Warner Bros. Discovery adds 1.6 million DTC subscribers in 1Q 2023

Friday, May 5th, 2023 
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NEW YORK — Warner Bros. Discovery, Inc. (the “Company”) (Nasdaq: WBD) today reported financial results for the quarter ended March 31, 2023.

Direct-to-Consumer Segment

Q1 2023 Highlights

  • The Last of Us is now averaging nearly 32 million cross-platform viewers per episode in the U.S., and is the most-watched show in the history of HBO Max in both Europe and Latin America(12).
  • Total DTC subscribers* were 97.6 million, an increase of 1.6 million global subscribers since the end of Q4. Global DTC ARPU** was $7.48.
  • DTC revenues were $2,455 million. Revenues decreased 1% ex-FX compared to the prior year quarter, on a pro forma combined basis.
    • Distribution revenue decreased 1% ex-FX, as global retail subscriber gains were more than offset by a decline in wholesale revenues.
    • Advertising revenue increased 29% ex-FX, primarily driven by subscriber growth on our DTC ad-supported tiers.
    • Content revenue decreased 16% ex-FX, primarily driven by lower third-party licensing of HBO content.
  • DTC operating expenses were $2,405 million. Operating expenses decreased 24% ex-FX compared to the prior year quarter, on a pro forma combined basis.
    • Costs of revenues decreased 8% ex-FX, primarily driven by lower content amortization and the shutdown of CNN+.
    • SG&A decreased 50% ex-FX, primarily driven by more efficient marketing spend.
  • DTC Adjusted EBITDA was $50 million, a $704 million year-over-year improvement on a pro forma combined basis.

DTC Subscribers (In millions, except ARPU)

                        Q1 2023  Q4 2022  Q1 2022
                        -------  -------  -------
Domestic
 Total subscribers*        55.3     54.6     53.4
 ARPU**                  $10.82   $10.83
International
 Total subscribers*        42.3     41.5     37.2
 ARPU**                   $3.48    $3.28
Total DTC subscribers*     97.6     96.1     90.6
Global ARPU**             $7.48    $7.39

Note: Global and International ARPUs reflect a change in methodology. Prior to Q1 2023, ARPU was calculated on a constant currency basis using the 2022 Baseline Rate, as defined in the ex-FX definition. Beginning in Q1 2023, ARPU is calculated on an as-reported basis. Prior periods have been recast to reflect the change in methodology.

Subscriber counts in the above table are rounded and minor differences in totals may exist.

* Direct-to-Consumer (“DTC”) Subscriber: The Company defines a “DTC Subscription” as: (i) a retail subscription to discovery+, HBO or HBO Max for which we have recognized subscription revenue, whether directly or through a third party, from a direct-to-consumer platform;(ii) a wholesale subscription to discovery+, HBO, or HBO Max for which we have recognized subscription revenue from a fixed-fee arrangement with a third party and where the individual user has activated their subscription; (iii) a wholesale subscription to discovery+, HBO or HBO Max for which we have recognized subscription revenue on a per subscriber basis; and (iv) users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.

We may refer to the aggregate number of DTC Subscriptions as “subscribers.”

We define a Domestic subscriber as a subscription based either in the United States of America or Canada. We define an International subscriber as a subscription based outside of the United States of America or Canada.

The reported number of “subscribers” included herein and the definition of “DTC Subscription” as used herein excludes: (i) individuals who subscribe to DTC products, other than discovery+, HBO and HBO Max, that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) a limited number of international discovery+ subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) domestic and international Cinemax subscribers, and international basic HBO subscribers; and (iv) users on free trials except for those users on free trial that convert to a DTC Subscription within the first seven days of the next month as noted above.

** ARPU: The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily-average number of paying subscribers for the period. Where daily values are not available, the sum of beginning of period and end of period divided by two is used.

Excluded from the ARPU calculation are: (i) HBO Max/HBO Hotel and Bulk Institution subscription revenue and subscribers (i.e., subscribers billed on a bulk basis); (ii) Cinemax subscription revenue and subscribers; (iii) HBO Basic subscription revenue and subscribers (International-only); (iv) Non-discovery+ DTC revenue and subscribers; and (v) Non-Core discovery+ revenue and subscribers, and (vi) users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month.

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