PART I. FINANCIAL INFORMATION [Unaudited Financial Statements](index=4&type=section&id=ITEM%201.%20Unaudited%20Financial%20Statements) Q2 2025 statements show a turnaround to net income, driven by a significant gain on debt extinguishment Consolidated Statements of Operations Highlights (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $9,812 | $9,713 | +1.0% | | Operating Loss | $(185) | $(10,208) | +98.2% | | Gain on Extinguishment of Debt | $2,958 | $542 | +445.8% | | **Net Income (Loss)** | $1,588 | $(10,028) | N/A | | Diluted EPS | $0.63 | $(4.07) | N/A | Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $4,888 | $5,312 | -7.9% | | Total Assets | $101,727 | $104,560 | -2.7% | | Total Debt (Current + Noncurrent) | $34,632 | $39,505 | -12.3% | | Total Equity | $37,323 | $34,829 | +7.2% | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $1,536 | $1,813 | -15.3% | | Cash used in investing activities | $(431) | $(137) | +214.6% | | Cash used in financing activities | $(1,886) | $(2,274) | -17.1% | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the planned corporate separation, a major debt restructuring, and key joint venture activities - In June 2025, the company announced a plan to separate into two publicly traded companies, **'Warner Bros.'** (Streaming and Studios) and **'Discovery Global'** (Global Linear Networks), expected to be completed by mid-2026[26](index=26&type=chunk) - The company completed tender offers in June 2025, purchasing **$17.7 billion in senior notes** and recording a **gain on extinguishment of approximately $3.0 billion**, funded by a new **$17.0 billion Bridge Loan Facility**[70](index=70&type=chunk)[71](index=71&type=chunk) - In January 2025, the company contributed a 70% interest in its music catalog to a joint venture with Cutting Edge Group, receiving **net proceeds of $601 million**[66](index=66&type=chunk) - The Venu Sports joint venture with Disney and Fox was discontinued in January 2025; WBD's share of a settlement paid to FuboTV was **$55 million**[130](index=130&type=chunk)[131](index=131&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the planned separation, segment performance, and significant debt restructuring activities - The company announced plans in June 2025 to separate into two publicly traded companies: **'Warner Bros.'** (Streaming & Studios) and **'Discovery Global'** (Global Linear Networks), with completion expected by mid-2026[162](index=162&type=chunk) - Key industry headwinds include continued pressures on linear distribution, declines in linear subscribers, and softness in the U.S. linear advertising market[166](index=166&type=chunk) - A significant debt restructuring occurred in Q2 2025, with the company entering a **$17.0 billion Bridge Loan Facility** to fund tender offers for **$17.7 billion** of its existing notes, resulting in a **~$3.0 billion gain on extinguishment**[183](index=183&type=chunk)[237](index=237&type=chunk) Q2 2025 Revenue Performance (ex-FX) | Revenue Stream | % Change (ex-FX) | Key Drivers | | :--- | :--- | :--- | | Distribution | 0% | Streaming subscriber growth offset linear declines | | Advertising | -10% | Audience declines in domestic networks and pricing pressure | | Content | +16% | Strong theatrical performance from films like *A Minecraft Movie* | [Streaming Segment Analysis](index=37&type=section&id=Streaming%20Segment) The Streaming segment achieved revenue growth and positive Adjusted EBITDA, driven by strong subscriber gains Streaming Subscriber Growth (as of June 30) | Subscriber Type | 2025 (millions) | 2024 (millions) | % Change | | :--- | :--- | :--- | :--- | | Total Domestic | 57.8 | 52.4 | +10% | | Total International | 67.9 | 50.8 | +33% | | **Total Streaming** | **125.7** | **103.3** | **+22%** | Streaming Segment Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (ex-FX) | | :--- | :--- | :--- | :--- | | Total Revenues | $2,793 | $2,568 | +8% | | Adjusted EBITDA | $293 | $(107) | N/A | | Global ARPU | $7.14 | $8.00 | -11% | - The decrease in Global ARPU was primarily driven by the **33% growth in international subscribers**, which have a lower ARPU, and broader distribution of the lower-priced 'HBO Max Basic with Ads' tier domestically[199](index=199&type=chunk)[206](index=206&type=chunk) [Studios Segment Analysis](index=40&type=section&id=Studios%20Segment) The Studios segment delivered exceptional revenue and Adjusted EBITDA growth, fueled by strong content performance Studios Segment Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (ex-FX) | | :--- | :--- | :--- | :--- | | Total Revenues | $3,801 | $2,449 | +54% | | Content Revenue | $3,591 | $2,237 | +59% | | Adjusted EBITDA | $863 | $210 | +311% | - Theatrical product revenue **increased 38% in Q2** due to the strong performance of *A Minecraft Movie*, *Sinners*, and *Final Destination Bloodlines*[214](index=214&type=chunk)[216](index=216&type=chunk) - Television product revenue **grew 115% in Q2**, primarily due to higher intercompany content licensing to other WBD segments, reflecting the timing of renewals[214](index=214&type=chunk)[215](index=215&type=chunk) [Global Linear Networks Segment