Discovery Sees Profit Slip in Q1

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First-quarter net income available to Discovery Communications was $215 million, down 18 percent on the comparable period a year ago.

The company reported that higher operating results and lower income tax expense were more than offset by higher losses from equity investees primarily due to the timing of its solar investments (which had a negative impact on net income in the first quarter but are expected to have a positive impact on net income for the full year), a $34 million after-tax debt extinguishment charge and higher restructuring charges than in the prior year.

First-quarter revenues of $1.6 billion increased 3 percent compared to the prior year, primarily due to 5-percent growth at international networks and 3-percent growth at U.S. networks. Adjusted Operating Income Before Depreciation and Amortization (OIBDA) increased 5 percent to $603 million, driven by 6-percent growth at U.S. networks and 7-percent growth at international networks.

U.S. networks’ revenues for Q1 were up by 3 percent to $829 million, with 5 percent distribution growth and 1 percent advertising growth. Distribution revenue growth was primarily led by higher rates, partially offset by a slight decline in subscribers and, to a lesser extent, the growth was driven by contributions from other distribution revenues. Advertising revenues increased 1 percent, primarily from higher pricing and continued monetization of the GO platform, partially offset by lower delivery and the impact of the Group Nine transaction. Operating expenses were down 2 percent compared to the prior year, primarily due to lower content amortization and impairment costs, lower personnel costs, and the impact of the Group Nine transaction, partially offset by higher marketing and research costs. Adjusted OIBDA increased 6 percent to $501 million, seeing higher revenues and lower operating costs.

The international networks saw Q1 revenues increase 5 percent to $747 million and adjusted OIBDA increase 7 percent to $194 million. Distribution revenues, excluding the impact of currency effects, grew 10 percent, mostly due to higher affiliate rates in Europe as a result of a continuing investment in sports, as well as a higher number of subscribers and higher affiliate rates in Latin America. Ad revenues, excluding the impact of currency effects, increased 3 percent, with growth in the Nordics (primarily due to the absence of the Telenor blackout that occurred in the first quarter of 2016) as well as in CEEMEA and Latin America, partially offset by declines in the U.K. and Asia. Operating expenses increased 5 percent, primarily due to increased sports and other content and production costs.

“Improved ratings across many of Discovery’s key distinctive programs and brands, coupled with strong global distribution growth, led to solid organic growth in the first quarter,” said Discovery’s president and CEO, David Zaslav. “Beyond our linear business, we continue to focus on new strategic partnerships and investments to help drive our multiplatform growth strategy and ensure that we reach our global superfans on every screen.”