Time Warner Posts Higher Q3 Earnings

NEW YORK: Revenues at Time Warner grew 9 percent to $7.2 billion in the third quarter, while operating income increased 10 percent to $2 billion, with Warner Bros.’ Suicide Squad and Sully contributing to the gains.

Turner saw revenues grow by 9 percent to $2.6 billion, with increases of 12 percent in subscription revenues, 33 percent in content and other revenues, and 2 percent in advertising revenues. Subscription revenues saw a lift, on higher domestic rates and growth at Turner’s international networks—partially offset by the impact of lower U.S. subscribers and foreign exchange rates. Content and other revenues were helped by higher international licensing revenues. Operating income was up 8 percent to $1.2 billion. The growth in revenues more than offset higher expenses, including programming costs, which grew by 5 percent partly due to Turner’s news business and its coverage of the U.S. presidential election.

At HBO, revenues were up 4 percent to $1.4 billion, thanks to an increase of 5 percent in subscription revenues. This was partially offset by a decline of 2 percent in content and other revenues, due to lower domestic licensing revenues, partially offset by higher international licensing revenues. Subscription revenues were up, thanks to higher domestic rates and international growth. Operating income increased 2 percent to $530 million, as the growth in revenues more than offset higher expenses. Programming costs gained 15 percent with higher acquired theatrical programming expenses due to the timing of availabilities and increased spend for original series.

Revenues increased 7 percent at Warner Bros. to $3.4 billion, with higher theatrical revenues partially offset by lower video-games revenues. Theatrical revenues saw a nice lift thanks to the box-office releases of Suicide Squad, The Legend of Tarzan, Sully and Lights Out. Operating income was up 11 percent to $428 million, as an increase in revenues was partially offset by higher costs of revenues associated with the mix of film releases.

Jeff Bewkes, Time Warner’s chairman and CEO, said: “We had a strong third quarter, which keeps us on track to exceed our original 2016 outlook and underscores our leadership in creating and distributing the very best content. In television, HBO took home more Primetime Emmy Awards than any other network for the 15th consecutive year and Time Warner’s divisions won a total of 40 Emmys, more than any other company. CNN’s standout election coverage made it the number one news network in prime time among adults 18 to 49 for the fourth consecutive quarter and Turner’s momentum doesn’t stop there. Year-to-date, TBS, TNT and Adult Swim are three of the top five ad-supported cable networks in prime time among adults 18 to 49. In film, Warner Bros. had a strong quarter led by Suicide Squad and has the number one release of the fall in Sully, while anticipation is off the charts for J.K. Rowling’s Fantastic Beasts and Where to Find Them, which hits the big screen on November 18.”

He continued: “The agreement we announced on October 22 to be acquired by AT&T Inc. represents a great outcome for our shareholders and an excellent opportunity to drive long-term value well into the future. Combining with AT&T is the natural next step in the evolution of our business and allows us to significantly accelerate our most important strategies.”

Time Warner has now increased its 2016 full-year business outlook. The company is forecasting adjusted EPS to be in the range of $5.73 to $5.83. This outlook includes a $0.28 net tax benefit recognized in the third quarter of 2016 related to an IRS-approved tax accounting method change. Without that benefit, the outlook for 2016 adjusted EPS would be $5.45 to $5.55.