Analysis](index=42&type=section&id=Global%20Linear%20Networks%20Segment) The Global Linear Networks segment faced revenue and Adjusted EBITDA declines from subscriber and advertising losses Global Linear Networks Segment Financials (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | % Change (ex-FX) | | :--- | :--- | :--- | :--- | | Total Revenues | $4,803 | $5,272 | -9% | | Distribution Revenue | $2,477 | $2,675 | -7% | | Advertising Revenue | $1,953 | $2,214 | -13% | | Adjusted EBITDA | $1,512 | $1,998 | -25% | - Distribution revenue decline was primarily caused by a **9% drop in domestic linear subscribers**[225](index=225&type=chunk) - Advertising revenue decline was driven by a **23% audience decline in domestic networks** and the absence of the NCAA Final Four, which aired in the prior year[226](index=226&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains solid liquidity while executing a major debt restructuring via a new $17.0 billion bridge loan Capital Resources (as of June 30, 2025) | Resource | Amount (in billions) | | :--- | :--- | | Cash and cash equivalents | $4.9 | | Unused Revolving Credit Facility | $4.0 | | Total Debt Outstanding | $35.0 | - In Q2 2025, the company entered into a **$17.0 billion Bridge Loan Facility** to finance tender offers for its senior notes; the bridge loan is expected to be refinanced before the planned Separation[237](index=237&type=chunk) - In January 2025, the company received **$601 million in net proceeds** from contributing a 70% interest in its music catalog to a joint venture[243](index=243&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposures have not materially changed since the previous fiscal year-end - The company's exposures to market risk **have not materially changed** since December 31, 2024[271](index=271&type=chunk) [Controls and Procedures](index=51&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal financial reporting controls - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[272](index=272&type=chunk) - **No changes in internal control over financial reporting** occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[273](index=273&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=52&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in a securities class action and a shareholder derivative action related to NBA negotiations - A securities class action (Collura v. Warner Bros. Discovery, Inc.) alleges misleading statements were made between February and August 2024 concerning **NBA contract negotiations**[276](index=276&type=chunk) - A consolidated shareholder derivative action (In re Warner Bros. Discovery, Inc. Derivative Litigation) asserts claims for breach of fiduciary duty based on the same facts as the securities case; **this action is currently stayed**[277](index=277&type=chunk) [Risk Factors](index=52&type=section&id=ITEM%201A.%20Risk%20Factors) New material risks relate to the planned corporate separation, a new bridge loan, and potential tax implications [Risks Related to the Separation](index=53&type=section&id=Risks%20Related%20to%20the%20Separation) The planned separation faces risks of non-completion, business disruption, and adverse tax consequences - **Failure to complete the planned separation** could lead to negative market reactions, wasted costs, and diversion of management focus[279](index=279&type=chunk)[284](index=284&type=chunk) - The pendency of the separation could **disrupt business relationships** with distributors, advertisers, and content providers, and place a significant burden on internal resources[281](index=281&type=chunk)[282](index=282&type=chunk) - If the separation **fails to qualify for tax-free treatment**, WBD, the new spun-off company (Spinco), and shareholders could be subject to significant U.S. federal income taxes[291](index=291&type=chunk)[292](index=292&type=chunk) [Risks Related to Financial, Capital and Corporate Structure](index=54&type=section&id=Risks%20Related%20to%20our%20Financial%2C%20Capital%20and%20Corporate%20Structure) The new $17 billion bridge loan introduces risks from restrictive covenants, interest rates, and refinancing - The new **$17 billion Bridge Loan Facility contains restrictive covenants** that limit the company's ability to engage in mergers, incur debt, and pay dividends[287](index=287&type=chunk) - A breach of covenants or default under the Bridge Loan could **trigger cross-default provisions** in other debt agreements, leading to a broader acceleration of debt[288](index=288&type=chunk) - The company may be **unable to obtain permanent financing to refinance the Bridge Loan Facility** on favorable terms, which could adversely affect its business and financial condition[290](index=290&type=chunk) [Exhibits](index=56&type=section&id=ITEM%206.%20Exhibits) This section lists filed exhibits, including credit agreements, employment contracts, and required certifications - Key exhibits filed include amendments to credit agreements, details of the new Non-Investment Grade Leveraged Bridge Loan Agreement, and employment agreements for **CEO David Zaslav and CFO Gunnar Wiedenfels**[294](index=294&type=chunk)

