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

David Zaslav, President and Chief Executive Officer of Discovery said, "Discovery delivered improving financial results in the third quarter, a testament to the powerful appeal of our content and brands, led in the U.S. by TLC, which beat top-rated sports and news networks in coveted Primetime demos, even in a record year for cable news. And as promised, our healthy liquidity position and another robust quarter of free cash flow generation allowed us to return $228 million to shareholders through share repurchases. In the midst of macroeconomic uncertainty with the ongoing COVID pandemic, as well as the continuing evolution of our industry, we remain focused on positioning Discovery for long-term growth and shareholder value creation through the execution of our strategic priorities, including our next generation initiatives."

Third-Quarter 2020 Financial Highlights

• Total revenues of $2,561 million decreased 4% compared to the prior year quarter, or decreased 5% ex-FX.(1)
  • U.S. distribution revenues increased 2% and advertising revenues decreased 8%; and
  • International distribution revenues decreased 4% and advertising revenues decreased 9%, both ex-FX.
• Net income available to Discovery, Inc. was $300 million and EPS was $0.44 per diluted share.
• Adjusted EPS(2) was $0.81 per diluted share.
• Total Adjusted OIBDA(3) decreased 15% to $954 million, or decreased 14% ex-FX.
• Cash provided by operating activities was $860 million and Free Cash Flow(4) was $787 million.
• Repurchased 11.2 million Series C common shares for $228 million at an average price of $20.37 per share.

Operational Highlights

• Total share of viewing across the international portfolio in the third quarter of 2020 improved 5% on average, with strong growth in the UK, Germany, Italy and Norway. Additionally, Q3 marked five consecutive quarters of year-over-year share improvement.(6)
• Discovery's portfolio of networks accounted for 4 of the top 5 cable networks during Total Day in the third quarter among key women demos, including HGTV, ID, TLC and Food Network,(7) and gained more share in Primetime than any other TV portfolio.(8)
• For 2020 to-date, TLC continues to be the #1 ad-supported cable network in Primetime among women and #2 among persons aged 25-54 and 18-49.(9) On Sunday and Monday nights in the third quarter, TLC was the #1 network on all of TV among women, driven by mega-hit franchise shows 90 Day Fiancé: Happily Ever After and 90 Day Fiancé: The Other Way.(10) And the most recent 90 Day spinoff series, Darcey & Stacey, has become the #1 freshman cable series year-to-date among women demos and persons aged 25-54.(11)

Third-Quarter 2020 Highlights

• Total U.S. Networks revenues of $1,659 million decreased 4% compared to the prior year quarter.
  • Advertising decreased 8% primarily driven by softer demand stemming from the COVID-19 pandemic, secular declines in the pay-TV ecosystem, and lower ratings, partially offset by higher pricing.
  • Distribution increased 2% driven by increases in contractual affiliate rates, partially offset by a decline in linear subscribers.
  • At September 30, 2020, subscribers to our fully distributed networks were 4% lower than the prior year while total portfolio subscribers were 6% lower than at September 30, 2019.

• Total operating expenses of $708 million decreased 2% compared to the prior year quarter.
  • Costs of revenues increased 3% primarily due to investments in content to support next generation initiatives.
  • SG&A expenses decreased 8% primarily due to lower marketing-related expenses and, as a result of COVID-19, a reduction in travel costs.

• Adjusted OIBDA decreased 5% to $951 million.

Third-Quarter 2020 Highlights

• Total International Networks revenues of $902 million decreased 5%, or decreased 6% ex-FX, compared to the prior year quarter.
  • Ex-FX, advertising decreased 9% primarily driven by a decline in demand stemming from the COVID-19 pandemic and the discontinuation of pay-TV distribution with certain European operators.
  • Ex-FX, distribution decreased 4% primarily driven by lower contractual affiliate rates, the discontinuation of pay-TV distribution with certain European operators, and the impact from the timing of sporting events due to COVID-19, partially offset by higher next generation revenues due to subscriber growth.

• Total operating expenses of $775 million increased 9%, or increased 5% ex-FX, compared to the prior year quarter.
  • Ex-FX, costs of revenues increased 11% primarily due to sports content spend in Europe.
  • Ex-FX, SG&A decreased 8% primarily due to a reduction in travel costs as a result of COVID-19 and lower marketing-related expenses, partially offset by higher personnel costs.

• Adjusted OIBDA of $127 million decreased 46%, or decreased 41% ex-FX.

Corporate, Inter-segment Eliminations, and Other

• In Q3, Corporate Adjusted OIBDA decreased by $8 million compared to the prior year quarter.

Free Cash Flow

• Cash provided by operating activities decreased to $860 million from $951 million in the prior year quarter. Free cash flow decreased to $787 million from $884 million, primarily attributable to lower operating results due to the negative impact of COVID-19 on revenues and higher capital expenditures. Capital expenditures increased due to investments in technology infrastructure, software development, and facilities.

Other Items

Share BuybackIn February 2020, the Company's Board of Directors authorized common stock repurchases of up to $2 billion. During the three months ended September 30, 2020, the Company repurchased 11.2 million Series C common shares for $228 million at an average price of $20.37 per share, under its $2 billion repurchase authorization. There is $1.6 billion remaining under the authorization.

2020 Outlook(13)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.

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.