 2023 Earnings Conference Call. Andrew Slabin, David Zaslav, Gunnar Wiedenfels, and JB Perrette will be discussing the company's financial performance and future plans. The presentation will include forward-looking statements and the company's filings with the SEC should be consulted for more information. David Zaslav highlights the company's progress in paying off debt and reducing leverage. They expect to continue this trend in 2024.

The organization has become more efficient and has exceeded its goal of generating free cash flow. The first quarter is already showing improved free cash flow and an increase in streaming advertising. The company is optimistic about their digital and advanced advertising solutions and expects to drive momentum in 2024. However, they are facing challenges in the pay-TV and linear advertising ecosystems, but are finding innovative solutions and seeing improvement in ratings and advertising revenue. The international networks, led by Gerhard Zeiler, are performing strongly and gaining momentum.

The third paragraph discusses the positive performance of linear advertising in the EMEA region, particularly in Poland, Germany, and Italy. The success is attributed to strong ratings for flagship programming and a creative team with momentum. Despite some sluggishness in certain markets, EMEA saw its largest quarterly year-over-year share growth since the pandemic began. The focus of Warner Bros. Discovery is on growth, driven by great storytelling and a strong lineup of franchises, brands, and content. The studios are back to full capacity after strikes, and the company had both successes and misses in theatrical and gaming releases. The animation division has been relaunched and will release two features a year starting in 2026. Overall, the company is excited about the future for movie-going audiences.

Warner Bros. is excited about their upcoming slate of films, including Dune: Part Two and Godzilla vs Kong: The New Empire. They are focused on bringing in top talent, such as Tom Cruise, Alejandro Inarritu, Paul Thomas Anderson, and George Clooney. They also have several highly anticipated TV projects in the works, including True Detective, The White Lotus, and The Last of Us. Overall, Warner Bros. is pleased to have so many talented creatives working with them.

Warner Bros is focused on creating great storytelling and building a strong future. They have a strategic advantage with their franchises and are committed to reinvigorating them. This includes upcoming projects such as a new Superman movie and a Game of Thrones spin-off. They are also excited about reigniting the Harry Potter franchise and aim to debut new stories on their streaming service, Max, in 2026. Their top priority is to drive profitable growth for Max and they are on track to achieve their goals.

The company is anticipating significant growth in the next 24 months, with the rollout of Max in international markets, including key regions such as Latin America, EMEA, and APAC. They also have plans to expand into new markets like France and Belgium, coinciding with the Paris Olympics. With only half the addressable households and markets covered, there is a huge opportunity for growth. The company is also launching an ad-supported offering and has lucrative partnership deals to help with scaling. Q4 saw the lowest US churn rates for HBO Max, and improvements in personalization and product are expected to continue reducing churn. The company is also excited about the upcoming content pipeline for Max, which was previously slowed down by production strikes. Upcoming releases include popular series such as True Detective, Hacks, House of the Dragon, DC's The Penguin, and the new Dune series.

In 2025, HBO Max will release new seasons of popular shows like The White Lotus, The Last of Us, and Euphoria. They will also add highly anticipated movies like Aquaman and the Lost Kingdom, Wonka, and Dune: Part Two to the streaming service. Additionally, they have formed a joint venture with Disney and Fox for sports content, which they believe will contribute to their growth. They are also in discussions to renew their NBA rights and are excited for their coverage of the Paris Summer Olympics. Overall, HBO Max is confident in their financial and creative positioning and will continue to make necessary decisions to drive growth and increase shareholder value.

During the fourth quarter financial report, Gunnar Wiedenfels discussed the company's progress in achieving key objectives and evolving in a changing industry. Despite industry headwinds, the company saw a 12% increase in EBITDA on a pro forma basis. The post-merger integration is now complete and the company has achieved $4 billion in combined merger and transformation savings. The streaming team has also made significant progress, generating $100 million in positive EBITDA and surpassing targets. The company is focused on capturing further improvement opportunities and operating with a one-team, one-company mindset.

The company has seen significant growth in subscriber-related revenues and plans to continue investing in subscriber growth while maintaining a disciplined approach. They are also focusing on relaunching and rebranding in existing markets to improve the product experience and content offering. Additionally, the company has generated a high amount of free cash flow and made strides in capital efficiencies.