Group 1 - Warner Bros. Discovery, Inc. reported its Q2 earnings, showing revenue growth despite industry challenges [1] - The earnings report indicates that revenue growth is not guaranteed in the current declining market [1]

Core Insights - Warner Bros. Discovery (WBD) reported Q2 2025 earnings of 63 cents per share, exceeding the Zacks Consensus Estimate of a loss of 16 cents, compared to a loss of $4.07 per share in the same quarter last year [1][9] - Revenues increased by 1% year over year to $9.81 billion, slightly missing the Zacks Consensus Estimate by 0.15% [1] - The company ended Q2 2025 with 125.7 million global subscribers, an increase of 3.4 million sequentially [3][4] Revenue Breakdown - Advertising revenues decreased by 10% excluding foreign exchange, primarily due to declines in domestic linear audiences [2] - Distribution revenues remained relatively unchanged, with growth in global streaming subscribers offset by declines in domestic linear pay TV subscribers [2] - Content revenues increased by 16% excluding foreign exchange, driven by higher box office revenues from theatrical releases [2] - Other revenues declined by 19% year over year, impacted by separation-related costs [2] Segment Performance - Streaming segment revenues reached $2.8 billion, up 9% year over year, with subscriber revenues growing by 10% to $2.7 billion [5] - The Studios segment reported revenues of $3.8 billion, a 55% increase year over year, with profits rising to $863 million from $210 million a year ago [6] - Global Linear Networks revenues decreased by 9% year over year to $4.8 billion, with advertising revenues plunging by 12% [7] Financial Position - WBD ended Q2 2025 with $35.6 billion in gross debt and a net leverage ratio of 3.3x [11] - The company reduced gross debt by $2.7 billion during the quarter, including a $1.5 billion term loan repayment [10][11] - Cash and cash equivalents increased to $4.88 billion from $3.89 billion as of March 31, 2025 [11] Future Guidance - WBD targets at least 150 million streaming subscribers by the end of 2026 and anticipates a profit of approximately $1.3 billion from the streaming segment in 2025 [13] - The Studios segment is expected to return to $3 billion in EBITDA, driven by successful content releases [13]

Economic Overview - U.S. pre-market futures are at peak highs, with the Dow up 185 points, S&P 500 up 35 points, and Nasdaq up 120 points, indicating a healthy market environment [1] - The small-cap Russell index is up 20 points, showing recovery from a previous selloff, with Q2 earnings season exceeding expectations across various industries [2] Productivity and Labor Costs - U.S. Productivity in Q2 increased by 2.4%, surpassing the expected 1.9%, marking a significant recovery from the previous quarter's -1.8% [3] - Unit Labor Costs rose by 1.6%, slightly above the estimated 1.3%, and down from a revised 6.9% in Q1, indicating improved economic conditions [4] Employment Data - Initial Jobless Claims rose to 226K, 5K higher than estimated, but still below the near-term high of 250K reported in early June [5] - Continuing Jobless Claims reached 1.974 million, the highest since November 2021, but still below the psychologically significant 2 million mark [6] Company Earnings Reports - Eli Lilly reported Q2 earnings of $6.31 per share, exceeding the $5.61 estimate, with revenues of $15.56 billion, up 5.5% [7] - Despite strong earnings, Eli Lilly's shares fell 7% due to disappointing performance of its new obesity pill, which had a 12% weight loss rate [8] - Warner Bros. Discovery reported earnings of $0.63 per share, significantly better than the expected -$0.16, with revenues of $9.81 billion [9] - Ralph Lauren's fiscal Q1 earnings were $3.77 per share, beating the $3.48 estimate, with revenues of $1.7 billion, up 14% year over year [10] Upcoming Economic Data - Wholesale Inventories for June and Consumer Credit data will be released later today, following a previous Consumer Credit increase of $5.1 billion [11]

