Discovery Communications Reports Q1 Profit

SILVER SPRING: For the quarter ended March 31, Discovery Communications reported higher profits, led by the strength of its U.S. cable networks.

First-quarter revenues of $1.56 billion increased 2 percent compared to the prior year, as 8-percent growth at the U.S. networks was partially offset by a 3-percent decline at international networks, primarily due to currency effects, and lower revenues at education and other. Quarterly net income increased 5 percent to $263 million, largely due to improved operating results, a decrease in taxes, lower currency-related losses and a gain from the sale of SBS Radio, partially offset by higher equity-based compensation and a decline in income from equity investors.

U.S. networks’ revenues in the first quarter increased 8 percent to $807 million, driven by 8-percent distribution growth and 7-percent advertising growth. Distribution revenue growth was primarily driven by higher rates. Advertising revenues increased 7 percent primarily due to higher pricing and inventory management, partially offset by lower delivery. Adjusted OIBDA increased 11 percent to $473 million, as revenue growth was partially offset by a 3-percent increase in operating expenses, mainly due to higher content amortization.

International networks’ revenues decreased 3 percent to $711 million and adjusted OIBDA decreased 14 percent to $185 million. Discovery noted that changes in foreign currency exchange rates reduced first-quarter international revenues and adjusted OIBDA growth by 6 percent and 12 percent, respectively.

“Discovery’s business momentum continued to build in the first quarter with strong viewership across our worldwide portfolio of brands and platforms,” said David Zaslav, the president and CEO of Discovery Communications. “Our unmatched global distribution network; diverse, much-loved brands; and unique flexible business model yet again produced strong results, particularly in the U.S. We have also made progress in reaching consumers across the world’s 7 billion screens with a robust multiplatform strategy that is increasingly showing potential to drive growth in the future. Given the long-term growth profile associated with the investments we’ve made, I remain optimistic about our overall operating and financial prospects, the opportunities ahead, and our potential to deliver significant shareholder value.”

For the full year, Discovery expects adjusted EPS excluding currency effects to grow at least high teens and free cash flow excluding currency effects to grow at least high teens. Discovery said in a Securities and Exchange Commission filing that it has committed between $40 million and $60 million to an employee buyout, with the aim of streamlining and helping to invest in growth initiatives, including digital services and content creation.