The author is pleased with the team's focus on capital returns and shareholder value. They have made solid progress in 2023 and expect another strong year in 2024. They have paid down $5.4 billion in debt, resulting in a net leverage of 3.9 times EBITDA. The outstanding debt is fixed with an average cost of 4.6% and manageable amounts coming due in the next three years. The company remains committed to their long-term gross leverage target and expects to continue delevering in 2024. In the Studios segment, the strikes had a significant impact on production and delivery of TV content in the fourth quarter, leading to decisions about retaining or licensing content externally.

The paragraph discusses the inconsistent performance of the theatrical slate and the impact it had on the company's financial results. It mentions the success of Wonka and the underperformance of Aquaman and The Color Purple. The upcoming quarter will also be challenging for the Studios segment due to tough year-over-year comparisons and the burden of marketing campaigns for Dune Two and Godzilla vs. Kong. In the Networks segment, there was a decrease in revenues and advertising due to softness in the US market, but there has been an improvement in Q1. Domestic ad sales are doing well, while international ad sales are stronger in EMEA.

The first quarter has shown acceleration in EMEA and challenging market conditions in LatAm, but Max's relaunch in those markets presents a good opportunity. Network distribution revenues were flat after adjusting for certain factors, and overall Networks EBITDA decreased. D2C finished the quarter with nearly 98 million subscribers, with international driving growth. Domestic declines were due to lack of fresh content, and linear wholesale losses are masking D2C traction. Content revenue in the segment declined due to timing of third-party licensing deals.

The D2C subscriber-related revenues were up over 6% in the quarter, with distribution revenues increasing 4% due to price increases and partnerships. Advertising revenues also increased significantly, and the company expects this segment to be a major driver of growth in 2024. The D2C segment is expected to be profitable for the year, with a focus on achieving $1 billion in EBITDA by 2025. Q1 free cash flow is expected to improve significantly compared to the previous year, and the company is focused on capturing cash opportunities. However, there may be some negative impacts on free cash flow, such as the reversal of net cash benefits from strikes and integration-related cash costs.

The company expects to incur some additional cash restructuring costs as they continue their transformation journey, but at a lower level. The Olympics will have a negative impact on free cash flow this year due to its working capital dynamics. Interest expense is expected to decrease in 2024 as the company continues to reduce debt, and CapEx may also decrease slightly. EBITDA will be the main factor in determining free cash flow. The company has made significant changes and progress in its transformation, which will help them achieve their growth objectives and focus on driving shareholder value. The first question in the Q&A was about the company's strategic plans for the Studios and DTC segments over the next few years.

The speaker is discussing the progress of their vision for the company and when it will start to show financial success. They mention upcoming projects and investments in DC content. They also touch on the need for more programming in the evolving media landscape.

The speaker discusses the company's strategy of balancing well-known brands like Lord of the Rings and Harry Potter with new content like Barbie. They also mention the underperformance of the studio and their optimism for the future. The D2C segment has seen increased engagement thanks to the inclusion of legacy Discovery content, and the top 10 shows on Max often include legacy Discovery content, highlighting the success of the two portfolios coming together.

The speaker discusses three key points about the next few years, including a focus on WB-based franchises for Max Originals, a strong content lineup, and optimism for growth. They also mention a new skinny sports bundle and its potential impact on cord cutting.

The speaker discusses the success of Bleacher Report, a sports app with a large audience of young people. They also mention a new app-based product that will allow viewers to easily access all sports playoffs without having to search for specific channels. The speaker believes this product will appeal to the younger generation who are not subscribing to traditional cable. They also express excitement for the partnership with Disney and Fox and believe this product will coexist effectively with cable. The product is still in development and no official announcement has been made yet.

The speaker discusses their plans for the future and how they will meet the strong demand in the marketplace. They also address questions about EBITDA and mention factors that will affect comparability over the year. They emphasize the importance of their D2C segment and their goal of profitable growth. They mention a $1 billion goal before 2025 and their focus on making decisions that benefit the company and respond to consumer reception.

The company is focused on long term asset value and generating value, rather than short term profitability. They are optimistic about their streaming business and plan to continue investing in it. They will be transparent about their projections and will focus on deleveraging the company and generating free cash flow.

