Warner Bros. Discovery(US:WBD)2025-08-07 19:51PART I. FINANCIAL INFORMATION Unaudited Financial Statements 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 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-202626 - 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 Facility7071 - 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 million66 - 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 million130131 Management's Discussion and Analysis of Financial Condition and Results of Operations 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-2026162 - Key industry headwinds include continued pressures on linear distribution, declines in linear subscribers, and softness in the U.S. linear advertising market166 - 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 extinguishment183237 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 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 domestically199206 Studios Segment Analysis 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 Bloodlines214216 - Television product revenue grew 115% in Q2, primarily due to higher intercompany content licensing to other WBD segments, reflecting the timing of renewals214215 Global Linear Networks Segment Analysis 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 subscribers225 - 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 year226 Liquidity and Capital Resources 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 Separation237 - In January 2025, the company received $601 million in net proceeds from contributing a 70% interest in its music catalog to a joint venture243 Quantitative and Qualitative Disclosures About Market Risk 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, 2024271 Controls and Procedures 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 effective272 - No changes in internal control over financial reporting occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, internal controls273 PART II. OTHER INFORMATION Legal Proceedings 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 negotiations276 - 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 stayed277 Risk Factors New material risks relate to the planned corporate separation, a new bridge loan, and potential tax implications Risks Related to the Separation 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 focus279284 - The pendency of the separation could disrupt business relationships with distributors, advertisers, and content providers, and place a significant burden on internal resources281282 - 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 taxes291292 Risks Related to Financial, Capital and Corporate Structure 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 dividends287 - 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 debt288 - 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 condition290 Exhibits 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 Wiedenfels294