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2][3] - The company focuses on medium and small-cap markets while also covering blue-chip companies, commodities, and broader investment stories [3] - Proactive's news team delivers insights across various sectors including biotech, pharma, mining, natural resources, battery metals, oil and gas, crypto, and emerging technologies [3] Group 2 - Proactive is committed to adopting technology to enhance workflows and content production [4] - The company utilizes automation and software tools, including generative AI, while ensuring all content is edited and authored by humans [5]

Group 1: Earnings Performance - Warner Bros. Discovery reported quarterly earnings of $0.63 per share, significantly beating the Zacks Consensus Estimate of a loss of $0.16 per share, and improving from a loss of $4.07 per share a year ago [1] - The earnings surprise was +493.75%, contrasting with a previous quarter where the company had a loss of $0.18 per share against an expected loss of $0.12, resulting in a surprise of -50% [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times [2] Group 2: Revenue Performance - The company posted revenues of $9.81 billion for the quarter ended June 2025, which missed the Zacks Consensus Estimate by 0.15%, but showed an increase from year-ago revenues of $9.71 billion [3] - Warner Bros. Discovery has not been able to beat consensus revenue estimates over the last four quarters [3] Group 3: Stock Performance and Outlook - Warner Bros. Discovery shares have increased by approximately 21% since the beginning of the year, outperforming the S&P 500's gain of 7.9% [4] - The future performance of the stock will depend on management's commentary during the earnings call and the company's earnings outlook [4][5] - The current consensus EPS estimate for the coming quarter is $0.17 on revenues of $9.25 billion, and for the current fiscal year, it is -$0.04 on revenues of $37.91 billion [8] Group 4: Industry Context - The Broadcast Radio and Television industry, to which Warner Bros. Discovery belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, indicating potential challenges ahead [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Warner Bros. Discovery's stock performance [6]

Financial Data and Key Metrics Changes - Warner Bros. Discovery's Studios business is projected to deliver at least $2.4 billion in adjusted EBITDA in 2025, with a goal of reaching $3 billion [9] - The streaming business is on track to exceed $1.3 billion in adjusted EBITDA in 2025 and aims for over 150 million subscribers by 2026 [9][10] - The company has reduced its net leverage from over five times to 3.3 times, the lowest since the merger [10] Business Line Data and Key Metrics Changes - The Motion Pictures segment achieved a milestone by opening five consecutive films with over $45 million in domestic box office [7] - HBO Max added more than 3.4 million subscribers in Q2, continuing its global expansion [9] - Warner Bros. TV led all studios in Emmy nominations, with HBO setting a record of 142 nominations [8] Market Data and Key Metrics Changes - The company is focusing on enhancing its content licensing strategies, with an annual library revenue target of $5 billion from Warner Bros. TV and film [12] - The Networks content sales reached $580 million in 2024, significantly above the normalized run rate of approximately $200 million per quarter [20] Company Strategy and Development Direction - The strategic objectives include being the premier home for creative talent, producing high-quality film and television, and distributing content through a profitable streaming service [6] - The company is investing in its creative and operational capabilities across various segments, including HBO, Warner Bros. television, and DC studios [9] - Plans to split into two independent publicly traded companies in 2026 are underway, with current momentum expected to position both for long-term success [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's creative success and growth trajectory, particularly in the Motion Pictures and streaming segments [9] - The focus remains on delivering high-quality content and enhancing the consumer experience, with expectations for significant growth in the coming years [54][90] Other Important Information - The company is reimagining its U.S. networks portfolio as a content engine around strong unscripted brands, moving away from traditional linear networks [19] - There is a strong emphasis on bundling strategies to reduce churn and enhance customer lifetime value [83] Q&A Session Summary Question: Content licensing strategies for Warner Brothers and Discovery - Management highlighted the importance of maintaining asset value and growth over short-term financial gains, opting to sell less content into the streaming market to drive growth for HBO Max [13][14] Question: Future franchises and growth opportunities - The company is focusing on leveraging its extensive IP portfolio, including major franchises like Harry Potter and Superman, to drive revenue across various channels [26][30] Question: HBO Max U.S. distribution deal restructuring - The restructuring of the legacy deal is expected to impact revenue growth positively after 2026, with new international launches planned [46][49] Question: Addressing marketers' desire for cross-platform advertising - The company is maintaining synergy opportunities in ad sales and has seen strong pricing across all categories, particularly in sports [75] Question: Reducing churn and converting unauthorized account shares - Management is in the early stages of addressing account sharing and is implementing strategies to reduce churn through improved content scheduling and bundling [81][84]

