Discovery, Inc. (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the quarter and year ended December 31, 2020.
David Zaslav, President and Chief Executive Officer of Discovery said, "2020 was a year of change, challenge, and opportunity, and our company has shown incredible resilience, creativity and focus as one global team. We finished with strong operating momentum and great command and control across our global businesses, uniquely positioning us to balance our core and next generation businesses. We are off to a promising start in 2021 with the successful launch of discovery+. We have now surpassed 11 million total paying direct-to-consumer subscribers globally and are on pace to be at 12 million by the end of the month, underscoring the value of the investments we've made in content, beloved personalities and brands with huge consumer appeal, supported by industry-leading DTC capabilities. Our unmatched global scale and ability to serve consumers everywhere with a truly differentiated offering across platforms, as well as our robust cash flows, even amidst the significant investments in our next generation initiatives and the ongoing COVID-19 pandemic, position us to achieve sustainable long-term growth and drive long-term shareholder value."
Fourth-Quarter 2020 Financial Highlights
- Total revenues of $2,886 million were flat compared to the prior year quarter, both reported and ex-FX.(1)
- U.S. advertising revenues were flat and distribution revenues increased 5%; and
- International advertising revenues decreased 1% and distribution revenues decreased 4%, both ex-FX.
- Net income available to Discovery, Inc. was $271 million and EPS was $0.42 per diluted share.
- Adjusted EPS(2) was $0.76 per diluted share.
- Total Adjusted OIBDA(3) decreased 9% to $1,002 million, or decreased 8% ex-FX.
- Cash provided by operating activities was $553 million and free cash flow(4) was $441 million.
- Repurchased 10.9 million Series C common shares for $213 million at an average price of $19.50 per share.
Full Year 2020 Financial Highlights
- Total revenues of $10,671 million decreased 4%, both reported and ex-FX.
- U.S. advertising revenues decreased 5% and distribution revenues increased 4% (or increased 3% excluding certain non-recurring items recognized in the second quarter); and
- International advertising revenues decreased 12% and distribution revenues decreased 3%, both ex-FX.
- Net income available to Discovery, Inc. was $1,219 million and EPS was $1.81 per diluted share.
- Adjusted EPS was $3.20 per diluted share.
- Total Adjusted OIBDA decreased 10% to $4,196 million, or decreased 9% ex-FX.
- Cash provided by operating activities was $2,739 million and free cash flow was $2,337 million.
- Repurchased 41.6 million Series C common shares for $965 million at an average price of $23.18 per share.
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||||||||||
|
Dollars in millions, except per share amounts |
2020 |
2019 |
% |
Ex-FX(1) |
2020 |
2019 |
% |
Ex-FX(1) |
|||||||||||||||||
|
Total revenue |
$ |
2,886 |
$ |
2,874 |
— |
% |
— |
% |
$ |
10,671 |
$ |
11,144 |
(4) |
% |
(4) |
% |
|||||||||
|
Net income available to Discovery, Inc. |
$ |
271 |
$ |
476 |
(43) |
% |
$ |
1,219 |
$ |
2,069 |
(41) |
% |
|||||||||||||
|
U.S. Networks Adjusted OIBDA |
946 |
925 |
2 |
% |
3,975 |
4,117 |
(3) |
% |
|||||||||||||||||
|
International Networks Adjusted OIBDA |
196 |
315 |
(38) |
% |
(35) |
% |
723 |
1,057 |
(32) |
% |
(28) |
% |
|||||||||||||
|
Total Adjusted OIBDA(5) |
$ |
1,002 |
$ |
1,105 |
(9) |
% |
(8) |
% |
$ |
4,196 |
$ |
4,671 |
(10) |
% |
(9) |
% |
|||||||||
|
Diluted EPS |
$ |
0.42 |
$ |
0.67 |
(37) |
% |
$ |
1.81 |
$ |
2.88 |
(37) |
% |
|||||||||||||
|
Adjusted EPS |
$ |
0.76 |
$ |
0.98 |
(22) |
% |
$ |
3.20 |
$ |
3.69 |
(13) |
% |
|||||||||||||
|
Free cash flow |
$ |
441 |
$ |
1,132 |
(61) |
% |
$ |
2,337 |
$ |
3,110 |
(25) |
% |
|||||||||||||
Operational Highlights
- Executed key distribution partnerships for the launch of discovery+ with Verizon in the U.S, Sky in the U.K. and Ireland, and Vodafone across several European markets, as well as the rebranding of dplay in certain international markets.
