Discovery’s Q3 Earnings Flat Despite Rise in Revenues

Third-quarter net income available to Discovery Communications of $218 million was down just slightly from the year-ago period, though quarterly revenues saw a 6-percent increase.

Q3 revenues of $1.65 billion were up 6 percent compared to the prior year’s third quarter, as 11-percent growth at the international networks and 4-percent growth at U.S. networks were partially offset by a decline in the education and other segment. Adjusted Operating Income Before Depreciation and Amortization (OIBDA) increased 3 percent to $575 million, thanks to 5-percent growth at U.S. networks, partially offset by higher corporate costs.

Net income for the quarter was relatively flat, as improved operating results and a tax benefit this quarter were offset by $142 million after-tax costs related to the Scripps transaction, currency-related transactional losses compared to gains in the prior year, and losses from equity investees primarily due to solar investments versus a gain in the prior year.

U.S. networks’ revenues for the third quarter increased 4 percent to $823 million, driven by 6-percent distribution growth and 3-percent advertising growth. Distribution revenue growth was driven by increases in affiliate fee rates and increases in content licensing revenue, partially offset by a decline in affiliate subscribers. Total portfolio subscribers declined 5 percent in the quarter, while subscribers to Discovery’s fully distributed networks declined 3 percent. International networks’ revenues for the third quarter increased 11 percent to $796 million and Adjusted OIBDA of $180 million was consistent with the prior year. Distribution revenues, excluding the impact of currency effects, grew 9 percent, mostly due to higher affiliate rates in Europe following further investment in sports content and higher affiliate rates in Latin America, partially offset by lower subscribers in Latin America and lower affiliate rates in Asia. Advertising revenues, excluding the impact of currency effects, increased 5 percent, mostly due to higher ratings in Southern Europe, Latin America and CEEMEA, and higher pricing in Latin America and CEEMEA.

“Advertising and global distribution revenue growth helped to drive solid third-quarter results for Discovery,” said David Zaslav, the president and CEO of Discovery Communications. “We continued to focus on investments to strengthen our worldwide IP portfolio as well as strategic partnerships to nourish global superfans across every screen, platform and service. Additionally, we are excited by the prospects for a combined Discovery and Scripps as we continue to make progress on the transaction to create a global leader in real-life entertainment.”