Financial Data and Key Metrics Changes - Warner Bros. Discovery reported strong momentum in its financial performance, with the Studios business on track to deliver at least $2.4 billion in adjusted EBITDA in 2025, aiming for a $3 billion goal [8] - The streaming business is projected to exceed $1.3 billion in adjusted EBITDA in 2025, with a target of over 150 million subscribers by 2026 [8][9] - The company has significantly reduced its net leverage from over five times to 3.3 times, the lowest since the merger [9] Business Line Data and Key Metrics Changes - The Motion Pictures segment achieved a milestone by opening five consecutive films with over $45 million in domestic box office [7] - HBO Max added more than 3.4 million subscribers in Q2, continuing its global expansion [8] - Warner Bros. TV led all studios in Emmy nominations, with HBO setting a new record of 142 nominations [7] Market Data and Key Metrics Changes - The company is focusing on optimizing its global networks, including CNN and TNT Sports, to drive innovation in news, sports, and unscripted programming [9] - The U.S. networks portfolio is being reimagined as a content engine around strong unscripted brands, with content licensing expected to play a significant role in monetization [20] Company Strategy and Development Direction - The strategic objectives include being the premier home for creative talent, operating as the largest producer of film and television, and distributing content through a profitable streaming service [6] - The company is investing in its creative and operational capabilities across various segments, including HBO, Warner Bros. television, and DC studios [8] - Warner Bros. Discovery plans to split into two independent publicly traded companies in 2026, positioning both for long-term success [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's creative success and the positive trends in subscriber growth and content quality [8] - The company is focused on enhancing the consumer experience and addressing the challenges in the streaming landscape, including churn reduction and account sharing [88][89] Other Important Information - The company is exploring opportunities in theme parks and live events related to its franchises, with a focus on maximizing the value of its intellectual property [40][44] - The restructuring of the HBO Max U.S. distribution deal is expected to impact revenue growth positively after 2026 [46][49] Q&A Session Summary Question: Can you talk about your content licensing strategies? - Management highlighted the importance of maintaining a strong internal content library while balancing external licensing opportunities to drive growth [13][15] Question: What future franchises do you see as having a halo effect on the organization? - The company is focusing on leveraging its well-known IP, such as Harry Potter and DC characters, to create stability and growth across various revenue streams [27][30] Question: Can you comment on the restructuring of the HBO Max U.S. distribution deal? - The legacy deal adjustments are expected to have a meaningful impact on revenue growth, with a reacceleration anticipated after 2026 [46][49] Question: How are you addressing churn and unauthorized account sharing? - Management indicated that they are in the early stages of addressing account sharing and are implementing strategies to reduce churn through improved content scheduling and bundling [84][88] Question: How does the engagement look for ad-supported subscribers versus direct sign-ups? - The company is focusing on activation and engagement strategies for wholesale subscribers, with positive trends observed in recent partnerships [66][70]

Core Insights - Warner Bros. Discovery (WBD) aims to release 12-14 films annually across its key labels, including Warner Bros. Pictures, DC Studios, New Line Cinema, and Warner Bros. Animation, following a successful second quarter at the box office [1][4] Group 1: Financial Performance - WBD's Motion Picture Group has generated over $3 billion in global box office revenue year-to-date, with more than $2 billion coming from four films released in the second quarter [3] - The company anticipates $2.4 billion in total Studios profit for 2025, aiming for a $3 billion target [4] Group 2: Strategic Initiatives - The recent success is attributed to a deliberate rebuilding and transformation strategy executed over the last three years since Discovery acquired Warner Media, focusing on a more analytical green lighting process and systematic marketing strategies [5][6] - The film studio has reorganized its marketing and distribution teams into a globally integrated model to enhance coordination across territories, which has led to some layoffs [6] Group 3: Upcoming Releases and Management - Upcoming releases include 1-2 Warner Bros. Pictures tentpoles, 1-2 DC Studios films, 3-4 New Line Cinema releases, and 1-2 WB Animation titles, along with a select number of moderately budgeted original films [2] - The DC Studios film "Superman" opened to $220 million globally, marking the strongest opening for DC Studios since 2022, with James Gunn managing a more cohesive and strategic approach to the DC universe [7]

Warner Bros. Discovery's earnings got a boost from its film studios after a handful of box office hits during the second quarter. The period from April though June saw the releases of "A Minecraft Movie," "Sinners," "Final Destination: Bloodlines," and "F1," which together generated $2 billion in the global box office to date, the company said Thursday. To help the unit, the company hired James Gunn and Peter Safran in 2022 as the co-heads of its DC Comics film and TV unit, in a move to steady the ship of t ...