In the paragraph, the speaker discusses the company's plans to generate $6.2 billion in revenue and focus on driving free cash flow and deleveraging the balance sheet. They mention that the company has great content and creatives and that they believe this will differentiate them. In response to a question about free cash flow and capital allocation, the speaker does not provide a specific quantitative guidance but mentions that they are prioritizing investments to drive free cash flow and deleveraging.

The company acknowledges that there will be a $1 billion reversal in 2024, but they are taking steps to improve their financials in the long term. They are focused on capital efficiency and have already made changes to their investment decision-making process. They have confidence in achieving their long term target of 60% cash conversion. They are also investing in the company while also deleveraging and maintaining a 2.5 to 3 times capital structure. They believe there will be more options available in the future.

David Zaslav discusses the company's focus on running its businesses efficiently and growing free cash flow. He mentions the impact of strikes on their past year's performance and their efforts to maintain a healthy balance sheet. Zaslav also highlights the company's assets and its strategy of building Max and deploying its creative assets. The next question shifts to advertising, and Zaslav mentions seeing strength in Q1 and expresses confidence in its continuation throughout the year despite increased competition from Amazon and Walmart's VIZIO.

The speaker discussed the improvements in advertising revenue in the US and internationally, with strong performance in key markets like Poland and Italy. They also mentioned upcoming market launches in countries like the UK, Germany, Italy, Australia, and Japan, and highlighted the potential for growth in third-party content sales. The team has made structural changes to better utilize the data footprint of Warner Bros. Discovery and is seeing positive results from upfront deals and reduced cancellations.

The company is seeing stable numbers in previously underperforming markets such as the UK and Nordics. They have a large addressable market and are planning to roll out in new markets starting in 2024. They are also continuing to sell content to third-party platforms.

The company is taking a case by case approach to deciding whether to fully exploit their own platforms or partially exploit with third parties. They have not sold anything since the Warner Bros. Discovery merger, but have done some co-exclusive deals. The company is having tough discussions internally and making decisions based on data. They are also focused on providing oxygen to their content and optimizing returns for both the company and talent. When they do sell content, it is only co-exclusively so they still hold onto everything. The Warner Bros. Television business is back in action with over 100 series and great talent, and the company is aggressive in their approach to their library.

The company has a strong core group of branded programs that have been around for a long time and have been syndicated on other platforms, bringing in significant revenue. They have a large library of motion pictures and TV shows and are focused on monetizing them through different windows. They are planning to launch their direct-to-consumer Max strategy in the UK, Germany, and Italy, but are still considering their partnerships in other markets. They are also in negotiations to retain the NBA rights, but are aware of the financial challenges that come with it.

Discovery has partnerships with Sky in various markets, but they are also focused on launching their own direct-to-consumer products in these markets. They have already had success with their Discovery+ product in the UK and a partnership with BT in sport. They see potential for growth and economics in these markets, but the rollout will not begin until 2026. Additionally, they have found distribution partners who are eager to help them scale quickly. They have also made a deal with Reliance in India.

The company is strategically evaluating markets to determine where to invest and where to sit out. They see potential for profitability and asset value in certain markets, such as Europe and Latin America. They are currently in exclusive discussions for NBA rights and generally prefer to own their content, but acknowledge the value of sports deals. They aim to be disciplined in their negotiations and see opportunities for efficiency in their overall content spend. They hope to continue their strong partnership with the NBA.

Robert Fishman asks two questions to David Zaslav about the future of the digital streaming ecosystem and the potential for bundling Max with other streaming services. Zaslav believes that rebundling is inevitable and that it will improve the consumer experience. He also mentions the success of bundling Max with Verizon and the potential for future bundling with other services. He sees this as a way to make it easier for consumers to access content across different platforms.

The speaker discusses the potential for bundling content through intermediaries or platforms like Apple or Amazon, as well as the possibility of doing it themselves. They believe this will provide a simpler and more fluid experience for consumers. The speaker also mentions the new sports venture and its potential to bundle with existing streaming services like Max, which will make it easier for consumers to access content. More information will be shared closer to the launch of the venture.

The speaker mentions that they are continuing to focus on Bleacher Report's sports offering and are excited to bring March Madness coverage to Max for the first time in the next 45 days. They also mention looking forward to the NBA playoffs in the spring. The operator then ends the conference call.

This summary was generated with AI and may contain some inaccuracies.