- Total share of viewing across the international portfolio in Q4 improved 4% on average, marking six consecutive quarters of year-over-year share improvement, with strong performance in the U.K., Spain and Poland.(6)
- In Q4, Discovery was the #1 Most-Watched pay-TV Portfolio in the U.S. among key demos.(7)
- TLC was the #1 cable network on Sunday nights in Q4 among total Households and adults and women aged 25-54, 18-49, 18-34, and P2+.(8) Additionally, for 2020, TLC was the #1 pay-TV network in Primetime among key women demographics aged 25-54, 18-49, and 18-34, and saw its best women 25-54 ratings and P2+ delivery in network history.(9)
Segment Results
U.S. Networks
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||||||
|
Dollars in millions |
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
|||||||||||||||
|
Advertising |
$ |
1,048 |
$ |
1,051 |
— |
% |
$ |
4,012 |
$ |
4,245 |
(5) |
% |
|||||||||
|
Distribution |
709 |
673 |
5 |
% |
2,852 |
2,739 |
4 |
% |
|||||||||||||
|
Other |
21 |
28 |
(25) |
% |
85 |
108 |
(21) |
% |
|||||||||||||
|
Total revenues |
$ |
1,778 |
$ |
1,752 |
1 |
% |
$ |
6,949 |
$ |
7,092 |
(2) |
% |
|||||||||
|
Costs of revenues, excluding depreciation |
509 |
503 |
1 |
% |
1,843 |
1,800 |
2 |
% |
|||||||||||||
|
Selling, general & administrative(10) |
323 |
324 |
— |
% |
1,131 |
1,175 |
(4) |
% |
|||||||||||||
|
Adjusted OIBDA |
$ |
946 |
$ |
925 |
2 |
% |
$ |
3,975 |
$ |
4,117 |
(3) |
% |
|||||||||
Fourth-Quarter 2020
- Total U.S. Networks revenues of $1,778 million increased 1% compared to the prior year quarter.
- Advertising was flat as higher pricing and the continued monetization of content offerings on our next generation platforms were offset by secular declines in the pay-TV ecosystem and lower ratings.
- Distribution increased 5% primarily driven by increases in contractual affiliate rates, partially offset by a decline in linear subscribers.
- At December 31, 2020, subscribers to our fully distributed networks were 3% lower and total portfolio subscribers were 5% lower than at December 31, 2019.
- Total operating expenses of $832 million increased 1% compared to the prior year quarter.
- Costs of revenues increased 1% primarily due to investments in content to support our next generation initiatives.
- SG&A expenses were consistent to the prior year quarter as a reduction in travel costs due to the COVID-19 pandemic was offset by higher marketing-related expenses to support our next generation initiatives and higher personnel costs.
- Adjusted OIBDA increased 2% to $946 million.
Full Year 2020
- Total U.S. Networks revenues of $6,949 million decreased 2% compared to the prior year.
- Advertising decreased 5% primarily due to softer demand stemming from the COVID-19 pandemic, secular declines in the pay-TV ecosystem, lower ratings, and a decline in inventory, partially offset by increases in pricing and the continued monetization of content offerings on our next generation platforms.
- Distribution increased 4% driven by increases in contractual affiliate rates and certain non-recurring items, partially offset by a decline in linear subscribers. Excluding certain non-recurring items, distribution increased 3%.
- Total operating expenses of $2,974 million were flat compared to the prior year.
- Costs of revenues increased 2% primarily due to investments in content to support next generation initiatives partially offset by a reduction in production projects as a result of COVID-19 and a non-recurring reserve release established in purchase accounting.
- SG&A expenses decreased 4% primarily due to a reduction in travel costs as a result of COVID-19 and lower marketing-related expenses, partially offset by an increase in personnel costs to support our next generation initiatives.
- Adjusted OIBDA decreased 3% to $3,975 million.
