Discovery Reports Second-Quarter 2020 Results

8/5/20

Discovery, Inc.  (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the quarter ended June 30, 2020.

David Zaslav, President and Chief Executive Officer of Discovery said, "Our top priority is the health and safety of our employees as global economies and our offices begin to reopen. I want to thank all of our teams for the exceptional focus and dedication even during these turbulent times that continued to drive outstanding progress for our business, including renewals with four of our largest distribution partners and meaningful cost containment. We generated significant free cash flows in Q2, demonstrating the durability of our business, especially against the backdrop of a historic disruption to the global advertising market due to the impacts of the pandemic. With our significant liquidity cushion and the initial signs of stabilization that we're seeing in many of our key markets around the world, we are pleased to announce our intention to resume returning capital to shareholders through share repurchases. We are cautiously optimistic about the global outlook for the rest of the year and firmly believe that the long-term prospects for Discovery remain as vibrant as ever."

Second-Quarter 2020 Financial Highlights

  • Total revenues of $2,541 million decreased 12% compared to the prior year quarter, or decreased 11% ex-FX.(1)
    • U.S. distribution revenues increased 7%, or increased 2% excluding certain non-recurring items, and advertising revenues decreased 14%; and
    • International distribution revenues decreased 2% and advertising revenues decreased 37%, ex-FX.
  • Net income available to Discovery was $271 million and diluted EPS was $0.40 per share.
  • Total Adjusted OIBDA(2) decreased 12% to $1,127 million, or decreased 11% ex-FX.
  • Adjusted EPS(3) was $0.77 per diluted share.
  • Free cash flow(4) was $879 million.

Operational Highlights

  • Total share of viewing across the international portfolio in the second quarter of 2020 improved 4% on average, with strong share growth in India, UK and Italy.(6)
  • In the second quarter, Discovery's portfolio of networks in the U.S. gained more share in primetime than any other TV portfolio in each of our target demos.(7)
  • TLC delivered its best quarter in network history and was the top network across all of TV on Sunday nights among W25-54, P25-54 and W18-49, driven by the performance of the '90 Day Fiancé' franchise. The network also continues to be the No. 1 destination for women on cable TV in 2020.(8)

Second-Quarter 2020 Highlights

  • Revenues of $1,756 million decreased 6% compared to the prior year quarter.
    • Advertising decreased 14%, primarily driven by a decline in demand stemming from the COVID-19 pandemic and, to a lesser extent, secular declines in the pay-TV ecosystem and lower inventory, partially offset by higher overall ratings and pricing.
    • Distribution increased 7%, primarily driven by increases in contractual affiliate rates and certain non-recurring items, partially offset by a decline in linear subscribers. Excluding the non-recurring items, distribution revenue increased 2%.
    • At June 30, 2020, subscribers to our fully distributed networks were 5% lower than the prior year. Total portfolio subscribers, excluding the one-time benefit of free previews provided during the pandemic, were 7% lower than at June 30, 2019.
  • Total operating expenses of $694 million decreased 6%.
    • Costs of revenues were consistent with the prior year quarter, primarily due to investments in content to support our next generation initiatives, offset by a non-recurring reserve release established in purchase accounting and a reduction in production projects as a result of the COVID-19 pandemic.
    • SG&A expenses decreased 15% primarily due to lower marketing-related expenses and, as a result of COVID-19, a reduction in travel costs.

    • Second-Quarter 2020 Highlights

    • Revenues of $783 million decreased 23%, or decreased 20% ex-FX, compared to the prior year quarter.
      • Ex-FX, advertising decreased 37%, primarily driven by a decline in demand stemming from the COVID-19 pandemic and, to a lesser extent, the discontinuation of certain pay-TV distribution in the Nordics.
      • Ex-FX, distribution decreased 2%, primarily driven by the impact on sporting events due to COVID-19, the discontinuation of certain pay-TV distribution in some European markets, and lower contractual rates, partially offset by increases in digital distribution.
    • Total operating expenses of $590 million decreased 20%, or decreased 16% ex-FX.
      • Ex-FX, costs of revenues decreased 23% primarily due to the timing of sporting events in Europe due to COVID-19.
      • Ex-FX, SG&A was relatively consistent with the prior year quarter.
    • Adjusted OIBDA of $193 million decreased 33%, or decreased 29% ex-FX.

    Corporate, Inter-segment Eliminations, and Other

    • For the second quarter of 2020, Corporate Adjusted OIBDA improved by $3 million compared to the prior year quarter.

    Free Cash Flow

    • Cash provided by operating activities increased to $991 million from $674 million in the prior year quarter. Free cash flow increased to $879 million from $596 million, primarily due to the timing of working capital, partially offset by higher capital expenditures. Capital expenditures increased due to investments in technology infrastructure, software development, and facilities.

    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 220 countries and territories and in 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 Eurosport Player, 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 forthcoming multi-platform JV with Chip and Joanna Gaines, Magnolia, 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.