Warner Bros. Discovery (WBD) will report first-quarter results before the market close on Thursday as the media giant works to reduce debt amid a declining linear TV business and an unfavorable advertising market. Investors will also be paying close attention to updates on NBA media rights after a Wall Street Journal report said the company is at risk of losing those rights to rival NBCUniversal (CMCSA).
On Monday, WBD CEO David Zaslav did not comment on the status of ongoing discussions while speaking at the Milken Institute’s annual conference in Beverly Hills.
“We continue to engage in constructive negotiations with the NBA,” he said. “It’s a great league. The TNT team is doing a great job. And we love the NBA.”
The company has struggled in recent quarters as profits were hit by a weak linear advertising environment and pressure on affiliate fees, or the fees that pay-TV providers pay network owners to carry their channels. This will likely impact first-quarter EBITDA and put full-year adjusted EBITDA at risk of falling below $10 billion, according to the latest estimates from Bloomberg. That’s $4 billion less than analysts expected at the time of the merger.
According to Bloomberg estimates, Wall Street expects the following for the first quarter:
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Revenue: $10.27 billion compared to $10.70 billion in the first quarter of 2023
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Adjusted loss per share: -$0.24 versus -$0.44 in Q1 2023
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Subscriber net additions: 1.25 million compared to 1.6 million in the first quarter of 2023
“WBD has an important year ahead and Q1 is unlikely to be off to a good start,” Macquarie analyst Tim Nollen wrote in a note to clients ahead of the results.
Still, the analyst said the company has some momentum with its upcoming sports streaming partnership with Disney (DIS) and Fox (FOXA), as well as its recently launched Max streaming service in markets outside the U.S., including Latin America and Europe.
And on Wednesday, WBD and Disney announced that they will offer a bundle of streaming services Disney+, Hulu and Max in the US starting this summer. Customers can sign up for the package with or without advertising on any of the three platforms.
In February, the company said its direct-to-consumer streaming unit turned a profit and posted EBITDA of $103 million for full-year 2023, compared with a loss of about $2.1 billion in the year Full year 2022.
Subscriber gains remained relatively stagnant, but “overseas launches and hit series like ‘House of the Dragon’ should revive gains,” said Bloomberg Intelligence analyst Geetha Ranganathan.
The company is reportedly seeking further cost cuts and further increases in streaming prices. According to Bloomberg, the cost-cutting plans could include layoffs after WBD cut 2,000 jobs last year. The company did not immediately respond to Yahoo Finance’s request for comment.
WBD was also at the center of the M&A discussions, as the two-year lock-up period following the merger has officially expired. At Milken, Zaslav avoided discussions about whether he would be interested in acquiring a company like Paramount (PARA), which is currently pursuing a takeover.
“Paramount is a great company. We have a number of great content companies. For us it is our goal [do] “The best we can do with the companies we have,” he said. “You have to look at your colleagues. You have to know what everyone is doing and learn from them, but ultimately if you do a good job with the resources you have, you will be successful.”
Warner Bros. Discovery shares have fallen about 30% since the beginning of the year.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at [email protected].
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