International Networks
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||||||||||
|
Dollars in millions |
2020 |
2019 |
% |
Ex-FX |
2020 |
2019 |
% |
Ex-FX |
|||||||||||||||||
|
Advertising |
$ |
554 |
$ |
546 |
1 |
% |
(1) |
% |
$ |
1,571 |
$ |
1,799 |
(13) |
% |
(12) |
% |
|||||||||
|
Distribution |
510 |
531 |
(4) |
% |
(4) |
% |
2,014 |
2,096 |
(4) |
% |
(3) |
% |
|||||||||||||
|
Other |
41 |
42 |
(2) |
% |
(11) |
% |
128 |
146 |
(12) |
% |
(15) |
% |
|||||||||||||
|
Total revenues |
$ |
1,105 |
$ |
1,119 |
(1) |
% |
(3) |
% |
$ |
3,713 |
$ |
4,041 |
(8) |
% |
(7) |
% |
|||||||||
|
Costs of revenues, excluding |
615 |
533 |
15 |
% |
10 |
% |
2,004 |
2,016 |
(1) |
% |
(1) |
% |
|||||||||||||
|
Selling, general & administrative(10) |
294 |
271 |
8 |
% |
7 |
% |
986 |
968 |
2 |
% |
3 |
% |
|||||||||||||
|
Adjusted OIBDA |
$ |
196 |
$ |
315 |
(38) |
% |
(35) |
% |
$ |
723 |
$ |
1,057 |
(32) |
% |
(28) |
% |
|||||||||
Fourth-Quarter 2020
- Total International Networks revenues of $1,105 million decreased 1%, or decreased 3% ex-FX, compared to the prior year quarter.
- Advertising decreased 1% ex-FX primarily driven by a decline in demand stemming from the COVID-19 pandemic and the discontinuation of pay-TV distribution with certain European operators.
- Distribution decreased 4% ex-FX primarily driven by COVID-related disruptions to the sports schedule in Europe, lower contractual affiliate rates, and the discontinuation of pay-TV distribution with certain European operators, partially offset by higher next generation revenues due to subscriber growth.
- Total operating expenses of $909 million increased 13%, or increased 9% ex-FX, compared to the prior year quarter.
- Costs of revenues increased 10% ex-FX primarily due to sports content spend in Europe.
- SG&A increased 7% ex-FX primarily attributable to higher personnel costs and higher marketing-related expenses to support our next generation initiatives, partially offset by a reduction in travel costs as a result of COVID-19.
- Adjusted OIBDA of $196 million decreased 38%, or decreased 35% ex-FX.
Full Year 2020
- Total International Networks revenues of $3,713 million decreased 8%, or decreased 7% ex-FX, compared to the prior year.
- Advertising decreased 12% ex-FX primarily driven by a decline in demand stemming from the COVID-19 pandemic and the discontinuation of pay-TV distribution with certain European operators.
- Distribution decreased 3% ex-FX primarily driven by lower contractual affiliate rates, the discontinuation of pay-TV distribution with certain European operators, and COVID-related disruptions to the sports schedule in Europe, partially offset by higher next generation revenues due to subscriber growth.
- Total operating expenses of $2,990 million were flat compared to the prior year, both on a reported and ex-FX basis.
- Costs of revenues decreased 1% ex-FX primarily due to a reduction in the number of sporting events in Europe due to COVID-19.
- SG&A increased 3% ex-FX primarily due to higher personnel costs to support our next generation initiatives, partially offset by a reduction in travel costs as a result of COVID-19.
- Adjusted OIBDA of $723 million decreased 32%, or decreased 28% ex-FX.
Free Cash Flow
- Fourth quarter cash provided by operating activities decreased to $553 million from $1,232 million in the prior year quarter. Free cash flow decreased to $441 million from $1,132 million, primarily attributable to lower operating results due to the negative impact of COVID-19 on Adjusted OIBDA, the timing of cash content spend (including sports rights payments), taxes, and working capital.
- Full year 2020 cash provided by operating activities decreased to $2,739 million from $3,399 million in the prior year. Free cash flow decreased to $2,337 million from $3,110 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 Buyback
In February 2020, the Company's Board of Directors authorized common stock repurchases of up to $2 billion. During the three months ended December 31, 2020, the Company repurchased 10.9 million Series C common shares for $213 million at an average price of $19.50 per share, under its $2 billion repurchase authorization. There is $1.4 billion remaining under the authorization as of December 31, 2020.
For the full year 2020, the Company repurchased 41.6 million Series C common shares for $965 million at an average price of $23.18 per share.
fuboTV Inc.
fuboTV Inc., a minority investment held by the Company, was listed on the New York Stock Exchange during the fourth quarter of 2020. As a result, the Company recognized a total gain of $126 million (including a realized gain of $101 million pertaining to the Company's sale of 4 million fuboTV Inc. shares), which is recorded in "Other income (expense), net" on the consolidated statements of operations.
2021 Outlook(11)
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 over 220 countries and territories and 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 discovery+, 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 Network, 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.
