Discovery Tops Expectations: Q1 Revenue And Profit Steady From A Year Ago, Advertising Flat
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Discovery, Inc.’s key financials held steady last quarter from the year earlier with advertising flat despite declines in linear subscribers for the first three months of the year.
Revenue eased 1% to $2.68 billion – and was unchanged excluding foreign exchange. Net income dipped 2% to $377 from $384 million. EPS was $0.55 a share versus $0.53. Total advertising sales were flat, driven by increases in pricing, continued monetization of content offerings on next generation platforms,and higher inventory, offset by lower overall ratings and secular declines in the pay-TV ecosystem, the company said Wednesday morning.
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Advertising was flat at $1.03 billion. Distribution increased 2% to $708 million on contractual affiliate rates, partially offset by the decline in linear subscribers.
Total portfolio subscribers were 6% lower in March than the year before. Subscribers to the fully distributed networks were down 4%.
Total operating expenses increased 7% to $740 million. Costs of revenues increased 6% primarily due to an increase in content investments. SG&A expenses increased 9% primarily due to higher marketing expenses to support our next generation initiatives.
“The world is facing an unprecedented challenge and I want to express our profound gratitude to the medical workers and front-line responders who are risking their personal safety every day during this fight with COVID-19. I am also enormously proud of Discovery’s employees who have pulled together and stepped up with resilience, heart and creativity. They continue to nourish our viewers at a time when our trusted brands and beloved personalities are a unique source of comfort and familiarity,” said CEO David Zaslav.
“As we navigate through the remainder of 2020, our priority remains on the well-being of our employees, clients, customers, and production partners. Furthermore, we will continue to focus on maintaining a healthy balance sheet with robust liquidity and investing in our businesses to position ourselves for long-term growth amid the changes in the pay-TV landscape,” he said.
Discovery noted measures to ensure sufficient liquidity and flexibility in light of the current uncertainty surrounding the impact of COVID-19. In March, it drew down $500 million under its $2.5 billion revolving credit facility. Last month, to preserve flexibility in the current environment, it reached an agreement with its lender group, led by Bank of America, to amend certain provisions of its revolving credit facilities, including resetting the leverage ratio until the first quarter of 2021.
Discovery is the parent of 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, as well as OWN: Oprah Winfrey Network in the U.S., Discovery Kids in Latin America, and premium sports network Eurosport, which has the rights to broadcast the posponed 2020 Summer Olympics in Tokyo.
Executives will shed more on light last quarter and discuss current trends in a call at 8 am ET
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